United States District Court, M.D. Pennsylvania
ELECTRA REALTY COMPANY, INC., and LEBO REALTY, L.P., Plaintiffs,
KAPLAN HIGHER EDUCATION CORPORATION, Defendant.
JOHN E. JONES III JUDGE.
breach of contract action, Plaintiffs Electra Realty Company,
Inc. (“Electra Realty”) and Lebo Realty, L.P.
(“Lebo Realty”) (collectively,
“Plaintiffs”) claim that Defendant Kaplan Higher
Education Corporation (“Kaplan”) is liable, as a
guarantor, for the default of two leases on properties owned
by Plaintiffs. Presently before the Court is Kaplan's
Motion to Dismiss for Failure to State a Claim. (Doc. 4). For
the reasons explained below, we will grant Kaplan's
initiated this action by filing a Complaint in the Court of
Common Pleas of Dauphin County, Pennsylvania, on May 2, 2019.
Kaplan filed a Notice of Removal to this Court on June 6,
2019. Plaintiffs Complaint states the following factual
allegations, which we assume to be true.
Realty and Lebo Realty separately entered into lease
agreements with Thompson Education, LLC,
(“Thompson”), a subsidiary of Kaplan. (Doc. 1-2
at ¶¶ 5-6, 8). The two leases provided for ten-year
terms beginning September 1, 2006. (Id. at ¶
7). Kaplan is the guarantor on the two leases by agreement
dated May 22, 2006. (Id. at ¶ 4). Plaintiffs
attached the lease agreements and the guaranty agreements as
exhibits to their Complaint.
March 24, 2015, in letters separately addressed to Electra
Realty and Lebo Realty, Thompson, through Kaplan, informed
Plaintiffs that it was selling the business assets at the
lease locations to Education Corporation of America
(“ECA”). (Id. at ¶ 9). The letters
further stated that the two leases would be assigned to and
assumed by Virginia College, LLC (“Virginia
College”), a wholly owned subsidiary of ECA.
(Id. at ¶ 10). Kaplan asked Plaintiffs to sign
an acknowledgment portion on the letters. (Id. at
¶ 13). Kaplan also enclosed releases of guaranty with
the letters and asked Plaintiffs to sign them, indicating
that ECA would execute a substitute guaranty. (Id.
at ¶ 11). Plaintiffs also attached the letters and
releases as exhibits to their Complaint.
Lebo (“Mr. Lebo”) signed in acknowledgment of the
letters as president of Electra Realty and managing partner
of Lebo Realty on March 24, 2015. (Id. at
¶¶ 14-15). Mr. Lebo also executed the releases of
guaranty on April 27, 2015. (Exs. C, D to Pl.'s Compl.).
ECA did not execute a substitute guaranty in favor of either
Plaintiff. (Doc. 1-2 at ¶ 20). At the time that
Plaintiffs executed the letters and releases, ECA appeared
solvent; now, however, ECA is insolvent. (Id. at
¶¶ 22, 24).
February 4, 2016, Plaintiffs executed amendments to the two
leases. (Id. at ¶¶ 26-27). The amendments
extended the initial terms of the leases to February 28,
2019, increased the base rent for the properties, and
provided Virginia College a renewal option to extend the
leases another three years. (Exs. E, F to Pl.'s Compl.).
On May 15, 2018, Virginia College exercised its renewal
options and extended the leases to February 28, 2022. (Doc.
1-2 at ¶¶ 28-29). Subsequently, Virginia College
defaulted on its rent payments. On November 7, 2018,
Plaintiffs separately provided notice to Virginia College
that its rent was past due. (Id. at ¶¶
30-31). Plaintiffs now bring this action claiming that Kaplan
is still the guarantor on the leases and is obligated to pay
filed the instant Motion to Dismiss and supporting brief on
June 20, 2019. (Doc. 4). Plaintiffs jointly filed an
opposition brief on July 19, 2019, (Doc. 9), and Kaplan
replied on August 2, 2019. (Doc. 10). Having been fully
briefed, the Motion is ripe for review.
STANDARD OF REVIEW
considering a motion to dismiss pursuant to Rule 12(b)(6),
courts “accept all factual allegations as true,
construe the complaint in the light most favorable to the
plaintiff, and determine whether, under any reasonable
reading of the complaint, the plaintiff may be entitled to
relief.” Phillips v. County of Allegheny, 515
F.3d 224, 231 (3d Cir. 2008) (quoting Pinker v. Roche
Holdings, Ltd., 292 F.3d 361, 374 n.7 (3d Cir. 2002)).
In resolving a motion to dismiss pursuant to Rule 12(b)(6), a
court generally should consider only the allegations in the
complaint, as well as “documents that are attached to
or submitted with the complaint, . . . and any matters
incorporated by reference or integral to the claim, items
subject to judicial notice, matters of public record, orders,
[and] items appearing in the record of the case.”
Buck v. Hampton Twp. Sch. Dist., 452 F.3d 256, 260
(3d Cir. 2006).
12(b)(6) motion tests the sufficiency of the complaint
against the pleading requirements of Rule 8(a). Rule 8(a)(2)
requires that a complaint contain a short and plain statement
of the claim showing that the pleader is entitled to relief,
“in order to give the defendant fair notice of what the
claim is and the grounds upon which it rests.” Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting
Conley v. Gibson, 355 U.S. 41, 47 (1957)). While a
complaint attacked by a Rule 12(b)(6) motion to dismiss need
not contain detailed factual allegations, it must contain
“sufficient factual matter, accepted as true, to
‘state a claim to relief that is plausible on its
face.'” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009). To survive a motion to dismiss, a civil plaintiff
must allege facts that ‘raise a right to relief above
the speculative level . . . .” Victaulic Co. v.
Tieman, 499 F.3d 227, 235 (3d Cir. 2007) (quoting
Twombly, 550 U.S. at 555). Accordingly, to satisfy
the plausibility standard, the complaint must indicate that
defendant's liability is more than “a sheer
possibility.” Iqbal, 556 U.S. at 678.
“Where a complaint pleads facts that are ‘merely
consistent with' a defendant's liability, it
‘stops short of the line between possibility and
plausibility of entitlement to relief.'”
Id. (quoting Twombly, 550 U.S. at 557).
the two-pronged approach articulated in Twombly and
later formalized in Iqbal, a district court must
first identify all factual allegations that constitute
nothing more than “legal conclusions” or
“naked assertions.” Twombly, 550 U.S. at
555, 557. Such allegations are “not entitled to the
assumption of truth” and must be disregarded for
purposes of resolving a 12(b)(6) motion to dismiss.
Iqbal, 556 U.S. at 679. Next, the district court
must identify “the ‘nub' of the . . .
complaint - the well-pleaded, nonconclusory factual
allegation[s].” Id. Taking these allegations
as true, the district judge must then determine whether the
complaint states a plausible claim for relief. See
“a complaint may not be dismissed merely because it
appears unlikely that the plaintiff can prove those facts or
will ultimately prevail on the merits.”
Phillips, 515 F.3d at 231 (citing Twombly,
550 U.S. at 556-57). Rule 8 “does not impose a
probability requirement at the pleading stage, but instead
simply calls for enough facts to raise a ...