Michael L. Scott; Linda A. Larkin, Plaintiffs-Appellants,
First Southern National Bank, Defendant-Appellee.
Argued: August 9, 2019
from the United States District Court for the Eastern
District of Kentucky at Lexington. No. 5:16-cv-00281-Karen K.
Caldwell, Chief District Judge.
Richard A. Getty, THE GETTY LAW GROUP, PLLC, Lexington,
Kentucky, for Appellants.
C. "Coley" Stilz III, KINKEAD & STILZ, PLLC,
Lexington, Kentucky, for Appellee.
Richard A. Getty, Danielle Harlan, THE GETTY LAW GROUP, PLLC,
Lexington, Kentucky, for Appellants.
C. "Coley" Stilz III, KINKEAD & STILZ, PLLC,
Lexington, Kentucky, Stanton L. Cave, LAW OFFICE OF STAN
CAVE, Lexington, Kentucky, for Appellee.
Before: CLAY, LARSEN, and READLER, Circuit Judges.
Michael L. Scott and Linda A. Larkin filed a five count
Complaint in state court against Defendant First Southern
National Bank ("First Southern") after First
Southern failed to extend additional loans to finance
Plaintiffs' commercial renovation project. First Southern
removed the action to federal district court, properly
invoking federal question jurisdiction, see 28
U.S.C. §§ 1331 and 1441, for Plaintiffs' claims
under the Fair Credit Reporting Act ("FCRA"), 15
U.S.C. § 1681, et seq., and supplemental
jurisdiction over Plaintiffs' related state common law
claims, see 28 U.S.C. § 1367. After discovery,
First Southern moved for summary judgment on all claims. In
response, Plaintiffs filed a motion for partial summary
judgment on their claim that First Southern breached its duty
of good faith and fair dealing. The district court granted
First Southern's motion for summary judgment, denied
Plaintiffs' motion for partial summary judgment, and
entered judgment in favor of First Southern. Plaintiffs filed
this timely appeal.
reasons provided below, we AFFIRM the
own two dental practices, several LLC's that own
properties that Plaintiffs use to generate rental income, a
sports bar, and an indoor basketball gymnasium that they also
rent out as an event center. Around 2009, Scott began
"buying property" that he "could rehab"
because "it was a great time to buy . . . especially in
Cincinnati." (Scott Dep., ECF No. 66-2 at PageID #322.)
To further his property-investment efforts, Scott obtained a
$300, 000 commercial line of credit ("Credit Line")
from First Southern.
had previously taken out several loans from First Southern,
including a home equity loan, a line of credit, and a
construction loan. From his prior dealings with First
Southern, Scott knew that First Southern went through a
"process" before it "len[t] money or renew[ed]
notes to approve people for loans." (Id. at
316.) Scott knew that this process entailed
"collect[ing] . . . financial information about the
borrower" through "[p]ersonal financial
statements" and "credit reports" and gathering
"information about the collateral that's going to be
pledged." (Id. at 317.) And Scott understood
that First Southern evaluated this financial information
before deciding whether to approve a borrower for a loan.
2013, Scott sought a loan from First Southern to convert a
vacant former hotel into 26 apartment units and two
commercial spaces. To support his loan request, Scott
provided First Southern with a total cost estimate of $941,
793.32 for the renovation. Scott submitted the cost estimate
to Rocky Mason, the Community President of First
Southern's Lexington branch who managed Plaintiffs'
accounts at First Southern. Scott and Mason also communicated
about the loan request via text message, discussing, among
other things, the terms of the potential loan, the bank's
appraisal of Scott's collateral, and the bank's
valuation of the renovation project.
First Southern received the cost estimates for the renovation
project from Scott, First Southern followed its usual process
for reviewing a request for a sizable loan. An analyst from
First Southern evaluated Plaintiffs' financial
statements, three years of Plaintiffs' tax returns, and
Plaintiffs' credit report. The analyst compiled
Plaintiffs' financial information into a "loan
presentation" that was submitted to First Southern's
Executive Loan Committee. After reviewing the loan
presentation, the Executive Loan Committee approved
Plaintiffs' loan request.
