Opinion
No. 02 CV. 9916 (RLC).
January 19, 2006
PATRICK C. SCHMITTER, NATHANIEL P.T. READ, AKIN GUMP STRAUSS HAUER FELD LLP, New York, R. LAURENCE MACON, Of Counsel. Attorneys for Plaintiff,
RAYMOND L. VANDENBERG, VANDENBERG FELIU, LLP, New York, MICHAEL S. GRUEN STEVEN S. DIEBERT Of Counsel. Attorney for Defendants.
OPINION
BACKGROUND
In an opinion dated November 14, 2005, familiarity with which is assumed, this Court granted summary judgment to plaintiff LaSalle National Bank ("LaSalle"), after finding that LaSalle had proven that defendant Capco American Securitization Corporation ("Capco") had breached the warranties provided in the Pooling Services Agreement ("PSA") by providing LaSalle with a defective U.C.C. filing when transferring mortgages. The filing did not perfect an interest in the personalty of Health and Living Center, Inc. (the "borrower"). When the borrower declared bankruptcy, LaSalle's interests were impaired.
Order Granting Mot. Summ. J., 2005 U.S. Dist. LEXIS 27781 (S.D.N.Y. Nov. 14, 2005).
Capco now moves for reconsideration. Capco argues that a bankruptcy reorganization plan entered when the motion was pending (the "Plan") established the security interest at issue. Additionally, Capco argues that the Plan estopps LaSalle from asserting that it suffered damages because of the faulty filing, and that this defeats LaSalle's claim for breach of warranty. Def. Mot. Recons. Mem. 8-9. In order to assert this novel defense, Capco requests leave to withdraw an admission. Def. Mot. Recons. Reply Mem. 3-4.
See Chapter 11 Plan of Reorganization, In Re Health Living Center, Inc., d/b/a Collins Health Care, No. 02-33575 (Bankr. W.D. Penn. Nov. 20, 2003).
Capco argues that their request to withdraw the admission was "implicit in [its] Rule 54(b) motion," and "is hereby explicitly made." Def. Mot. Recons. Reply Mem. 4. It is not clear that this motion can be made in this manner. Cf. Employers Ins. of Wausau v. Petroleum Specialties, Inc., 69 F.3d 98, 104 (6th Cir. 1995) (holding that "conclusory statements . . . [in] a memorandum of law are clearly not a motion.")
DISCUSSION
Capco admitted in its answer to LaSalle's complaint that the faulty U.C.C. filing did not establish a security interest in the borrower's personalty. Capco must receive the court's leave to withdraw this admission before it may argue that LaSalle is estopped from pleading damages.While Capco summarized the two-part test for withdrawing an admission correctly, it neglected to mention the relationship between Rule 36(b) and Rule 16 of the Federal Rules of Civil Procedure. Def. Mot. Recons. Mem. 7. When the court has entered a scheduling order, the standard detailed in Rule 16 applies. Rule 16, 36 (b), F.R. Civ. P.; see also JAMES WM. MOORE ET AL., 7 MOORE'S FEDERAL PRACTICE — CIVIL § 36.13 (3d ed. 2005).
As detailed extensively in the court's earlier opinion, the court entered pre-trial orders directing the course of discovery in this case. Consequently, Capco must demonstrate "good cause" to modify these orders and to reopen discovery, in addition to making the showing required by Rule 36(b). Cf. In re Fill, 68 B.R. 923 (Bankr. S.D.N.Y 1987); Groshowski v. Phoenix Constr., 318 F.3d 80, 86 (2d Cir. 2003).
Order Granting Mot. Summ. J., 2005 U.S. Dist. LEXIS 27781, at *6 n. 6.
Such good cause would exist if there were some reason why the plan was not available to Capco while LaSalle's motion was pending. However, the Plan was a public document: it was filed in the bankruptcy court on September 23, 2003, and confirmed on November 20, 2003, approximately two years before the court ruled upon LaSalle's motion for summary judgment. See In re Martin-Trigona, 763 F.2d 140, 142-43 (2d Cir. 1985). Had Capco exercised reasonable diligence during that time it surely would have uncovered the Plan, as it quickly became aware of the Plan before the time for filing a motion for reconsideration had passed. Capco has offered no reasonable excuse for their failure to bring the Plan to the court's attention while LaSalle's motion for summary judgment was before the court.
LaSalle had no duty to provide mortgage filings to Capco, since these were public documents that courts deem to be equally available to both parties. Cf. Ionian Shipping Co. v. Tyson Shipping Co., 49 F.R.D. 334, 337 (S.D.N.Y. 1969) (Croake, J.).
Furthermore, LaSalle has already met its burden of demonstrating that it would suffer prejudice if the court set aside its earlier discovery orders. Thus, even if Capco had shown that good cause exists for the court to allow withdrawal of the admission and to reopen discovery, this would not be warranted owing to the prejudice to LaSalle. Cf. Banos v. City of Chicago, 398 F.3d 889 (7th Cir. 2005). Accordingly, Capco's motion for leave to withdraw the admission is denied.
Order Granting Mot. Summ. J., 2005 U.S. Dist. LEXIS 27781, at *7. Accordingly, the holding that LaSalle would be prejudiced by reopening discovery is also the law of the case.
