Opinion
Case No. 02-81166-CIV-RYSKAMP/VITUNAC
November 12, 2003
ORDER ON MOTIONS FOR RECONSIDERATION
THIS CAUSE comes before the Court pursuant to Plaintiff Peter T. Loftin's ("Loftin," or "Plaintiff) Motion to Delete, Correct or Clarify a Single Sentence in Order Granting Defendants' Motions to Dismiss, filed September 15, 2003 [DE 128] and Supplemental Motion to Reconsider, filed September 25, 2003 [DE 130]. Defendants QA Investments, LLC ("QA") and Quellos Group, Inc. ("Quellos") responded to the September 15, 2003 motion on September 17, 2003 [DE 129]. Defendant Sidley, Austin, Brown Wood, LLP ("Brown Wood") responded to both motions on October 10, 2003 [DE 137], as did Defendant KPMG LLP ("KPMG") [DE 138], Defendant Presidio Growth, LLC ("Presidio") joined KPMG's response, and Defendants QA and Quellos joined Brown Wood's response. Loftin replied to all responses on October 20, 2003 [DE 143]. These motions are ripe for adjudication.
1. Procedural Impropriety of the Motion to Reconsider Application of the PSLRA Bar
The Court dismissed Loftin's RICO claims with prejudice on the grounds that they are barred by the Private Securities Litigation Reform Act of 1995 ("PSLRA"), 18 U.S.C. § 1964(c). The PSLRA provides that a civil RICO claimant may not "rely upon any conduct that would have been actionable as fraud in the purchase or sale of securities to establish a violation of section 1962" unless the person who committed said fraudulent conduct has been criminally convicted. 18 U.S.C. § 1964(c).
Plaintiff's claims are predicated on his engaging in two tax avoidance schemes, known as the FLIP and the BLIP transactions. Loftin's supplemental motion for reconsideration concedes that the FLIP transaction involved the purchase and sale of securities in that it explains that the strategy included "the sale of warrants and the like." For purposes of securities fraud claims, "securities" include "transferable shares," as well as "options" and "warrants" to purchase such shares. 15 U.S.C. § 77b(a)(1), 78(a)(1).
Loftin argues that his claims relating to the BLIP transaction are actionable under RICO because the BLIP transaction involved commodities subject to the sole jurisdiction of the Commodities Futures Trading Commission ("CFTC"). Loftin bases this argument on a "little-known and arcane statute," 7 U.S.C. § 2, and his counsel's recent acquisition of the International Swap Dealers Association, Inc. ("ISDA") master agreements governing the transaction.
The Master Agreements provide that the BLIP transaction "is intended to constitute a `swap agreement' within the meaning of Commodity Futures Trading Commission ("CFTC") Regulation Section 35.1(b)(1), Section 101(53)(B) of the U.S. Bankruptcy Code, and the CFTC Policy Statement Concerning Swap Transactions, 54 Fed. Reg. 30694 (July 21, 1989)." (Friedman Aff., Ex. A, p. 8; Ex. B, p. 7.)
The Court rejects Loftin's motion to reconsider out of hand because it is patently improper under the Federal Rules of Civil Procedure. Loftin brings his supplementary motion to reconsider pursuant to Rules 59(e), 60(b)(1), 60(b)(2) and 60(b)(6). Rule 60(b)(1) provides that a court may relieve a party from a final order based on "mistake, inadvertence, surprise, or excusable neglect." "[A]ttorney negligence or oversight is rarely grounds for relief under 60(b)(1). U.S. Real Prop. Res., 920 F.2d 788, 792 (11th Cir. 1991). See also Helm v. Resolution Trust Corp., 161 F.R.D. 347, 350 (N.D. Ill. 1995) (attorney negligence, including the misreading of a statute, "is not the kind of `mistake' for which Rule 60(b)(1) is intended to provide relief, nor is it intended to be classified as `excusable neglect' within that Rule") (emphasis in original). Nor is a litigant's failure to remember and advise his counsel of material facts an adequate basis for granting relief pursuant to 60(b)(1). See Bershad v. McDonough. 469 F.2d 1333, 1336-37 (7th Cir. 1972) (defendant's failure to tell attorney true number of shares purchased from plaintiff, and attorney's failure to plead those facts in the answer, not grounds for 60(b)(1) relief)).
Rules 59 and 60(b)(2) are not proper bases for Plaintiff's motion for reconsideration, as the Court has not conducted a trial in this matter. See Rule 59 (stating that "[a] new trial may be granted" only in certain circumstances); Rule 60(b)(2) (providing for relief only on the basis of "newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial under Rule 59(b)).
Rule 60(b)(6) allows relief from an order for "any other reason justifying relief from the operation" of the order. This rule is intended "only for extraordinary circumstances." Frederick v. Kirby Tankships, Inc., 205 F.3d 1277, 1288 (11th Cir. 2000). "It is well established . . . that relief under this clause is an extraordinary remedy which may be invoked only upon a showing of exceptional circumstances." Griffin v. Swim-Tech Corp., 722 F.2d 677, 680 (11th Cir. 1984).
