The Caper Corporation v. Wells Fargo Bank, N.A.

UNPUBLISHED

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 13-2152

THE CAPER CORPORATION,

Plaintiff - Appellant,

v.

WELLS FARGO BANK, N.A., as successor by merger to Wachovia
Bank, N.A.,

Defendant – Appellee.

Appeal from the United States District Court for the Eastern
District of North Carolina, at Wilmington. James C. Dever III,
Chief District Judge. (7:12−cv−00357−D)

Submitted: March 21, 2014 Decided: July 17, 2014

Before KING and THACKER, Circuit Judges, and DAVIS, Senior
Circuit Judge.

Affirmed by unpublished per curiam opinion.

S. Leigh Rodenbough, IV, James C. Adams, II, Benjamin R. Norman,
BROOKS, PIERCE, MCLENDON, HUMPHREY & LEONARD, LLP, Greensboro,
North Carolina, for Appellant. William L. Esser IV, Matthew H.
Mall, PARKER POE ADAMS & BERNSTEIN LLP, Charlotte, North
Carolina, for Appellee.

Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:

This case arises from an interest rate swap agreement

and accompanying loan contract between Appellant The Caper

Corporation (“Appellant”) and Appellee Wells Fargo (“Appellee”),

as successor in interest to Wachovia Bank, N.A. The district

court dismissed all ten of Appellant’s causes of action, which

sound in both contract and tort, for failure to state a claim

under Federal Rule of Civil Procedure 12(b)(6). For the reasons

that follow, we affirm.

I.

A. 1

Appellant is a real estate development corporation

organized under Florida law and headquartered in North Carolina.

Beginning in the early 1980s, Appellant financed many of its

commercial and residential development projects through loans

obtained from Appellee and its predecessors-in-interest.

Consistent with this relationship, on April 8, 2005, Appellee

loaned Appellant $3.8 million (the “Original Loan”) so that

Appellant could purchase an office building located in

1
The facts set forth in this section are derived from the
complaint, the “documents incorporated into the complaint by
reference,” Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551
U.S. 308, 322 (2007), and the documents “attached to the motion
to dismiss” that are “integral to the complaint and authentic,”
Philips v. Pitt Cnty. Mem’l Hosp., 572 F.3d 176, 180 (4th Cir.
2009).

2
Wilmington, North Carolina (the “Property”). The seven-year

loan agreement, which was secured by a deed of trust to the

Property, included a one-year variable interest rate followed by

a six-year fixed interest rate. Appellant used the loan

disbursement to purchase the Property and, effective July 1,

2005, leased it to a commercial tenant for a term of seven

years.

Several months after executing the Original Loan,

Appellant decided to seek refinancing in order to develop

certain portions of the Property for the tenant’s use. Appellee

responded to Appellant’s inquiry with a term sheet (the “Term

Sheet”) offering a $10.3 million (later reduced by agreement to

$4.3 million), ten-year refinanced loan with a variable interest

rate set at the one-month London Interbank Offered Rate

(“LIBOR”) plus 1.75% (later reduced by agreement to LIBOR plus

1.70%). The proposed refinanced loan, according to the Term

Sheet, would include a 0.25% fee and “[o]ther costs as required

including appraisal fee, environmental assessment, title

insurance and legal fees (if applicable).” J.A. 23. 2 The Term

Sheet further provided that Appellant could obtain a fixed rate

2
Citations to the “J.A.” refer to the Joint Appendix filed
by the parties in this appeal.

3
through a separate interest rate swap agreement, which was

“available upon request.” Id. at 13.

As described by the district court, an interest rate

swap agreement

is a standalone interest rate hedging
instrument whereby two parties pay each
other interest based on a notional principal
amount (i.e., an agreed hypothetical
principal amount). The first party pays a
fixed interest rate to the second party,
while the second party pays a variable
interest rate to the first party. If the
first party is a borrower with a variable
interest rate loan, where the loan interest
rate and swap interest rate are the same,
and the notional principal amount is equal
to the loan principal, the loan holder
effectively pays only a fixed interest rate.
Incoming payments under the interest rate
swap offset any interest due under the loan,
leaving a net payment at the fixed interest
rate.

The Caper Corp. v. Wells Fargo Bank, N.A., No. 7:12-CV-357-D,

2013 WL 4504450, at *1 n.1 (E.D.N.C. Aug. 22, 2013) (internal

citations omitted). Notably, the Term Sheet stated that

Appellee would extend any swap agreement at “a market-derived

rate.” J.A. 22. Appellee orally advised Appellant that the

proposed refinanced loan, on the other hand, was being offered

at “market rates.” Id.

Intent on securing a fixed-rate loan or its

equivalent, Appellant’s president, Walter Pancoe (“Pancoe”),

contacted Appellee about the swap option mentioned in the Term

4
Sheet. Following a brief telephone conversation, Appellee’s

agent, Matt Boss (“Boss”), sent Pancoe a letter (the “Swap

Letter”) proposing an interest rate swap as a way “to hedge

against future interest rate increases on [Appellant’s]

[anticipated] floating rate loan.” J.A. 116. In explaining the

proposed swap, the Swap Letter described, inter alia, the

possibility of “termination fees” if the “swap transaction is

unwound before its stated maturity,” id., and identified some of

the risks involved in executing a swap agreement before closing

on the proposed refinanced loan:

Caper can even use a swap to lock in a fixed
rate in advance of its loan closing. Please
be aware, however, that any swap is a
separate contract and would be an ongoing
obligation whether or not the loan takes
place. The risk of the swap being
unnecessary (because the loan never
materializes or for other reasons) should be
carefully considered by Caper before
entering into a swap to lock in a rate.

Id. at 117 (emphasis supplied); see also id. at 120. The letter

went on to disclaim any advisory role on the part of Appellee,

repeatedly stating that Appellant “must make its own evaluation

of the proposed transaction . . . and the risks involved.” Id.

at 120.

