                    United States Court of Appeals
                          FOR THE EIGHTH CIRCUIT
                               ________________

                                  No. 09-2072
                               ________________

John Dubinsky, et al.,                   *
                                         *
            Plaintiffs-Appellants,       *
                                         *      Appeal from the United States
      v.                                 *      District Court for the Eastern
                                         *      District of Missouri.
Mermart, LLC,                            *
                                         *
            Defendant-Appellee.          *
                                         *
                                         *

                               ________________

                          Submitted: January 12, 2010
                              Filed: February 10, 2010
                               ________________

Before GRUENDER and SHEPHERD, Circuit Judges, and JARVEY,1 District Judge.
                        ________________

JARVEY, District Judge.

      John Dubinsky, William Stern, Alvin Siteman, Eldon Schoenberg, David
Rasch, and Jack Cregan (“Subordinate Bondholders”) invested in a refinancing
venture for a real estate development. They sued the developer of the project,
Mermart, L.L.C. (“Mermart”), alleging breach of contract and demanding equitable


      1
        The Honorable John A. Jarvey, United States District Judge for the Southern
District of Iowa, sitting by designation.
accounting for failure to pay interest under the financing documents, as well as
alleging unjust enrichment, negligence, and fraudulent misrepresentation based on
alleged representations that the project was free from environmental hazards. The
district court2 dismissed the contract claims, finding that the Subordinate Bondholders
failed to obtain written consent of UMB Bank, N.A. (“UMB Bank”), the Senior
Mortgagee, as required by the financing documents. The district court also dismissed
the negligence, unjust enrichment, and fraudulent misrepresentation claims because
the economic loss doctrine precluded recovery. For the following reasons, we affirm.

                                 I. BACKGROUND

       In 2001, Mermart commenced a $47.3 million redevelopment of the historic
Merchandise Mart Building in downtown St. Louis to convert the property into a
mixed-use apartment and retail building. During the renovation, Mermart retained a
third-party contractor to remove lead based paint found in the building. The
renovation was complete in 2003 when the Missouri Department of Natural Resources
issued a certificate of occupancy. In preparation for a later refinancing, Mermart hired
Consulting Solutions, Inc. to conduct an independent environmental assessment
report. This report, dated April 6, 2005, revealed the continued presence of lead paint
and suggested that further remediation was necessary.

      On Dec. 1, 2005, Mermart executed a Subordinate Trust Indenture
(“Indenture”) with itself as the borrower, the Industrial Development Authority of the
City of St. Louis (“IDA”) as issuers of the Series B subordinate bonds (“Series B
bonds”), and UMB Bank as the Trustee. Together with the Indenture, Mermart also




      2
        The Honorable Carol E. Jackson, United States District Judge for the Eastern
District of Missouri.

                                          -2-
completed a series of associated refinancing documents3 (collectively, “Financing
Documents”) on the same day. The Financing Documents specified that UMB Bank
would act as the Trustee for the Subordinate Bondholders and as the Trustee for the
Senior Mortgagees, UMB Bank4 and the Federal Home Loan Mortgage Corporation
(“Freddie Mac”). The Subordinate Bondholders then purchased the Series B bonds
from the IDA. The Series B bonds bore a fixed annual interest rate of 10 percent from
January 15, 2006 to June 15, 2036, at which time the entire principal amount of $1.1
million was also due.

       Beginning in 2007, as units became available, Mermart began to remediate the
continued presence of the lead paint. Mermart characterized the cost of removal as
an “upgrade” expense, rather than a capital expense. This allowed Mermart to deduct
the removal costs from the funds available to the Subordinate Net Loan Operating
Income (“SLNOI”), used to make the interest payments to the Subordinate
Bondholders. On April 28, 2008, the Subordinate Bondholders notified UMB Bank
that Mermart had committed an Event of Default under the Financing Documents by
Mermart’s failure to make the contractual interest payments. The Trustee, UMB
Bank, responded to the Subordinate Bondholders on August 26, 2008 and declined to
take legal action against Mermart.




      3
       The other refinancing documents include: a Subordination Agreement; a
Subordinate Loan Agreement; a Subordinate Multifamily Note; a Subordinate
Multifamily Deed of Trust, Assignment of Rents, and Security Agreement; and an
Assignment of Subordinate Security Instrument.
      4
       UMB Bank served numerous roles in this transaction. For example, UMB
Bank was a backer of the redevelopment venture in the guise of Senior Mortgagee,
along with Freddie Mac. UMB Bank was also the trustee for senior bondholders,
while concurrently the trustee to any subordinate interests, including the Subordinate
Bondholders.

