Fortress Systems, L.L.C. v. Bank Of The West

2008 WL 64690 (2008)

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Nature of the Case

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Facts

P needed to open its own manufacturing facility that would mix and package its products. The current investors of $750,000, the Brodericks, were not interested in investing further in P and instead wanted to continue operations as is. P through a new investor, Houston, attempted to buy out the Brodericks for $300,000. They refused. P then merged P into a company owned by Houston. They then applied a Nebraska law allowing for the forced buyout of minority shareholders and bought out the Brodericks. The Brodericks got $87,526. The Brodericks initiated a shareholder lawsuit requesting a temporary restraining order on behalf of themselves and P and John Houston. After the merger and buyout, Houston sought to secure financing for the new manufacturing facility. Christy Edwards, who had worked on P's loan application at US Bank, began working for D and expressed an interest in making the loan to P. At their first meeting with Edwards, P discussed with Edwards how Houston became involved in their business through the forced buyout of the Brodericks and that the Brodericks were suing them and Houston. Edwards testified that there was no discussion regarding the existence of the Broderick lawsuit. In a second meeting Edwards is alleged to have told P in private that if P did everything she asked, P would get the loan. P supplied financial information and D checked it out. At no time did D request, nor did P complete, a formal loan application. D did not have a formal loan application form for commercial lending. Edwards requested that P increase the lease term on the new building from five years to ten years. P did so. D denied every telling P to do so. Edwards is also alleged to told P that in order to get the loan, P needed to start spending $ 320,000 of its own money on the new facility because the Bank wanted Fortress to have its own capital already committed. Edwards denied this. On November 30, 2001, D issued a commitment for a credit facility to P consisting of $ 2.2 million for the build-out and a $1.0 million revolving line of credit. P signed the Commitment Letter. On December 6, 2001, Houston sent a fax outlining issues in the loan documents that to be resolved prior to the closing of the loan. On that same day, Edwards learned from D's legal counsel that it was representing the Brodericks in the Broderick lawsuit. On December 10, 2001, Edwards informed P that the loan would not be made because of the Broderick lawsuit. Edwards told them at the December 10, 2001 meeting that if P could make the Brodericks' lawsuit go away or settle it in a manner that did not adversely impact the company, D would close the loan. Edwards testified that she did not make such a statement because she did not have the authority to do so. P entered into intense settlement negotiations with the Brodericks. The Brodericks would receive approximately $4 million to be paid out of royalties received by the company over a number of years. In order to finance the royalty payments required in the settlement, P negotiated a price increase for their product with GNC. The final settlement agreement was to be signed at the closing of the loan. Because the loan wasn't made, the settlement agreement was never signed. The Broderick lawsuit eventually settled for $17,500 as P declared bankruptcy. The jury found elements of promissory estoppel and damages.