The opinion of the court was delivered by: Schiller, J.
Plaintiffs bring this derivative action on behalf of Lipscomb Square Cooperative ("Lipscomb Square") against the United States Department of Housing and Urban Development ("HUD"), Multifamily Management of Philadelphia, LLC ("MMP"), Herbert Brunson Jr., Elizabeth Williams, and Vaqueca Henderson based on Defendants' oversight and management of Lipscomb Square. Plaintiffs claim that HUD, which regulates Lipscomb Square and insures its mortgage, acted improperly by: (1) ordering Lipscomb Square to hold a new election for its board of directors and accepting the results of that election as valid; (2) accepting and retaining excess income funds from Lipscomb Square; and (3) refusing to sanction MMP for its poor management of Lipscomb Square or terminate MMP's contract with Lipscomb Square. Currently before the Court is HUD's motion to dismiss the Second Amended Complaint or in the alternative, for summary judgment. For the reasons that follow, HUD's motion is granted in part and denied in part.
Plaintiffs are individual shareholders and residents of Lipscomb Square. (Second Am. Compl. ¶ 7.) Lipscomb Square is a non-profit housing cooperative which holds title to the property located at 625 South 12th Street, Philadelphia, Pennsylvania. (Id. ¶6.) The property is held subject to a mortgage, which is insured by HUD. (Id. ¶13.) HUD regulates Lipscomb Square pursuant to a regulatory agreement. (Id. Ex. A [Regulatory Agreement] at 1.) MMP is the managing agent of Lipscomb Square and is responsible for managing the operation of the cooperative. (Id. ¶¶18, 37; Ex. B [Mgt. Contract].)
Lipscomb Square is run by a five-person board of directors. (Id. ¶¶ 15, 32.) Lipscomb Square's by-laws provide for staggered elections of such directors, whereby each year a minimum of one and a maximum of three spots on the board may be up for election. (Id. ¶ 33; Compl. Ex. C [By-Laws].) Prior to December 14, 2009, the five board members were Barbara Hankinson, Herbert Brunson, Jamila Hankinson, Dimitri Ferrel, and Robert Brown. (Id. ¶¶ 20, 21.) On November 25, 2009, HUD's project manager for Lipscomb Square, Rita DeMarco, sent a letter to the board demanding and directing it to call a special meeting of the general membership on or before December 14, 2009 for the purpose of electing an entirely new board of directors. (Id. ¶76.) An election was subsequently held on December 14, 2009, and on December 18, 2009 DeMarco indicated to Lipscomb Square's counsel that HUD accepted the election results and recognized Brunson as the new board president, as well as Williams and Henderson as new Lipscomb Square board members. (Id. ¶¶ 19, 80.)
HUD also accepted over $40,000 in excess income*fn1 payments made by MMP as managing agent for Lipscomb Square, and retained such payments over Lipscomb Square's objections. (Second Am. Compl. ¶¶ 50, 82, 94, 104.) Plaintiffs allege that HUD had previously acknowledged that such amounts were not due, and had waived its claim to any such amounts. (Id. ¶¶ 50, 82.)
Lipscomb Square also claims that HUD failed to sanction MMP or to terminate the management contract between MMP and Lipscomb Square, despite MMP's multiple alleged breaches of that contract. (Id. ¶¶ 79, 93, 103.) MMP's alleged breaches stemmed from problems with maintenance and repair; failure to provide accurate financial information; failure to find new members for the cooperative; failure to collect accounts receivable; and failure to communicate with the board. (Id. ¶¶ 42, 44, 46, 53-57, 58.) Lipscomb Square attempted to terminate its contract with MMP, however, HUD informed Lipscomb Square that under its regulatory agreement with HUD, MMP could not be terminated until HUD approved a replacement management agent. (Id. ¶¶ 45, 59.)
In reviewing a motion to dismiss for failure to state a claim, a district court must accept as true all well-pleaded allegations and draw all reasonable inferences in favor of the non-moving party. See Bd. of Trs. of Bricklayers and Allied Craftsman Local 6 of N.J. Welfare Fund v. Wettlin Assocs., 237 F.3d 270, 272 (3d Cir. 2001). A court should accept the complaint's allegations as true, read those allegations in the light most favorable to the plaintiff, and determine whether a reasonable reading indicates that relief may be warranted. Umland v. PLANCO Fin. Servs., Inc., 542 F.3d 59, 64 (3d Cir. 2008). A court need not credit "bald assertions" or "legal conclusions" when deciding a motion to dismiss. Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997); see also Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009).
"Factual allegations [in a complaint] must be enough to raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). To survive a motion to dismiss, a complaint must include "enough facts to state a claim to relief that is plausible on its face." Id. at 570. Although the federal rules impose no probability requirement at the pleading stage, a plaintiff must present "enough facts to raise a reasonable expectation that discovery will reveal evidence of the necessary element[s]" of a cause of action. Phillips v. County of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008). "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." Iqbal, 129 S.Ct. at 1949. Simply reciting the elements will not suffice. Id. (concluding that pleading that offers labels and conclusions without further factual enhancement will not survive motion to dismiss); see also Phillips, 515 F.3d at 231.
The Third Circuit Court of Appeals has recently directed district courts to conduct a two-part analysis when faced with a 12(b)(6) motion. First, the legal elements and factual allegations of the claim should be separated, with the well-pleaded facts accepted as true but the legal conclusions disregarded. Fowler v. UPMC Shadyside, 578 F.3d 203, 210--11 (3d Cir. 2009). Second, the court must then make a common sense determination of whether the facts alleged in the complaint are sufficient to show a plausible claim for relief. Id. at 211. If the court can only infer the mere possibility of misconduct, the complaint must be dismissed because it has alleged-but has failed to show-that the pleader is entitled to relief. Id.
When faced with a motion to dismiss for failure to state a claim, courts may consider the allegations in the complaint, exhibits attached to the complaint, matters of public record, and documents that form the basis of a claim. Lum v. Bank of Am., 361 F.3d 217, 222 n.3 (3d Cir. 2004). A district court may also consider an undisputedly authentic document that a defendant attaches as an exhibit to a motion to dismiss if the plaintiff's claims are based on the document. Pension Benefit Guar. Corp. v. White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir. 1993).