Claims against the lender which had financed an acquisition gone awry were barred by the exculpatory provisions of a subordination agreement. Georgia law applied, and Georgia law permits one contracting party to waive all recourse in the event of breach by the other. The exculpatory provision was valid and an absolute defense to plaintiffs’ claims, and the Court granted the Defendant’s Motion to Dismiss.
Plaintiffs did not have a claims for the breach of the duty of good faith and fair dealing, because the assertion of valid rights under an enforceable agreement does not give rise to such a claim just because the assertion of those rights adversely impacts the parties against whom the rights are asserted.
The tortious interference with contract claim made the the Plaintiffs was also dismissed. Although Plaintiffs had plead all of the elements of that claim, the face of the complaint demonstrated that there was a valid business justification for the Defendant’s actions. A lender exercising its rights to collateral under a standard commercial financing arrangement ordinarily has justification for its actions, and the plaintiff make something more than conclusory allegations about justification.
The Court also rejected a facilitation of fraud claim, holding "[t]o the extent Plaintiffs’ theory is that a commercial lender would agree to defraud a seller of a business by making a loan to the purchaser which the lender agreed in advance would be put in default and that the purchasers of the business would pledge their own assets and provide personal guarantees of the loan knowing it was going into default, such a theory is simply not sustainable."
Plaintiff were also not entitled to proceed on their claim for marshalling of assets, because such a claim is inapplicable where a superior creditor has a right to certain assets.
There was no fiduciary duty under the loan agreement. The lender had not stepped into the shoes of the majority shareholders by exercising its rights under the loan agreement.
The Court granted leave to the Plaintiffs, however to make derivative claims against the lender. It permitted Plaintiffs to assert these claims because a receiver had been appointed for the corporation and he had stated that he would not pursue claims for economic reasons.
Brief in Support of Motion to Dismiss
Brief in Opposition to Motion to Dismiss