Raspberry Holdings LLC v. NextBank International Inc.

Background

Raspberry Holdings alleged that it entered into a Mortgage Warehouse Security Agreement with NextBank on or about October 3, 2022. The agreement contemplated a revolving credit facility of up to $100 million, including an initial $30 million advance and later advances. Raspberry Holdings alleged that it posted the required collateral and performed its obligations, but that NextBank did not provide funding and later returned the collateral.

The agreement selected New York law and gave exclusive jurisdiction to New York state and federal courts. NextBank is a wholly owned subsidiary of NextPlay. Raspberry Holdings alleged claims for breach of contract, fraudulent and negligent misrepresentation and promissory estoppel, unjust enrichment, and breach of Article 5 of the Uniform Commercial Code. Defendants moved to dismiss for lack of personal jurisdiction and failure to state a claim.

Personal jurisdiction

The court held that it had personal jurisdiction over NextBank. NextBank signed the agreement containing the mandatory New York forum-selection clause, which the court found clear and enforceable. The court also stated that Raspberry Holdings had sufficiently shown specific jurisdiction because NextBank allegedly maintained offices in New York and hosted a meeting there related to negotiating the agreement.

The court reached the opposite conclusion for NextPlay. NextPlay did not sign the agreement, and Raspberry Holdings did not allege conduct by NextPlay in New York independent of NextBank’s conduct. The court found insufficient evidence that NextPlay controlled the negotiation, signing, or performance of the agreement, or that NextBank was merely a department of NextPlay for jurisdictional purposes. Common ownership and financial or organizational ties were not enough. The court therefore held that it could not exercise personal jurisdiction over NextPlay and dismissed NextPlay from the case.

Claims

The court denied the motion to dismiss the breach-of-contract claim against NextBank. Raspberry Holdings adequately alleged the existence of an agreement, its own performance, NextBank’s failure to provide funding, and damages. Although the agreement contained conditions that had to be satisfied before funding was required, the court held that Raspberry Holdings’ general allegations that it performed its obligations were sufficient at the pleading stage. The court stated that NextBank could raise failure to satisfy a particular condition as an affirmative defense.

The court granted the motion to dismiss the second cause of action for fraudulent and negligent misrepresentation and promissory estoppel. The fraud allegations did not identify who made the alleged statements or when they were made, and they did not provide facts creating a strong inference that the statements were knowingly false. The allegations that Defendants misrepresented their ability or intention to fund were also inseparable from the contract claim. Although the alleged statement that Signature Bank guaranteed the Deposit Account Control Agreement concerned a fact separate from the contract’s funding obligation, the court found the allegations about that statement insufficiently specific. The negligent-misrepresentation theory failed because the parties had an arm’s-length business relationship without the special duty required for that claim. The promissory-estoppel theory was barred by the existence of the contract.

The court granted the motion to dismiss the third cause of action for unjust enrichment. Because the written agreement governed the parties’ relationship and its validity was not disputed, Raspberry Holdings could not pursue a quasi-contract claim concerning the same subject matter.

The court granted the motion to dismiss the fourth cause of action for breach of Uniform Commercial Code Article 5. The agreement was not a letter of credit because it did not substitute one party’s credit for another’s and did not contain an irrevocable promise to pay upon presentation of specified documents. It was instead a commercial contract.

Other arguments and disposition

The court rejected Defendants’ argument that the Federal Deposit Insurance Corporation had to be joined as a necessary party. The court concluded that any potential claim involving the Federal Deposit Insurance Corporation and Signature Bank was separate from whether NextBank performed its agreement with Raspberry Holdings, and the case could proceed without the Federal Deposit Insurance Corporation.

The court also rejected Defendants’ argument that the agreement’s forum-selection clause was unavailable because the claims had insufficient value. The court explained that the agreement concerned a transaction of up to $100 million and that the relevant New York statute did not limit enforcement of forum-selection clauses. The court concluded that the motion to dismiss was granted in part and denied in part: NextPlay was dismissed; the motion was granted as to the second, third, and fourth causes of action; and the motion was denied as to the first cause of action for breach of contract against NextBank. The clerk was directed to close the motion.