                                         -3-
       The Subordinate Bondholders, who own 51 percent of the bonds issued,
thereafter brought this action seeking damages for breach of contract, equitable
accounting, negligence, unjust enrichment, and fraud. Mermart filed a motion to
dismiss pursuant to Federal Rules of Civil Procedure 12(b)(6) and 9(b), seeking
dismissal because the Subordinate Bondholders failed to obtain the written consent
of the Senior Mortgagee prior to bringing suit. Mermart asserted that the fraudulent
misrepresentation claim was not pled with particularity, or, in the alternative, that the
negligence, unjust enrichment, and fraudulent misrepresentation claims were
precluded by the economic loss doctrine.

       The district court granted Mermart’s motion to dismiss in its entirety. At issue
was whether section 707 of the Indenture controlled, which imposed no restrictions
on bringing suit, or whether sections 4(b) and 5(c) of the Subordination Agreement
required written consent of the Senior Mortgagee before filing suit. Dubinsky, et al.
v. Mermart, L.L.C., 2009 WL 1011503, at *3 (E.D. Mo. Apr. 15, 2009). The court
agreed with the latter interpretation, finding that the Subordinate Bondholders “were
required under the financing documents to obtain the written consent of the Senior
Mortgagee [UMB Bank] . . . [and] the action was filed without satisfying the
applicable prerequisites contained within the financing documents.” Id. at *4. The
court added that “upon a finding that plaintiffs were restricted by the Subordination
Agreement, the claims for an equitable accounting and breach of contract should be
dismissed.” Id.

       Next, the court found separate and independent grounds for dismissal of the
negligence, unjust enrichment, and fraudulent misrepresentation claims. The court
held that the negligence claim was an issue “based on” the Financing Documents and
was “precluded by the Subordination Agreement,” again, because the Subordinate
Bondholders did not first seek written consent to file a claim, and also because the
negligence claim was precluded by the economic loss doctrine. Id. at *5. The unjust
enrichment claim failed for similar reasons. Id. at *6. Lastly, the court held that the

                                          -4-
fraudulent misrepresentation claims failed because the alleged fraudulent
misrepresentations did not “pertain to any matter outside of or collateral to the
contracts.” Id. at *7.

      The Subordinate Bondholders appeal.

                                  II. DISCUSSION

      We review de novo a motion to dismiss for failure to state a claim under Rule
12(b)(6). Ashley County, Ark. v. Pfizer, Inc., 552 F.3d 659, 665 (8th Cir. 2009). To
survive a motion to dismiss, a claim must have “facial plausibility when the plaintiff
pleads a factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 129 S.Ct. 1937,
1949 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955,
167 L.Ed.2d 929 (2007)). We must take all facts alleged in the complaint as true, but
“threadbare” assertions of a cause of action are insufficient. Charles Brooks Co. v.
Ga. Pac., L.L.C., 552 F.3d 718, 721 (8th Cir. 2009).

      At the outset, we must determine whether the Subordination Agreement
required the Subordinate Bondholders to obtain the written consent of the Senior
Mortgagee before bringing the enforcement action. The Subordinate Bondholders
argue that this condition precedent to bringing enforcement actions under sections
4(b) and 5(c) of the Subordination Agreement applies only to the Subordinate
Mortgagees and not to the Subordinate Bondholders. They argue that section 707(a)
of the Indenture—which does not require written consent—details the procedure
applicable to them for enforcement actions.

       Mermart urges an interpretation that treats the Financing Documents as an
interconnected set of contracts. Pursuant to this interpretation, Mermart would have
us find that section 210 of the Indenture controls the Subordinate Bondholders’ right

                                          -5-
to bring suit, because the Subordination Agreement is the controlling document if
there are any “conflicts or inconsistency” among the Financing Documents. To
further buttress this argument, Mermart urges us to find that the terms “Subordinate
Mortgagee” and “Subordinate Bondholder,” as used in the Financing Documents, are
in effect interchangeable with no discernable differences in meaning or the parties the
terms represent.

