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Flannery v. Mid Penn Bank

December 3, 2008

RALPH M. FLANNERY, PLAINTIFF
v.
MID PENN BANK, MID PENN BANCORP, INC., ALAN W. DAKEY, AND ROBERT H. ROTH, DEFENDANT



The opinion of the court was delivered by: Judge Sylvia H. Rambo

MEMORANDUM

Before the court is Defendants' motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. The case concerns a dispute arising out of a loan guaranty and subsequent default on the loan. Plaintiff's complaint alleges fourteen counts under federal and state law against Defendants, and Defendants seek to dismiss each count. As explained below, the court will grant Defendants' motion to dismiss.

I. Background

A. Facts*fn1

Plaintiff filed this complaint alleging various federal and state law claims arising from a loan guaranty. In July 2004, four individuals formed Friendship Road Development Group, LLC ("FRDG"), a real estate development company that owns commercial property located at 421 Friendship Road, in Harrisburg, Pennsylvania. (Doc. 1 ¶¶ 9--10.) At the time of formation, FRDG had four members who each had a 25% ownership interest: Donald C. Cappetta, David I. Bowser, Jeffrey Roth, and Collin Spencer. (Id. ¶ 11.) In February 2005, Plaintiff purchased member Roth's ownership interest and one-half of member Spencer's ownership interest, giving Plaintiff a 37.5% ownership interest in FRDG.*fn2 (Id. ¶¶ 12--13.) Member Bowser also served as president of Bowser Construction, Inc., the general contractor for construction work done at 421 Friendship Road. (Id. ¶ 14.)

In April of 2005, Mid Penn Bank extended a $500,000.00 loan to Harrisburg Fudd, LLC, a prospective tenant for the commercial space being developed at 421 Friendship Road. (Id. ¶ 15.) Mid Penn Bank extended the loan so that Harrisburg Fudd could pay Bowser Construction for construction of the space that FRDG would lease to Harrisburg Fudd. (Id. ¶ 16.) As collateral for the loan, Plaintiff, Plaintiff's wife, Bowser, Cappetta, and a separate company, Harrisburg Fudd I, LP, personally guaranteed the loan. (Id. ¶ 17.) Mid Penn Bank further required FRDG to secure the loan with a $500,000.00 mortgage for the property located at 421 Friendship Road. (Id. ¶ 22.) Member Cappetta procured the mortgage without authorization of the other FRDG members by using an Operating Agreement with falsified signatures that appeared to authorize Cappeta to execute the mortgage. (Id. ¶ 25.) Defendant Roth served as the loan officer representing Mid Penn Bank in agreement. (Id. ¶ 28.)

Mid Penn Bank administered the loan for nearly two years until Harrisburg Fudd defaulted on the loan in February 2007. (Id. ¶ 32.) After the default, a judgment by confession was entered against Harrisburg Fudd, Harrisburg Fudd I, Bowser, Capetta, Plaintiff, and Plaintiff's wife. (Id. ¶ 32.) In August 2007, Mid Penn Bank agreed to release Bowser as a personal guarantor and to sell its interest in the judgment to Bowser. (Id. ¶ 34.) On August 23, 2007, Bowser formed Blac, Inc., and Blac, Inc. bought Mid Penn Bank's interest on September 13, 2007. (Id. ¶ 35.) Plaintiff alleges, on information and belief, that Mid Penn Bank reached these agreements with Bowser and Blac, Inc. because Bowser had substantial business and personal investments with Mid Penn Bank as well as personal relationships with Defendants Roth and Dakey and other agents, employees, officers, and directors of Mid Penn Bank and Mid Penn Bancorp. (Id. ¶ 38.) In December 2007, Bowser agreed to release Plaintiff from the judgment and all interest, attorney fees, and costs in exchange Plaintiff's interest in FRDG. (Id. ¶ 44.)

B. Procedural History

On April 11, 2008, Plaintiff filed the instant complaint against Defendants, alleging fourteen counts of federal and state law violations. (Doc. 1.) On June 23, 2008, Defendants filed a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief could be granted. (Doc. 9.) After Plaintiff failed to respond to the motion to dismiss, the court deemed the motion unopposed and dismissed the case on July 24, 2008. (Doc. 24.) On July 28, 2008, Plaintiff filed a motion for reconsideration and supporting brief, which informed the court that his counsel had suffered disfiguring burns and other horrible injuries and was comatose as the result of a automobile accident on July 4, 2008. (Doc. 13--14.) The court granted the motion for reconsideration, reopened the case, and extended the time for Plaintiff to file a brief in opposition to Defendants' motion to dismiss. (Doc. 17.) On October 29, 2008, Plaintiff, through new counsel, filed a brief in opposition to Defendants' motion to dismiss. (Doc. 24.) Defendants filed a reply brief on November 11, 2008. (Doc. 28.) Accordingly, the motion is ripe for disposition.