23, 2013, Plaintiffs and First Southern executed a Commercial
Loan Agreement through which Frist Southern extended
Plaintiffs a commercial loan for the renovation project
("Construction Loan"). The Commercial Loan
Agreement provided that the "maximum total principal
balance" for the Construction Loan "will not exceed
$1, 013, 519.00." (Loan Agreement, ECF No. 66-11 at
PageID #582.) The Commercial Loan Agreement, by its terms,
represented "the complete and final expression of the
understanding between" Plaintiffs and First Southern,
provided that it could "not be amended or modified by
oral agreement," and stated that "[n]o amendment or
modification . . . is effective unless made in writing and
executed" by Plaintiffs and First Southern.
(Id. at PageID #587.)
the Commercial Loan Agreement did not contain any promise
that First Southern would extend additional loans to
Plaintiffs, Scott believed that First Southern would loan him
any extra funds needed to complete the renovation. According
to Scott, he and Mason had discussed the possibility of cost
overruns before Plaintiffs and First Southern entered into
the Commercial Loan Agreement; Mason understood that overruns
were likely and told Scott that because of Scott's
longstanding relationship with First Southern, Mason
"d[id]n't see [Scott] having any problems"
obtaining additional financing. (Scott Dep., ECF No. 66-2 at
PageID #336.) Scott asserts that Mason "represented
[that] the project was going to be finished."
(Id. at PageID #345.) Scott states that he relied on
Mason's assurances that Scott could obtain additional
funding in deciding to finance the project through First
Southern rather than through a different lending institution.
early November 2013, Scott informed Mason via text message
that Plaintiffs would likely need an additional $400, 000 to
complete the renovation. Scott asked Mason to "let me
know as soon as possible" if First Southern "cannot
do" the additional loan because Scott could "get it
from PNC" instead. (Text Messages, ECF No. 66-7 at
PageID #533.) In response, Mason asked Scott to provide a
"breakdown" for the additional $400, 000 Scott
might request. (Id.) Scott stated that he would have
the architect for the renovation project explain to Mason the
reasons for requesting the additional funds.
November 9, 2013 and November 27, 2013, the architect
provided Mason with revised bids for certain individual
components of the renovation. But the architect did not
provide an updated estimate of the total cost to complete the
project. On January 10, 2014, Mason emailed Scott, "[i]f
you will need more funds, we will need to gather an estimate
of what it will cost to complete soon." (ECF No. 77-14
at PageID #1195.) On February 21, 2014, the architect
provided First Southern with an updated cost estimate for the
entire renovation project. The revised total estimated cost
was $1, 654, 648.65, i.e., approximately $712, 000 above the
total cost for the project that Plaintiffs had represented in
their loan application and approximately $640, 000 more than
First Southern had loaned Plaintiffs.
following week, Mason and Scott met in Cincinnati. Mason
states that Scott requested that First Southern loan
Plaintiffs an additional $650, 000; that Mason requested that
Scott present additional collateral to support his new loan
request; and that Scott refused to offer additional
collateral. Scott states that Mason never asked that Scott
provide additional collateral. Scott also asserts that
additional collateral was not needed because he was already
"overcollateralized" on his loans with First
Southern. (Scott Dep, ECF No. 66-2 at PageID #358.) A few
days after their meeting, Scott texted Mason to "try
[his] best to get the whole amount" of the additional
funds that Scott had requested. (ECF No. 66-7 at PageID
initiated the process of reviewing Scott's new loan
request. This process involved obtaining itemized cost
breakdowns from the architect, assembling Plaintiffs'
updated financial information, running new credit checks on
Plaintiffs, and ultimately seeking approval of a new loan
from First Southern's Executive Loan Committee. When
compiling this updated information, an analyst from First
Southern discovered that Plaintiffs had incurred additional
debt in the period since First Southern had approved the
Construction Loan and that Plaintiffs had failed to disclose
this new debt to Frist Southern. After ...