The Court is aware that the denial of Capco's Rule 36(b) motion disposes of the claims brought pursuant to Rule 54(b). However, (continued on next page) the court chooses to examine Capco's arguments and rule upon them to demonstrate that they are entirely meritless.
Capco also requests reconsideration of the order granting summary judgment to LaSalle. Prior to entry of a final judgment, an "order or other form of decision is subject to revision at any time. . . ." Rule 54(b), F.R. Civ. P. However, when considering motions for reconsideration, the court must treat their earlier decision as the law of the case. As such, the "court should be loathe to [reverse themselves] in the absence of extraordinary circumstances. . . ."
The Second Circuit has specified that earlier decisions may not be changed unless there is "an intervening change of controlling law, the availability of new evidence, or the need to correct a clear error or prevent a manifest injustice." Virgin Atl. Airways, Ltd. v. Nat'l Mediation Bd., 956 F.2d 1245, 1255 (2d Cir. 1992) (internal quotation marks omitted).
Christianson v. Colt Indus. Operating Corp., 486 U.S. 800, 831 (1988) (citation omitted). The same standard applies to motions brought pursuant to Local Rule 6.3. In re Rezulin Prods. Liab. Litig., 224 F.R.D. 346 (S.D.N.Y. 2004) (Kaplan, J.).
Capco argues that extraordinary circumstances exist, for two independent reasons. They argue that the motion brings to light new evidence, and that recognition of the effect of the Plan is necessary to prevent manifest injustice. Each argument will be considered in turn.
Relief from a judgment or order can be only granted on the basis of new evidence if the movant demonstrates that the new evidence was not available when the original motion was submitted. Cf. United States v. Bank of N.Y., 14 F.3d 756, 759 (2d Cir. 1994); accord. Nemaizer v. Baker, 793 F.2d 58, 61 (2d Cir. 1986). Additionally, "when newly discovered evidence is the basis for reconsideration, the proponent must demonstrate that the newly discovered evidence was neither in his possession nor available upon the exercise of reasonable diligence at the time the interlocutory decision was rendered." In re Rezulin Prods. Liab. Litig., 224 F.R.D. 346, 350 (S.D.N.Y. 2004) (Kaplan, J.) (emphasis added).
The court will accept that Capco was unaware of the existence of the Plan while the motion for summary judgment was pending. However, Capco has failed to demonstrate that the Plan was unavailable during that time. As noted above, the Plan was a public document; it was clearly discoverable through the exercise of reasonable diligence. Evidence that is contained in the public records at the time of the initial judgment cannot be considered newly discovered evidence under Rule 54(b). Consequently, relief cannot be granted on the basis of Capco's argument that the Plan was new evidence uncovered after the order granting summary judgment was entered.
See Bourne v. Walt Disney Co., 1994 U.S. Dist. LEXIS 7783, No. 91 Civ. 0344, (S.D.N.Y. June 10, 1994) (Stanton, J.),aff'd, 68 F.3d 621 (2d Cir. 1995), cert. denied, 517 U.S. 1240 (1996).
Second, reconsideration of the court's earlier motion is not necessary to prevent manifest injustice. Even if the court finds that the Plan is new evidence, it is not proof that Capco was not in material breach of the PSA.
Capco does not argue that the filing was not defective or that the defect was not a breach of the PSA's warranties. Rather, they argue that the breach was not material, since the Plan contained a confirmation from the borrower of LaSalle's security interest, despite the defective filing. However, the court found that Capco was in breach of its duty to repurchase the mortgage as of August 2002, more than a year before the bankruptcy court approved the reorganization plan.
See Mobil Oil Exploration Producing Southeast, Inc. v. United States, 530 U.S. 604, 635 (holding that "[t]he time for determining materiality is the time of the breach. . . .") (2000) (citation omitted). Furthermore, LaSalle and Capco bargained for the amount in the repurchase clause, and without recovery in this amount they have not been made whole. This is another reason that neither the Plan nor any other document entered in the bankruptcy court establishes that Capco was never in material breach, regardless of whether or not LaSalle managed to obtain a security interest in the borrower's personalty at some point during the proceedings.
As detailed in the order granting summary judgment, LaSalle proved that the failure to obtain a clearly established security interest at the time of the bankruptcy impaired its ability to negotiate with the lender. This occurred during the year between Capco's refusal to repurchase the mortgage and the entry of the Plan. LaSalle's inability to sell the borrower's facility as a going concern at the time of the bankruptcy was a direct result of the faulty filing. Consequently, the breach was clearly material.
The argument that the Plan estopped LaSalle from bringing or maintaining an action for breach of contract is in fact doubly frivolous, as the issues in question in the two proceedings are not even similar, never mind identical.
CONCLUSION
Capco's motion to withdraw an admission made in its pleading and for reconsideration of the court's earlier order is DENIED. The clerk is directed to enter final judgment in favor of LaSalle. LaSalle is directed to submit affidavits that establish the attorney fees chargeable to Capco. LaSalle must also enter affidavits detailing the amount recovered from the debtor, so that the court can deduct the value of the mitigation from the repurchase price when calculating the damages. These affidavits shall be due on February 13, 2006. Should Capco wish to challenge the evidence presented in these affidavits, their response and accompanying affidavits must be filed by February 28, 2006.IT IS SO ORDERED