United States District Court, N.D. Illinois, Eastern Division
FDIC AS RECEIVER FOR SEAWAY BANK AND TRUST CO., Plaintiff/Counter-Defendant,
URBAN PARTNERSHIP BANK, Defendant/Counter-Plaintiff.
MEMORANDUM OPINION AND ORDER
Robert Blakey United States District Judge
Federal Deposit Insurance Company as Receiver for Seaway Bank
and Trust Company (FDIC-R) sued Urban Partnership Bank (UPB)
for the return of deposits that Seaway paid toward an
unsuccessful sale of certain loans. [1-1]. The FDIC-R claims
that there was no meeting of the minds between Seaway and
UPB, so the sale agreement under which UPB asserts rights to
the deposits never existed. Id. The FDIC-R seeks a
declaratory judgment that UPB and Seaway never entered a
binding agreement, and brings a conversion claim for
UPB's continued possession of Seaway's deposits.
Id. UPB asserts an estoppel counterclaim and
affirmative defense that seek to compel the FDIC-R to uphold
UPB's agreement with Seaway, as well as affirmative
defenses for “failure to do equity” and
“failure to state a claim.” . This opinion
addresses the FDIC-R's motion to dismiss UPB's
counterclaim and strike its affirmative defenses.
Court incorporates by reference, and presumes familiarity
with, its prior opinion sustaining UPB's related
third-party complaint, . This Court provides additional
facts relevant to UPB's counterclaim and affirmative
defenses against the FDIC-R but only briefly revisits the
relevant transactions, which were also alleged in the
September 2015, UPB prepared to sell the loan portfolio in an
online auction and hired First Financial Network (FFN) as its
loan sale adviser.  ¶¶ 3-4. From October 14,
interested buyers could visit FFN's website for
information about the loan portfolio, including the terms and
conditions of sale. Id. ¶¶ 5-7, 10. On
consultation with UPB, FFN updated the terms and conditions
on October 22, notifying bidders of the change. Id.
¶¶ 11-12;  at 3. The updated terms required
bidders to submit a loan servicing plan with their bid,
addressing how loan payments would be “collected and
administered after the servicing transfer date” if the
bidder won. See  ¶ 13. The terms and
conditions also provided that the terms of sale in the loan
sale agreement (LSA) were non-negotiable. Id. ¶
posted the LSA online on October 30. Id. ¶ 16.
The LSA proposed a closing date of December 11, 2015, for the
sale of the portfolio. Id. ¶ 17. The LSA
provided that the servicing transfer date for loans
not subject to the Real Estate Settlement Procedures
Act (RESPA) was the closing date-December 11. Id.
¶¶ 19- 20. The LSA's provision for RESPA loans
incorporated RESPA by reference; reading the LSA and RESPA
together, UPB would transfer all RESPA loan servicing to the
buyer on December 26 (15 days after the closing). See
id. ¶¶ 21-22.
registered as a bidder around October 16. Id. ¶
26. The deadline for bids was November 17. Id.
¶ 23. To place a bid, bidders had to submit sealed bids
through the site managed by FFN, and wire an initial deposit
of $100, 000 to FFN's designated depository. Id.
¶ 24. Before the deadline, Seaway reviewed the terms and
conditions on FFN's website and in the LSA; Seaway then
contacted FFN to ask it to waive the requirement that Seaway
submit a loan servicing plan “because Seaway is a
bank.” Id. ¶¶ 27-28. FFN granted
Seaway a one-day extension, authorizing it to submit a
servicing plan by November 18. Id. ¶ 29.
November 17, Seaway's Chief Credit Officer submitted
Seaway's bid certification to FFN; the certification
acknowledged that the bidder “accepts all terms and
conditions” in the relevant sale documents, including
the LSA and the posted terms and conditions of sale.
Id. ¶¶ 30-31. Seaway submitted its bid
online without any contingencies or conditions. Id.
¶¶ 32-33. Seaway wired its initial deposit to FFN
on November 17 and provided its servicing plan on November
18. Id. ¶¶ 35-36. Seaway's servicing
plan included a one-page outline and PowerPoint slides about
a third-party loan servicing provider. Id. ¶
37. Seaway's servicing plan and accompanying email did
not indicate that Seaway sought to alter the servicing
transfer date. See id. ¶¶ 38-39. UPB
accepted Seaway's bid on November 23, 2015, and released
all other bids for the portfolio. Id. ¶¶
40-41. Seaway wired its final deposits to FFN's
designated depository on November 24. Id. ¶ 42.
