UMB Bank N.A. v. Asbury Communities, Inc.

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF OKLAHOMA

UMB BANK N.A. in its capacity as (i) )

bond trustee under the Trust Indenture )

dated as of May 1, 2012 between the )

Oklahoma Development Finance )

Authority and the UMB Bank, N.A., (ii) )

Bond Trustee under the Trust Indenture )

dated as of July 1, 2013 between the )

Oklahoma Development Finance )

Authority and UMB Bank, N.A., and (iii) )

Master Trustee under the Master Trust )

Indenture dated as of November 1, 2007 )

among Asbury Communities, Inc., as )

obligated group agent, Inverness Village )

and UMB Bank, N.A. as master trustee, )

)

Plaintiff, )

)

v. ) Case No. 20-CV-160-TCK-CDL

)

ASBURY COMMUNITIES, INC., )

a Maryland nonstock corporation, )

)

Defendant. )

OPINION AND ORDER

Before the Court is the Defendant’s Partial Motion to Dismiss Plaintiff’s Second Amended

Complaint filed pursuant to Federal Rule of Civil Procedure 12(b)(6). (Doc. 55). Plaintiff filed a

Response (Doc. 56), and Defendant filed a Reply. (Doc. 57).

The plaintiff, UMB Bank N.A. (“UMB”) alleges the defendant, Asbury Communities, Inc.

(“Asbury”) breached three separate contracts, all governed under different states’ laws. It also

alleges Asbury tortiously interfered with UMB’s prospective economic advantage with respect to

Inverness Village (“Inverness”), a non-party, and impermissibly interfered with its contract with

Inverness. While Asbury acknowledges UMB’s allegations are enough to avoid dismissal at this

stage on the contract claims, it contends the tort claims should be dismissed as a matter of law.

I. BACKGROUND

Inverness was a nonprofit located in Tulsa, Oklahoma, that owned and operated a

continuing care retirement community. Bonds were issued to raise funds for Inverness. UMB was

the trustee under the bonds and the entity entitled to receive Inverness’ payments. Inverness was

responsible for repaying the principal and interest payments on the bonds. Asbury is a nonprofit,

nonstock corporation which is the sole member of Inverness. Further, Asbury often times funded

Inverness over the years to help Inverness serve its residents.

This litigation emanates from Inverness’ breach of its agreement to repay a debt owed to

UMB. Inverness subsequently filed for bankruptcy. UMB has asserted tortious interference with

prospective business advantage and tortious interference with contract claims against Asbury

under Oklahoma law. Specifically, UMB alleges Asbury’s tortious actions interfered with UMB’s

prospective bond restructuring deal with Inverness, and Asbury’s tortious actions also interfered

with Inverness’ future ability to make bond payments under the Bond Documents.

Asbury, however, contends that UMB was left with limited options due to Inverness’

bankruptcy, and now impermissibly attempts to recover against Asbury by way of its claims for

tortious interference. Asbury asserts in its Motion to Dismiss that “ At the time Inverness filed

bankruptcy, Inverness owed Asbury many million dollars that Asbury will never recover … Now,

even though Asbury had no obligation to continue to fund Inverness when it would never be repaid,

UMB wants Asbury to pay even more money to cover UMB’s alleged financial losses caused by

Inverness’ bankruptcy.” (Doc. 55 at 2).

Inverness defaulted on its payment obligations to UMB in January of 2018 resulting in

financial harm to UMB. According to UMB’s Second Amended Complaint (“SAC”), UMB and

Inverness explored opportunities to restructure the debt and cure Inverness’ default throughout

2018 but these efforts ultimately failed. Now, UMB alleges the restructuring was unsuccessful due

to Asbury’s conduct. Specifically, UMB claims that Asbury tortiously interfered with its

prospective economic advantage by replacing Inverness’ Board of Directors. In its SAC, it also

claims that Asbury interfered by failing to continue to support Inverness financially, continuing to

take management fees, understating Inverness’ liquidity, and failing to implement specific cost-

savings measures that UMB believes should have been implemented. Id. at ¶ 48.

UMB also alleges that Asbury “indicated interest in purchasing Inverness at a distressed

price” as early as March 2018 by offering to purchase Inverness in an effort to become the stalking

horse bidder. SAC at ¶¶ 170-171. However, Inverness received higher offers and ultimately chose

a different bidder. Id. ¶ 175.

