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Mendy Brothers, LLC, v. Bank of New York Mellon

United States District Court, E.D. Louisiana

June 13, 2017

MENDY BROTHERS, LLC, ET AL
v.
BANK OF NEW YORK MELLON ET AL

         SECTION "L" (5)

          ORDER & REASONS

         Before the Court is Defendant Bank of New York Mellon's Motion for Judgment on the Pleadings. R. Doc. 40. Plaintiffs oppose the motion, R. Doc. 46. Defendant timely replies. R. Doc. 54. Having reviewed the parties' arguments and applicable law, the Court now issues this Order and Reasons.

         I. BACKGROUND

         This case arises out of Plaintiffs Edward Mendy's (“Mendy”) and Mendy Brothers LLC's (“Mendy Brothers”) alleged agreement to purchase immovable property from Defendant Bank of New York Mellon (“BNYM”). Plaintiffs maintain this Court has diversity jurisdiction under 28 U.S.C. § 1332. R. Doc. 18 at 1.

         Plaintiff Mendy Brothers and Plaintiff Mendy, an owner of Mendy Brothers, bring this breach of contract claim seeking specific performance. Id. at 17. In October 2015, Mendy discussed the purchase of a home located at 7833 Primrose Street, New Orleans, LA, 70126 (the “Property”) with BNYM's agent, who informed Mendy that the purchase price was negotiable. Id. at 4-5. Mendy and Mendy Brothers made a series of offers on the property, which BNYM rejected. Id. at 6. On April 11, 2016, BNYM countered Plaintiffs' offer with a counteroffer price of $95, 000. Id. On April 12, 2016, BNYM's agent informed Plaintiffs that multiple purchasers had expressed interest in the property and encouraged Plaintiffs to increase their offer; however, Plaintiffs allege that this communication did not indicate a withdrawal of the counteroffer. Id. Plaintiffs responded to BNYM that they did not wish to participate in a bidding war but would consider the outstanding counteroffer, which they accepted via the online management system BNYM used in its real estate transactions. Id. at 7. Plaintiffs contend that this acceptance created a binding contract for the sale and purchase of the Property. Id. However, BNYM accepted a different offer that was higher than the price offered by Plaintiffs. Id. at 8. Plaintiffs seek specific performance and monetary damages for this alleged breach of contract. Id. at 12-13.

         Plaintiffs also allege unjust enrichment and seek the profits Defendants made on the sale of the property and damages for the difference between the agreed-upon price and the increase in property values in the neighborhood. Id. at 14. Plaintiffs also allege they were the victims of a civil conspiracy between BNYM and their unnamed associates, and seek compensatory and punitive damages. Id. at 15.

         Defendant BNYM responded, denying it had a contract with Plaintiffs. R. Doc. 19 at 7. BNYM raised a number of affirmative defenses, including Plaintiffs' failure to mitigate damages, failure to state a claim, res judiciata, waiver, issue preclusion, prescription, preemption and statute of limitations. Id. at 15-16.

         Defendant BNYM asserts a Counterclaim against Plaintiffs, alleging that they wrongfully caused a notice of lis pendens to be filed in the mortgage and conveyance records of Orleans Parish. Id. at 20, 21. BNYM alleges that Plaintiffs did not timely respond to their call for highest and best offers for the Property, and when Plaintiffs' belated offer did arrive, it was lower than other offers. Id. at 23. BNYM contends that the call for highest and best offers effectively rejected offers previously presented, and revoked any counteroffers previously made. Id. Plaintiffs filed a notice of lis pendens at the advent of this court action, which impacted BNYM's ability to sell the Property to the highest bidder. Id. at 21. BNYM alleges that this current court action does not affect title or assert a mortgage or privilege, as required under La. C.C. 3751, because Plaintiffs have no rights to the Property. Id. BNYM seeks damages, the amount of which will be proven at trial. Id.

         II. PRESENT MOTIONS

         A. Defendant BNYM's Motion for Judgment on the Pleadings (R. Doc. 40)

         Defendant explains this is a breach of contract dispute, where Plaintiffs' contend they entered into a contract to purchase residential property with BNYM, and then BNYM refused to sell the property at the agreed upon price. R. Doc. 40 at 1. However, BNYM avers that Plaintiffs' claims for breach of contract, unjust enrichment, civil conspiracy, punitive damages, unfair trade practices and attorney fees are unsupported in fact and law and should be dismissed. Id.

