Opinion
No. 94 Civ. 8294 (PKL).
September 30, 2004
GADSBY HANNAH LLP, Daniel J. Kelly, Esq., Boston, MA, and LEADER BERKON LLP, S. Alyssa Young, Esq., New York, NY, Attorneys for Plaintiff.
BROOKS BANKER, New York, New York, Attorney for Defendants.
OPINION AND ORDER
Plaintiff Raymond H. Wechsler, the administrative trustee overseeing the assets of Towers Financial Corporation ("Towers"), brings this action against Hunt Health Systems, Ltd. ("Hunt Health") and affiliated entities for alleged breach of contract and fraudulent conveyance in connection with the parties' factoring agreement ("HCP agreement" or "agreement"). The Court bifurcated the case on August 8, 2003, separating the breach of contract and fraudulent conveyance claims. Wechsler v. Hunt Health Systems, Ltd., No. 94 Civ. 8294, 2003 U.S. Dist. LEXIS 13775, at *1 (S.D.N.Y. Aug. 8, 2003). After a ten day bench trial on the breach of contract claim, this Court entered a final judgment on August 11, 2004 ("Order" or "August 11 Order") finding defendants materially breached the agreement and awarding plaintiff damages and prejudgment interest. Wechsler v. Hunt Health Systems, Ltd., No. 94 Civ. 8294, 2004 U.S. Dist. LEXIS 15926, at *1 (S.D.N.Y. Aug. 11, 2004). Defendants filed a notice of appeal on September 16, 2004.
As this Court has previously noted, by Order of United States Bankruptcy Judge Prudence Carter Beatty dated August 5, 1999, the Towers Financial Administrative Trust was terminated and the Trust's claim against Hunt Health was assigned to Raymond H. Wechsler in his personal capacity.
The fraudulent conveyance claim is to be decided by jury trial which has yet to be calendared.
Defendants' notice of appeal does not affect the jurisdiction of this Court over the instant motion. See Fed.R.App.P. 4(a)(4) ("If a party files a notice of appeal after the court announces or enters judgment — but before it disposes of [a motion pursuant to Rules 52(b) and 59(e)] — the notice becomes effective . . . when the order disposing of the . . . motion is entered.").
Plaintiff now moves this Court, pursuant to Rules 52(b) and 59(e) of the Federal Rules of Civil Procedure and Rule 6.3 of the Local Rules of the United States District Courts for the Southern and Eastern Districts of New York ("Local Rule 6.3"), to amend or reconsider the Order due to "`manifest errors of law or fact'" and "`controlling authority or factual matters presented to the Court . . . and overlooked.'" Plaintiff's Memorandum in Support of Plaintiff's Motion to Amend the Court's Final Judgment Pursuant to Fed.R.Civ.P. 52(b) and 59(e) ("Pl.'s Mem.") at 2 (internal citations omitted). Plaintiff avers that this Court (1) failed to find defendants breached paragraph 8(ix) of the HCP agreement, thus converting all outstanding accounts into Rejected Accounts; (2) overlooked the effect of the acceleration clauses, including their effect on the prejudgment interest rate and; (3) erred in applying a 365 day limit on factoring fees. For the reasons set forth below, plaintiff's motion to amend or reconsider the judgment is denied.
Background
I. Factual History
The detailed factual history giving rise to this litigation is painstakingly set out in this Court's August 11 Order, with which the Court assumes familiarity. Towers entered into an accounts receivable purchase contract with defendant Hunt Health on July 10, 1991. The contract failed on February 26, 1993, thereby giving rise to the contract claims in this action, discussed and decided by the August 11 Order. The Court held that defendants materially breached the contract by (1) retaining post-contract termination proceeds on accounts sold to Towers and; (2) terminating the contract without paying liquidated damages. The Court awarded plaintiff $724,075 for damages arising from the breaches and awarded prejudgment interest totaling $746,719, calculated under New York's statutory rate of 9% per annum.