II. MOTION TO DISMISS STANDARD

A Complaint must contain “a short and plain statement of the claim, showing that the

pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). A Complaint must contain enough “factual

matters, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal,

556 U.S. 662, 678 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “Threadbare

recitals of the elements of a cause of action, supported by mere conclusory statements, do not

suffice.” Iqbal, 556 U.S. at 678 (citations omitted). The trial court must insist the plaintiff put

forward specific, non-conclusory factual allegations, to assist the court in determining whether the

complaint is plausible. Robbins v. Oklahoma, 519 F.3d 1242, 1249 (10th Cir. 2008). The mere

metaphysical possibility that some plaintiff could prove some set of facts in support of the pleaded

claims is insufficient; the complaint must give the court reason to believe [the] plaintiff has a

reasonable likelihood of mustering factual support for [the] claims.” Id. at 1247.

“The nature and specificity of the allegations required to state a plausible claim will vary

based on the context.” Kansas Penn Gaming, LLC v. Collins, 656 F.3d 1210, 1215 (10th Cir.

2011). A plaintiff is not entitled to file a bare bones complaint and fill in the necessary facts after

discovery is complete. London v. Beaty, 612 Fed. Appx. 910, 916 (10th Cir. 2015). The trial court

must insist that the plaintiff put forward specific, non-conclusory factual allegations, to assist the

court in determining whether the complaint is plausible. Robbins, 519 F.3d at 1249.

III. ANALYSIS

I. Tortious Interference with Contract

UMB alleges Asbury interfered with UMB’s contractual right to receive the full amount of

the Bond Debt from Inverness by “refusing to support Inverness, manufacturing a liquidity crisis

at Inverness, refusing to implement cost saving measures which would have significantly increased

the value of Inverness, and replacing the Inverness Board….” SAC ¶ 224.

To prevail on its claim, UMB must establish:

1) Asbury’s alleged interference was with an existing contractual or business right;

2) Asbury’s alleged interference was malicious and wrongful;

3) the interference was neither justified, privileged nor excusable; and

4) the interference proximately caused UMB damage.

Wilspec Technologies, Inc., 204 P.3d 69, 74 (Okla. 2009). Such a claim is viable only if the alleged

interferer is not a party to the contract or business relationship. Id.

A. Statute of Limitations

The statute of limitations for a tortious interference with contract claim is two (2) years. 12

Okla. Stat. § 95; see also Metro Oil Co., Inc. v. Sun Refining & Marketing Co., 936 F.2d 501, 504

(10th Cir. 1991). UMB has alleged that its tortious interference with contract claim occurred in

January 2018. SAC ¶¶ 21, 77, 80. UMB did not commence this litigation until March 17, 2020.

Therefore, UMB’s claim for tortious interference with contract is barred by the applicable statute

of limitations.

Under Oklahoma law, a cause of action accrues upon the date the tortious act, or the

happening of the breach, and not the date of the resulting damage.” Id. at 504. In its Response,

UMB contends that its claim is based upon “Asbury’s intentional interference with UMB’s rights

under the Existing Contracts after the Initial Default . . . .” (Doc. 56 at p.22). However, one of

UMB’s key allegations is that Inverness stopped making its debt service payments on the Bond

Debt in January 2018 because Asbury announced it would no longer monetarily support Inverness.

See SAC ¶¶ 21, 77, 80. Accordingly, any claim UMB may have had for tortious interference with

contract accrued in January 2018, regardless of whether UMB experienced additional damages as

a result of Inverness’ failure to make subsequent payments.

UMB further argues that it can bypass the limitations period because Inverness made

multiple breaches by failing to make subsequent monthly payments. However, Oklahoma law

provides that UMB’s tort claim accrued from the date of Inverness’ initial default in January 2018.

City of Tulsa v. Bank of Oklahoma, N.A., 280 P.3d 314, 320 (Okla. 2011)(holding that tort claim

based on default by third party on loans accrued from date of first default).

Further, UMB’s argument that it did not have knowledge of Asbury’s alleged tortious

interference until July 2018 is also contradicted by its own allegations in its SAC. UMB alleges

that it knew that Inverness failed to make its debt payments beginning in January 2018 because

Asbury announced it would no longer monetarily support Inverness. See SAC ¶¶ 21, 77, 80.

