Opinion
Civil Action 21-35
06-17-2021
ALBINO CONSTRUCTION CO., INC. a/d/b/a/ ALBINO CONCRETE CONSTRUCTION, LLC v. WELLS FARGO BANK, NATIONAL ASSOCIATION
MEMORANDUM
R. BARCLAY SURRICK, J.
Plaintiff Albino Construction brings tort claims against Defendant Wells Fargo after Wells Fargo denied Albino a loan under the Paycheck Protection Program (“PPP”)-a program created by Congress to assist small businesses facing hardship during the COVID-19 global pandemic. Wells Fargo's denied Albino's loan because Albino failed to provide the required financial documents as part of its application. Despite this failure, Albino files this lawsuit against Wells Fargo, alleging that the Bank was negligent in processing the loan application and breached fiduciary duties owed to Albino. Presently before us are two motions. Albino seeks remand of the action to the Bucks County Court of Common Pleas. (ECF No. 8.) Wells Fargo seeks dismissal of Plaintiff's Complaint. (ECF No. 3.) For the reasons that follow, Plaintiff's Motion to Remand will be denied and Defendant's Motion to Dismiss will be granted.
I. BACKGROUND
Plaintiff is a Pennsylvania corporation in the business of concrete construction. (Compl. ¶¶ 1, 2, Not. Of Removal Ex. A.) Its principal place of business is located in Holland, Pennsylvania. (Id. ¶ 2.) Wells Fargo Bank, N.A. is a national bank with its main office in Sioux Falls, South Dakota. See https://www.sec.gov/edgar/browse/?CIK=740906 (last visited June 17, 2021); see also Venture Gen. Agency, LLC v. Wells Fargo Bank, N.A., 829 Fed.Appx. 837 (9th Cir. 2020) (noting that Wells Fargo Bank, N.A. is a citizen of South Dakota).
The Securities and Exchange Commission (“SEC”) provides public access to company documents through its Electronic Data Gathering, Analysis, and Retrieval (“EDGAR”) System.
Wells Fargo began making PPP loans to assist small businesses with hardships associated with the COVID-19 pandemic. Congress created the PPP as part of the Coronavirus Aid, Relief, and Economic Security Act, Pub. L. 116-136 (the “CARES Act”). The PPP provided $659 billion in funding for loans to help small businesses meet payroll and cover other expenses. See Dep't of the Treasury, The Paycheck Protection Program (last visited June 17, 2021), https://home.treasury.gov/policy-issues/coronavirus/assistance-for-small-businesses/paycheck-protection-program. While the PPP loans were guaranteed by the Small Business Association (“SBA”), the loans were made by private lenders like Wells Fargo, and not by the federal government.
On July 24, 2020, Albino electronically applied to Wells Fargo for a PPP loan. Albino's application can be found at Exhibit P-2 to its Complaint. (Compl. ¶ 5 & Albino Form 2483, Compl. Ex. P-2.) The application was submitted on SBA Form 2483, the PPP Application Form. (Id.) Use of Form 2483 was required by the SBA. See Business Loan Program Temporary Changes; Paycheck Protection Program, 85 Fed. Reg. 20811-01 (“The applicant must submit SBA Form 2483 (Paycheck Protection Program Application Form) and payroll documentation, as described above.”).
SBA Form 2483 requires that certain financial documents be submitted as part of the application for a PPA loan. Specifically, Form 2483 states:
This form is to be completed by the authorized representative of the Applicant and submitted to your SBA Participating Lender. Submission of the requested information is required to make a determination regarding eligibility for financial assistance. Failure to submit the information would affect that determination.(See Albino Form 2483).
SBA Form 2483 also lists the required documents that applicants must submit to support the “average monthly payroll” figure submitted on the PPA application:
Make sure to also include 2019 IRS 941 quarterly statements (include last 4 quarters), Payroll Tax Form 944, 2019 IRS 940 annual statement on taxable wages and tips paid to your employees (if any) or records from equivalent 3d party payroll processor if applicable.(Id.) There is no dispute that when Albino submitted its Form 2483 to Wells Fargo, it did not include the required 2019 IRS 941 quarterly statements or the Payroll Tax Form 944. Instead, Albino provided the IRS Form 941 for the first quarter of 2020. IRS forms from 2020, however, were not requested on Form 2483.