In the interest of clarity, the Court feels it necessary to address plaintiff's disturbing mischaracterization of the holding of the August 11 Order. Plaintiff contends that defendants "materially breached the agreements . . . by not paying early termination damages, not forwarding payments made to Hunt Health on accounts, depriving Towers of access to Hunt Health's facility to pick up checks, and depriving Towers of information about which accounts it had collected and which remained outstanding." Pl.'s Mem. at 2-3 (emphasis added). However, as defendants correctly state, the August 11 Order was not so sweeping; this Court found only that defendants materially breached the agreement by not forwarding payments after the 1993 termination of the contract and by not paying early termination damages at that time. Wechsler, 2004 U.S. Dist. LEXIS 15926, at *72-86; Defendants' Memorandum of Law in Opposition to Plaintiff's Motion to Amend the Court's Final Judgment Pursuant to Fed.R.Civ.P. 52(b) and 59(e) ("Defs.' Mem.") at 3.
Discussion
I. The Motion for Reconsideration Standard
"The standards governing motions for amendment of findings under Rule 52(b), motions to alter or amend a judgment pursuant to Rule 59(e), and motions for reconsideration pursuant to Local Rule 6.3 are the same." 4200 Ave. K LLC v. Fishman, No. 00 Civ. 8814, 2001 U.S. Dist. LEXIS 5938, at *2 (S.D.N.Y. May 10, 2001);see Defs.' Mem. at 1. For clarity's sake, the Court will refer to plaintiff's motion as a motion to reconsider the judgment under Local Rule 6.3. The motion to reconsider must be made within ten days of entry of the judgment. Fed.R.Civ.P. 52(b); 59(e); Local Rule 6.3.
As this Court made clear in a previous ruling in this case,see Wechsler v. Hunt Health Systems, Ltd., 186 F. Supp. 2d 402, 410 (S.D.N.Y. 2002), a motion to reconsider will generally be denied "unless the moving party can point to controlling decisions or data that the court overlooked — matters, in other words, that might reasonably be expected to alter the conclusion reached by the court." Shrader v. CSX Transp., Inc., 70 F.3d 255, 257 (2d Cir. 1995). Further, the decision to grant or deny a motion for reconsideration or reargument is in the "`sound discretion of a district court judge and will not be overturned on appeal absent an abuse of discretion.'" Davidson v. Scully, 172 F. Supp. 2d 458, 462 (S.D.N.Y. 2001) (Leisure, J.) (quotingMcCarthy v. Manson, 714 F.2d 234, 237 (2d Cir. 1983)). The motion to reconsider cannot properly advance "new facts, issues or arguments not previously presented to the court." Id. at 461. A party seeking reconsideration "is not supposed to treat the court's initial decision as the opening of a dialogue in which that party may then use such a motion to advance new theories or adduce new evidence in response to the court's rulings." Polsby v. St. Martin's Press, Inc., No. 97 Civ. 690, 2000 U.S. Dist. LEXIS 596, at *3 (S.D.N.Y. Jan. 18, 2000) (internal citations omitted). A motion for reconsideration "is not a substitute for appeal and may be granted only where the Court has overlooked matters or controlling decisions which might have materially influenced the earlier decision." Morales v. Quintiles Transnat'l Corp., 25 F. Supp. 2d 369, 372 (S.D.N.Y. 1998) (internal citations omitted). In determining whether a motion for reconsideration should be granted, Local Rule 6.3 should "be narrowly construed and strictly applied so as to avoid repetitive arguments on issues that have been considered fully by the Court." Dellefave v. Access Temps., Inc., No. 99 Civ. 6098, 2001 U.S. Dist. LEXIS 3165, at *1 (S.D.N.Y. Mar. 22, 2001); see Sequa Corp. v. GBJ Corp., 156 F.3d 136, 144 (2d Cir. 1998) (noting that a motion for reconsideration should not sound as a dinner bell for a party wishing to take a second bite at the apple).