Because UMB alleges the contract at issue was breached in January 2018, and it knew of the breach

and the alleged cause of the breach at that time, UMB’s tortious interference with contract claim

accrued in January 2018.

Finally, UMB argues that the tortious breach of contract claim is not barred by the two year

statute of limitations because the interference with the existing contracts “and the Restructuring

Opportunities” occurred in July 2018. However, a restructuring opportunity is not a contract and

there can be no tortious breach of contract when the relationship with which the defendant

purportedly interfered is not a contract. Wilspec Technologies, Inc. v. Dunan Holding Group, 204

P.3d 69, 71-72 (Okla. 2009); See also Silver Point Fin., LLC v. Deutsche Bank Trust Co. Ams. (In

re K-V Discovery Solutions, Inc.), 496 B.R. 330, 342 (Bankr. S.D.N.Y. 2013) (Whereas a

refinancing may start a new contract between the parties, a restructuring refers to altering an

already existing contract between the parties.). Therefore, the Court finds the “Bond Restructuring

Opportunity” was a reorganization of, or an amendment to, UMB’s existing contractual

relationship with Inverness. Accordingly, the claim for tortious interference is time-barred.

B. Representative Capacity

UMB’s tortious interference with contract claim also fails because one who acts in a

representative capacity cannot be liable for tortious interference with the contract of its principal.

Ray v. American Nat'l Bank & Trust Co. of Sapulpa, 894 P.2d 1056, 1060 (Okla. 1994); Wilspec

Technologies, Inc. v. Dunan Holding Group, Co., Ltd., 204 P.3d 69, 74 (Okla. 2009). Asbury acted

in a representative capacity on behalf of Inverness in nearly every respect. See SAC ¶ I. As such,

Asbury cannot be held liable for tortiously interfering with contracts in which it acted in a

representative capacity.

The Oklahoma Supreme Court has further determined that a tortious interference with

contract claim can only be maintained against a stranger to the contract. See Ray v. American Nat'l

Bank & Trust Co. of Sapulpa, 894 P.2d at 1060; See also, Wilspec Technologies, Inc. v. Dunan

Holding Group, Co., Ltd., 204 P.3d at 74 (“The claim is viable only if the interferor is not a party

to the contract or business relationship.”). Asbury, as sole member and supporting organization of

Inverness, was not a true stranger to the contract between UMB and Inverness.

II. Tortious Interference with Prospective Economic Advantage

UMB alleges Asbury tortiously interfered with its prospective economic advantage by

replacing the Inverness Board of Directors to prevent approval of the restructuring of the Bond

Debt. In the SAC, UMB also alleges that Asbury interfered with the restructuring opportunity by

continuing to take management fees which are the subject of UMB’s breach of contract claims,

and failing to provide the financial assistance UMB wanted Asbury to provide. SAC ¶ 223. The

elements of a claim for interference with a prospective economic advantage are:

1) the existence of a valid business relation or expectancy;

2) knowledge of the relationship or expectance on the part of the interferer;

3) an intentional interference inducing or causing a breach or termination of the relationship

or expectancy; and

4) resultant damage to the party whose relationship has been disrupted.

Loven v. Church Mutual Insurance Co.,452 P.3d 418, 425 (Okla. 2019). UMB’s allegations do not

establish such a claim.

A. UMB and Inverness had an Existing Contract

A claim for interference with prospective economic advantage is improper where the

parties’ relationship has been reduced to a contract. The Restatement (Second) of Torts provides:

One who intentionally and improperly interferes with another’s

prospective contractual relation (except a contract to marry) is subject to

liability to the other for the pecuniary harm resulting from loss of the

benefits of the relation, whether the interference consists of (a) inducing or

otherwise causing a third person not to enter into or continue the

prospective relation or (b) preventing the other from acquiring or

continuing the prospective relation.

Wilspec Technologies, Inc. v. Dunan Holding Group, Co., Ltd., 204 P.3d 69, 72 fn. 3 (Okla.

