United States District Court, N.D. Iowa, Western Division
AMERICREDIT FINANCIAL SERVICES, INC., d/b/a GM Financial, Plaintiff,
ADAMS MOTOR COMPANY, et al., Defendants.
MEMORANDUM OPINION AND ORDER
Leonard T. Strand, Chief Judge.
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.
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
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:
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.
Financial acted as AMC's floorplan lender 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.
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
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
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.
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. 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.
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.
Motion to Dismiss Counterclaims
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
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
Ashcroft v. Iqbal, 556 U.S. 662, 677-78 (2009).
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
Financial argues that defendants' counterclaims fail
because defendants signed a Forbearance
Agreement 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
support of their counterclaim of promissory estoppel,
defendants 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. 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.
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,  the elements of a claim for promissory
(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