Thereafter, on November 21, 2005, Appellant elected to

enter into a ten-year swap agreement with Appellee (the

“Original Swap Agreement”) prior to closing on the proposed

5
refinanced loan. As is typical in such contracts, the Original

Swap Agreement was governed by an International Swap Dealers

Association Master Agreement and Schedule (collectively, the

“Master Agreement”), which set forth the general terms governing

the transaction, and a more particularized Confirmation

containing the specific financial terms. The swap itself was

based on a notional amount of $4.3 million, pursuant to which

Appellant would make payments at a fixed 6.91% interest rate and

Appellee would make payments at a variable interest rate of the

one-month LIBOR plus 1.70%. By its plain language, the Original

Swap Agreement was set to expire on January 15, 2016 (the

“Termination Date”), and one party would be required to pay the

other a variable, market-based termination fee in the event of

an early termination. 3 The Original Swap Agreement further

provided that the parties were obliged to make all “payments

that become due” under the Agreement “whether or not” the terms

of the ultimate loan differed from the Agreement or “the

Termination Date . . . occur[ed] . . . after the maturity date

of any loan.” J.A. 77.

3
The precise amount of the termination fee, and the party
responsible therefor, depended upon the relative positions of
the fixed rate in the Original Swap Agreement and the market
fixed rate for a swap with the same maturity date and structure
remaining under the Agreement at the time of the early
termination.

6
 At some point after the execution of the Original Swap

Agreement, Appellee decided to align the term of the proposed

refinanced loan with the term of the Property’s existing lease,

shortening its offered loan term from ten to six years. Pancoe

complained to Appellee that, as a consequence of this

modification, the terms of the proposed refinanced loan and the

Original Swap Agreement no longer matched, i.e., the parties’

obligations under the Original Swap Agreement would outlast

their obligations under the proposed refinanced loan by almost

four years. In response, Appellee’s agent, Randall C. Tomsic

(“Tomsic”), allegedly assured Pancoe, “if [Appellant’s]

obligations under the [proposed refinanced loan] ended, its

obligations under the [Original Swap Agreement] would end at the

same time without any additional payment obligations.” J.A. 17.

Mollified by this representation, Appellant entered into a six-

year refinanced loan agreement with Appellee (the “Refinanced

Loan”) on January 23, 2006, in the principal amount of $4.3

million, with a variable interest rate set at the one-month

LIBOR plus 1.70%. 4 The Refinanced Loan was set to mature on

March 15, 2012.

4
Notably, the executed loan documents contain no mention of
the parties’ alleged oral agreement as to the simultaneous
termination, without an accompanying fee, of the of the Original
Swap Agreement and the Refinanced Loan. Rather, the relevant
promissory note provides, “[a]ll swap agreements . . . between
(Continued)
7
 Subsequently, on February 2, 2006, the parties agreed

to amend the terms of the Original Swap Agreement so that the

monthly payments for the Refinanced Loan and the Original Swap

Agreement would fall on the same dates. At this time, the

complaint alleges, Appellee “refus[ed] to amend the [Original

Swap Agreement] to shorten its term” to match that of the

Refinanced Loan “because shortening the term of the Original

Swap would have resulted in a loss to [Appellee] of

approximately $14,000.” J.A. 18. Indeed, the amended

Confirmation ultimately executed by the parties in June 2006

(“Amended Swap Agreement” or “Amendment”) -- which reset the

monthly payment dates for the swap, as the parties agreed --

neither shortened the term of the Original Swap Agreement nor

included any language waiving the early termination fee. To the

contrary, the Amendment actually extended the Termination Date

of the Original Swap Agreement from January 15, 2016, to

February 10, 2016, and added an “Additional Termination Event”

pursuant to which the swap would “terminate and be replaced by

an obligation of one party to make a [termination fee] payment

to the other party” if the Agreement became unsecured after

[Appellant] and [Appellee] . . . are independent agreements
governed by [their] written provisions . . ., which will remain
in full force and effect, unaffected by any repayment [or]
prepayment” of the Refinanced Loan. J.A. 127.

8
March 15, 2012. Id. at 49. The Amendment also incorporated

“[a]ll provisions” of the Master Agreement that were not

“expressly modified” in the Amendment itself. Id.

For the next four years, Appellant made monthly

payments to Appellee as required by the Refinanced Loan and the

Amended Swap Agreement. In April 2011, the tenant of the

Property decided that it would not renew the lease when it

expired in June 2012. As a result, Appellant asked Appellee for

an extension of the Refinanced Loan or, in the alternative, for

a new short-term loan. Appellant also requested that the

Amended Swap Agreement be terminated when the Refinanced Loan

matured “without any additional payment obligation,” as Appellee

had allegedly promised. J.A. 19. In a series of discussions,

Appellee initially “reconfirmed” Appellant’s understanding as to

the contemporaneous termination of the Amended Swap Agreement

and the Refinanced Loan, id., but later advised that it intended

to hold Appellant to the terms of the agreement as written. On

April 11, 2012, after much back-and-forth, Appellee agreed to

extend the term of the Refinanced Loan from March 15, 2012, to

September 30, 2012, and the parties executed a loan modification

to that effect.

Prior to the new maturity date of the Refinanced Loan,

Appellant entered into a contract to sell the Property and

requested a “payoff from [Appellee] for the Refinanced Loan in

9
anticipation of a closing.” J.A. 21. Appellee informed

Appellant that it was invoking its contractual right to withhold

the deed of trust to the Property pending repayment of the

Refinanced Loan, termination of the Amended Swap Agreement, and

satisfaction of any termination fee. On June 28, 2012,

Appellant closed on the sale of the Property and repaid the

Refinanced Loan in full, triggering Appellee’s contractual right

to terminate the swap at a cost to Appellant of $568,337 (the

“Termination Fee”). That same day, Appellant paid the

Termination Fee and executed a Confirmation of Termination, to

which it appended language noting that it acted “under duress[]

and with full reservation of rights to contest its liability for

the Termination Fee.” Id. at 139. Appellee then released the

deed of trust on the Property.

