IN RE BRICK BY BRICK BUILDS, INC.

661 B.R. 266

IN RE: BRICK BY BRICK BUILDS, INC., Debtor.

In re: CrissCross Center, Co., Debtor.

Brick by Brick Builds, Inc. and CrissCross Center, Co., Plaintiffs, v. Lincoln Capital Management, LLC, Defendant.

Case No. 8:23-bk-05564-RCT

Case No. 8:23-bk-05565-RCT

Adv. Case No. 8:24-ap-00008-RCT

United States Bankruptcy Court, M.D. Florida, Tampa Division

Signed April 17, 2024

John A. Anthony, Stephenie Biernacki Anthony, Anthony & Partners, LLC, Tampa, FL, for Plaintiffs.

Jake C. Blanchard, Blanchard Law, P.A., Pinellas Park, FL, for Intervenor-Plaintiffs Rimoun Goris and Robin G. Goris.

Mark D. Hildreth, Shumaker, Loop & Kendrick, LLP, Sarasota, FL, Jay B. Verona, Shumaker, Loop & Kendrick, LLP, Tampa, FL, for Defendant.

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS

Roberta A. Colton, United States Bankruptcy Judge.

This case was considered on March 29, 2024, at a hearing on Defendant's Motion to Dismiss Counts II, III, and V of Plaintiffs' complaint. (Doc. 8). Plaintiffs filed a response in opposition. (Doc. 9). Both parties also filed supplemental authority. (Docs. 11, 12). After hearing arguments and considering the record, the Court grants in part and denies in part Defendant's Motion to Dismiss.

I. Standard of Review

A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)¹ evaluates the sufficiency of a complaint to determine whether it sets forth sufficient factual allegations to state a claim for relief. Thus, a court must determine whether the complaint satisfies Rule 8(a)(2), which requires a short and plain statement of the claim showing that the pleader is entitled to relief so that the defendant is given fair notice of what the claim is and the grounds upon which it rests.² To survive a Rule 12(b) motion, the complaint must contain enough factual allegations, taken as true, to raise the right to relief above the speculative level.³

II. Background

Plaintiff Brick by Brick Builds, Inc. ("BBB") obtained funding from Defendant Lincoln Capital Management, LLC ("Lincoln") to pay for the construction of its Pasco co-working facility via two secured loans, which were guaranteed by Plaintiff CrissCross Center, Co. Lincoln agreed to provide interim funding until permanent funding could be obtained from the Small Business Administration ("SBA") and one of the Take-Out Parties (Harvest Commercial Capital, LLC or Newtek Business Lending, LLC). Newtek had found that BBB pre-qualified for permanent financing and accepted a good faith deposit of $25,000 so that Newtek could continue its review and analysis to determine whether permanent financing could be achieved.

Plaintiffs contend that Lincoln's misconduct caused them damages. Specifically, they allege that by failing to provide information and documentation requested by the Take-Out Parties, Lincoln ruined Plaintiffs' chances of refinancing.

Additionally, the general contractor for the construction of the Pasco facility was Bandes Construction Company, Inc. Plaintiffs contend that by failing to remit final payment to Bandes, Lincoln caused Bandes to lien the Pasco facility, making it unmarketable. Plaintiffs contend that BBB still had $742,000 of available credit at the time that Lincoln refused to pay Bandes.

Plaintiffs also identify five other instances of alleged misconduct by Lincoln: (1) Lincoln grossly miscalculated the balance of the loans, by accruing interest on funds that had not been advanced, by failing to post payments, and by failing to provide requested backup so that the loans could be calculated accurately; (2) Lincoln failed to respond as requested to the Pasco County Florida Community Development Department ("Pasco"), a governmental entity that had been considering Plaintiffs for a grant, when Pasco requested information and documentation necessary to evaluate the eligibility of Plaintiffs for a grant or loan; (3) Lincoln failed to respond as requested to the SBA when the SBA requested information and documentation necessary to evaluate the eligibility of Plaintiffs for the loan; (4) Lincoln failed to respond as requested to the Certified Development Company ("CDC") for the SBA when the CDC requested information and documentation necessary to evaluate the eligibility of Plaintiffs for a grant or loan; and (5) Lincoln refused to accept voluntary relinquishment of title to the Pasco facility as offered by Plaintiffs, even though Lincoln ruined the project by failing to facilitate take-out financing and then failing to pay Bandes.