II. Plaintiff's Motion to Reconsider the Judgment
Plaintiff's arguments seem to be reincarnations of those settled by the August 11 Order. Plaintiff argues that the Court rendered its opinion blind to the evidence before it, but points to nothing on the record that the Court did not fully consider. Nor does plaintiff identify ignored precedent which, upon reconsideration, would materially alter the judgment of this Court. As a threshold matter, these arguments are not properly raised in a motion to reconsider. A favorable construction of plaintiff's argument coupled with the complex procedural and factual history of this litigation, however, prompt the Court to clarify the August 11 Order. Plaintiff's three arguments in support of reconsideration are addressed in turn below.
A. Plaintiff's Claim that this Court Failed to Find Hunt Health Breached Paragraph 8(ix) of the HCP Agreement and Overlooked the Consequences Thereof
Construed most favorably, plaintiff's first argument follows in three parts. First, plaintiff contends that this Court failed to consider defendants' actions as a material breach of paragraph 8(ix) of the agreement which warrants that Hunt Health "will do nothing to impair [Towers'] right in any Account purchased by [Towers]." HCP agreement, Plaintiff's Exhibit 2 ("Pl.'s Exh. 2"), ¶ 8. Because of this oversight, the Court failed to define all outstanding accounts as Rejected Accounts counting toward the total indebtedness by which damages were determined. Thus, the Court underrepresented plaintiff's proper damages award.
"Rejected Accounts" as defined in HCP agreement, paragraph 5, are any and all accounts not conforming with the "representations and warranties set forth in paragraph 8." Pl.'s Exh. 2, ¶ 5.
Upon outlining plaintiff's argument, however, the Court experiences an overwhelming sense of déjà vu. Plaintiff advanced and the Court accepted, in part, this claim in the August 11 Order. To remind plaintiff: "[P]laintiff contends that accounts for which Hunt Health received payment during 1993 became Rejected Accounts. . . . The Court therefore finds that accounts for which Hunt Health received and kept payments throughout 1993 became Rejected Accounts, and the advances on these accounts became an indebtedness." Wechsler, 2004 U.S. Dist. LEXIS 15926, at *54, 64. The Court also adjudged that all accounts coded as appealed were Rejected. Id. at *54-55. However, plaintiff failed to show by a preponderance of the evidence that accounts remaining unpaid for 60-90 days were all Rejected Accounts, therefore, the Court did not find that such accounts gave rise to indebtedness. Id. at *55-61.
To the extent that plaintiff alleges the Court failed to consider paragraph 8(ix) of the HCP agreement in making this determination, plaintiff's argument is not properly presented in a motion for reconsideration. Plaintiff had ample opportunity to present this argument during the bench trial and the almost ten years of previous litigation but failed to do so. The Court engaged in an account by account inquiry, based in part on plaintiff expert's testimony, regarding the Rejected status of each account. Id. at *53-64. Such inquiry would hardly have been necessary if plaintiff had asserted and proven, by a preponderance of the evidence, his current allegation that paragraph 8(ix) converted all outstanding accounts into Rejected Accounts. The Court cannot allow plaintiff, through a motion for reconsideration, to re-litigate that which has already been decided simply because he failed to timely assert that which now seems to him a compelling legal argument.
B. Plaintiff's Claim that the Court Failed to Give Proper Effect to the Acceleration Clauses
Plaintiff argues that, despite the Court's lengthy discussion of the acceleration clauses and their effects, the Court failed to find all present and future debts immediately due and owing at the time of defendants' breach. Again plaintiff claims that all outstanding advances counted toward indebtedness and were subject to the acceleration clause. Plaintiff argues that the 18% interest rate was "contingent on Towers' making a demand for payment under paragraph 5, and thus was a `future' debt" which became immediately due under the acceleration clauses. Inversely, plaintiff contends that he was somehow alleviated from demanding defendants perform under the contract; instead stating that the 18% interest rate was automatically incurred. Alternatively, plaintiff argues that Towers did demand performance and points to a letter, interrogatory answer, and his complaint to support this allegation.
