BOSTON (LN) — A federal judge in Massachusetts on Monday kept alive LendingClub Bank's breach-of-contract and fraudulent-concealment claims against Valley National Bank, ruling the national banking association plausibly alleged that Valley concealed the full scope of its financial entanglements with a troubled New Jersey borrower while sending monthly participation payments to LendingClub's Boston office.
The dispute traces to April 2020, when Radius Bank — later acquired by and renamed LendingClub — paid $10,000,002.10 to purchase a 20.28 percent stake in a $49,300,000 commercial real-estate loan Valley had made to 1100 American Blvd LLC, a single-purpose entity controlled by New Jersey real-estate investor Shulamit Prager, a principal of Opal Holdings LLC, a real-estate firm based in New York. The sole tenant of the Pennington, New Jersey property was Merrill Lynch, whose lease was set to expire November 30, 2024.
As that deadline approached, LendingClub's Boston-based employees spent months pressing Valley for updates on a potential lease extension. Valley's responses were sparse. On October 26, 2023, Valley employee William Seery told LendingClub the extension option notice was "expected any day." Colleague Ann Wilhelm echoed that the borrower had "not received the notice yet but is expecting any day." By March 2024, LendingClub still had no substantive update, and Merrill Lynch ultimately did not renew.
The complaint alleges Valley's delay in declaring a default was no accident. According to LendingClub, Valley had quietly entered into five other substantial loans with affiliates of the borrower and Prager — an alleged fact Valley did not reveal until a September 27, 2024 call, more than four years into the parties' relationship. LendingClub contends Valley refused to trigger a default on the participation loan because doing so would have cross-defaulted those other loans.
U.S. District Judge F. Dennis Saylor IV held those allegations sufficient to sustain the breach-of-contract claim under New York law. The Participation Agreement required Valley to notify LendingClub of any payment default within ten days. The complaint alleged LendingClub was not told until August 21, 2024, that the borrower had missed its August 1 payment — fifteen days after the default would have been triggered under the underlying mortgage. Had Valley given timely notice, LendingClub argues, it could have forced Valley to repurchase its share of the loan at par value under section 9 of the agreement.
The fraudulent-concealment claim survived on similar logic. Saylor held the complaint adequately alleged that Valley had superior knowledge of its dealings with Prager's affiliates, that LendingClub had no independent means of learning of those dealings, and that Valley withheld the information to avoid being forced to cross-default its other loans. The judge acknowledged the Participation Agreement expressly disclaimed any fiduciary relationship between the banks, but held that a confidential relationship — sufficient to create a duty of disclosure — remained a question of fact at the pleading stage.
Two fraud counts did not make it through. Saylor dismissed LendingClub's claims for constructive fraud and affirmative fraud, holding the complaint failed to identify any particular statement that was false when made. The only candidate for the constructive-fraud claim was a November 5, 2024 statement by Valley employee Angela Morisco that Valley was, according to the complaint, "only just then able to confirm common ownership between AREP and the Borrower." Saylor held that a separate lender's earlier complaint alleging common ownership did not plausibly establish that Valley's statement was false.
Saylor also denied Valley's motion to dismiss for lack of personal jurisdiction, concluding that Valley's five-year course of dealing with LendingClub's Massachusetts-based employees — including hundreds of communications, monthly payments sent to Boston, and at least one in-person visit by Seery to LendingClub's Boston office — satisfied both the Massachusetts long-arm statute and constitutional due-process requirements.
Saylor further denied Valley's motion to transfer the case to the District of New Jersey, where three other actions against Valley involving the same Participation Agreement form and the same borrower are pending before a single judge. The court held those cases distinguishable because LendingClub's claims turn on what Valley said and did specifically toward LendingClub — not on Valley's conduct toward other participants — and because Valley's key employees, including Seery and Wilhelm, worked out of Valley's New York office, not its New Jersey main office.
Valley's implied-covenant claim also survived, with Saylor holding that the allegation Valley refused to declare a default specifically to protect its other Prager loans was at least arguably distinct from the straight breach-of-contract theory.
LendingClub sent Valley a demand letter on December 5, 2024, demanding that Valley cure its defaults and repurchase LendingClub's share of the loan. Valley did not substantively respond.