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Americredit Financial Services, Inc. v. Adams Motor Co.

United States District Court, N.D. Iowa, Western Division

August 20, 2019

AMERICREDIT FINANCIAL SERVICES, INC., d/b/a GM Financial, Plaintiff,
v.
ADAMS MOTOR COMPANY, et al., Defendants.

          MEMORANDUM OPINION AND ORDER

          Leonard T. Strand, Chief Judge.

         I. INTRODUCTION

         Plaintiff Americredit Financial Services, Inc., d/b/a GM Financial (GM Financial), filed its complaint (Doc. No. 1) against defendants Adams Motor Company (AMC) and Robert G. Adams (Adams) on August 2, 2018, based on diversity jurisdiction under 28 U.S.C. § 1332. Two motions by GM Financial are currently before me: (1) a motion (Doc. No. 14) to dismiss defendants' counterclaims and strike an affirmative defense and (2) a motion (Doc. No. 27) for summary judgment.

         Defendants did not file a resistance to the motion to dismiss counterclaims and strike an affirmative defense. They did file a resistance (Doc. No. 34) to the motion for summary judgment and GM Financial filed a reply (Doc. No. 35). I find that oral argument is unnecessary. See Local Rule 7(c).

         II. RELEVANT FACTS

         The only fact in dispute is the amount of the judgment to which GM Financial is entitled. See Doc. No. 34. All other facts discussed below are undisputed:

         GM Financial is a Delaware corporation with its principal place of business in Fort Worth Texas. AMC is an Iowa company operating an automobile dealership in Denison, Iowa. Adams is a resident of Iowa.

         GM Financial acted as AMC's floorplan lender[1] and entered into a term loan and revolving line of credit with AMC on June 15, 2015. Doc. No. 27-2 at 2. The terms of the parties' agreements were governed by a Master Loan Agreement (Loan Agreement) and a Revolving Line of Credit Promissory Note (RLOC), both of which are in the record. Id. at 2-3. The balance of the RLOC (approximately $280, 972.22) was converted into a term loan on May 5, 2017 (the First Term Loan). The First Term Loan provides that AMC will repay GM Financial $280, 972.22, plus interest at the rate of 6.25 percent. Id. at 3. AMC agreed that its payments under the First Term Loan would comply with the payment provisions set forth in Section 5 of the First Term Loan. Id. AMC also agreed that it would be in default under the First Term Loan if it failed to make payment when due or if it otherwise committed an “Event of Default” under the Loan Agreement. Id. An “Event of Default” under the Loan Agreement is defined as “fail[ure] to comply with or perform under any term, condition or covenant of this Agreement” including the failure to pay any sums as required. Id. at 2-3. It is also an “Event of Default” if any Borrower, entity Borrower, or Guarantor is indicted or convicted of either a felony or misdemeanor involving fraud. Id.

         On July 1, 2015, GM Financial and AMC entered into a Term Loan Promissory Note for the sum of $800, 000 (the Second Term Loan). Id. at 3. The Second Term Loan provides that AMC will repay GM Financial $800, 000.00 plus interest at the rate of 4.25 percent. Id. at 4. AMC agreed that its payments would comply with the payment provisions set forth in Section 5 of the Second Term Loan. Id. It further agreed that it would be in default if it failed to make any payment under the Second Term Loan when due or if it committed an “Event of Default” under the Loan Agreement. Id.

         Adams guaranteed all of AMC's obligations to GM Financial. Id. The Continuing Guaranty provides that Adams “unconditionally and absolutely guarantees the prompt and punctual payment, when due, upon maturity, by acceleration, or otherwise, of all of the Obligations that [GM Financial] may now and in the future extend to [AMC].” Id.

         GM Financial performed all of the terms and conditions of the Loan Agreement, term loan promissory notes and Continuing Guaranty. Id. AMC failed to pay as required by the Loan Agreement, First Term Loan and Second Term Loan. Id. at 5. GM Financial sent defendants Notices of Default on December 13, 2017; January 3, 2018; January 10, 2018; January 30, 2018; February 13, 2018; February 22, 2018; March 7, 2018; March 13, 2018; March 21, 2018 and April 3, 2018. Id. On April 23, 2018, GM Financial terminated AMC's credit lines and demanded immediate payment of the outstanding balances of the Loan Agreement, First Term Loan and Second Term Loan in the amount of $2, 377, 608.35. As of January 31, 2019, GM Financial asserts that defendants are indebted in the amount of $1, 103, 107.37, plus interest and legal fees. Id.

         On January 17, 2018, GM Financial filed a Petition for Replevin with the District Court of Crawford County, Iowa, which sought possession of vehicles financed by GM Financial. Id. at 6. GM Financial filed a motion for summary judgment in that action, which was granted on August 14, 2018.[2] Id. The court found that GM Financial was entitled to permanent possession of certain vehicle collateral due to AMC's breach of the Loan Agreement. It also found that GM Financial did not waive its right to enforce the terms of the Loan Agreement. Id.

         GM Financial filed the instant action on August 2, 2018, alleging breach of contract (Count I), breach of contract of the continuing guaranty (Count II) and unjust enrichment (Count III). See Doc. No. 2. Defendants asserted three affirmative defenses in their Answer: failure to state a claim, unclean hands and waiver. Doc. No. 27-2 at 7; Doc. No. 9. They also filed counterclaims based on promissory estoppel and breach of the implied covenant of good faith and fair dealing. Id. GM Financial argues in its motion to dismiss counterclaims and strike an affirmative that defendants have released all claims, including claims for waiver against GM Financial. Defendants did not file a response to that motion and the time for doing so has passed.