B.

Appellant filed a complaint against Appellee in the

Superior Court of New Hanover County, North Carolina, on

November 26, 2012. Appellee removed the case to the Eastern

District of North Carolina on December 27, 2012, invoking the

court’s diversity jurisdiction pursuant to 28 U.S.C. § 1332.

Subsequently, on January 30, 2013, Appellee moved to dismiss

Appellant’s complaint in its entirety for failure to state a

claim under Federal Rule of Civil Procedure 12(b)(6). The

10
district court granted Appellee’s motion on August 22, 2013.

Appellant timely filed a notice of appeal.

II.

We review de novo the district court’s grant of

Appellee’s motion to dismiss pursuant to Rule 12(b)(6).

Spaulding v. Wells Fargo Bank, N.A., 714 F.3d 769, 776 (4th Cir.

2013). To survive such a motion, the complaint must contain

facts sufficient “to raise a right to relief above the

speculative level” and “state a claim to relief that is

plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S.

544, 555, 570 (2007). Although we must view the facts alleged

in the complaint “in the light most favorable to the plaintiff,”

Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc., 591 F.3d

250, 255 (4th Cir. 2009), we will not accept “unwarranted

inferences, unreasonable conclusions, . . . arguments,” or

“allegations that offer only naked assertions devoid of further

factual enhancement.” U.S. ex rel. Oberg v. Penn. Higher Educ.

Assistance Agency, 745 F.3d 131, 136 (4th Cir. 2014) (internal

quotation marks omitted).

III.

Appellant’s complaint sets forth ten causes of action:

(1) fraud as to the termination fee; (2) negligent

misrepresentation as to the termination fee; (3) duress as to

the termination fee; (4) fraudulent overcharges; (5) negligent

11
misrepresentation as to the overcharges; (6) breach of fiduciary

duty; (7) constructive fraud; (8) unfair and deceptive trade

practices in violation of N.C. Gen. Stat. § 75-1.1; (9)

rescission or reformation of the swap agreement due to

commercial frustration of purpose and mutual mistake; and (10)

rescission or reformation of the swap agreement due to

unsuitability. We hold that the district court correctly

granted Appellee’s motion to dismiss all ten counts.

A.

As a federal court sitting in diversity, we must apply

the substantive law of the forum state, including its choice of

law rules. Kenney v. Indep. Order of Foresters, 744 F.3d 901,

905 (4th Cir. 2014). The proper choice-of-law analysis in North

Carolina varies depending on how a claim is characterized.

Choice of law in contracts cases is governed by the rule of lex

loci contractus, see Tanglewood Land Co. v. Byrd, 261 S.E.2d

655, 656 (N.C. 1980), and choice of law in torts cases is

governed by the rule of lex loci delicti, see Boudreau v.

Baughman, 368 S.E.2d 849, 854 (N.C. 1988). Further, where the

contracting parties have agreed “that a given jurisdiction’s

substantive law shall govern the interpretation of the contract,

such a contractual provision will be given effect.” Byrd, 261

S.E.2d at 656.

12
 The complaint sets forth ten causes of action, eight

tort claims (Counts One – Eight) and two contract claims (Counts

Nine – Ten). The relevant contracts contain a New York choice

of law provision, and the parties agree that the law of New York

applies to Counts Nine and Ten. See J.A. 73 (“[T]his Agreement

will be governed by and construed in accordance with the law of

the state of New York[.]”). The parties disagree, however, as

to the law to be applied to the tort claims set forth in Counts

One – Eight. Appellee favors New York law, while Appellant

prefers that of North Carolina. Nevertheless, the parties

concede that the approach to interpreting the tort claims is the

same under either legal regime. In the interest of simplicity,

and because it will not affect the outcome of this appeal, we

will analyze the tort claims under the law of North Carolina.

See Okmyansky v. Herbalife Int’l of Am., Inc., 415 F.3d 154, 158

(1st Cir. 2005) (“[W]hen the resolution of a choice-of-law

determination would not alter the disposition of a legal

question, a reviewing court need not decide which body of law

controls.”).

13
 B.

1.

Counts One and Two:
Fraud and Negligent Misrepresentation (Termination Fee)

In Counts One and Two of its complaint, Appellant

alleges that Appellee fraudulently or negligently misrepresented

that Appellant’s obligations under the Original and Amended Swap

Agreements (collectively, the “Swap Agreement”) would end,

without any financial penalty to Appellant, upon the

satisfaction or termination of the Refinanced Loan. The

district court held that Appellant did not state a claim for

fraud or misrepresentation because its “reliance on such oral

misrepresentations was not reasonable or justifiable in light of

the written contract.” The Caper Corp. v. Wells Fargo Bank,

N.A., No. 7:12-CV-357-D, 2013 WL 4504450, at *7 (E.D.N.C. Aug.

22, 2013). We agree.

To state a claim for actual fraud, the plaintiff must

allege facts plausibly showing that (1) the defendant made a

false representation of a material fact; (2) the defendant made

the representation with the intent to deceive the plaintiff; (3)

the plaintiff relied on the representation and its reliance was

reasonable; and (4) the plaintiff suffered damages because of

its reliance. See Forbis v. Neal, 649 S.E.2d 382, 387 (N.C.