2009)(quoting Restatement (Second) of Torts § 766B). As the Restatement suggests, the prospect

of a contract or business relationship is necessary. Courts interpreting Section 766B note “this

Section is concerned only with intentional interference with prospective contractual relations, not

yet reduced to contract.” Pizza Mgmt., Inc. v. Pizza Hut, Inc., 1989 WL 46253, *15 (D. Kan. April

14, 1989) (rev’d on other grounds, 1989 WL 89937 (D. Kan. July 19, 1989); see also Pizza Mgmt.,

Inc. v. Pizza Hut, Inc., 737 F. Supp. 1154, 1161 (D. Kan. 1990); see also Okla. Uniform Jury

Instruction No. 24.2, Notes on Use. A claim for interference with prospective economic advantage

is unavailable where the parties’ relationship “is based on subsisting, not potential, contracts.”

Pizza Mgmt., Inc., 1989 WL 46253, *15.

In its SAC, UMB pleads that it had an existing contract with Inverness for the Bond Debt

and that it was harmed because the Bond Debt was not paid in full (SAC ¶¶ 21, 77, 80, 234).

Accordingly, UMB does not dispute that any expectation of full payment of the debt was based on

the existing contract it had with Inverness.

B. Enforcement of Contractual Rights

The exercise of a contractual right does not amount to tortious interference with prospective

economic advantage. Medical Diagnostic Laboratories, LLC v. Health Care Service Corporation,

772 Fed. Appx. 637, 641 (10th Cir. 2019) (unpublished) (“asserting contractual rights . . . does not

amount to tortious interference.”). Accordingly, any claim for interference based on the

replacement of the Inverness Board [the Bylaws expressly allow Asbury to remove and replace

Inverness Board members], the decision to stop supporting Inverness monetarily [the Management

Services Agreement (“MSA”) expressly provides that Asbury is not responsible for paying

Inverness’ expense when Inverness lacks sufficient funds ¶ II(B)(9)], or any other contractual right

of Asbury [the MSA expressly provides that Asbury was to provide financial forecasting services

only as requested by Inverness and “deemed necessary and appropriate” by Asbury (¶ II(B)(10)],

is not a viable tort claim.

C. Causation

UMB’s allegations in the SAC demonstrate Asbury’s alleged post March 2018 conduct did

not cause UMB’s injuries or Inverness’ breach. Oklahoma jurisprudence makes clear that in order

to recover for tortious interference with contract, the plaintiff must establish the alleged

interference produced the breach of the contract. See Wilspec Technologies, Inc., 204 P.3d at 72

(“Section 766 focuses on conduct directed at a third party which induces the third party to breach

his contract with the plaintiff.”); see also Mac Adjustment, Inc. v. Property Loss Research Bureau,

595 P.2d 427, 428 (Okla. 1979)(plaintiff must establish “damage was proximately sustained as a

result of the complained-of interference.”).

The injury UMB complains of is that it did not receive the full amount of the Bond Debt.

SAC ¶ 232. UMB’s SAC demonstrates Inverness’ conduct, not Asbury’s, caused UMB’s damages.

Id. at ¶ 21 (“In January 2018, Inverness stopped making payment on the Bond Debt and defaulted

on the Bonds ….”). Inverness was obligated to repay the Bond Debt. Id. at ¶¶ 13–14 (“Inverness

agreed to pay principal and interest payments as and when such amounts were due….”). Asbury

had no duty to repay the Bond Debt or fund Inverness’ repayment of the same. See Id. at ¶¶ 13–14

(Asbury was not obligated to make payments); ¶ 80 (Inverness stopped making payments on the

bonds because Asbury announced that it would no longer provide additional loans.).

Further, Inverness’ default, and UMB’s alleged injury, occurred prior to the change of

Board members or the liquidity crisis that UMB alleges was an unlawful interference. UMB’s SAC

establishes the following timeline:

 Inverness defaulted on the Bond Debt in January of 2018. Id. at ¶¶ 21, 80.

 The “cost saving measures” were presented to Inverness’ Board and Asbury

representatives on February 22, 2018. Id. at ¶¶ 101 - 102.

 On February 22, 2018, UMB met with Asbury to review and discuss Asbury’s

projections of Inverness’ financials. Id. at ¶ 101.

 Asbury informed relevant parties of the liquidity crisis in July of 2018. Id. at ¶

172.

