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Global Acquisitions Network, A Wyoming Corporation v. Bank of America Corporation

February 19, 2013

GLOBAL ACQUISITIONS NETWORK, A WYOMING CORPORATION;
SHAWN CORNEILLE, AN INDIVIDUAL, PLAINTIFFS,
v.
BANK OF AMERICA CORPORATION, A DELAWARE CORPORATION;
ORIANA CAPITAL PARTNERS,LLC, A CONNECTICUT LIMITED LIABILITY COMPANY;
ZANCO, A COMPANY OF UNKNOWN BUSINESS FORM,
HLB FINANCIAL, LLC, A COMPANY OF UNKNOWN FORM;
W/C INVESTMETN HOLDINGS INC., A FLORIDA CORPORATIN; DEXTER CHAPPELL, AN INDIVIDUAL;
VALERIE CHAPPELL, AN INDIVIDUAL;
JON LEARY, AN INDIVIDUAL;
GLEN MCINERNEY ALSO KNOWN AS
LARRY BENNETT, AN INDIVIDUAL;
CHRISTOPHER RAY ZANCO, AN INDIVIDUAL;
BERNARD WOODSON, AN INDIVIDUAL, DEFENDANTS.



The opinion of the court was delivered by: United States District Judge Dean D. Pregerson

O

ORDER GRANTING DEFENDANTS' MOTION TO DISMISS WITH LEAVE TO AMEND CERTAIN CLAIMS [Dkt. No. 21]

Before the Court is Defendant Bank of America Corporation's ("BAC") Motion to Dismiss (Dkt. No. 21) all claims against it by Plaintiffs Global Acquisitions Network ("GAN") and Shawn Corneille, GAN's CEO and President. BAC's motion is made pursuant to Fed. R. Civ. P. 12(b)(6) and Fed. R. Civ. P. 9(b). Plaintiffs' claims against BAC include negligence, breach of fiduciary duty, fraud in the inducement, fraud, intentional and negligent misrepresentation, and conspiracy.*fn1 Plaintiffs seek $2.5 billion in damages from BAC and the other defendants, punitive damages, and an accounting. Plaintiffs also brought a claim for conversion (Claim 10) against "All Defendants," but agree with BAC that this claim does not apply to BAC and should be dismissed as to BAC. Having considered the parties' submissions, the court adopts the following order.

I. BACKGROUND

Plaintiffs allege the following facts. Plaintiffs are the owners of two collateralized mortgage obligations ("CMOs") that have a combined face value of approximately $2.5 billion. (Compl. ¶ 20.) Defendants Dexter Chappell and Oriana Capital Partners (collectively, the "Oriana Defendants") agreed to use the CMOs as collateral for an approximately $18 million non-recourse loan to Plaintiffs. (Compl. ¶¶ 21, 25.) After one year, the CMOs would be returned to Plaintiffs. (Compl. ¶ 22.) The Oriana Defendants told Plaintiffs that they would be the only parties funding the loan, and that they would obtain a line of credit from Bank of America/Merrill Lynch to do so. (Compl. ¶¶ 27, 28.) The parties executed a written contract for this transaction, which was dated effective February 1, 2012.*fn2 (Compl. ¶ 41 & Ex. 1.) The agreement provided that within 24 hours of its execution, Plaintiffs would transfer the CMOs to the Oriana Defendants' account,*fn3 and Oriana would transfer the loan funds five to ten days later. (Compl. ¶¶ 41, 42 & Ex. 1 ¶¶ 5, 7.)

Before entering into the contractual agreement for the loan and before transferring the CMOs, Plaintiffs told the Oriana Defendants that they would need an assurance from Bank of America/Merrill Lynch that the Oriana Defendants had the financial capacity to obtain the financing for the loan or to fund it in cash themselves. (Compl. ¶¶ 29, 31.) To address Plaintiffs' concerns, a conference call was allegedly held on February 9, 2012, at approximately 7:56 a.m., between Plaintiffs, the Oriana Defendants, and a Bank of America Bank Officer whose name Plaintiffs believe was Tom Hazlet or Hazlit. (Compl. ¶¶ 33, 34.) The call was identified as originating from the number 800-432-1000, which Plaintiffs allege is a Bank of America phone number. (Compl. ¶ 33.) During this call, both the Oriana Defendants and the Bank Officer, Hazlet or Hazlit, told Plaintiffs that Bank of America was the primary financial institution with which the Oriana Defendants did business and that it would be the institution funding the credit line for Plaintiffs' non-recourse loan. (Compl. ¶ 35.) Additionally, the Bank Officer stated that the Oriana Defendants had access to a credit line and had the financial resources to fund the loan. (Compl. ¶ 37.)