         BNYM provides a factual overview of the negotiations which Plaintiffs' contend created a contract to purchase the residential property. Id. at 3. After some back and forth between the parties' realtors, Plaintiffs claim that BNYM made a counteroffer to sell the property to Plaintiffs for $95, 000. Id. at 3. Plaintiffs contend that they eventually accepted this counter offer through Defendant's online offer management system. However, Defendant explains that the alleged offer and acceptance were not in the form of an authentic act or act under private signature, as required by Louisiana law. Furthermore, Defendant argues Plaintiffs have not alleged the realtor who was involved in the negotiations had the mandate authority to contractually bind Plaintiffs in the sale of immovable property. Id. at 4. As such, Defendant contends that the supposed contract is not enforceable and Plaintiffs have failed to allege facts to support their other claims.

         First, Defendant argues that Plaintiffs' breach of contract claims must be dismissed. Id. at 6. To prevail on a breach of contract claim in Louisiana, the party must prove the obligor undertook an obligation, failed to perform the obligation, and the failure to perform caused damages. Id. To create a binding obligation to buy or sell immovable property, a contract must be memorialized in writing as an authentic act or act under private signature. Id. at 7 (citing La. Civ. Code art. 1839). Furthermore, when such a contract is entered by an agent, that agent must have an express written mandate memorialized as an authentic act or act under private signature granting the agent authority to enter a contract to buy or sell immovable property. Id. at 8. Defendant argues that Plaintiffs have not alleged any facts that the supposed contract or mandate were written as an authentic act or act under private signature. Thus, Defendant argues the purported agreement did not create a binding obligation, and Plaintiffs' breach of contract claims must be dismissed. Id. at 8-9.

         Next, Defendant argues that Plaintiffs' unjust enrichment claim fails as a matter of law. Id. at 10. According to Defendant, a party may only bring suit for unjust enrichment when the law does not provide any other remedy. Id. (citing La. Civ. Code. art. 2298). Defendant contends that because Plaintiffs could, in theory, recover for breach of contract, they cannot recover under a theory of unjust enrichment. Id. at 11. Furthermore, Defendant avers that even if Plaintiffs were entitled to recover on these grounds, they have failed to allege facts to support such a claim. Id. In their Complaint, Plaintiffs claim that Defendant would be unjustly enriched if it sold the property to a third party at a higher price. Defendant argues that such hypothetical speculation is an insufficient basis to pursue an unjust enrichment claim.[1] Id.

         Additionally, Defendant contends that Plaintiffs' claim for civil conspiracy should be dismissed. Id. at 13. Under Louisiana law, civil conspiracy is not a cause of action, but must be accompanied by an underlying tort. Id. Here, Plaintiffs' claim is based on an alleged breach of contract, not a tort, and therefore Defendant contends the civil conspiracy claim fails as a matter of law. Id. Furthermore, Plaintiffs fail to allege any facts that Defendant worked with any other defendants or individuals to effectuate the alleged conspiracy in this case. Id. at 14. Because conspiracy cannot be a solo endeavor, Defendant argues this claim should be dismissed.

         Finally, Defendant addresses Plaintiffs' claims for punitive damages, attorney fees, and unfair trade practices. Under Louisiana law, punitive damages are not recoverable except for the three statutory exceptions. Id. at 15. Plaintiffs' claims do not fall into any of these statutory exceptions, thus, Defendant argues punitive damages are precluded in this case. Id. Next, Defendant avers that the American Rule applies to attorney fees unless such fees are specifically authorized by statute. Id. There is no statute that would entitle Plaintiffs' to attorney fees in this case, and Plaintiffs have not indicated any such basis for recovery. Id. Finally, Defendant avers that as a federally chartered bank insured by the Federal Deposit Insurance Company, it is exempt from any claim under the Louisiana Unfair Trade Practices Act (“LUTPA”). Id. at 16-17. LUPTA does not apply to “any federally insured financial institution, its subsidiaries, and affiliates.” Id. (citing La. Rev. Stat. § 51:1406(1)). Thus, Defendant argues that these claims must also be dismissed.

         B. Plaintiffs' ...


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