2007). Pursuant to Federal Rule of Civil Procedure 9(b), the

14
plaintiff must plead with particularity “the time, place, and

contents of the false representations, as well as the identity

of the person making the misrepresentation and what he obtained

thereby.” McCauley v. Home Loan Inv. Bank, F.S.B., 710 F.3d

551, 559 (4th Cir. 2013) (internal quotation marks omitted). To

state a claim for negligent misrepresentation, the plaintiff

must allege facts plausibly showing that it “‘[1] justifiably

relie[d] [2] to [its] detriment [3] on information prepared

without reasonable care [4] by one who owed the relying party a

duty of care.’” Dallaire v. Bank of America, N.A., --- S.E.2d -

---, 2014 WL 2612658, at *5 (N.C. 2014) (quoting Raritan River

Steel Co. v. Cherry, Bekaert & Holland, 67 S.E.2d 609, 612 (N.C.

App. 1988)).

The “question of justifiable reliance [for negligent

misrepresentation claims] is analogous to that of reasonable

reliance in fraud actions.” Marcus Bros. Textiles, Inc. v.

Price Waterhouse, LLP, 513 S.E.2d 320, 327 (N.C. 1999) (internal

quotation marks omitted); see also Helms v. Holland, 478 S.E.2d

513, 517 (N.C. 1996) (“Justifiable reliance is an essential

element of both fraud and negligent misrepresentation.”). For

both claims, the recipient of a representation must use

reasonable care to ascertain the truth of that representation in

order to reasonably rely on the same. See Fox v. S. Appliances,

Inc., 141 S.E.2d 522, 526 (N.C. 1965). A plaintiff, in other

15
words, “cannot establish justified reliance . . . if [it] fails

to make reasonable inquiry regarding the alleged statement.”

Dallaire, 2014 WL 2612658, at *5. Where a plaintiff “could have

discovered the truth [about the misrepresentation] upon inquiry,

the complaint must allege that [the plaintiff] was denied the

opportunity to investigate or . . . could not have learned the

true facts by exercise of reasonable diligence” in order to

survive a motion to dismiss. Pinney v. State Farm Mut. Ins.

Co., 552 S.E.2d 186, 192 (N.C. App. 2001) (emphasis supplied)

(internal quotation marks omitted); see also Oberlin Capital,

L.P. v. Slavin, 554 S.E.2d 840, 846–47 (N.C. App. 2001); Hudson–

Cole Dev. Corp. v. Beemer, 511 S.E.2d 309, 313 (N.C. App. 1999).

As a corollary of this broader principle, “[a] person

who executes a written instrument is ordinarily charged with

knowledge of its contents and may not base an action for fraud

on ignorance of the legal effect of its provisions.” Int’l

Harvester Credit Corp. v. Bowman, 316 S.E.2d 619, 621 (N.C. App.

1984) (internal citations omitted). A party who signs a written

contract

is under a duty to ascertain its contents,
and in the absence of a showing that he was
wilfully misled or misinformed by the
defendant as to these contents, or that they
were kept from him in fraudulent opposition
to his request, he is held to have signed
with full knowledge and assent as to what is
therein contained.

16
Harris v. Bingham, 97 S.E.2d 453, 454 (N.C. 1957); see also

Davis v. Davis, 124 S.E.2d 130, 133 (N.C. 1962) (“One who signs

a written contract . . . is bound thereby unless the failure to

read is justified by some special circumstance.”). In the

absence of some further misconduct on the part of the defendant,

then, a plaintiff who relies upon a misrepresentation that is

directly contradicted by a subsequent written agreement cannot

establish justifiable reliance sufficient to support a claim of

fraud or negligent misrepresentation as a matter of law. See

Isley v. Brown, 117 S.E.2d 821, 823–24 (N.C. 1961); Cobb v.

Penn. Life Ins. Co., 715 S.E.2d 541, 549 (N.C. App. 2011);

Sullivan v. Mebane Packaging Group, Inc., 581 S.E.2d 452, 459

(N.C. App. 2003); Bowman, 316 S.E.2d at 621. 5

Here, Appellant seeks relief for fraud and negligent

misrepresentation on the grounds that it detrimentally relied on

Tomsic’s assurances that, “if [Appellant’s] obligations under

the [proposed refinanced loan] ended, its obligations under the

5
Notably, the general rule charging “[a] person who
executes a written instrument . . . with knowledge of its
contents” and foreclosing a related action for fraud “do[es] not
apply to situations in which the person making the
misrepresentations stands in a fiduciary relationship to the
signing party.” Bowman, 316 S.E.2d at 621 (citing Vail v. Vail,
63 S.E.2d 202, 206 (N.C. 1951)). Although Appellant seeks to
take advantage of this exception, we conclude, for the reasons
explained in greater detail below, that Appellant has failed to
establish the existence of a fiduciary relationship with
Appellee. Consequently, we will not address this exception.

17
[Original Swap Agreement] would end at the same time without any

additional payment obligations.” J.A. 17. The complaint

alleges that Tomsic made this representation at some point

between November 21, 2005, when the parties executed the

Original Swap Agreement, and January 23, 2006, when the parties

executed the Refinanced Loan. Critically, as reflected in both

the complaint and the accompanying contracts, Appellant executed

the Amended Swap Agreement after this alleged misrepresentation

took place, despite the fact that Appellee “refus[ed] to amend

the [Original Swap Agreement] to shorten its term and address

Appellant’s concerns.” J.A. 19.

The Amendment, by its plain terms, provided that the

Swap Agreement would not terminate until February 10, 2016, well

after the maturation date of the Refinanced Loan, and set forth

a monthly payment schedule through that date. The “Additional

Termination Event” included in the Amendment further stated

that, if the Agreement became unsecured after March 15, 2012 --

the scheduled closing date of the Refinanced Loan -- “all

obligations under this [Amendment] w[ould] terminate and be

replaced by an obligation of one party to make a payment to the

other party” under the provisions of the Master Agreement

covering termination fees. Id. at 49 (emphasis supplied); see

also id. (“Such payment will be due . . . by the party obligated

to pay that amount under [the Master Agreement].”). Appellant

18
also acknowledged, inter alia, “that the payments due by it

under this [Amendment] shall be due . . . whether or not . . .

the term of any Financing is shorter or longer than the Term of

this [Amendment], or any other terms of any Financing differ

from the terms of this [Amendment].” Id. at 47.