After it submitted its application, Albino received an e-mail from Wells Fargo acknowledging receipt of the PPP loan application. (See Compl. ¶ 6; July 24, 2020 E-mail, Compl. Ex. P-3.) The email stated that Albino's “Paycheck Protection Loan Application has been received” and that Wells Fargo will continue to provide updates on the status of the application. The Email also states:
We may request additional supporting documentation via email, which we'll submit along with your application to the SBA. If we do not receive these documents by the provided response date, our application may be declined, due to failure to provide the required loan documentation, as required by the SBA.(Id.) Albino was never contacted about deficiencies in the application or to request additional information. (Compl. ¶ 6.)
By letter dated August 10, 2020, Wells Fargo denied Albino's PPP loan. (Compl. ¶ 7; Aug. 10, 2020 Letter, Compl. Ex. P-4.) The letter states:
We carefully reviewed your application for a Paycheck Protection Program (PPP) loan. Unfortunately, your application is not able to be approved at this time.
Based on analysis of the information provided, we are unable to approve your application for the following reason(s):
- Requested information was not provided.(Aug. 10 Letter.)
Albino contacted Wells Fargo to inquire about the denial and specifically about the notation that “requested information was not provided.” (Compl. ¶ 9.) The Wells Fargo representative confirmed that Wells Fargo did not request additional information. (Id. ¶ 8.) The Representative also informed Albino that the deadline for submission of the PPA application had expired. (Id. ¶ 9.)
Albino's Complaint followed and asserts three claims against Wells Fargo: negligence and compensatory damages (Count I); breach of fiduciary duty and compensatory damages (Count II); and breach of fiduciary duty, punitive damages, and attorney fees (Count III).
II. MOTION TO REMAND
Before we address the merits of Defendant's Motion to Dismiss, we must first determine whether we have jurisdiction over this case. Plaintiff argues that we do not and that the case should be remanded to the Court of Common Pleas for Bucks County. Plaintiff contends that the parties are not completely diverse and that the jurisdictional amount requirement is not met.
A. Legal Standard
“[A]ny civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending.” 28 U.S.C. § 1441(a). A defendant may remove a civil action to a district court in cases where “the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between . . . citizens of different States.” 28 U.S.C. § 1332(a). Removal statutes “are to be strictly construed against removal and all doubts should be resolved in favor of remand.” In re Briscoe, 448 F.3d 201, 217 (3d Cir. 2006) (quoting Batoff v. State Farm Ins. Co., 977 F.2d 848, 851 (3d Cir. 1992)). The party seeking federal jurisdiction through removal has the burden of showing that the case is properly before the federal court. Frederico v. Home Depot, 507 F.3d 188, 193 (3d Cir. 2007).
B. Discussion
Albino argues that the parties are not diverse because Albino and Wells Fargo are both citizens of Pennsylvania. It contends that because Wells Fargo is registered to do business in Pennsylvania and maintains branch stores in the state, it should be deemed a citizen of Pennsylvania for purposes of determining federal jurisdiction. Albino's argument has been rejected by the United States Supreme Court. In Washington Bank v. Schmidt, 546 U.S. 303, 307 (2006), the Supreme Court held that “a national bank . . . is a citizen of the state in which its main office, as set forth in the articles of incorporation, is located.” See also Bizzarro v. First Nat'l Bank, 804 Fed.Appx. 190, 191 (3d Cir. 2020) (finding that for purposes of determining diversity jurisdiction, defendant bank was citizen of Pennsylvania only because main office is in Pennsylvania, as set forth in articles of incorporation); Wells Fargo Bank, Nat'l Ass'n v. Akanan, No. 17-159, 2018 WL 4357191, at *1 (W.D. Pa. Sept. 12, 2018) (citing Schmidt and finding that complete diversity exists because Wells Fargo is a citizen of South Dakota). Complete diversity exists here. Albino is a citizen of Pennsylvania and Wells Fargo is a citizen of South Dakota. See Schmidt, 546 U.S. at 307.