The first prong of plaintiff's argument, that the Court failed to find all outstanding accounts counted toward indebtedness and thus became immediately due under the acceleration clauses, fails for the same reasons cited above in Part II.A. The Court unequivocally found all indebtedness to be immediately due upon breach. "The Court holds that the [acceleration] clauses are enforceable, and finds that Hunt Health's indebtedness to Towers became due upon Hunt Health's breaches of the agreements. Hunt Health's breaches of the agreements, therefore, make all of Hunt Health's indebtedness to Towers immediately due." Wechsler, 2004 U.S. Dist. LEXIS 15926, at *102. However, the Court found that plaintiff did not show by a preponderance of the evidence that all outstanding accounts were Rejected or non-Reimbursable giving rise to indebtedness under the contract. The acceleration clauses only affected indebtedness and as such, the Court can see, and plaintiff points to, no reason in law or fact to reconsider the calculation of indebtedness.
Because the argument was not previously presented, it is unclear to the Court why the 18% interest rate would constitute future debt absent prior satisfaction of the demand requirement of paragraph 5. As a threshold issue, plaintiff's argument is not properly raised in a motion to reconsider as the Court cannot have overlooked a legal argument it never had the opportunity to consider. See supra, Part I; Wechsler, 2004 U.S. Dist. LEXIS 15926, at *137 ("Plaintiff requests interest at an 18% annual rate, without offering support for this calculation."). Despite plaintiff's failure to articulate his reason for requesting 18%, this Court proceeded to consider paragraph 5's demand requirement and ultimately found demand was necessary and plaintiff did not demand performance. See Wechsler, 2004 U.S. Dist. 15926, at *137-39. Moreover, the argument that the 18% interest rate is a future debt is completely without merit. This Court cannot properly entertain claims of hypothetical future demands giving rise to an 18% interest rate subject to the acceleration clauses.
It is plain that this Court wholly rejected plaintiff's argument that demand was unnecessary in the August 11 Order.Id. Further, plaintiff himself concedes that the 18% interest rate on indebtedness "was contingent on Towers' making a demand for payment" (Pl.'s Mem. at 6). Plaintiff's argument is untenable as he argues in the same breath that the interest rate was contingent on demand, and that the demand requirement was obviated. However, because plaintiff asserts that the Court mischaracterized its own prior ruling and overlooked evidence on the record showing Towers actually demanded performance, the Court feels discussion is necessary.
Plaintiff relies on this Court's prior decision granting plaintiff partial summary judgment wherein the Court stated that under paragraph 5, Towers was not required to notify Hunt Health in order for the Rejected Accounts to give rise to indebtedness.See generally Wechsler v. Hunt Health, 198 F. Supp. 2d 508 (S.D.N.Y. Apr. 18, 2002). Plaintiff's reliance on this opinion is misplaced. The Court did find that Towers was not required to notify Hunt Health of non-conforming accounts for indebtedness to arise. However, in the same opinion, the Court stated the 18% interest rate would result only from Towers' choice to demand performance rather than offset the amount due against the balance of the purchase price for other accounts Towers owed to Hunt Health. It was Towers' prerogative either to make a demand or to offset the balance. See id. at 519-21 ("If Hunt Health does not cure or substitute . . . Towers can then make a demand for payment, with an 18% interest rate running from the date of the demand, or Towers can choose to offset the indebtedness from the balance of the purchase price it owes.") (emphasis added). Indebtedness arose from Towers' advance of money to Hunt Health on non-conforming accounts, i.e. Towers overpaid. No notice is required for the legal consequence of induced overpayment to arise. Id. Conversely, the demand clause represents one means of self-help under the contract. Unlike indebtedness, the 18% interest rate cannot automatically arise because under the agreement, Towers was required to choose between demanding payment and offsetting the indebtedness.
Plaintiff's side argument that he did in fact demand Hunt Health's performance is not properly raised for the first time in this motion. Plaintiff never previously argued that Towers demanded performance. As plaintiff correctly observes, "The Court's prior ruling cited in the August 11, 2004 Opinion was predicated on the defendants' argument that Towers was required to give to Hunt Health notice of a Rejected Account before Hunt Health's obligations to cure, substitute or pay back the advance became due." Pl.'s Mem. at 6-7 n. 5. Plaintiff did not propose that the demand requirement was obviated nor that Towers had actually demanded performance because such satisfaction of the demand requirement would have rendered the April 18, 2002 ruling moot. Defendants would certainly have been on notice of indebtedness if a demand for payment of indebtedness had been made.