The final clause of the Amendment reads, “[a]ll

provisions contained in or incorporated by reference in the

Master Agreement will govern this [Amendment] except as

expressly modified herein.” J.A. 49 (emphasis supplied). Those

“govern[ing]” terms include a merger clause, which states that

the Master Agreement and any Confirmations “constitute[] the

entire agreement and understanding of the parties . . .

supersed[ing] all oral communication and prior writings with

respect thereto,” and a clause prohibiting oral amendments,

which specifies that “[n]o amendment, modification or waiver . .

. will be effective unless in writing . . . and executed by each

of the parties or confirmed by an exchange of telexes or

electronic messages on an electronic messaging system.” Id. at

64. Finally, in addition to setting forth a detailed process

for calculating termination fees, the Master Agreement states,

[Appellant] . . . understands that the terms
under which any Transaction may be
terminated early are set forth in this
Agreement (including any Confirmation of
such Transaction), and any early termination
of a Transaction other than pursuant to the
provisions of this Agreement (including any

19
 such Confirmation) is subject to mutual
agreement of the parties confirmed in
writing, the terms of which may require one
party to pay an early termination fee to the
other party based upon market conditions
prevailing at the time of early termination.

Id. at 75 (emphasis supplied); see also id. at 77.

As the foregoing provisions exemplify, Appellee’s

alleged oral misrepresentation -- that the Swap Agreement and

the Refinanced Loan would contemporaneously terminate without an

early termination fee –- is directly contradicted by the

unambiguous written terms of both the Amendment and the Master

Agreement. Appellant admits to receiving the Amendment, which

was sent by facsimile, from Appellee. See J.A. 18 (alleging

that Appellee “sent [the Amendment]” to Appellant on June 6,

2006); see also id. at 46-53, 86-92 (executed copies of the

Amendment attached to the complaint and the motion to dismiss,

respectively). The Amendment required Appellant to “confirm

that the foregoing correctly sets forth the terms of our

agreement by executing a copy . . . and returning it to

[Appellee].” Id. at 50. Pancoe “[a]ccepted and [c]onfirmed”

the Amendment with his signature, the authenticity of which is

unchallenged. Id.

The complaint does not allege that Appellee

misrepresented the character or terms of the Amendment itself or

otherwise interfered with Pancoe’s ability to read and

20
understand the same. 6 Indeed, the full extent of the

misrepresentation alleged in the complaint is Appellee’s pre-

Amendment oral promise to permit the early termination of the

Original Swap Agreement without an attendant termination fee --

the complaint does not charge Appellee with providing any

assurances as to whether this alleged agreement survived the

parties’ execution of the Amendment. Appellant thus could have

immediately ascertained the truth of its post-Amendment

liability for a termination fee by simply reviewing the plain

language of the Amendment and the Master Agreement, which it had

a duty to read. See Davis, 124 S.E.2d at 133.

The reasonableness of a party’s reliance “is generally

a question for the jury, except in instances in which ‘the facts

are so clear as to permit only one conclusion.’” Dallaire, 2014

WL 2612658, at *5 (quoting Marcus Bros., 513 S.E.2d at 327). In

6
Although Appellant alleges that Appellee “deceptively”
inserted the Additional Termination Event into the Amendment
without its “prior agreement,” it neither disputes Pancoe’s
execution of the contract as written nor provides any sort of
factual elaboration as to how this alleged “decepti[on]” was
achieved. J.A. 18. This allegation is thus nothing more than a
“‘naked assertion[] devoid of further factual enhancement,’” and
we will not credit it. U.S. ex rel. Oberg v. Penn. Higher Educ.
Assistance Agency, 745 F.3d 131, 136 (4th Cir. 2014) (quoting
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)); see also Nemet
Chevrolet, Ltd. v. Consumeraffairs.com, Inc., 591 F.3d 250, 255
(4th Cir. 2009) (“[B]are assertions devoid of further factual
enhancement fail to constitute well-pled facts for Rule 12(b)(6)
purposes.”).

21
this case, even accepting as true that Appellee orally

misrepresented Appellant’s obligation to pay a termination fee,

Appellant still cannot establish that it justifiably relied on

that misrepresentation as a matter of law. In terms of the

relevant pleading requirements, because Appellant “could have

discovered the truth [about the misrepresentation] upon

inquiry,” it was required to –- and did not -- allege that “[it]

was denied the opportunity to investigate or . . . could not

have learned the true facts by exercise of reasonable

diligence.” Pinney, 52 S.E.2d at 192 (internal quotation marks

omitted). With respect to the claims’ substantive merit,

Appellant’s reliance on Appellee’s oral misrepresentation was

not reasonable or justifiable as a matter of law because the

misrepresentation was directly contradicted by numerous

provisions of the subsequently-executed Amendment and the

governing Master Agreement. See Bowman, 316 S.E.2d at 621. On

both fronts, we conclude that Counts One and Two of Appellant’s

complaint fail to state claims for fraud or negligent

misrepresentation under Fed. R. Civ. P. 12(b)(6) and were

properly dismissed.

2.

Count Three: Duress

In Count Three of its complaint, Appellant alleges a

claim of economic duress resulting from Appellee’s refusal to

22
release the deed of trust to the Property until Appellant paid

the termination fee. Pursuant to the Master Agreement, Appellee

was entitled to hold any collateral supporting the Swap

Agreement “[u]ntil such time as all such obligations of

[Appellant] are completely satisfied notwithstanding any

repayment, acceleration, satisfaction, discharge or release of

any . . . loan or other financing.” J.A. 77. The deed of

trust, too, allowed Appellee to hold the deed until Appellant

paid all obligations due under the Swap Agreement. See id. at

104-105 (granting Appellee the Property “in fee simple” to

“secure payment and performance of obligations under” the Swap

Agreement until “all [o]bligations are timely paid and

performed”). Inasmuch as “[a] threat to do what one has a legal

right to do cannot constitute duress,” Bell Bakeries, Inc. v.

