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Lnv Corporation v. Outsource Service Management, LLC

United States District Court, D. Minnesota

March 4, 2014

LNV Corporation, Plaintiff,
Outsource Service Management, LLC, d/b/a Presidium Asset Solutions and BF-Negev, LLC, Defendants.


JOAN N. ERICKSEN, District Judge.

LNV Corporation brought this action against Outsource Service Management, LLC ("OSM") and BF-Negev, LLC. OSM asserted counterclaims against LNV, and LNV has now moved to dismiss a portion of those counterclaims. ECF No. 56.

For the reasons discussed below, the motion will be denied.


In relevant part, this case arises from LNV and OSM's dispute over their respective rights and obligations stemming from a $140 million construction loan, known as the Lake Austin loan, that was made to a developer to build the Grande Palisades resort and condominium complex near Disney World in Orlando, Florida.[1]

According to OSM's allegations, the Lake Austin loan was originated by the Marshall Financial Group of Minneapolis in 2007. To finance the loan, Marshall entered into participation agreements with a number of different banks. One of them was Columbian Bank of Kansas, which purchased an approximately 4.3% undivided interest in the loan. According to the Participation Agreement, when the borrower made a draw request for an "Advance" of principal from Marshall, Columbian Bank was to deposit its pro rata share of the disbursement into Marshall's designated account. Columbian Bank also agreed to pay its proportion of any "Extraordinary Expenses, " or costs that the lead lender may have to incur to "collect and enforce payment and performance" from the borrower.

In August of 2008, Columbian Bank was closed by the Kansas State Bank Commissioner and the Federal Deposit Insurance Corporation was appointed as receiver.[2] Over a year later, on September 30, 2009, the FDIC-R finalized the sale of a pool of loans owned by Columbian Bank to LNV. Included in this package was Columbian Bank's interest in the Lake Austin loan, which by then was non-performing. As of the date on which LNV signed the Loan Sale Agreement with the FDIC-R, OSM alleges that over $3 million in Advances due under the Participation Agreement had gone unpaid. That shortfall had been made up by a group of other participants in the Lake Austin loan.

By October of 2009, through a series of assignments, OSM had become the lead lender and servicer of the loan. The next month, OSM commenced litigation against the defaulted borrower and its guarantors seeking collection of the debt and a judicial foreclosure on the Lake Austin project. Owing to that litigation and other efforts, OSM alleges that it incurred over $15 million in Extraordinary Expenses.

Since 2009, OSM repeatedly demanded payment from LNV of both the unfunded Advances and its share of the Extraordinary Expenses under the terms of the Participation Agreement. LNV repeatedly refused, and this action followed.


On these allegations, OSM brought counterclaims against LNV for breach of contract, declaratory judgment, and unjust enrichment. With its Motion to Dismiss, LNV argues that a portion of OSM's breach of contract claim should be dismissed for lack of subject matter jurisdiction, and that OSM's declaratory judgment and unjust enrichment claims should each be dismissed both for lack of subject matter jurisdiction and for failure to state a claim on which relief can be granted.

The jurisdictional issues LNV raises under Federal Rule of Civil Procedure 12(b)(1), "whether they involve questions of law or fact, are for the court to decide." Osborn v. U.S., 918 F.2d 724, 729 (8th Cir. 1990) (citation omitted). Accordingly, if the parties submit matters outside the pleadings - as they have done here - the court is

free to weigh the evidence and satisfy itself as to the existence of its power to hear the case. In short, no presumptive truthfulness attaches to the [claimant's] allegations, and the existence of disputed material facts will not preclude the trial court from evaluating for itself the merits of jurisdictional claims. Moreover, the [claimant] will have the burden of proof that jurisdiction exists.

Id. at 730 (quoting Mortensen v. First Fed. Sav. & Loan Ass'n, 549 F.2d 884, 891 (3rd Cir. 1977)). With that said, however, a decision on jurisdiction may be deferred if it is "so bound up with the merits that a full trial on the merits may be necessary to resolve the ...

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