South Atlantic Ltd. Partnership v. Riese

• Decision Date: 30 January 2004
• Docket Number: No. 02-2274.,02-2274.
• Parties: SOUTH ATLANTIC LIMITED PARTNERSHIP OF TENNESSEE, LP; South Atlantic Income Properties, LLC; South Atlantic Management Company, Plaintiffs-Appellees, v. David R. RIESE; Gary Plichta, Defendants-Appellants, and Gibraltar Companies of Tennessee, Incorporated; Gibraltar Companies, Incorporated, Defendants, v. E. Stephen Stroud; Grace D. Ramsey; Steve Simpson, Third Party Defendants-Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

356 F.3d 576

SOUTH ATLANTIC LIMITED PARTNERSHIP OF TENNESSEE, LP; South Atlantic Income Properties, LLC; South Atlantic Management Company, Plaintiffs-Appellees, v. David R. RIESE; Gary Plichta, Defendants-Appellants, and Gibraltar Companies of Tennessee, Incorporated; Gibraltar Companies, Incorporated, Defendants, v. E. Stephen Stroud; Grace D. Ramsey; Steve Simpson, Third Party Defendants-Appellees.

No. 02-2274.

United States Court of Appeals, Fourth Circuit.

Argued: October 28, 2003.

Decided: January 30, 2004.

Appeal from the United States District Court for the Eastern District of North Carolina, Malcolm J. Howard, J ARGUED: Sean Eric Andrussier, Womble, Carlyle, Sandridge & Rice, P.L.L.C., Raleigh, North Carolina, for Appellants. Kenneth Ray Wooten, Ward & Smith, P.A., New Bern, North Carolina, for Appellees. ON BRIEF: Pressly M. Millen, Womble, Carlyle, Sandridge & Rice, P.L.L.C., Raleigh, North Carolina, for Appellants. E.D. Gaskins, Jr., Everett, Gaskins, Hancock & Stevens, Raleigh, North Carolina, for Appellees.

Before MOTZ, TRAXLER, and KING, Circuit Judges.

Vacated and remanded by published opinion. Judge KING wrote the opinion, in which Judge DIANA GRIBBON MOTZ and Judge TRAXLER joined.

OPINION

KING, Circuit Judge:

David Riese and Gary Plichta have initiated this appeal from an October 1, 2002, judgment entered by the district court. South Atl. Ltd. P'ship of Tenn. v. Riese, 5:96CV901H1 (E.D.N.C. Oct. 1, 2002). Riese and Plichta maintain that the 2002 judgment improperly modified the court's earlier May 6, 1999, judgment, which had been affirmed on appeal. South Atl. Ltd. P'ship of Tenn. v. Riese, 5:96CV901H1 (E.D.N.C. May 6, 1999); aff'd by South Atl. Ltd. P'ship of Tenn. v. Riese, 284 F.3d 518 (4th Cir.2002) (hereinafter "SALT I"). As explained below, the 2002 judgment contravened the mandate rule, and we therefore vacate and remand.

I.

In order to determine whether entry of the 2002 judgment contravened our mandate in SALT I, we must understand the procedural history of this litigation. This procedural history can be, for organizational purposes, divided into three periods — the period prior to May 6, 1999 (the "Pre-Judgment" period); the period between May 6, 1999, and the issuance of the SALT I mandate on May 14, 2002 (the "Post-Judgment" period); and the period following issuance of the SALT I mandate (the "Post-Mandate" period). Prior to reviewing this procedural history, we will briefly relate the relevant facts underlying this dispute.

A.

In the 1980s, David Riese and Gary Plichta (the "Riese Group") joined efforts to develop a multi-family residential community, known as Lexington Apartments (the "Lexington"), near Nashville, Tennessee. In 1993, in order to secure the capital necessary to develop the Lexington, the Riese Group joined forces with E. Stephen Stroud, Stroud's wife Grace Ramsey, and Steven Simpson (the "Stroud Group"). The Stroud Group and the Riese Group then formed a limited partnership, called South Atlantic Limited Partnership of Tennessee ("SALT" or the "Partnership"), to develop real estate in the Nashville area. The Partnership was structured so that SALT owned the Lexington. The Riese Group owned twenty-five percent of SALT, and the other seventy-five percent was controlled by the Stroud Group.

Rather than retain a third-party to oversee development of the Lexington, the Partnership authorized the Riese Group to form Gibraltar Companies of Tennessee, Incorporated ("Gibraltar")¹ to serve as its general construction contractor. SALT and Gibraltar entered into a general contractor agreement in August 1994, pursuant to which Gibraltar was required, inter alia, to achieve substantial completion of the Lexington within eighteen months of commencing construction.

The beginning of the Lexington's construction was delayed almost six weeks, and several additional delays occurred after construction commenced. In January 1996, citing concerns stemming from construction quality and delays, SALT replaced Gibraltar with a new general contractor, and the Lexington was completed in August 1996.