Jefferson Std. Life Ins. Co., 96 S.E.2d 408, 416 (N.C. 1957)

(internal quotation marks omitted), we conclude that the

district court properly dismissed Count Three for failing to

state a claim under Fed. R. Civ. P. 12(b)(6).

3.

Counts Four and Five:
Fraud and Negligent Misrepresentation (Overcharges)

In Counts Four and Five of its complaint, Appellant

alleges that Appellee fraudulently or negligently misrepresented

that Appellant would receive a “market rate” as the fixed rate

23
under the Swap Agreement. In actuality, Appellant alleges, the

6.91% fixed interest rate was approximately 32 basis points

(.32%) above the interdealer broker market rate, resulting in

“overcharges” of at least $97,666. J.A. 24. The district court

dismissed both of these claims, concluding that Appellant

“fail[ed] to plausibly allege that [Appellee] misrepresented

that it offered [Appellant] the interdealer broker market rate.”

Caper Corp., 2013 WL 4504450, at *10. Again, we agree.

The complaint provides scant support for the

conclusion that Appellant was entitled to the interdealer broker

market rate, which Appellant itself admits is “a closed market[]

open to only the largest commercial and investment banks.” J.A.

23. Appellant relies primarily on the following two

allegations: (1) Appellee “represented the interest rate swap

would be extended to [Appellant] at ‘a market-derived rate’” in

the Term Sheet; and (2) “Boss similarly advised Pancoe in

telephone conversations that the Refinanced Loan was being

offered to Caper at market rates.” Id. at 22. Appellant

contends that these two statements, taken together, caused it to

believe that Appellee was offering the Swap Agreement at “market

rates,” i.e., the “interdealer broker market rate” with “no mark

up” for Appellee. Id. at 23. This understanding was bolstered,

Appellant claims, by the fact that the Term Sheet disclosed the

24
fees Appellee would collect for the proposed refinanced loan but

did not disclose any fees for the proposed swap agreement. Id.

The relevant allegations in the complaint, as set

forth above, consist primarily of a few vague and undated

averments of Appellee’s purported misrepresentations, which are,

in turn, couched in terms of both “market rate” and “market-

derived rate.” J.A. 22 (emphasis supplied). Critically, the

complaint is completely devoid of any allegation that Appellee

ever explicitly offered Appellant the interdealer broker market

rate or even intimated that the interdealer broker market rate

was, in fact, the “market rate” or “market-derived rate” to

which it referred. See, e.g., Caper Corp., 2013 WL 4504450, at

*10 (observing that “[t]he phrase ‘market-derived rate’ implies

something other than a market rate.”). The complaint further

contains no allegation that Appellant sought any sort of

clarification as to the meaning of “market rate” before

allegedly relying to its detriment on its own definition. See

Dallaire, 2014 WL 2612658, at *5 (“A party cannot establish

justified reliance on an alleged misrepresentation if the party

fails to make reasonable inquiry regarding the alleged

statement.”). Indeed, as described by the district court, the

complaint “state[s] nothing more than conjecture on

[Appellant’s] part that [Appellee’s] offer of a ‘market rate’ or

25
‘market-derived rate’ meant the ‘interdealer broker market

rate.’” Caper Corp., 2013 WL 4504450, at *10.

Even viewing the adequately pleaded facts in

Appellant’s favor and giving it the benefit of all reasonable

inferences, we must conclude Appellant has failed to plausibly

allege that Appellee offered the fixed rate of the Swap

Agreement at the interdealer broker market rate or that

Appellant justifiably relied on such a representation. We thus

agree with the district court that Appellant has failed to state

a claim for fraud or negligent misrepresentation under Fed. R.

Civ. P. 12(b)(6) with respect to Appellee’s alleged

“overcharges.”

4.

Counts Six and Seven:
Breach of Fiduciary Duty and Constructive Fraud

In Counts Six and Seven of its complaint, Appellant

alleges that Appellee breached its fiduciary duty to Appellant

and committed constructive fraud. Both of these claims require

the existence of an antecedent fiduciary relationship between

Appellant and Appellee. See Green v. Freeman, 749 S.E.2d 262,

268 (N.C. 2013) (“‘For a breach of fiduciary duty to exist,

there must first be a fiduciary relationship between the

parties.’” (quoting Dalton v. Camp, 548 S.E.2d 704, 707 (N.C.

2001))); Forbis, 649 S.E.2d at 388 (“A claim of constructive

26
fraud . . . . arises where a confidential or fiduciary

relationship exists.” (internal quotation marks omitted)). We

conclude, as did the district court, that Appellant has failed

to allege facts sufficient to state a plausible claim of a

fiduciary relationship with Appellee.

As a general rule, “[a] fiduciary relationship . . .

aris[es] when ‘there has been a special confidence reposed in

one who in equity and good conscience is bound to act in good

faith and with due regard to the interests of the one reposing

confidence.’” Dallaire, 2014 WL 2612658, at *3 (quoting Green,

749 S.E.2d at 268). Such relationships are ordinarily

“characterized by ‘confidence reposed on one side[] and

resulting domination and influence on the other,’” which results

in “a heightened level of trust and the duty of the fiduciary to

act in the best interests of the other party.” Id. at *3

(quoting Dalton, 548 S.E.2d at 708). Ordinary borrower-lender

or debtor-creditor relationships, in contrast, are marked by

arm’s length transactions and do not typically give rise to

fiduciary duties. See id. at *4 (“[B]orrowers and lenders are

generally bound only by the terms of their contract and the

Uniform Commercial Code.” (citation omitted)). Nevertheless, it

remains at least “theoretically” possible for “a particular

bank-customer transaction to ‘give rise to a fiduciary relation

27
given the proper circumstances.’” Id. (quoting Branch Banking &

Trust Co v. Thompson, 418 S.E.2d 694, 699 (N.C. App. 1992)).