Based on these assurances from the Oriana Defendants and the Bank of America Bank Officer, Plaintiffs decided to transfer the CMOs to the Oriana Defendants. The CMOs were delivered to the Fidelity account designated by the Oriana Defendants between February 27 and 29, 2012, and they confirmed receipt of the CMOs. (Compl. ¶¶ 40, 46, 47 & Ex. 3.) On March 12, 2012, the Oriana Defendants told Plaintiffs that they would be unable to fund the loan within the contractually required time period, so the parties agreed to extend the payout deadline to April 18. (Compl. ¶¶ 52, 53.)

By May 30, the Oriana Defendants still had not made the loan to Plaintiffs. (Compl. ¶ 57.) Over the next couple of months, the parties communicated, primarily through counsel, by phone and email about the status of the loan and the CMOs. The Oriana Defendants continually stated that they would disburse the loan funds soon, and they provided a series of excuses for their continual failure to do so, including delays caused by Bank of America procedures. (Compl. ¶¶ 58-61, 73-75.) Over the course of this communication, Plaintiffs learned that the Fidelity account to which they had transferred the CMOs was actually owned by a third party. Oriana's name had been added to the account, but the Oriana Defendants informed Plaintiffs that, as of July 7, 2012, the account had been closed and Oriana was unable to obtain any details about the closure because Defendant Chappell was not listed as an account holder. (Compl. ¶¶ 65, 66.) At that time, the Oriana Defendants stated that they did not know what had happened to the CMOs or where they were located. (Compl. ¶ 67.) Eventually, in an August 6, 2012, email,*fn4 counsel for the Oriana Defendants admitted that they misrepresented their ability to fund the loan through a Bank of America credit line or with their own funds, but contended that the CMOs were never received in the Fidelity account. (Compl. ¶ 76.) As of the time of the filing of Plaintiff's complaint in October 2012, the Oriana Defendants still had not paid the loan or returned the CMOs, and Plaintiffs did not know where the CMOs were located. (Compl. ¶¶ 85, 86.)

II. LEGAL STANDARDS

A complaint may be dismissed for failure to state a claim upon which relief can be granted. See Fed. R. Civ. P. 12(b)(6). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.' A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Although the court must accept as true all of the factual allegations in a complaint, that principle "is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id.

To determine whether a complaint states a claim sufficient to withstand dismissal, a court considers the contents of the complaint and its attached exhibits, documents incorporated into the complaint by reference, and matters properly subject to judicial notice. Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322-23 (2007); Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001).

Where a motion to dismiss is granted, a district court should provide leave to amend unless it is clear that the complaint could not be saved by any amendment. Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008) (citation omitted).

III. DISCUSSION

The essence of Plaintiffs' claims against BAC is that Plaintiffs reasonably relied on the Bank of America Bank Officer's representations about the Oriana Defendants' financial capacity, and based on those representations, entered into the loan agreement and transferred the CMOs to Oriana. Plaintiffs contend that BAC is vicariously liable for the actions of its employee, the Bank Officer. (Opp. at 5.)

BAC's motion to dismiss raises three primary arguments in response: BAC is a holding company that does not engage in banking operations; BAC owed no duty of care to Plaintiffs and was not in a fiduciary relationship with them; and Plaintiffs fail to plead their fraud-related claims with particularity as required under Rule 9(b). (Mot. at 1-2.)

The Court notes at the outset that it has serious doubts about the plausibility of the scenario alleged by Plaintiffs. It seems highly dubious that an individual or a corporation would depart with something of great value on the basis of an alleged oral representation made over the phone by someone of uncertain identity who purports to work for a bank. Also, while the purported "face value" of the CMOs may be billions of dollars, they may in fact be worthless. Nevertheless, although the Court GRANTS BAC's motion as to all ...


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