II. Legal Standard

Among other requirements, a sound complaint must set forth "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). This statement must "give the defendant fair notice of what the . . . claim is and the grounds upon which it rests." Bell Atlantic Corp. v. Twombly, - U.S. -, 127 S.Ct. 1955, 1964 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). "Fair notice" in Rule 8(a)(2) "depends on the type of case-some complaints will require at least some factual allegations to make out a showing that the pleader is entitled to relief." Phillips v. County of Allegheny, 515 F.3d 224, 232 (3d Cir. 2008) (quotation omitted). "A situation may arise where, at some point, the factual detail in a complaint is so undeveloped that it does not provide a defendant the type of notice of claim which is contemplated by Rule 8." Id. A plaintiff must provide "more than labels and conclusions" or "a formulaic recitation of the elements of a cause of action" to show entitlement to relief. Twombly, 127 S.Ct.at 1965; accord Phillips, 515 F.3d at 238--39; Baraka v. McGreevey, 481 F.3d 187, 195 (3d Cir. 2007) (The court is not "compelled to accept unsupported conclusions and unwarranted inferences or a legal conclusion couched as a factual allegation." (quotations and citations omitted)); Evancho v. Fisher, 423 F.3d 347, 350(3d Cir. 2005).

A defendant may attack a complaint by a motion under Rule 12(b)(6) for failure to state a claim upon which relief can be granted. In deciding a motion to dismiss under Rule 12(b)(6), the court is required to accept as true all of the factual allegations in the complaint, Erickson v. Pardus, - U.S. -, 127 S.Ct. 2197, 2200 (2007), and all reasonable inferences permitted by the factual allegations, Watson v. Abington Twp., 478 F.3d 144, 150 (3d Cir. 2007), viewing them in the light most favorable to the plaintiff, Kanter v. Barella, 489 F.3d 170, 177 (3d Cir. 2007). If the facts alleged are sufficient to "raise a right to relief above the speculative level" such that the plaintiff's claim is "plausible on its face," a complaint will survive a motion to dismiss. Twombly, 127 S.Ct. at 1965, 1974; Phillips, 515 F.3d at 234; Victaulic Co. v. Tieman, 499 F.3d 227, 234 (3d Cir. 2007); Stevenson v. Caroll, 495 F.3d 62, 66 (3d Cir. 2007). This requirement "calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of" necessary elements of the plaintiff's cause of action. Twombly, 127 S.Ct. at 1965.

"To decide a motion to dismiss, courts generally consider only the allegations contained in the complaint, exhibits attached to the complaint and matters of public record." Pension Benefit Guar. Corp. v. White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir. 1993) (citations omitted); see also Sands v. McCormick, 502 F.3d 263, 268 (3d Cir. 2007). The court may consider "undisputedly authentic document[s] that a defendant attaches as an exhibit to a motion to dismiss if the plaintiff's claims are based on the [attached] document[s]." Id. Additionally, "documents whose contents are alleged in the complaint and whose authenticity no party questions, but which are not physically attached to the pleading may be considered." Pryor v. Nat'l Collegiate Athletic Ass'n, 288 F.3d 548, 560 (3d Cir. 2002); see also U.S. Express Lines, Ltd. v. Higgins, 281 F.3d 383, 388 (3d Cir. 2002) ("Although a district court may not consider matters extraneous to the pleadings, a document integral to or explicitly relied upon in the complaint may be considered without converting the motion to dismiss into one for summary judgment.") (internal quotation omitted). However, the court may not rely on other parts of the record in making its decision. Jordan v. Fox, Rothschild, O'Brien & Frankel, 20 F.3d 1250, 1261 (3d Cir. 1994).

III. Discussion

Plaintiff alleges fourteen separate counts of federal and state law claims, which all seem fundamentally based on the theory that Defendants colluded with Bowser to defraud Plaintiff out of his interest in FRDG. Defendants argue either the Rooker-Feldman doctrine or doctrine of res judicata bar all of Plaintiff's claims or that, in the alternative, Plaintiff has failed to adequately allege any claims against Defendants.

A. Fraud Claims Barred by the Rooker-Feldman Doctrine

Defendants argue that the Rooker-Feldman doctrine bars all of Plaintiff's claims because a confession of judgment was entered against Plaintiff in state court. The court finds that the Rooker-Feldman doctrine strips this court of jurisdiction ...


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