Appellant, in short, does not allege in its complaint

any facts that would show Appellee had the “amount of control

and domination required to form a fiduciary relationship outside

that of the normal relationships recognized by law.” S.N.R.

Mgmt. Corp. v. Danube Part. 141, LLC, 659 S.E.2d 442, 451 (N.C.

App. 2008) (internal quotation marks omitted). Appellant’s

longstanding business relationship with Appellee, particularly

Appellee’s role in “author[ing] the terms and details of many of

[Appellant’s] financial transactions,” J.A. 12, is indicative of

nothing more than a typical lender-borrower or debtor-creditor

relationship. See Thompson, 418 S.E.2d at 699 (The “mere

existence of a debtor-creditor relationship . . . [does] not

create a fiduciary relationship.” (internal quotation marks

omitted)). Similarly, Appellee’s “superior knowledge of the

terms and risks and pricing” of interest rate swap agreements,

J.A. 36, does not give rise to a concomitant duty for Appellee

to put the interests of Appellant, a corporation with equal

bargaining position dealing at arm’s length, ahead of its own.

See S. Atl. Ltd. P’ship of Tenn. L.P. v. Riese, 284 F.3d 518,

533 (4th Cir. 2002) (“[E]ven when parties to an arms-length

transaction have reposed confidence in each other, no fiduciary

duty arises unless one party thoroughly dominates the other.”

28
(citing Tin Originals, Inc. v. Colonial Tin Works, Inc., 391

S.E.2d 831, 833 (N.C. App. 1990))).

The remaining allegations in the complaint with

respect to Appellant’s relationship with Appellee consist

primarily of conclusory recitations of the elements of a breach

of fiduciary duty claim and are entitled to no weight. See

Caper Corp., 2013 WL 4504450, at *8. Consequently, we conclude

that the district court properly dismissed Appellant’s breach of

fiduciary duty and constructive fraud claims pursuant to Fed. R.

Civ. P. 12(b)(6).

5.

Count Eight: Unfair and Deceptive Trade Practices

In Count Eight of its complaint, Appellant alleges

that Appellee engaged in acts or practices prohibited by North

Carolina’s Unfair and Deceptive Trade Practices statute

(“UDTPA”), N.C. Gen. Stat. § 75–1.1. Appellant does not

identify any specific violations of the UDTPA within this count,

but instead incorporates generally all of the complaint’s

preceding allegations. On this count, too, we conclude that

Appellant has failed to allege facts sufficient to state a claim

under Fed. R. Civ. P. 12(b)(6).

To state a claim for unfair or deceptive trade

practices, the plaintiff must allege facts plausibly showing

that “‘(1) [the] defendant committed an unfair or deceptive act

29
or practice, (2) the action in question was in or affecting

commerce, and (3) the act proximately caused injury to the

plaintiff.’” Bumpers v. Comm’y Bank of N. Virginia, 747 S.E.2d

220, 226 (N.C. 2013) (quoting Dalton, 548 S.E.2d at 711). If

the claim arises from the defendant’s alleged misrepresentation,

the plaintiff must also plausibly allege that it “reasonabl[y]

reli[ed]” on that misrepresentation. Id. An act is “deceptive”

if it has a tendency or capacity to deceive a reasonable

businessperson, see RD & J Props. v. Lauralea–Dilton Enters.,

LLC, 600 S.E.2d 492, 501 (N.C. App. 2004), and “unfair” if it is

“immoral, unethical, oppressive, unscrupulous, or substantially

injurious to consumers” such that it “amounts to an inequitable

assertion of . . . power or position,” Carcano v. JBSS, LLC,

684 S.E.2d 41, 50 (N.C. App. 2009) (internal quotation marks

omitted). Whether actions are deceptive or unfair within the

meaning of the UDTPA is a question of law. Dalton, 548 S.E.2d

at 711.

On appeal, Appellant takes the position that

“everything alleged [in the complaint] constitutes an unfair and

deceptive trade practice.” Appellant’s Br. 49. We are

unconvinced. The allegedly unlawful acts or practices

identified in the complaint are either factually unsubstantiated

or well within Appellee’s contractual rights –- none “have the

capacity to deceive a reasonable businessperson,” RD & J Props.,

30
600 S.E.2d at 501, or otherwise qualify as unfair or deceptive

under the UDTPA. In any event, as we have already discussed,

the complaint fails to establish reasonable reliance on

Appellee’s alleged misrepresentations as a matter of law,

precluding Appellant from seeking relief under N.C. Gen. Stat.

§ 75–1.1. See Bumpers, 747 S.E.2d at 226-27. We therefore

affirm the district court’s dismissal of this count.

6.

Counts Nine and Ten: Rescission or Reformation

In Counts Nine and Ten of its complaint, which are

governed by New York law, 7 Appellant seeks reformation or

rescission of the Swap Agreement on the grounds of commercial

frustration of purpose, mutual mistake, and unsuitability.

Although there is some debate as to whether Appellant preserved

its right to pursue these claims by executing the Confirmation

of Termination “under duress[] and with full reservation of

rights to contest its liability for the Termination Fee,” J.A.

139, we will simply assume, without deciding, that Appellant’s

rights have been preserved.

7
As we have explained, the substantive law governing these
claims is dictated by the New York choice of law provision in
the Swap Agreement. See J.A. 73 (“[T]his Agreement will be
governed by and construed in accordance with the law of the
state of New York[.]”).

31
 a.

Frustration of Purpose

Appellant contends that it is entitled to rescission

or reformation of the Swap Agreement because the artificial

depreciation of LIBOR, coupled with the ensuing worldwide credit

crisis that began in October 2008, “dramatically increased the

interest rate risk of [Appellant] as opposed to hedging or

limiting it,” frustrating the purpose of the Swap Agreement.

