Razor Capital, LLC v. Cmax Fin. LLC

RAZOR CAPITAL, LLC, a Minnesota limited liability company, Plaintiff, v. CMAX FINANCE LLC, a Delaware limited liability company, Defendant.

CASE NO. 17-80388-CIV-MARRA

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA

August 11, 2017

OPINION AND ORDER

This cause is before the Court upon Defendant CMAX Finance LLC's Motion to Dismiss the First Amended Complaint (DE 14). The Motion is fully briefed and ripe for review. The Court has carefully considered the Motion and is otherwise fully advised in the premises.

I. Background

Plaintiff Razor Capital, LLC ("Plaintiff") brings this five-count First Amended Complaint¹ ("FAC") (DE 12) against Defendant CMAX Finance LLC ("Defendant") for fraud in the inducement (count one); negligent misrepresentation (count two); unjust enrichment (count three); tortious interference with contract (count four) and a violation of Florida's Deceptive and Unfair Trade Practices Act ("FDUTPA"), Florida Statute §501.201.

According to the allegations of the FAC, which this Court must accept as true for purposes of this motion, Plaintiff buys, sells and collects on defaulted consumer debt including defaulted residential mortgages. Defendant holds itself out and acts as a lender to, and agent andbroker of, companies seeking to sell debt portfolios which include such defaulted debt. This action arises out of Plaintiff's $730,000.00 purchase of a pool of defaulted debt (hereinafter, "mortgage loan file") that Defendant was brokering. (FAC ¶1.) Beginning in 2011, Defendant began discussions with the principals of a company called HP Debt Exchange, LLC ("HP Debt") for the purpose of lending money to HP Debt to purchase pools of delinquent consumer debt. Thereafter, Defendant successfully originated a loan to HP Debt that enabled HP Debt to purchase certain pools of delinquent consumer debt. One of Defendant's closely affiliated special purpose vehicles, CMAX Finance Partners I, LLC ("CMAX I") funded this loan. Defendant both serviced the loan and monitored the collateral. HP Debt's purchase included the mortgage loan file, which HP Debt then pledged as collateral back to CMAX I. (FAC ¶2.)

When the debt portfolio underperformed and HP Debt defaulted on its loan, Defendant discovered multiple material defects with the collateral, making it undesirable for Defendant to foreclose on the collateral as a remedy to recover upon its loan to HP Debt. (FAC ¶3.) Defendant then devised a plan to broker the debt/collateral for sale to a third party and pocket the proceeds from any sale, rather than foreclose upon the collateral. Defendant concealed and failed to disclose the material defects it discovered when it marketed the mortgage loan file for sale to third parties. Had Plaintiff known about these defects, it would not have purchased the mortgage loan file. (FAC ¶4.) Defendant also concealed the "sloppy" business practices and documentation of the seller to induce Plaintiff to purchase the mortgage loan file. (FAC ¶6.) Plaintiff paid a materially inflated price. (FAC ¶8.)

After the closing, Plaintiff discovered that many of the accounts in the mortgage loan file were subject to settlements that neither Defendant nor HP Debt disclosed and which substantiallyreduced the unpaid principal balance of the mortgage loan file. (FAC ¶¶86-87.) Plaintiff tried to unwind the agreement and obtain a full refund from HP Debt. (FAC ¶89.) In so doing, Plaintiff spoke with Defendant, who averred that it did not know about the settlements and were "similarly duped." (FAC ¶¶90-97.) Defendant concealed its true level of knowledge and suggested that Plaintiff and Defendant file a "joint action" against HP Debt. (FAC ¶98.) Had Plaintiff known that Defendant had retained over 90% of the funds it sought to recover, it would have made immediate demands on Defendant to recover the funds. (FAC ¶103.) Instead, Plaintiff filed suit against HP Debt on February 4, 2013 and Plaintiff obtained a default judgment against HP Debt upon which it has been unable to collect. (FAC ¶¶105, 110.) As part of the documents Plaintiff received from Defendant during that litigation,² Plaintiff learned about Defendant's actions and concealment of the deal with HP Debt. (FAC ¶¶108-17.)

Defendant moves to dismiss on the following grounds: (1) the unjust enrichment, FDUTPA and tortious interference claims are barred by Florida's four-year statute of limitations; (2) the doctrine of delayed discovery does not apply to the fraud in inducement and negligent misrepresentation claims; (3) Plaintiff had a duty to reasonably investigate the material facts affecting its purchase; (4) Plaintiff should have named CMAX 1 as the defendant and (5) the claim for punitive damages are insufficiently pled and unsupported by Florida law.

