CMH Liquidating Trust v. Anderson (In re Cmty. Mem'l Hosp.)
| Decision Date | 13 March 2019 |
| Docket Number | Case No. 12-20666,Adversary Proceeding No. 14-02020 |
| Parties | IN RE: COMMUNITY MEMORIAL HOSPITAL, d/b/a Cheboygan Memorial Hospital, Debtor, CMH Liquidating Trust, Plaintiff, v. Ted Anderson; William Borgerding; Timothy Burandt; Brian Burns; Holly Campa; Barbara Cliff; Eugene Cooley; David Courtney ; Marvin Coy ; Leif Dahleen; Nancy Dextrom; Brian Dietz ; Paul Ellinger; Susan Eno; John Everett; Carl Franzon; Michael Konicki; James Laughlin; Gary Lewins; Kathleen Lieder; James McClurg; Daniel Nieland; David Oram; John Parigi II; Kenneth Pletcher; Carolyn Riley; Shari Schult; Fred Vitello; John Ward; Donald Watson; Michael Weeks, and Hal Yost, Defendants. |
| Court | United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — Eastern District of Michigan |
Bryan R. Walters, Michael S. McElwee, John J. Rolecki, Grand Rapids, MI, John W. Allen, Kalamazoo, MI, for Plaintiff.
David Lawrence Puskar, Gregory W. Mair, Kenneth W. Kable, Robert Andrew Jordan, David Alexander Wallace, Saginaw, MI, Sandra S. Hamilton, Craig S. Neckers, Grand Rapids, MI, Adam L. Kochenderfer, Scott A. Wolfson, Wolfson Bolton PLLC, Sean M. Walsh, Giarmarco Mullins & Horton, P.C., Troy, MI, David A. Lerner, Bloomfield Hills, MI, Ronald Arthur Schuknecht, Susan Jill Rice, Traverse City, MI, Matthew W. Schlegel, Detroit, MI, for Defendants.
Plaintiff CMH Liquidating Trust ("the Trust") brings this Motion to Alter or Amend ("Motion to Amend") this Court's "Order Granting in Part, And Denying, In Part, Defendants' Motion to Dismiss the Amended Complaint" dated August 13, 2018 (ECF No. 278 ). For the reasons explained below, this Court denies, in part, and grants, in part, the Motion to Amend.
Plaintiff brings this motion pursuant to "Federal Rule of Bankruptcy Procedure 7059(e)." (Plaintiff's Motion to Alter or Amend Order - ECF No. 282 ). However, there is no such rule and it appears that Plaintiff intends to rely on Federal Rule of Bankruptcy Procedure 9023 which incorporates Federal Rule of Civil Procedure 59 into bankruptcy practice. Plaintiff also references Rule 9024-1(a) of the Local Rules for the United States Bankruptcy Court for the Eastern District of Michigan which governs motions for reconsideration.
Federal Rule of Civil Procedure 59(e) permits a party to file a motion to alter or amend a judgment. A Rule 59(e) motion may be granted: (1) to correct a clear error of law; (2) to account for newly discovered evidence or an intervening change in the controlling law; or (3) to otherwise prevent manifest injustice. GenCorp, Inc. v. Am. Int'l Underwriters , 178 F.3d 804, 834 (6th Cir. 1999) ; Henderson v. Walled Lake Consol. Sch. , 469 F.3d 479, 496 (6th Cir. 2006). The granting of a motion brought pursuant to Rule 59(e)"is an extraordinary remedy and should be used sparingly" because Rule 59(e)"serves the narrow purpose of allowing a party to correct manifest errors of law or fact or to present newly discovered evidence." Hamerly v. Fifth Third Mortg. Co. (In re J & M Salupo Dev. Co.), 388 B.R. 795, 800-01 (6th Cir. BAP 2008).
"A motion under Rule 59(e) is not an opportunity to re-argue a case." Sault Ste. Marie Tribe of Chippewa Indians v. Engler , 146 F.3d 367, 374 (6th Cir. 1998) ; Michigan Flyer LLC v. Wayne Cnty. Airport Auth. , 860 F.3d 425, 431 (6th Cir. 2017). F.D.I.C. v. World Univ. Inc., 978 F.2d 10, 16 (1st Cir. 1992) (internal citations omitted). See also Roger Miller Music, Inc. v. Sony/ATV Publ'g, LLC , 477 F.3d 383, 395 (6th Cir. 2007).
Local Rule 9024-1(a)(3) provides:
Generally, and without restricting the discretion of the court, a motion for reconsideration that merely presents the same issues ruled upon by the court, either expressly or by reasonable implication, will not be granted. The movant must not only demonstrate a palpable defect by which the court and the parties have been misled but also show that a different disposition of the case must result from a correction thereof.
The "palpable defect" standard under the local rule has been held to be "not inconsistent" with the standard for Rule 59(e) motions. Henderson , 469 F.3d at 496.