Meanwhile, in January 1996, Prudential Insurance Company executed a letter of intent to purchase the Lexington. In May 1996, Stroud's attorney notified the Riese Group that an audit reflected that the Riese Group and Gibraltar had engaged in financial improprieties during construction of the Lexington. Stroud's attorney also informed the Riese Group that, as a result of these improprieties, it would be expelled from SALT on May 31, 1996. According to the Stroud Group, SALT's book value was less than zero at the end of May 1996. Pursuant to the partnership agreement, therefore, the Riese Group received nothing for its twenty-five percent ownership interest in SALT. On June 11, 1996, eleven days after the Riese Group was expelled from the Partnership, Prudential purchased the Lexington from SALT for $17,640,000, netting SALT a profit of approximately $1,200,000.

B.

1. THE PRE-JUDGMENT PERIOD

In October 1996, SALT, along with its general partner (South Atlantic Income Properties, L.L.C.) and its majority limited partner (South Atlantic Management Company) (collectively, the "SALT Group"), filed suit against the Riese Group and Gibraltar in the Eastern District of North Carolina. The Riese Group and Gibraltar responded with counterclaims against the SALT Group and with third-party claims against the Stroud Group. The various claims in the lawsuit included breaches of contract, breaches of fiduciary duties, and violations of North Carolina's Unfair Trade Practices Act (the "UTPA"). SALT I at 524.

A jury trial was conducted in the Eastern District of North Carolina in November 1998. Upon its conclusion, the jury rendered its Verdict, finding: (1) that the Riese Group had breached its fiduciary duties to SALT; (2) that Gibraltar had breached its contractual obligations to SALT; and (3) that the SALT Group, the Stroud Group, the Riese Group, and Gibraltar had each engaged in unfair and deceptive trade practices. On November 19, 1998, the court entered judgment on the Verdict.² On December 4, 1998, the Riese Group and Gibraltar moved the court, pursuant to Rules 59 and 60(a) of the Federal Rules of Civil Procedure, to correct certain clerical errors in the judgment. Specifically, they sought to amend the judgment to reflect that the breach of contract aspect of the Verdict related only to Gibraltar, rather than to all defendants, and that the Riese Group and Gibraltar's UTPA award was against the Stroud Group as well as the SALT Group. On March 10, 1999, in conformity with those requests, the court entered an Amended Judgment.

On March 24, 1999, the SALT and Stroud Groups sought, pursuant to Rule 60(a), to amend the judgment a second time. They sought to remove Gibraltar Companies, Incorporated, as a counter-claimant and third-party plaintiff in the Amended Judgment of March 10, 1999. They also sought to have the judgment reflect that they (the SALT and Stroud Groups) were jointly and severally liable for their UTPA violations, and that the Riese Group and Gibraltar were jointly and severally liable for their UTPA violations. Finally, the SALT and Stroud Groups requested the court to aggregate the SALT Group's total recovery in the judgment (i.e., aggregate its recovery of costs with its recovery for Gibraltar's breach of contract and the Riese Group's and Gibraltar's UTPA violations).

On March 29, 1999, the Riese Group and Gibraltar filed a cross-motion, pursuant to Rule 60(a), also seeking to amend the judgment for a second time. Although they agreed with certain of the amendments proposed by the SALT and Stroud Groups, they opposed the aggregation of the SALT Group's total recovery. The Riese Group and Gibraltar noted that the SALT Group's various awards were not rendered against the same parties. See infra note 5. They contended, therefore, that aggregating the claims "could be potentially confusing for court personnel (including state court personnel) attempting to deal with [the] judgment...."

While the Rule 60(a) motions were pending, the parties proceeded to appeal various aspects of the Amended Judgment. The SALT and Stroud Groups filed their notice of appeal on April 9, 1999, and the Riese Group and Gibraltar filed a notice of appeal on April 22, 1999. On May 1, 1999 we consolidated these two appeals (Nos.99-1497(L) and 99-1552, respectively).

2. THE POST-JUDGMENT PERIOD

On May 6, 1999, while the two consolidated appeals were pending in this Court, the district court amended the judgment for a second time, entering its Second Amended Judgment. Despite the Riese Group and Gibraltar's objection to aggregation of the SALT Group's total recovery, the Second Amended Judgment provided that the SALT Group "collectively shall have ... a total recovery, exclusive of interest, of $1,578,765.94."³

On May 14, 1999, eight days after entry of the Second Amended Judgment (the "Judgment"), the SALT and Stroud Groups moved the district court, pursuant to Rule 62(d), to stay the Judgment without requiring bond (the "Bond Motion"). On June 2, 1999, the Riese Group and Gibraltar filed a motion to stay execution of the Judgment pending appeal. In support of the Bond Motion, the SALT and Stroud Groups asserted that the two motions raised the issue of "how properly to treat [the Riese Group and Gibraltar's] recovery on their counterclaim to offset [the SALT Group's] recovery on [its] claims, for purposes of execution." They contended that the court should amend the Judgment again to adopt a net recovery approach to the various awards, that is, by: (1) aggregating the SALT Group's recovery with the Stroud Group's recovery; (2) aggregating the Riese Group's recovery with Gibraltar's recovery; and (3) setting off the Riese Group and Gibraltar's total recovery against the SALT and Stroud Groups' total recovery (the "Net Recovery Approach").

The SALT and Stroud Groups sponsored the Net...