United States District Court, W.D. Missouri, St. Joseph Division
ORDER DENYING IN PART AND GRANTING IN PART
DEFENDANTS' MOTIONS TO DISMISS FOR FAILURE TO STATE A
CLAIM; DENYING MOTIONS TO DISMISS FOR LACK OF PERSONAL
KAYS, UNITED STATES DISTRICT JUDGE.
lawsuit arises from Plaintiffs Eric Allenspach and Marianne
Allenspach-Boller's allegations that Defendant United
Community Bank (“UCB”), and its employees,
Defendants Marla Kephart and Janet Foster (the
“Individual Defendants”), failed to perform the
necessary underwriting requirements for an SBA loan and to
timely report fraud once it was uncovered, despite assuring
Plaintiffs it would do so.
before the Court are Defendants' Motions to Dismiss for
Failure to State a Claim (Docs. 5, 7, 9), and the Individual
Defendants' Motions to Dismiss for Lack of Personal
Jurisdiction (Docs. 7, 9). For the reasons below, the motions to
dismiss for failure to state a claim are denied in part and
granted in part, and the motions to dismiss for lack of
personal jurisdiction are denied. Plaintiff shall have
twenty-one days to file an amended complaint.
who are citizens of Missouri, own Reliable Machine &
Engineering, Inc. (“Reliable”), which is also a
named Plaintiff in this case. Reliable is incorporated in
Missouri and has its principal place of business in Polo,
Missouri. Defendant UCB is a state-chartered Georgia bank
registered with and regulated by the Georgia Department of
Banking and Finance. Its home office is in Blairsville,
Georgia. Defendant Foster is a citizen of Louisiana, and
Defendant Kephart is a citizen of North Carolina. Plaintiffs
filed this lawsuit in the Circuit Court of Caldwell County,
Missouri, and Defendants removed the case to federal court by
invoking the Court's diversity jurisdiction.
Petition contains eleven claims. Counts I, II, and III assert
claims of fraudulent and negligent misrepresentation, as well
as negligence. These counts arise from UCB's failure to
comply with SBA underwriting guidelines after informing
Plaintiffs that it would do so. All other counts stem from
Defendant's failure to report a non-party's fraud to
the SBA after assuring Plaintiffs they would report it.
Counts IV, V, VII, VIII allege all Defendants engaged in
fraudulent and negligent misrepresentations, as well as
negligence and breach of fiduciary duty. Counts VI, IX, and
X, respectively, allege UCB negligently hired the Individual
Defendants, breached the covenant of good faith and fair
dealing, and negligently inflicted emotional distress upon
Plaintiffs. Finally, Count XI seeks a declaratory judgment
that Plaintiffs are released of their debt to UCB.
Petition alleges that in mid-2015, after “purposeful
and deliberate” due diligence, Plaintiffs decided to
purchase Rood Machine & Engineering, Inc. (“Rood
Machine”) from Todd Rood. Pet. at ¶¶12-16.
Plaintiffs went to UCB to obtain funds to purchase the
business, and UCB informed Plaintiffs they would need a Small
Business Administration (“SBA”) loan. Plaintiffs
then took out an SBA loan in the amount of $1, 744, 000.00 to
fund the purchase of Rood Machine.
UCB had ensured Plaintiffs that it had appropriately
underwritten the SBA loan, Plaintiffs discovered after
they took over the business that Rood had falsified financial
records related to Rood Machine. Plaintiffs contacted
Defendants about Rood's misrepresentations and received
assurances from them that they would report his fraud to the
SBA. Defendants, however, failed to report the misconduct.
Because of their failure, “Rood's assets were not
frozen and available for set-off of the Loan, ” so
Plaintiffs “had to continue making payments on a debt
that would have been satisfied.” Id. at
later pled guilty to loan application fraud in federal court
and was ordered to pay restitution to UCB in the amount of
$1, 085, 608.49. Despite this judgment, Plaintiffs were
required to continue making monthly payments on the loan.
Because of Defendants' conduct, however, Plaintiffs'
“ability to make monthly payments due under the terms
of the Loan was advers[e]ly affected.” Id. at
¶103. UCB therefore threatened foreclosure.
claim Defendants' misconduct has cost them $1, 200, 000
plus interest, as well as $14, 000, 000 in lost profits.
Defendants' motion to dismiss is denied in part and
granted in part.
complaint may be dismissed if it fails “to state a
claim upon which relief can be granted.” Fed.R.Civ.P.
12(b)(6). To avoid dismissal, a complaint must include
“enough facts to state a claim to relief that is
plausible on its face.” Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 570 (2007). In reviewing the
complaint, the court construes it liberally and draws all
reasonable inferences from the facts in the plaintiff's
favor. Monson v. Drug Enforcement Admin., 589 F.3d
952, 961 (8th Cir. 2009).
Missouri law applies to the tort claims, and a mix of Georgia
and Missouri law apply to the contract claims.
the Court is hearing these claims pursuant to its diversity
jurisdiction, Missouri choice-of-law rules apply to this
case. Stricker v. Union Planters Bank, 436 F.3d 875,
877 (8th Cir. 2006). Thus, Plaintiffs' tort claims are
subject to Missouri's “most significant
relationship test, ” Dorman v. Emerson Elec.
Co., 23 F.3d 1354, 1358 (8th Cir. 1994), which
“essentially establishes a presumption that the state
with the most significant relationship is the state where the
injury occurred, absent an overriding interest of another
state based on the factors articulated in [Restatement
(Second) of Conflict of Laws § 6].” Wolfley v.
Solectron USA, Inc., 541 F.3d 819, 823 (8th Cir. 2008).
Defendants do not dispute that any injury occurred in
Missouri, so Missouri law governs Plaintiffs' tort
IX, however, is a contract claim. Under Missouri law, a court
must enforce a choice-of-law clause that specifically
identifies the jurisdiction's law that governs.
Hope's Windows, Inc. v. McClain, 394 S.W.3d
4778, 483 (Mo.Ct.App. 2013). The Loan Agreement provides that
it is governed by Georgia law, while the related documents
(Note, Deed of Trust, and Guarantees) explicitly state they
are governed by Missouri law. Thus, the Court applies
Missouri and Georgia law, where appropriate, in analyzing
Plaintiffs have not sufficiently pled fraud.
I and IV allege two misstatements as actionable fraud: 1)
that UCB would perform the appropriate underwriting and 2)
that Defendants would report Rood's fraud to the SBA.
Having examined the pleading requirements for fraud in
conjunction with the elements of a claim for fraudulent
misrepresentation in Missouri, the Court ...