The case centers on an April 14, 2020 loan-participation agreement under which LendingClub's predecessor, Radius Bank, purchased a 20.28398 percent interest — roughly $10 million — in a $49.3 million loan Valley made to 1100 American Blvd LLC, the leasehold owner of a Pennington, New Jersey property whose sole tenant was Merrill Lynch. As Merrill Lynch's lease approached its November 2024 expiration, LendingClub alleges Valley repeatedly delayed, omitted, and misrepresented material information about the lease renewal, the borrower's payment defaults, and — critically — Valley's five other substantial loans to affiliates of the borrower and its principal, Shulamit Prager. LendingClub contends Valley refused to declare the borrower in default in order to avoid triggering cross-defaults on those undisclosed loans.
Judge F. Dennis Saylor IV of the District of Massachusetts denied Valley's motion to dismiss for lack of personal jurisdiction, holding that Valley's contacts with Massachusetts were sufficient to support specific jurisdiction. Valley had solicited and negotiated the Participation Agreement through communications with Radius employees in Boston, sent hundreds of communications and monthly payments to LendingClub's Boston office over five years, and had one of its employees, William Seery, visit the Boston office at least once. The court also denied Valley's motion to transfer the case to the District of New Jersey, finding that Massachusetts had a substantial connection to the dispute and that Valley had not shown the balance of convenience and fairness weighed heavily in favor of transfer.
On the pleadings, the court denied Valley's motion to dismiss the breach-of-contract claim. The complaint plausibly alleged that Valley breached section 9(a) of the Participation Agreement — which required written notice of a payment default within a reasonable time, based on the nature and severity of the default, and in no event more than ten days — by waiting until August 21, 2024, to inform LendingClub of a missed payment that was due August 1. The court also held that the complaint adequately alleged a breach of section 8(b), which required Valley to exercise the same care in servicing the loan as it would for transactions entered into solely for its own account, pointing to allegations that Valley's inaction allowed the borrower to transfer $645,870 out of its Valley accounts before the funds were dissipated.
The implied-covenant claim survived as well. Although most of its allegations overlapped with the breach-of-contract claim, the court held that the allegation that Valley refused to place the borrower in default specifically to avoid cross-defaulting its other Prager-affiliated loans was sufficiently distinct to survive dismissal under New York law.
The fraudulent-concealment claim also proceeded. The court held that the complaint adequately alleged a confidential relationship giving rise to a duty to disclose, notwithstanding the Participation Agreement's express disclaimer of any fiduciary relationship, because the complaint alleged that knowledge of Valley's other loans with Prager affiliates was uniquely in Valley's possession and unavailable to LendingClub through ordinary diligence. The court further held that the complaint plausibly alleged Valley concealed that information to avoid revealing the extent of its relationship with Prager and thereby avoid triggering cross-defaults. The opinion as available in the source packet does not fully resolve the court's analysis of the reliance element; editors should confirm the complete disposition before publication.
The constructive-fraud and affirmative-fraud claims did not survive. The court held that the complaint failed to plausibly allege that any specific statement Valley made was false when made. The primary candidate — a November 2024 statement by Valley employee Angela Morisco that Valley was only then able to confirm common ownership between the borrower and its landlord entity — was not adequately supported by allegations of falsity, and the affirmative-fraud claim failed because the complaint identified no particular false statement about Valley's reasons for not declaring a default.