Plaintiff responds that (1) Defendant's argument that Plaintiff has sued the wrong party amounts to Defendant improperly asking that the Court not take the allegations of the FAC as true; (2) the statute of limitations arguments involve factual issues that cannot be resolved on amotion to dismiss; (3) Defendant's fraudulent concealment tolls the statute of limitations for the claims of unjust enrichment, violation of FDUTPA and tortious interference; (4) the claims for fraud and negligent misrepresentation are timely under the delayed discovery doctrine; (5) the FAC properly pleads that Defendant's omissions and misrepresentations were material to Plaintiff and (6) the FAC sufficiently pleads facts to support an award of punitive damages.

In reply, Defendant contends that the face of the FAC demonstrates that neither equitable tolling nor the delayed discovery doctrine are applicable. Specifically, Defendant claims that fraudulent concealment does not equitably toll Florida's statute of limitations on any claims. Defendant also claims that the delayed discovery doctrine does not delay accrual of Plaintiff's claims for fraud and negligent misrepresentation as a matter of law.

Plaintiff has filed a sur-reply to address the application of equitable tolling.³

II. Legal Standard

Rule 8(a)(2) of the Federal Rules of Civil Procedure requires "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). The Supreme Court has held that "[w]hile a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the 'grounds' of his 'entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative level." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations omitted).

"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." Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (quotations and citations omitted). "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." Id. Thus, "only a complaint that states a plausible claim for relief survives a motion to dismiss." Id. at 1950. When considering a motion to dismiss, the Court must accept all of the plaintiff's allegations as true in determining whether a plaintiff has stated a claim for which relief could be granted. Hishon v. King & Spalding, 467 U.S. 69, 73 (1984).

III. Discussion⁴

"A statute of limitations bar is "an affirmative defense, and plaintiffs are not required to negate an affirmative defense in their complaint." La Grasta v. First Union Securities, Inc., 358 F.3d 840, 845 (11^th Cir. 2004) (brackets and ellipsis omitted). "[A] Rule 12(b)(6) dismissal on statute of limitations grounds is appropriate only if it is 'apparent from the face of the complaint' that the claim is time-barred." Id.

With respect to the claims for unjust enrichment, FDUTPA and tortious interference, Plaintiff asserts that the doctrine of equitable tolling applies. Equitable tolling may delay the running of the statute of limitations period based on the plaintiff's "blameless ignorance" and the lack of prejudice to the defendant. Machules v. Dept. of Admin., 523 So. 2d 1132, 1133-34 (Fla. 1988). The doctrine does not require misconduct on the part of the defendant. Id.

This Court has previously held that Florida law does not permit the application ofequitable tolling based on circumstances not listed in Florida Statute §95.051.⁵ See, e.g., Baez v. Root, 13-cv-81158, 2014 WL 1414433, at * 3 (S.D. Fla. Apr. 11, 2014); In re Chiquita BrandsInt'l, Inc., 690 F. Supp. 2d 1296, 1315 n.10 (S.D. Fla. 2010 ).⁶ Specifically, the Court has found that equitable tolling is limited to administrative actions. Baez, 2014 WL 1414433, at * 3 (citing HCA Health Servs. of Fla., Inc. v. Hillman, 906 So. 2d 1094, 1098-99 (Fla. Dist. Ct. App. 2004); Lopez v. Geico Cas. Co., 968 F. Supp. 2d 1202, 1206 (S.D. Fla. 2013); Watson v. Paul Revere Life Ins. Co., No. 11-21492-CIV-KMM, 2011 WL 5025120, at *4 (S.D. Fla. Oct. 21, 2011); Socas v. Northwestern Mut. Life Ins. Co., 829 F. Supp. 2d 1262 (S.D. Fla. 2011); Pierson v. Orlando Reg'l Healthcare Sys., Inc., No. 6:08-cv-466-Orl-28GJK, 2010 WL 1408391, at *15 (M.D. Fla. 2010)).

Nonetheless, Plaintiff has provided authority to the contrary and the Court will analyze it. The most persuasive case Plaintiff provided is Carroll v. TheStreet.com, Inc., No. 11-cv-81173, 2014 WL 5474061, at * 6 (S.D. Fla. July 10, 2014). The court in Carroll held that equitable tolling is not limited to the legislative constraints of Florida Statute §95.051. Id. at * 6. In so doing, it relied upon two Florida Supreme Court cases, Major League Baseball v. Morsani, 790 So. 2d 1071 (2001) and Machules. The Court disagrees with the conclusion that these cases compel such a result.

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