December 4, Seaway told FFN that-contrary to the provisions
of the LSA-it could not service the loans until at least 120
days after the December 11 closing date.  at 5; 
¶¶ 43-36. Seaway never signed the LSA and failed to
pay the balance of the purchase price on the closing date, as
required by the terms and conditions, the LSA, and
Seaway's bid certification.  ¶¶ 48-49. On
December 11, UPB declared that Seaway had defaulted under the
terms of the loan sale agreements. Id. ¶ 50.
UPB had FFN transfer Seaway's deposits to UPB and inform
Seaway that UPB considered it in default. Id.
relied upon Seaway's reputation, bid certification, bid
submission, and issuance of deposits when it declared Seaway
to be the winner of the portfolio auction and dismissed all
other bidders. Id. ¶¶ 53-58. As a result
of Seaway's failure to purchase the portfolio on December
11, UPB incurred the costs of the failed auction, and of
carrying the loans for an additional period before
remarketing and ultimately selling them at a lower price.
Id. ¶ 62.
sued UPB and FFN for its deposits in January 2016, and the
FDIC-R substituted as Plaintiff in February 2017.  at 1-2.
On the same day, the FDIC-R removed the case to this
district. Id. at 2-3. In March 2017, the FDIC-R
voluntarily dismissed its claims against FFN. . UPB
asserts one counterclaim against the FDIC-R for equitable
estoppel, and raises three affirmative defenses: equitable
estoppel, failure to do equity, and failure to state a
motion to dismiss under Federal Rule of Civil Procedure
12(b)(6) “challenges the sufficiency of the complaint
for failure to state a claim upon which relief may be
granted.” Gen. Elec. Capital Corp. v. Lease
Resolution Corp., 128 F.3d 1074, 1080 (7th Cir. 1997). A
counterclaim must meet the same standard as a complaint to
survive a motion to dismiss. See Cozzi Iron & Metal,
Inc. v. U.S. Office Equip., Inc., 250 F.3d 570, 574 (7th
Cir. 2001). Thus, it must provide a “short and plain
statement of the claim showing that the pleader is entitled
to relief, ” Fed.R.Civ.P. 8(a)(2), giving the
counter-defendant “fair notice” of the claim
“and the grounds upon which it rests, ” Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting
Conley v. Gibson, 355 U.S. 41, 47 (1957)). It must
state a facially plausible claim to relief, such that the
alleged facts permit “the reasonable inference”
that the counter-defendant is liable for the misconduct
alleged. Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009). In evaluating a counterclaim, this Court draws all
reasonable inferences in the counter-plaintiff's favor
and accepts all well-pleaded allegations as true. See
id. This Court need not, however, accept legal
conclusions or conclusory allegations. McCauley v. City
of Chicago, 671 F.3d 611, 616 (7th Cir. 2011).
motion to dismiss under Rule 12(b)(1) challenges the basis
for federal jurisdiction. On such motions, this Court also
accepts well-pleaded allegations as true and construes
reasonable inferences in the counter-plaintiff's favor.
See Scanlan v. Eisenberg, 669 F.3d 838, 841 (7th
Cir. 2012). But the Court may also consider other evidence
submitted on the issue of jurisdiction, including matters
outside the counterclaim's allegations. See Johnson
v. Apna Ghar, Inc., 330 F.3d 999, 1001 (7th Cir. 2003).
The claimant bears the burden of proving jurisdiction.
See Silha v. ACT, Inc., 807 F.3d 169, 173 (7th Cir.
Rule 12(f), courts may strike a party's
“insufficient defense or any redundant, immaterial,
impertinent, or scandalous matter.” Courts rarely grant
motions to strike; they are generally disfavored for their
dilatory effect and frequent use as a means to make arguments
beyond the page limits of the merits briefs. See Custom
Vehicles, Inc. v. Forest River, Inc., 464 F.3d 725,
726-27 (7th Cir. 2006). A motion to strike should succeed
only when it removes “unnecessary clutter from the
case, ” and thus expedites rather than delays
resolution on the merits. Heller Fin., Inc. v. Midwhey
Powder Co., Inc., 883 F.2d 1286, 1294 (7th Cir. 1989).
This Court will not strike affirmative defenses that are
“sufficient as a matter of law” or that present
genuine “questions of law or fact, ” but such
defenses must still satisfy “all pleading
requirements” of the Federal Rules. Id.