       Pursuant to Missouri law, a court must enforce a contract “as written and
according to the plain meaning of the words in the contract when the contract is clear
and unambiguous.” Contract Freighters, Inc. v. Hunt Transp., Inc., 245 F.3d 660, 663
(8th Cir. 2001) (quoting Farmland Indus., Inc. v. Frazier-Parrott Commodities, 111
F.3d 588, 590 (8th Cir. 1997)). When faced with conflicting or ambiguous specific
and general provisions in a contract, a court should enforce the more specific of the
terms. Five Star Quality Care-MO, L.L.C. v. Lawson, 283 S.W.3d 811, 815 (Mo. Ct.
App. 2009). The terms of a contract should be read as a whole to determine the intent
of the parties, TAP Pharm. Prods., Inc. v. St. Bd. of Pharmacy, 238 S.W.3d 140, 143
(Mo. 2007), and “[t]he test for ambiguity is whether the disputed language is
reasonably susceptible of more than one meaning when the words are given their plain
meaning as understood by an average person.” Rabius v. Brandon, 257 S.W.3d 641,
645 (Mo. Ct. App. 2008) (quoting Lacey v. St. Bd. of Registration for the Healing
Arts, 131 S.W.3d 831, 839 (Mo. Ct. App. 2004)).

       In this case, the Indenture and Subordination Agreement limit the rights and
remedies available to the Subordinate Bondholders. For example, the Indenture states
in section 2105 that the bonds are subordinate to all senior financing instruments, and


      5
       The indebtedness evidenced by the Bonds is and shall be subordinate in right
of payment to the prior payment in full of all the indebtedness under the Senior Bonds,
the Senior Agreement and the other Senior Loan Documents, to the extent and in the
manner provided in the Subordination Agreement. . . . The rights and remedies of the
                                                                          (continued...)

                                          -6-
that the bonds are subordinate to the “extent and manner” provided for in the
Subordination Agreement and all “rights and remedies . . . are subject to the
restrictions and limitations [therein] set forth.” Indenture, § 210. Yet sections 701,
703(a), and 707(a) then set forth the procedure in which an event of default may be
remedied. Section 7016 defines an Event of Default as a failure to pay any interest due
on the bonds, provided there is a sufficient amount of money in the SLNOI. § 701(a).
The Subordinate Bondholders may remedy7 such default by submitting a written


      5
        (...continued)
holders and subsequent holders of Bonds under this Indenture are subject to the
restrictions and limitations set forth in the Subordination Agreement.

Indenture, § 210. The Subordinate Loan Agreement also says that the “Indenture and
this Loan Agreement are and shall be subject and subordinate in all respects . . . to the
terms and conditions of the Subordination Agreement.” Subordinate Loan
Agreement, § 3.09.
      6
       An Event of Default is defined as a failure to make

      payment of any interest on the Bonds shall not be made when the same
      becomes due and payable, provided sufficient Subordinate Loan
      Available NOI has been deposited in the Bond Fund; . . . Notice of an
      Even of Default hereunder shall be promptly provided by the Trustee to
      the Senior Bonds Trustee, . . . .

Indenture, § 701(a).
      7
        Section 703 provides for “Enforcement of Remedies” and section 707 restricts
actions of individual bondholders.

      Upon the happening and continuance of any Event of Default hereunder,
      but subject to the terms of the Subordination Agreement, then and in
      every such case the Trustee may proceed, and upon the written request
      of . . . the holders of not less than 51% in aggregate principal amount of
      the Bonds then Outstanding hereunder and receipt by the Trustee of
                                                                         (continued...)

                                          -7-
request to the Trustee to sue, with at least 51 percent of the bondholders joining,
provided the bondholders provide satisfactory indemnity for expenses and fees.
Indenture, §§ 703(a), 707(a).

       The Indenture cannot be interpreted in isolation because it cross-references the
Subordination Agreement and refers to that instrument as controlling. For example,
section 4(b)8 of the Subordination Agreement states that the Subordinate Mortgagee
shall not bring action against or take any action concerning environmental matters,


      7
       (...continued)
      indemnity satisfactory to it for its fees and expenses . . . shall, subject to
      the provisions of the Subordination Agreement proceed . . . to protect
      and enforce its rights and the rights of the Bondholders . . . .

Indenture, § 703(a).

      No Bondholder shall have any right to institute any suit . . . unless (i)
      such Bondholder previously shall have given the Trustee written notice
      of the Event of Default on account of which such suit, action or
      proceeding is to be instituted; (ii) the holders of not less than 51% of the
      Bonds then Outstanding shall have made written request of the Trustee
      . . . and shall have afforded the Trustee a reasonable opportunity either
      to proceed to exercise the powers hereinabove granted . . . , and (iii)
      there shall have been offered to the Trustee reasonable security and
      indemnity against the costs . . . , and the Trustee shall have refused or
      neglected to comply with such request within a reasonable time; . . . .

Indenture, § 707(a).
      8
       Without the prior written consent of the Senior Mortgagee in each instance, the
Subordinate Mortgagee shall not . . . (v) appear in, defend or bring any action to
protect the Subordinate Mortgagee’s interest in the Mortgaged Property, or (vi) take
any action concerning environmental matters affecting the Mortgaged Property.