Plaintiff first argues that this Court improperly determined that the Amended Complaints failed to state a claim against Defendants Brian Dietz and Carolyn Riley, former Chief Executive Officers ("CEOs") of Community Memorial Hospital ("CMH"). In its Opinion Granting, in Part, and Denying, in Part, Defendants' Motions to Dismiss the Amended Complaint ("Opinion") this Court found that, aside from allegations regarding billing and coding issues, Plaintiff failed to state a claim against Dietz because the Amended Complaint did not allege that Dietz had the authority or responsibility to address the issues that were the basis for Plaintiff's claims of breach of fiduciary duty and/or negligence. (ECF No. 277 ). The Court's conclusion in this regard was based upon its analysis of two cases discussed by the parties, Bridgeport Holdings, Inc. v. Boyer (In re Bridgeport Holdings, Inc.) , 388 B.R. 548 (Bankr. D. Del. 2008) and Official Comm. of Unsecured Creditors v. Goldman Sachs Credit Partners L.P. (In re Fedders N. America, Inc.) , 405 B.R. 527 (Bankr. D. Del. 2009), as well as another case noted by the Court, Alberts v. Tuft (In re Greater Se. Comm. Hosp. Corp. I), 333 B.R. 506 (Bankr. D.C. 2005). The courts in those cases uniformly found a failure to state a claim against defendant corporate officers where the complaints did not state facts demonstrating that the officers had the authority to take the actions or make the decisions that were the basis for the alleged breaches of duty.
In the Opinion now challenged by Plaintiff, this Court found a failure to state a claim against Riley based on her status as a volunteer director. The Court did not address Riley's status as a CEO because it was not alleged in the Amended Complaint that Riley held this position. (ECF No. 277, p. 15 ).
Plaintiff now argues that the Court's analysis regarding the claims against Dietz and Riley ignored the fact that the CMH Bylaws ("Bylaws") provide that the CEO is an "ex-officio" voting member of the board and, therefore, Dietz and Riley should be held to the same standard as the other volunteer directors. Plaintiff also asserts that the Bylaws give the CEO broad powers and responsibility to act so that Plaintiff can be found to have "plausibly alleged breaches of fiduciary duty by the CEOs." (ECF No. 282, p. 5 ). These arguments fail for three reasons.
First, as was noted above, the Court analyzed (and rejected) the claims against Riley in the context of her position as a volunteer director. The Court did not analyze the claims against Dietz in the context of the standard for directors because the complaint did not allege that he was a director "ex-officio" or otherwise.
Second, Plaintiff's argument in this Motion to Amend relies on provisions of the Bylaws which Plaintiff acknowledges were not previously presented to the Court. (ECF No. 282, Exhibit A). To qualify as "newly discovered evidence" upon which a Rule 59(e) motion may be granted, evidence must have been previously unavailable. GenCorp, Inc. , 178 F.3d at 834. "Evidence is ‘unavailable,’ so as to justify its late submission by way of a motion under Rule 59(e) only if it could not, in the exercise of reasonable diligence, have been submitted before." Javetz v. Bd. of Control, Grand Valley State Univ., 903 F.Supp. 1181, 1191 (W.D. Mich. 1995) (collecting cases). There is no indication that Plaintiff could not have accessed the Bylaws prior to filing the Amended Complaint or the responses to the Motions to Dismiss and thus, the Bylaws are not newly discovered evidence for purposes of this motion.1
Third, Plaintiff asserts that the Court failed to properly consider certain allegations in the Amended Complaint that Plaintiff now argues are enough to state a claim against Dietz on the other alleged breaches of duty. The Court rejects Plaintiff's attempt to re-argue the case in this manner. Sault Ste. Marie Tribe of Chippewa Indians , 146 F.3d at 374.
Plaintiff next asserts that a portion of an email from a director that was quoted in the Amended Complaint demonstrates that Dietz had the "authority and responsibility for making whatever changes to hospital operations [sic] were necessary to put the Hospital on viable financial footing." (ECF No. 282-3, p. 7 n. 4 ). This email states, in part: "My understanding is that he [Dietz] was to make, in quick order, whatever staff or operational cuts were necessary to put CMH on a financially viable course."
First, this Court notes that the language in the email quoted by Plaintiff specifically references "staff or operational cuts." (Amended Complaint, ECF No. 192, ¶ 43 ). This language does not lead to a reasonable inference that Dietz that the authority to make "any changes necessary" to put the hospital on solid financial ground.
Additionally, it was not alleged that Dietz had the authority to make any changes necessary to improve the hospital's financial condition. Rather, the Amended Complaint made specific allegations against Dietz and all Defendants as to certain instances of nonfeasance or malfeasance that caused the Hospital's demise. As to Defendant Dietz it was alleged that he:
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