Plaintiffs contend that Lincoln's alleged misconducted caused them to be unable to fully occupy the Pasco facility, because necessary improvements and amenities could not be funded from Lincoln's loans or from a new loan. This, in turn, impacted Plaintiffs' working capital, and ability to service the loans. Because Lincoln refused to fund, while at the same time ruining Plaintiffs' prospects with Newtek, Bandes and its subcontractors went unpaid, and the occupants' perceptions of the Pasco facility have been tainted.

Plaintiff-Debtors filed for bankruptcy relief under Chapter 11 on December 7, 2023. Thereafter, they filed their adversary complaint against Lincoln, in which they assert seven claims: (1) breach of loan documents, (2) tortious interference with their relationships with Bandes, Newtek, and Harvest, (3) violation of Florida Statute § 713.3471, (4) objection to Lincoln's bankruptcy claim, (5) equitable subordination of Lincoln's claim under 11 U.S.C. § 510(c), (6) a request for the automatic stay to be extended to Debtors' principals, and (7) a request for an injunction protecting Debtors' principals. In response, Lincoln filed the instant motion to dismiss.

III. Motion to Dismiss

In its motion, Lincoln moves to dismiss three claims: (1) tortious interference, (2) violation of Florida Statute § 713.3471, and (8) equitable subordination. As explained below, the Court grants Lincoln's motion to dismiss to the extent that it seeks dismissal of the tortious interference claim and the claim under Florida Statute § 713.3471. However, the Court denies Lincoln's motion to the extent it seeks dismissal of Debtors' equitable subordination claim.

A. Count II: Tortious Interference

Debtors allege that Lincoln had actual knowledge of the existence of their business relationships with Newtek, Harvest, and Bandes, that Lincoln intentionally refused to remit funds available on the loans to Bandes, and that Lincoln completely failed to provide basic cooperation with document requests from Harvest and Newtek.

To state a claim for tortious interference, Debtors must allege: "(1) the existence of a business relationship, not necessarily evidenced by an enforceable contract; (2) knowledge of the relationship on the part of the defendant; (3) an intentional and unjustified interference with the relationship by the defendant; and (4) damage to the plaintiff as a result of the" interference.⁴ "As a general rule, an action for tortious interference with a business relationship requires a business relationship evidenced by an actual and identifiable understanding or agreement which in all probability would have been completed if the defendant had not interfered."⁵

Debtors allege that Lincoln interfered with two business relationships.

First, Debtors contend that Lincoln interfered with BBB's construction contract with Bandes. Lincoln responds that this claim cannot succeed as a matter of law, because Lincoln is not a stranger to the construction contract, and thus, the complaint fails to allege an unjustified interference. Lincoln points to the fact that, as part of the loan documents, BBB assigned its interest in the construction contract with Bandes to Lincoln.⁶

"For the interference to be unjustified, the interfering defendant must be a third party, a stranger to the business relationship."⁷ Under Florida law, "'[a] defendant is not a stranger to a business relationship if the defendant has any beneficial or economic interest in, or control over, that relationship.'"⁸ Here, Lincoln is not a stranger to the BBB-Bandes construction contract, as BBB assigned its interest in that contract to Lincoln. Indeed, Debtors' claim in Count III of the complaint reflects a direct obligation from Lincoln to Bandes under Florida Statute § 713.3471. In any event, "[u]nder the law of tortious interference, [the defendant] is not a 'stranger' to any contract that it ultimately will fund."⁹ As such, Debtors' tortious interference claim with respect to Bandes must be dismissed, since Lincoln certainly was a funding source for Bandes.

The second business relationship at issue is Debtors' relationship with the Take-Out Parties—Harvest and Newtek. However, Debtors only specifically describe Lincoln's interference with Newtek's attempts to gather financing information.

Lincoln argues that Debtors have not sufficiently alleged an interference by Lincoln with their relationship with Newtek, because: (1) that relationship was not evidenced by an enforceable contract; (2) failing to act (i.e., failing to respond to requests for information) cannot be deemed an interference; and (3) Lincoln was not a stranger to the relationship between Debtors and Newtek.

The Court is not persuaded by Lincoln's first argument—that a tortious interference claim cannot stand because the relationship between Debtors and Newtek was not evidenced by an enforceable contract. Lincoln argues that when there is not an enforceable contract evidencing the business relationship, there must be an understanding as to a specific transaction that has gone beyond the "mere offer" stage.¹⁰ Here, however, Debtors have alleged a specific potential loan transaction with Newtek that was supported with a $25,000 good faith deposit.

Lincoln's second argument—that a tortious interference claim cannot stand because failing to act (i.e., failing to respond to requests for information) cannot be deemed an interference—is more persuasive. Without an...