Albino also argues that the jurisdictional amount requirement is not met. In its Complaint, Albino alleges that its compensatory damages total $48.742.00. However, in Count III, which asserts a claim for breach of fiduciary duties, Albino also requests “punitive damages and attorney's fees, a sum of which is in excess of $50,000.” (Compl. 11.) Albino argues that because it does not seek a specific sum exceeding $75,000, but instead merely alleges an amount “in excess of $50,000, ” the jurisdictional amount requirement is not met. Albino's argument is meritless.
To remand a case for failing to satisfy the amount in controversy threshold, “[i]t must appear to a legal certainty that the claim is really for less than the jurisdictional amount.” TriState HVAC Equip., LLP v. Big Belly Solar, Inc., 752 F.Supp.2d 517, 529 (E.D. Pa. 2010) (quoting St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288-89 (1938)). Based on the allegations in Albino's Complaint, it does not appear to a legal certainty that the amount of damages, which includes punitive damages, would be less than $75,000. Although Albino's compensatory damages amount falls below the jurisdictional amount requirement, we must take into consideration the punitive damages when assessing jurisdiction where, as here, punitive damages are an available remedy for the claim asserted. See Muchler v. Greenwald, 624 Fed.Appx. 794, 798 (3d Cir. 2015) (“In circumstances where both actual and punitive damages are recoverable, punitive damages are properly considered in determining whether the jurisdictional amount has been satisfied.” (citation and internal quotation marks omitted)); Kremsky v. Kremsky, 758 Fed.Appx. 236, 240 (3d Cir. 2018) (affirming award of punitive damages for breach of fiduciary duty and fraudulent misrepresentation claims). Considering the possibility of punitive damages, it is feasible that Albino's damages amount well exceeds the $75,000 threshold requirement. See e.g., Hayfield v. Home Depot U.S.A., Inc., 168 F.Supp.2d 436, 458 (E.D. Pa. 2001) (concluding that for purposes of subject matter jurisdiction, contemplating an award of punitive damages greater than six times the amount of compensatory damages “would not be an excessive ratio”).
Accordingly, we have jurisdiction over this action and may review Defendant's Motion to Dismiss on the merits. Plaintiff's Motion to Remand will be denied.
III. MOTION TO DISMISS
Wells Fargo seeks dismissal of both claims asserted against it: the negligence claim and the breach of fiduciary duty claim. Wells Fargo argues that neither claim is viable because Wells Fargo as a lender did not owe any duties to Albino as a potential borrower.
A. Legal Standard
Under Federal Rule of Civil Procedure 8(a)(2), “[a] pleading that states a claim for relief must contain a short and plain statement of the claim showing that the pleader is entitled to relief.” Rule 12(b)(6) provides for the dismissal of a complaint, in whole or in part, for failure to state a claim upon which relief can be granted. A motion under Rule 12(b)(6) tests the sufficiency of the complaint against the pleading requirements of Rule 8(a). “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.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
A claim is plausible “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. A complaint that merely alleges entitlement to relief, without alleging facts that show entitlement, must be dismissed. See Fowler v. UPMC Shadyside, 578 F.3d 203, 211 (3d Cir. 2009). Courts need not accept “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements . . . .” Iqbal, 556 U.S. at 678. “While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations.” Id. at 679. This “‘does not impose a probability requirement at the pleading stage,' but instead ‘simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of' the necessary element.” Phillips v. Cty. of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008) (quoting Twombly, 550 U.S. at 556).
B. Discussion
Albino alleges in Count I of the Complaint that Wells Fargo was negligent in the processing of Albino's application for a PPP loan. Under Pennsylvania law, “[i]n order to state a cause of action for negligence, a plaintiff must allege facts which prove the breach of a legally recognized duty or obligation of the defendant that is causally related to actual damages suffered by the plaintiff.” Green v. Pennsylvania Hosp., 123 A.3d 310, 315-16 (2015). To state a negligence claim under Pennsylvania law, Plaintiff must demonstrate the following four elements: “(1) a legally recognized duty that the defendant conform to a standard of care; (2) the defendant breached that duty; (3) causation between the conduct and the resulting injury; and (4) actual damage to the plaintiff.” Newell v. Montana W., Inc., 154 A.3d 819, 822 (Pa. Super. Ct. 2017).