Subordination Agreement, § 4(b).

                                           -8-
unless it has the prior written consent of the Senior Mortgagee. Section 5(c)9 then
states that the Subordinate Mortgagee may not commence an action until there has
been notice of the intent to commence a legal suit and the Senior Mortgagee gives
written consent. These terms are not “susceptible of more than one meaning,” but
rather supplement the enforcement procedure in the Indenture. Rabius, 257 S.W.3d
at 645. Furthermore, this section states that the Senior Mortgagee has the “sole and
absolute discretion” to decide whether to grant permission to sue,10 which is a fair and
reasonable limitation among sophisticated parties because the senior debtholders
granted consent to allow subordinate debtholders. We interpret the Financing
Documents as a whole and find that sections 4(b) and 5(c) of the Subordination
Agreement provide that the Senior Mortgagee must give written consent to sue. See
TAP Pharm. Prods., Inc., 238 S.W.3d at 143. Thus, these sections supplement the
procedure set forth in section 707 of the Indenture; after the Subordinate Bondholders
provide written notice to sue and satisfactory indemnity, sections 4(b) and 5(c) of the
Subordination Agreement then impose limitations on the Subordinate Bondholders’
unilateral ability to proceed with a lawsuit.

       The Subordinate Bondholders assert that the maxim of expressio unius est
exclusio alterius applies, meaning that the expression of one thing is to the exclusion
of another. Am. Life Ins. Co. v. Barrett, 847 S.W.2d 125, 133 (Mo. Ct. App. 1993).
In this case, the Subordinate Bondholders assert, therefore, that the omission of the


      9
       The Subordinate Mortgagee may not proceed with an Enforcement Action until
the Subordinate Mortgagee has given the Senior Mortgagee an “Enforcement Action
Notice,” and “the Senior Mortgagee has delivered to the Subordinate Mortgagee the
Senior Mortgagee’s written consent to such Enforcement Action by the Subordinate
Mortgagee.” Subordination Agreement, § 5(c).
      10
        It even provides that such permission can be withheld arbitrarily. “The
Subordinate Mortgagee acknowledges that the Senior Mortgagee may grant or refuse
consent [with] . . . sole and absolute discretion, and that such discretion may be
exercised in an arbitrary manner.” Subordination Agreement, § 5(c).

                                          -9-
term “Subordinate Bondholders” from the Subordination Agreement was intentional
and that any sections not explicitly referring to “Subordinate Bondholders”—for
example, those referring to “Subordinate Mortgagees”— should not apply to them.
We note that the Subordination Agreement refers to the bondholders as “Subordinate
Mortgagees,” with this term defined as the “legal holder of the Subordinate Note” or
the Series B bonds.11 Courts should reject the interpretation of a contract that leads
to “unreasonable results when probable or reasonable construction can be adopted.”
Stonebrook Estates, L.L.C. v. Greene County, 275 S.W.3d 353, 355 (Mo. Ct. App.
2008) (quoting Blackburn v. Habitat Dev. Co., 57 S.W.3d 378, 386 (Mo. Ct. App.
2001)).

       If we find that the Senior Mortgagee must give written consent to suit, then the
Subordinate Bondholders claim that section 707(a) of the Indenture is rendered
meaningless, and “[a] construction that attributes a reasonable meaning to all the
provisions of the agreement is preferred to one that leaves some of the provisions
without function or sense.” Dunn Indus. Group, Inc. v. City of Sugar Creek, 112
S.W.3d 421, 428 (Mo. 2003) (citing City of Harrisonville v. Public Water Supply
Dist. No. 9 of Cass County, 49 S.W.3d 225, 231 (Mo. Ct. App. 2001)). We find that

      11
        The Preamble to the Subordination Agreement states,

      THIS SUBORDINATION AGREEMENT (this “Agreement”) is entered
      into as of the 1st day of December, 2005, by and between (i) . . .
      (“Freddie Mac”) (ii) UMB BANK, N.A., a national banking
      association, as trustee (the “Bond Trustee”) and together with Freddie
      Mac, the “Senior Mortgagee”), (iii) UMB BANK, N.A., a national
      banking association, as trustee for the Series B Bonds (as hereinafter
      defined) (the “Subordinate Mortgagee”).

Subordination Agreement, pmbl. (emphasis in original). The Definitions section also
defines “Subordinate Mortgagee” as the “person or entity named as such in the first
paragraph of this Agreement and any other person or entity who becomes the legal
holder of the Subordinate Note after the date of this Agreement.” Id. at 1(n).