         III. ANALYSIS

         A. Motion to Dismiss Counterclaims

         GM Financial seeks to dismiss the counterclaims of promissory estoppel and breach of implied covenant of good faith and fair dealing identified in defendants' Answer (Doc. No. 9). Under Rule 12(b)(6), “to survive a motion to dismiss for failure to state a claim, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Carlsen v. GameStop, Inc., 833 F.3d 903, 910 (8th Cir. 2016). The Supreme Court has provided the following guidance in considering whether a pleading properly states a claim:

Under Federal Rule of Civil Procedure 8(a)(2), a pleading must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” As the Court held in [Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)], the pleading standard Rule 8 announces but does not require “detailed factual allegations, ” but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation. Id., at 555, 127 S.Ct. 1955 (citing Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986)). A pleading that offers “labels and conclusions” or “a formulaic recitation of the elements of a cause of action will not do.” 550 U.S. at 555, 127 S.Ct. 1955. Nor does a complaint suffice if it tenders “naked assertion[s]” devoid of “further factual enhancement.” Id., at 557, 127 S.Ct. 1955.
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.” Id., at 570, 127 S.Ct. 1955. 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., at 556, 127 S.Ct. 1955. The plausibility standard is not akin to a “probability requirement, ” but it asks for more than a sheer possibility that a defendant has acted unlawfully. Ibid. 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., at 557, 127 S.Ct. 1955 (brackets omitted).

Ashcroft v. Iqbal, 556 U.S. 662, 677-78 (2009).

         Courts assess “plausibility” by “‘draw[ing] on [their own] judicial experience and common sense.'” Whitney v. Guys, Inc., 700 F.3d 1118, 1128 (8th Cir. 2012) (quoting Iqbal, 556 U.S. at 679). Also, courts “‘review the plausibility of the plaintiff's claim as a whole, not the plausibility of each individual allegation.'” Id. (quoting Zoltek Corp. v. Structural Polymer Grp., 592 F.3d 893, 896 n.4 (8th Cir. 2010)). While factual “plausibility” is typically the focus of a Rule 12(b)(6) motion to dismiss, federal courts may dismiss a claim that lacks a cognizable legal theory. See, e.g., Somers v. Apple, Inc., 729 F.3d 953, 959 (9th Cir. 2013); Ball v. Famiglio, 726 F.3d 448, 469 (3d Cir. 2013); Commonwealth Prop. Advocates, L.L.C. v. Mortg. Elec. Registration Sys., Inc., 680 F.3d 1194, 1202 (10th Cir. 2011); accord Target Training Intern., Ltd. v. Lee, 1 F.Supp.3d 927, 937 (N.D. Iowa 2014).

         GM Financial argues that defendants' counterclaims fail because defendants signed a Forbearance Agreement[3] under which they explicitly waived and released any and all claims against GM Financial. GM Financial also argues that defendants fail to allege sufficient facts to state its counterclaims of promissory estoppel and breach of implied covenant of good faith and fair dealing. As mentioned above, defendants have not resisted GM Financial's motion to dismiss. I will consider whether defendants have sufficiently stated their counterclaims before considering GM Financial's affirmative defense of waiver based on the Forbearance Agreement. In reviewing the counterclaims, I may consider the terms of the written contracts as they are embraced by the pleadings and attached to the complaint. See M.M. Silta, Inc. v. Cleveland Cliffs, Inc., 616 F.3d 872, 876 (8th Cir. 2010) (“Where, as here, the claims relate to a written contract that is part of the record in the case, we consider the language of the contract when reviewing the sufficiency of the complaint.”); Stahl v. U.S. Dept. of Ag., 327 F.3d 697, 700 (8th Cir. 2003) (“In a case involving a contract, the court may examine the contract documents in deciding a motion to dismiss.”).

         1. Promissory Estoppel

         In support of their counterclaim of promissory estoppel, defendants[4] allege that GM Financial and defendants had a clear and definite agreement that GM Financial would provide defendants with credit for new and used vehicles. Doc. No. 9 at 12. They allege that GM Financial made a clear promise that it would continue lending to defendants through February 16, 2018.[5] Id. They allege they acted to their substantial detriment in reasonable reliance on the lending agreement and subsequent promise to continue lending to defendants through February 16, 2018. Id. Defendants allege that GM Financial refused to follow through on its promises outlined in the agreement and its promise to continue lending to defendants through February 16, 2018, despite defendants' efforts to reduce indebtedness and follow the loan modification requests. Id. Defendants allege they were placed in an extremely difficult financial position without the necessary operating cash by GM Financial's abrupt and unwarranted refusal to continue the lending timeline as agreed upon by the parties. Id. Due to GM Financial's refusal to continue lending through February 16, 2018, defendants allege they were forced to seek financing from other institutions offering less-favorable terms, suffered cash flow problems that prevented them from timely repaying GM Financial and ultimately had to cease operating. Id. at 13.

         GM Financial argues defendants have not alleged sufficient facts to state a claim of promissory estoppel because the parties' relationship is governed by written agreements. Under Iowa law, [6] the elements of a claim for promissory estoppel are:

(1) a clear and definite promise; (2) the promise was made with the promisor's clear understanding that the promisee was seeking an assurance upon which the promisee could rely and without which he would not act; (3) the promisee acted to his substantial detriment in reasonable reliance on the ...

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