 Inverness’ Board was replaced in August of 2018. Id. at ¶¶ 142, 145.

UMB cannot establish that these acts induced Inverness to breach its obligations under the Bond

Debt when they all occurred after Inverness’ default. See Berman v. Davidson Media Virginia

Stations, LLC, 2016 WL 775784, *3 (E.D. Va. Feb. 26, 2016) (“[i]t stands contrary to basic logic

that an event that occurred after the breach of a contract could have caused the same breach.”)

(dismissing tortious interference with contract claim for failure to state a claim); see also Knight

Enterprises, Inc. v. RPF Oil Company, 829 N.W.2d 345, 349 (Mich. App. 2013) (tortious

interference with contract claim failed where defendant’s alleged misconduct occurred after third

party’s breach). As discussed supra, Oklahoma law provides that the tort claim alleged against

Asbury accrued from the date of Inverness’ initial default in January 2018.

D. Interference is Privileged if Undertaken in Good Faith

UMB must also establish Asbury acted without justification, privilege, or excuse. Wilspec

Technologies, Inc., 204 P.3d at 74. “Oklahoma law holds that an actor’s course of conduct is

privileged if its primary focus was protection of the actor’s legitimate economic interests rather

than interference.” Med. Diagnostic Labs., LLC, 772 Fed. Appx. 637 at 641 (internal citations and

quotations omitted). Interference is privileged when it is “undertaken in good faith and for a bona

fide organizational purpose.” Hawk Enterprises, Inc. v. Cash America Intern., Inc., 282 P.3d 786,

793 (Okla. 2012) “[A]lthough this privilege is not absolute and can be lost when the underlying

motive is to harm another, asserting contractual rights does not amount to tortious interference.”

Med. Diagnostic Labs, LLC, 772 Fed. Appx. at 641.

UMB alleges Asbury’s failure to act constitutes tortious interference. For example, UMB

alleges Asbury failed to support Inverness and failed to implement cost saving measures. However,

as stated supra, Asbury had no obligation to support Inverness financially or implement specific

cost savings measures. See MSA ¶ II(B)(3), (5), (9), and (10). The MSA also states:

[Inverness] shall at all times exercise control over the assets

and operation of the Facility ….

[Asbury] shall take no action, expend no funds, and incur

no obligation with respect to Major Decisions affecting the

Facility, unless such Major Decisions have been approved

by the Board of Directors of [Inverness].

SAC at Exhibit 1, §§ I(C) and I(E). The MSA, by its own terms, provides that Asbury was not

required to support Inverness or pay its debts. Id. at ¶ II(B)(9). Further, Asbury could not take

such actions because those responsibilities fell to Inverness. Therefore, Asbury was under no duty

to act and such inaction was justified.

Next, UMB contends Asbury is responsible for the replacement of Inverness’ Board of

Directors and this replacement resulted in UMB not receiving the full amount of the Bond Debt.

The SAC, however, establishes that pursuant to Inverness’ Bylaws, Asbury had the right to replace

Inverness’ Board of Directors. Id. at ¶ 60(d). Asserting a contractual right does not amount to

tortious interference. Med. Diagnostic Labs, LLC, 772 Fed. Appx. at 641. Removing an individual

from his position when such removal is within the scope of the parties’ agreement does not amount

to a tortious interference with contract claim. See, Ransome v. O’Bier, 2017 WL 1437100, *3 (E.D.

Va. April 20, 2017) (dismissing tortious interference with contract claim because reassignment of

principal to an administrative role was within the scope of employment agreement). Accordingly,

UMB’s claim for tortious interference with contract claim is dismissed.

IV. CONCLUSION

The Court finds UMB’s claims for tortious interference with prospective economic

advantage and tortious interference with contract fail as a matter of law. The tortious interference

with contract claim is time-barred, and a tortious interference with contract claim can only be

maintained against a stranger to the contract. The tortious interference with prospective economic

advantage claim fails because Inverness’ relationship with UMB was reduced to a contract and

Asbury’s conduct was authorized. Moreover, Asbury’s alleged conduct did not cause Inverness to

breach its contract with UMB, and Asbury’s alleged conduct was justified. Accordingly,

Defendant’s Partial Motion to Dismiss is granted.

IT IS SO ORDERED this 8th day of October, 2021.