Opinion ID: 3012532
Heading Depth: 2
Heading Rank: 1

Heading: Claims Dismissed on Basis of Judicial Estoppel

Text: We find that seven of Coast's claims -- Counts One, Four, Six, Seven, Thirteen, Fourteen, and Fifteen -- were dismissed on the basis of the default finding, and we therefore vacate the grant of summary judgment on those claims. The dismissal of Count One, Breach of Contract, most clearly depended on the judicial estoppel finding. The court invoked judicial estoppel in its discussion of this Count, and the court's finding of default formed the only stated basis for granting summary judgment to VCI on this contract claim. See Coast I at 5-7. We vacate the grant of summary judgment as to the breach of contract claim. In dismissing Count Four, Lender Liability, the District Court stated: As this Court has granted summary judgment on plaintiff's contract, good faith and fair dealing, and fiduciary duty claims, the Fourth Count of plaintiff's complaint alleging lender liability will also be dismissed as plaintiff has failed to show any breach of duty by the defendants' actions. Coast I at 8 n.5. Because the court dismissed the contract and good faith/fair dealing claims on the basis of judicial estoppel, this statement suggests that its dismissal of the lender liability claim was based on judicial estoppel as well. We vacate as to this claim. On Count Six, Conversion and Concealment of Assets, the court stated that: the security agreements executed between the parties provided the defendants with the paramount right to possess the collateral in the event of a default, and that Coast would deliver such collateral to the defendants. Thus, as a default had occurred, pursuant to the agreements between the parties, defendants were entitled to a right of possession. Coast I at 10-11 (emphasis added). Because this holding as to the conversion claim depended on the finding of default, we vacate. Count Seven alleged negligent supervision by VCI of its employees. The court stated that this count alleged acts of industrial espionage and tortious interference similar to those contained in other counts (namely Counts 8 and 9, discussed below). The court stated that such claims must fail for the same reasons as previously indicated. Id. at 17 n.10. However, the court also stated that as this Court has found that defendants did not breach the agreements, plaintiff's negligent supervision claim must also fail. Id. (emphasis added). Thus, this claim was dismissed on the basis of the judicial estoppel default finding, which formed the basis for deciding that VCI did not breach the Agreements. We vacate as to this claim. In discussing Count Thirteen, Breach of Implied Contract and Duty of Good Faith, the court held that the duty of good faith cannot be invoked by plaintiff to preclude defendants from exercising their rights under the agreements upon Coast's default. Coast I at 8 (emphasis added). Default thus formed the sole basis for dismissal. We vacate as to this claim. Finally, Counts Fourteen and Fifteen alleged discrimination by VCI under federal and state law respectively, on the basis of Shansab's status as a native of Afghanistan. Coast alleged that VCI terminated Coast's line of credit because of Shansab's race. In its second summary judgment order, in which it dismissed these claims, the court reviewed its first order, and specifically recounted its judicial estoppel finding of default. See Coast II at 2-3. The court expressly relied on the default finding to hold that Coast could not make a prima face case of discrimination in both its federal and state claims because it could not prove that Coast was qualified to continue to receive credit. Id. at 20-21. The court stated at length that its finding of default barred Coast in its discrimination claim. Id. The court also noted that even if Coast could make out a prima facie case, VCI had a race-neutral reason for its action: that Coast was in default, as decided in Coast I by judicial estoppel. Id. at 21-22. The court concluded that Coast's discrimination claims were bereft of any evidence that VCI intentionally discriminated against Coast... when it exercised its rights under the parties' agreements and foreclosed on its collateral. Id. at 22 (emphasis added). Because the District Court's dismissal of these discrimination claims was based heavily on the judicial estoppel finding of default, we vacate as to these claims. B. Claims Dismissed on Grounds Independent of Judicial Estoppel The District Court dismissed nine of Coast's claims against VCI without reliance on the judicial estoppel analysis. We do not find any error in the court's treatment of the following claims, and therefore we affirm the grant of summary judgment to VCI on these claims. With regard to Count Two, Breach of Fiduciary Duty, the court concluded that no independent fiduciary duty is generally owed from a lender to a borrower and that plaintiff has failed to show that defendants owed plaintiff a separate duty of care outside of its obligations under the various loan agreements. Coast I at 8. Although this discussion occurred in the same section in which judicial estoppel was invoked, the court did not rely on the default finding for dismissal. We therefore affirm as to this claim. The court held on Count Three, Fraud, that a mere alleged breach of contract without more does not create the existence of a fraud claim and that plaintiff failed to plead fraud with particularity under Federal Rule of Civil Procedure Rule 9(b). Id. at 9- 10. Default played no role, and we find no error, so we affirm. On Count Five, Trespass, the court similarly did not rely on the default finding but stated that if an individual has a cognizable right to enter the property, no action for trespass may lie and that here defendants had a contractual right to enter Coast's premises in order to inspect and safeguard its collateral, as well as to review Coast's books and records. Id. at 10. To be invoked, the contractual right to enter Coast's premises, inspect, and review did not require default by Coast. We affirm the dismissal of the trespass claim. Count Eight was dismissed because Coast did not meet the elements of industrial espionage. The court construed Count Nine as alleging tortious interference with prospective economic advantage, and found that Coast presented no evidence to support several of the elements of that claim. The court dismissed Count Ten, Unwarranted Issuance of Subpoenas, because Coast presented no evidence that subpoenas were issued wrongly. On none of these counts did the court rely on the default finding, and we find no error in its consideration of these claims. Id. at 16-17. We therefore affirm as to these claims. The court found that the bankruptcy remedy of Equitable Subordination, which Coast requested in Count Eleven, was not warranted here because Coast's bankruptcy case had been dismissed, Coast lacked standing to bring such a claim, and because the equitable remedy was not justified on the facts of this case. Id. at 1112. Default played no role, and we find no error. We affirm the dismissal of Count Eleven. The court found that Coast presented no evidence of agreement to support its claim of Conspiracy between VCI and codefendants AOA and VOA. Id. at 12. Again, default played no role, and we affirm. Finally, the court dismissed Count Sixteen, Violation of 42 U.S.C. 1982, because 1982 does not protect contract rights such as those asserted to be violated here, and therefore Coast could not state a claim under 1982. We affirm.