Loftin's counsel explains that time constraints kept it from reviewing the ISDA master agreements prior to entry of the order granting the motions to dismiss. Counsel received the documents through discovery on June 20, 2003. Counsel maintains that it received the master agreements along with numerous other documents and that it could not review all of the documents while simultaneously drafting a response to the last remaining motions to dismiss. Although the Court appreciates the complexity of this case and surmises that numerous documents surfaced during discovery, if counsel needed more time to review documents it should have so moved pursuant to Rule 6(b) rather than request re-opening of the case after entry of a final order. Moreover, counsel may not blame the timing of its receipt of the master agreements on the discovery process because Loftin already had the master agreements in his possession. Indeed, counsel received the master agreements from Loftin on June 19, 2003, one day prior to its receipt of the documents though the discovery process. Review of the master agreements should have been part of a pre-suit investigation.
Counsel's argument that it recently discovered "arcane" 7 U.S.C. § 2 is also unavailing. 7 U.S.C. § 2 existed in its current form prior to the filing of this action and should also have been the subject of a pre-suit investigation.
Loftin thus fails to present a valid reason for why he is entitled to relief under either of these rules. Wendy's Int'l. Inc. v. Nu-Cape Constr., Inc., 169 F.R.D. 680, 686-87 (M.D. Fla. 1996) ("motion for Relief under Rule 60(b) must be shaped to the specific grounds for modification or reversal enumerated in the Rule, and it may not be a mere general plea for relief) (citation omitted). Oversight by plaintiff and his counsel do not justify the extraordinary relief of revisiting a final order.See Prudential Sec., Inc. v. Emerson, 919 F. Supp. 415, 417-18 (M.D. Fla. 1996) (ruling that defendant could not argue for the first time on reconsideration that certain insurance policies were actually securities because "district courts are too busy to have parties present arguments one by one."); American Home Assur. Co. v. Glenn Estess Assoc's, Inc., 763 F.2d 1237, 1239 (11th Cir. 1985) ("There is a significant difference between pointing out errors in a court's decision on grounds that have already been urged before the court and raising altogether new arguments on a motion to amend; if accepted, the latter essentially affords a litigant `two bites at the apple.'").
Loftin also reargues his erroneous contention that, to be actionable under the securities laws, Defendants' alleged misrepresentations must relate to the value of the securities in question. This argument was fully briefed on the motions to dismiss, and raising it again in a motion to reconsider is procedurally improper and redundant. Loftin takes issue with the Court's statement in its prior order that Loftin did not cite any law for his argument that a misrepresentation must relate to the value of the securities to be actionable under the securities laws. In its prior order, the Court relied on the United States Supreme Court's holding in SEC v. Zandford, 535 U.S. 813, 820, 122 S.Ct. 1899, 1903 (2002) for the proposition that "neither the SEC nor this Court has ever held that there must be a misrepresentation about the value of a particular security in order to run afoul of the Act." The only post-Zandford case Loftin cites is Gintowt v. TL Ventures, 226 F. Supp.2d 672, 679 (E.D. Pa. 2002), which did not address the issue of whether a misrepresentation must relate to the value of securities to be actionable under the securities laws. Rather, Gintowt rejected Defendant's argument that the PSLRA barred Plaintiff's RICO claim because the complaint contained no allegations of the purchase or sale of securities. Nevertheless, the Court suggested that Defendants could raise the PSLRA issue on summary judgment. Id. To the extent that any of Loftin's cases stand for the proposition that only misrepresentations relating to the value of securities are actionable as securities fraud,Zandford has overruled them.
2. Motion to Clarify Sentence in Prior Order
Loftin seeks to amend the sentence in the Court's prior order which stated that "if Loftin's settlement payment amounts to nothing more than payment for back taxes and interest, he will not have suffered an injury." Loftin takes issue with this statement because he maintains that even if his payment to the IRS solely consists of back taxes and interest, he still will have paid millions in fees to Defendants.
Pursuant to Rule 60(a), the Court may "correct clerical mistakes in judgments, orders or other parts of the record." While the order granting the motions to dismiss currently contains a correct statement of the law, it is also correct that back taxes and interest are not legally cognizable injuries. Jones v. Childers, 18 F.3d 899, 915(11th Cir. 1994) (taxes paid on real income not a compensate injury). The Order shall be amended to read that "if Loftin's settlement payment amounts to nothing more than payment for back taxes and interest, he will not have suffered a compensable injury." This amended sentence merely relates to potential back taxes and interest Loftin may have to remit to the Internal Revenue Service and is not intended as a comment on any fees Loftin may have incurred in the implementation of the BLIP and FLIP transactions.
3. Conclusion
The Court, being fully advised and having considered the pertinent portions of the record, hereby
ORDERS AND ADJUDGES that Plaintiff Peter T. Loftin's Motion to Delete, Correct or Clarify a Single Sentence in Order Granting Defendants' Motions to Dismiss, filed September 15, 2003 [DE 128] is GRANTED, and his Supplemental Motion to Reconsider, filed September 25, 2003 [DE 130] is DENIED.
DONE AND ORDERED at Chambers in West Palm Beach, Florida,