                                         -10-
such an interpretation does not render section 707(a) meaningless. Sections 703 and
707(a) establish the procedure for the Subordinate Bondholders to bring notice of an
event of default to UMB Bank, and this right of the Subordinate Bondholders is not
abridged in any way by the Subordination Agreement. Instead, when read together,
the Subordination Agreement limits the power of the Subordinate Trustee/Mortgagee
to bring suit against the Senior Mortgagee because it requires that the Senior
Mortgagee must give written consent to be sued. This unequivocal consent
requirement serves to protect the superior interests of the senior bondholders in the
property over the subordinate interests.

       Thus, we conclude that the Subordination Agreement required the Subordinate
Bondholders to obtain the written consent of the Senior Mortgagee before bringing
the enforcement action. The district court properly dismissed the breach of contract
and accounting claims.

       The Subordinate Bondholders have raised for the first time on appeal the
argument that the written consent to suit is unconscionable as applied. We decline to
address this argument as it was not raised in the lower court. “Absent exceptional
circumstances we will not consider arguments raised for the first time on appeal.”
McBurney v. Stew Hansen’s Dodge City, Inc., 398 F.3d 998, 1002 (8th Cir. 2005).
See also Cole v. Int’l Union, United Auto., Aerospace & Agr. Implement Workers of
Am., 533 F.3d 932, 936 (8th Cir. 2008); Data Mfg., Inc. v. United Parcel Serv., Inc.,
557 F.3d 849, 854–55 (8th Cir. 2009). We find no exceptional circumstances here.

      The Subordinate Bondholders next assert that separate and independent state
claims for relief lie in tort, including the claims of negligence, unjust enrichment, and
fraudulent misrepresentation. Mermart counters that the these claims are barred by
the written permission to suit requirement and, alternatively, because the negligence
and unjust enrichment claims arise solely under the Financing Documents and are
purely economic losses. The economic loss doctrine bars “recovery of purely

                                          -11-
pecuniary losses in tort where the injury results from a breach of a contractual duty.”
Zoltek Corp. v. Structural Polymer Group, Ltd., 2008 WL 4921611, at *3 (E.D. Mo.
2008), aff’d on other grounds, No. 08-3928, 2010 WL 273957 (8th Cir. Jan. 26,
2010).

        We begin by addressing the negligence and unjust enrichment claims. The
district court dismissed the negligence claim as it “is precluded by the Subordination
Agreement because plaintiff did not obtain the consent of the Senior Mortgagee prior
to filing a claim based on the financing documents.” Dubinsky, 2009 WL 1011503,
at *5. We agree with the district court that the negligence claim is an enforcement
action under the Subordination Agreement. Id. Similarly, we find that, like the
negligence claim, the failure to make interest payments due to the characterization of
the lead paint remediation as an “upgrade expense,” is a matter that arises out of the
Financing Documents. The Subordinate Bondholders assert that Mermart’s
miscalculation of the cost of lead based paint removal deprived them of interest
payments, thereby unjustly enriching Mermart. Yet the district court was correct in
concluding that the Subordinate Bondholders’ “unjust enrichment claim seeks
recovery for events arising solely out of the financing documents” and that all alleged
instances of representations “concerning the presence or absence of lead based paint
is contained exclusively within the contracts themselves.” Id. at *5–6. Thus, we need
not reach the issue of the economic loss doctrine. We affirm the dismissal of the
negligence and unjust enrichment claims because the Subordinate Bondholders did not
obtain written permission to sue.

       Finally, the Subordinate Bondholders argue that Mermart made fraudulent
misrepresentations pertaining to the absence of lead-based paint. Mermart counters
that any such alleged statements are also covered solely by contractual duties. “A
fraud claim is permitted only if it arises from acts that are separate and distinct from
the contract.” O’Neal v. Stifel, Nicolaus & Co., Inc., 996 S.W.2d 700, 702 (Mo. Ct.
App. 1999) (citing Bernoudy v. Dura-Bond Concrete Restoration, Inc., 828 F.2d 1316,

                                         -12-
1318 (8th Cir. 1987)). Mermart represented that it “shall not cause or permit . . . any
violation or noncompliance” with environmental hazards, including lead-based paint.
Subordinate Multifamily Deed of Trust, § 18(a)(v). Here, we find that the claimed
fraudulent misrepresentation is also a matter that arises out of the Financing
Documents. Again, we affirm the dismissal of this claim because the Subordinate
Bondholders did not first obtain the written permission from the Senior Mortgagee to
sue.

                                III. CONCLUSION

      Because we conclude that the district court did not err in granting the motion
to dismiss, we affirm.
                       _____________________________




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