Wells Fargo argues that Albino's negligence claim fails because Wells Fargo did not owe a duty of care to Plaintiff. We agree. Albino has not cited any legal authority, and we are aware of none, that supports a finding that a lender owes a duty of care to a borrower in the processing of a loan application. In fact, the cases suggest that no independent duty is created between lenders and borrowers. See, e.g., Allen v. Wells Fargo, N.A., No. 14-5283, 2015 WL 5137953, at *5 (E.D. Pa. Aug. 28, 2015) (dismissing negligence claim because “[u]nder Pennsylvania law, a lender generally does not owe a duty to a borrower.”). Albino simply alleges without any legal support that Wells Fargo owed it a duty to process its loan application and notify it of deficiencies. “Under Pennsylvania law, a lender acts in his financial interest and does not owe a fiduciary duty to the borrower.” Schnell v. Bank of New York Mellon, 828 F.Supp.2d 798, 806 (E.D. Pa. 2011).
Even if Albino could demonstrate that Wells Fargo owed a duty to it in the processing of the PPP loans, the negligence claim would nevertheless fail because nothing in the Complaint suggests that Wells Fargo breached any duty. Albino's application for the PPP loan was deficient. It did not include required documents for the processing of the loan. The loan was denied on this basis. Simply because Wells Fargo did not flag Albino's deficiencies for Albino does not mean Wells Fargo was negligent. Wells Fargo has no duty to extend loans to potential borrowers with deficient applications. Nor does it have a duty to notify borrowers of mistakes made in loan applications. Accordingly, Albino's negligence claim must be dismissed.
Albino also asserts breach of fiduciary duty claims against Wells Fargo in Counts II and III of the Complaint. Specifically, Albino states that by “accepting” and “processing” its PPP application, Wells Fargo “accepted a fiduciary duty” to “ensure” the proper submission of the loan application. (Compl. ¶ 15.) To prevail on a breach of fiduciary duty claim, Albino must demonstrate: the existence of a fiduciary relationship; that Wells Fargo negligently or intentionally failed to act in good faith and solely for Albino's benefit; and that Albino suffered injury caused by the breach of fiduciary duty. Snyder v. Crusader Servicing Corp., 231 A.3d 20, 31-32 (Pa. Super. Ct. 2020).
Again, Albino has not cited to a single case to support its argument that there exists a fiduciary relationship between lenders and borrowers in the processing of loan applications. The law does not support Albino's position. Under Pennsylvania law, commercial lenders “do not have a fiduciary responsibility to their borrowers.” Morgan v. Bank of Am., N.A., No. 18-3671, 2019 WL 1332179, at *4 (E.D. Pa. Mar. 25, 2019) (dismissing breach of fiduciary duty claim asserted against bank). “There are exceptions to the general rule that lenders are not fiduciaries, such as when a lender gets involved in the borrower's day-to-day management and operations or had the ability to compel the borrower to engage in unusual transactions.” Id.; see also I & S Assocs. Tr. v. LaSalle Nat'l Bank, No. 99-4956, 2001 WL 1143319, at *7 (E.D. Pa. Sept. 27, 2001). These exceptions do not apply in Albino's case.
Even if Albino could establish a fiduciary relationship-which it cannot-the breach of fiduciary duty claims would nevertheless fail. Albino is unable to show that Wells Fargo negligently or intentionally failed to act in good faith and solely for Albino's benefit. Albino did not fill out the PPP loan application properly. It failed to submit required documentation despite that requirement being explicitly stated on the application. That Wells Fargo denied the loan on this basis does not in any way demonstrate Wells Fargo's lack of good faith. Albino's claims for breach of fiduciary duty must also be dismissed.
IV. CONCLUSION
For the foregoing reasons, Plaintiff's Motion for Remand will be denied, and Defendant's Motion to Dismiss will be granted.
An appropriate order follows.