Bond Safeguard Insurance Co. v. Wells Fargo Bank, N.A.

Case No. 11-15478 (11th Cir. December 21, 2012)
Bond holder sureties ("Sureties") of property developers ("Debtors") lacked standing to bring certain claims against Wells Fargo Bank and Key Bank ("Lenders") because their claims are general in nature and could also be brought by the Debtors. Thus, post-filing general claims against the Lenders may only be asserted by the Trustee of the Estate. The Southern District of Georgia ruling affirmed.
Procedural context:
Debtors filed for bankruptcy and settled all claims by the Debtors against the Lenders. The Sureties subsequently filed suit against Lenders in the Southern District of Georgia and then filed a First Amended Complaint asserting seven causes of action against the Lenders. On May 9, 2011, Lenders filed a Motion to Dismiss the First Amended Complaint for lack of subject matter jurisdiction and for failure to state a claim. The District Court agreed with the Lenders and dismissed the complaint of the Sureties. The Sureties Appealed to the 11th Circuit.
Debtors owned and developed real estate projects in North Carolina, Georgia, and Tennessee. The counties required the Debtors to secure performance bonds for the completion of certain agreed upon infrastructural improvements, and the Sureties issued subdivision bonds in favor of the counties. After Debtors defaulted, the counties looked to the Sureties to satisfy the obligations of the Debtors, and the Sureties made payments of more than $16 million to the counties. In the action against the Lenders, the Sureties allege that the Lenders wrongfully required the Debtors to make payments to the Lenders. Because of these wrongful payments, the Debtors were unable to complete improvements for which the Sureties had issued subdivision bonds, which led the Sureties to pay over $16 million to satisfy the obligations of the Debtors. In their First Amended Complaint, the Sureties alleged: (i) negligence, (ii) breach of fiduciary duty, (iii) money had and received, (iv) tortious interference with contract, (v) unjust enrichment and constructive trust, (vi) negligence per se, and (vii) commercial bad faith.
Marcus, Pryor, Friedman (District Judge for the District of Columbia, sitting by designation)

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