Plaintiff contends that the Court should have inferred, absent argument on the subject, that on the evidence, Plaintiff did demand performance. See Pl.'s Mem. at 6 n. 5. However, prior to issuing its August 11 Order, this Court combed the record and found Towers had made no such demand Further, the evidence plaintiff points to fails to meet the legal standard of demand The purpose of a demand requirement is to provide the target party with notice that further action in contravention to the demand will result in substantial legal consequence. See Gil Enterprises, Inc. v. Delvy, 79 F.3d 241, 246 (2d Cir. 1996) ("In order to prompt such rights and obligations, it is necessary that the party upon whom the demand is being made be put on notice that those legal obligations have been triggered . . . the gravamen of a legal demand is its notice providing function."). Though plaintiff is correct in stating that a party need not specifically use the word "demand" to prompt its consequence, the demand must contain imperative language putting the target party on notice of the "drastic legal repercussions that could result from noncompliance." Id. at 246.
Plaintiff first identifies a letter from Towers to Hunt Health responding to Hunt Health's inquiry as to its financial obligation to Towers. The letter informs Hunt Health of the balance due but contains no language requesting payment nor invoking the 18% per annum interest fee. See Defs.' Exh. 45. Plaintiff also points to his own response to defendants' interrogatories wherein plaintiff lists seventeen instances of "notice provided to defendants which informed defendants that a breach or a default of the HCP Agreement or the September Amendment had occurred." Defs.' Exh. 49 at 34-35. It is possible that one of the listed contacts could constitute demand under paragraph 5. However, as identified here, the correspondence only provided notice of breach, not demand for performance. Without more, the Court cannot determine if Towers demanded performance or exercised its option to offset the amount due. Finally, plaintiff claims the complaint itself served as a demand for performance. Again, this new argument is improperly presented in a motion for reconsideration. Further, it fails for the same reasons the letter and interrogatory response fail: None of these contained language putting defendant on notice that Towers was demanding payment and opting for the 18% interest rate rather than offsetting the outstanding balance. Ultimately, plaintiff had the opportunity and responsibility to assert and substantiate his allegation of actual demand during the ten day bench trial and failed to do so.
Thus, plaintiff's second ground for reconsideration is rejected.
C. Plaintiff's Claim that the Court Erred in Cutting Off Plaintiff's Rights to Factoring Fees After 365 Days
Plaintiff finally argues that, because paragraph 3 of the HCP agreement only applies to Reimbursable Accounts, its 365 day limitation should not be applied to the non-Reimbursable or Rejected Accounts. However, plaintiff misses the point of the Court's damages assessment. As previously explained, the Court awarded plaintiff expectation damages, purposed to place plaintiff in the position he would have occupied had both parties performed under the contract. Wechsler, 2004 U.S. Dist. LEXIS 15926, at *104-07. Plaintiff expected that all purchased accounts would be Reimbursable, or, if not, that Hunt Health would cure the defect: "Hunt Health had the option of substituting `good' accounts or pay[ing] down the advances made on those [bad] accounts." Pl.'s Mem. at 9; see Pl.'s Exh. 2, ¶ 5. However, if Hunt Health had not breached, plaintiff would have purchased only Reimbursable Accounts which could only be outstanding for 365 days under paragraph 3. Therefore, the Court sees no reason to abandon its ruling that, "[u]nder no understanding of the parties' contractual relationship could Towers expect to earn factoring fees on advances for more than 365 days." Wechsler, 2004 U.S. Dist. 15926, at *107. Plaintiff points to no fact or law that the Court overlooked in making this determination. For this reason, plaintiff's final ground for reconsideration cannot stand
Conclusion
For the reasons set forth above, plaintiff's motion for reconsideration of judgment of the August 11 Order pursuant to Rules 52(b), 59(e) of the Federal Rules of Civil Procedure, and Local Rule 6.3 is denied.
SO ORDERED.