J.A. 38. We conclude that Appellant has failed to allege facts

sufficient to establish entitlement to the remedies of

rescission and reformation.

The frustration of purpose doctrine is traditionally

employed as an affirmative defense to a contract claim,

operating to discharge a party from its outstanding contractual

obligations due to a supervening frustration. See Restatement

(Second) of Contracts § 265. The defense is applicable where an

unanticipated “‘change in circumstances makes one party’s

performance [under a contract] virtually worthless to the other,

frustrating his purpose in making the contract.’” PPF

Safeguard, LLC v. BCR Safeguard Holding, LLC, 924 N.Y.S.2d 391,

394 (N.Y. App. Div. 2011) (quoting Restatement (Second) of

Contracts § 265 cmt. a). “[T]he frustrated purpose must be so

completely the basis of the contract that, as both parties

understood, without it, the transaction would have made little

32
sense.” Crown It Servs., Inc. v. Koval–Olsen, 782 N.Y.S.2d 708,

711 (N.Y. App. Div. 2004). The doctrine is a “narrow one,” id.,

and its utility is “limited to instances where a virtually

cataclysmic, wholly unforeseeable event renders the contract

valueless to one party,” United States v. Gen. MacArthur Senior

Village, Inc., 508 F.2d 377, 381 (2d Cir. 1974).

We note at the outset that it is far from clear

whether the frustration of purpose doctrine, which ordinarily

operates as an excuse for nonperformance, is an appropriate

vehicle for the claim at issue here, i.e., an affirmative cause

of action seeking rescission or reformation of a fully-performed

contract. We need not dwell on this question, however, as

Appellant’s claim -– whether or not appropriately framed –- is

substantively meritless. As detailed in the complaint and the

accompanying contracts, the Swap Agreement was not rendered

“virtually worthless” by the depreciated LIBOR. PPF Safeguard,

LLC, 924 N.Y.S.2d at 394. Pursuant to the plain terms of the

Swap Agreement, Appellant made payments at a fixed interest rate

throughout the entire term of the Refinanced Loan. Appellant

was thus protected from the uncertainty of a variable interest

rate and, indeed, paid precisely “the amount of interest it

agreed to and expected to pay under the Swap Agreement.” Caper

Corp., 2013 WL 4504450, at *12. To the extent the ultimate

Termination Fee was higher than Appellant may have hoped for or

33
expected, “[i]t is not enough” for the purposes of the

frustration of purpose doctrine “that the transaction has become

less profitable for the affected party or even that he will

sustain a loss.” Rockland Dev. Assoc. v. Richlou Auto Body,

Inc., 570 N.Y.S.2d 343, 344 (N.Y. App. Div. 2004).

We agree with the district court that the purpose of

the Swap Agreement was not frustrated. Appellant’s claim for

relief based on the frustration of purpose doctrine, to the

extent it even states a viable claim, thus fails as a matter of

law.

b.

Mutual Mistake

With respect to Appellant’s mutual mistake claim, a

mutual mistake may be a ground for reforming or rescinding a

contract where “the parties have reached an oral agreement and,

unknown to either, the signed writing does not express that

agreement.” Chimart Assocs. v. Paul, 489 N.E.2d 231, 234 (N.Y.

1986). “The mutual mistake must exist at the time the contract

is entered and must be substantial.” Gould v. Bd. of Educ. of

Sewanhaka Cent. High Sch. Dist., 616 N.E.2d 142, 146 (N.Y.

1993). More specifically, “[t]he mistake must be ‘so material

that . . . it goes to the foundation of the agreement.’” Simkin

v. Blank, 968 N.E.2d 459, 462 (N.Y. 2012) (quoting Da Silva v.

Musso, 428 N.E.2d 382, 387 (N.Y. 1981)). Court-ordered relief

34
should not be granted on the basis of a mutual mistake except in

“exceptional situations.” Id. (internal quotation marks

omitted).

Here, Appellant alleges that the parties were mutually

mistaken as to whether LIBOR was “a rational and fundamentally

sound choice for [the] floating [interest] rate” to be used in

the Swap Agreement. J.A. 38. The alleged importance of this

understanding to the Swap Agreement, however, is belied by the

contract itself, which makes clear that the parties entered into

the Agreement in order to receive the difference between the

floating and fixed interest rates. See Simkin, 968 N.E.2d at

462 (“The mistake must . . . go[] to the foundation of the

agreement.’” (emphasis supplied) (internal quotation marks

omitted)). The Swap Agreement makes no mention of whether the

parties believed LIBOR to be a fundamentally sound market

indicator, much less whether such an understanding was the basis

for the parties’ selection of a LIBOR-derived variable interest

rate. To the contrary, as the district court noted, “[t]he

complaint shows that the parties chose the one-month LIBOR rate

not for its virtue as a fundamentally sound market indicator,

but in order to match the terms of the [Refinanced Loan].”

Caper Corp., 2013 WL 4504450, at *11.

Inasmuch as Appellant’s allegedly “foundational”

concern as to the reliability of LIBOR is completely absent from

35
any of the relevant contracts or supporting documentation, this

case does not present one of those “‘exceptional situations’”

warranting reformation or rescission on the basis of a mutual

mistake. Simkin, 968 N.E.2d at 462 (quoting Da Silva, 428

N.E.2d at 387). This claim, consequently, fails as a matter of

law.

c.

Unsuitability

Finally, Appellant sets forth a claim for rescission

or reformation based on “unsuitability” as “a variation on its

breach of fiduciary duty claim.” Appellant’s Br. 55. We need

not resolve the parties’ dispute as to whether this claim exists

under New York law –- it necessarily fails for lack of a

fiduciary relationship. We therefore affirm the district

court’s dismissal of this claim.

IV.

For the foregoing reasons, the judgment of the

district court is

AFFIRMED.

36