In re Jamuna Real Estate, LLC

• Decision Date: 22 July 2008
• Docket Number: Bankruptcy No. 04-37136.,Adversary No. 06-129.,Adversary No. 06-128.,Bankruptcy No. 04-37130.,Bankruptcy No. 04-37132.,Adversary No. 06-130.
• Citation: 392 B.R. 149
• Parties: In re JAMUNA REAL ESTATE, LLC, United Management Services, Inc. Bagga Enterprises, Inc., Debtors. Marvin Krasny, in his Capacity as Chapter 7 Trustee of United Management Services, Inc.; Marvin Krasny, in his Capacity As Chapter 7 Trustee of Jamuna Real Estate LLC; Gary Seitz, in his Capacity as Chapter 7 Trustee of Bagga Enterprises, Inc. and FL Receivables Trust 2002-A, Plaintiffs, v. Pratpal Bagga; Khushvinder Bagga; Ravinder Chawla; Hardeep Chawla; Welcome Group, Inc.; K & P Real Estate LLC; World Apparel Products, Inc. d/b/a/ SJM Trading Company, d/b/a Ten Tigers; American Merchandise Co., Inc., a/k/a American Merchandising Co., Inc.; 21st Century Restaurant Solutions, Inc.; Brand Trade, Inc.; H.B. Properties, Inc.; H.B. Properties LLP; Sant Properties; John and Jane Does and ABC Companies, Defendants.
• Court: U.S. Bankruptcy Court — Eastern District of Pennsylvania

Page 149

392 B.R. 149

In re JAMUNA REAL ESTATE, LLC, United Management Services, Inc. Bagga Enterprises, Inc., Debtors Marvin Krasny, in his Capacity as Chapter 7 Trustee of United Management Services, Inc.; Marvin Krasny, in his Capacity As Chapter 7 Trustee of Jamuna Real Estate LLC; Gary Seitz, in his Capacity as Chapter 7 Trustee of Bagga Enterprises, Inc. and FL Receivables Trust 2002-A, Plaintiffs, v. Pratpal Bagga; Khushvinder Bagga; Ravinder Chawla; Hardeep Chawla; Welcome Group, Inc.; K & P Real Estate LLC; World Apparel Products, Inc. d/b/a/ SJM Trading Company, d/b/a Ten Tigers; American Merchandise Co., Inc., a/k/a American Merchandising Co., Inc.; 21st Century Restaurant Solutions, Inc.; Brand Trade, Inc.; H.B. Properties, Inc.; H.B. Properties LLP; Sant Properties; John and Jane Does and ABC Companies, Defendants.

Bankruptcy No. 04-37130.

Bankruptcy No. 04-37132.

Bankruptcy No. 04-37136.

Adversary No. 06-128.

Adversary No. 06-129.

Adversary No. 06-130.

United States Bankruptcy Court, E.D. Pennsylvania.

July 22, 2008.

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OPINION

STEPHEN RASLAVICH, Chief Judge.

Introduction.

Before the Court is a Motion for Reconsideration and for Leave to Amend Complaint. The Motion is opposed. A hearing was held April 22, 2008 and the matter was taken under advisement. For the reasons set forth below, the Motion will be granted in part and denied in part.¹

What the Movants Seek

The Motion has been filed jointly by all of the Plaintiffs, although the relief sought varies among them. The principal plaintiff in this litigation is FL Receivables Trust 2002A, a special purpose business trust organized under the laws of the state of Delaware (the "Trust"). The other two Plaintiffs are the Chapter 7 Bankruptcy Trustees of entities to which the Trust made the defaulted loans which underpin the lawsuit, ("the Bankruptcy Trustees") (The Trust and the Bankruptcy Trustees are sometime herein collectively referred to as "Plaintiffs.") Relief of several sorts is sought: first, the Trust asks the Court to set aside its February 6, 2008 summary judgment ruling which dismissed the Trust's RICO claims with prejudice;² second, a corollary to that request asks that the Trust be permitted to amend and reassert the RICO claims which the February ruling dismissed; third, the Trust asks for leave to amend counts in the Complaint which were previously dismissed for failure to state a claim;³ fourth, the Bankruptcy Trustees seek permission to amend the Complaint to raise their own independent RICO claims; finally, the Trust asks for clarification on a particular point in the Court's February Opinion.

Summary of Holdings

The Motion for Reconsideration of the February 6, 2008 Opinion and Order granting Summary Judgment and dismissing the Trust's RICO claims is denied.

The Motion for Leave to Amend Complaint is granted in part and denied in part as follows:

Counts I and II (RICO and Conspiracy): The Trust's request for leave to amend the Complaint to replead the claims which were dismissed by the Court's February 6, 2008 ruling is denied; the Trust's RICO claims are limited to harm alleged to have been directly suffered by it.

The Bankruptcy Trustees' request for leave to amend to plead RICO and RICO Conspiracy claims is denied;

Count IV (Fraudulent Transfer):

Leave will be granted to amend the Complaint as proposed.

Count IX (Fraud, Conspiracy to Commit Fraud): Leave to amend the Fraud Count will be denied; however, leave will be granted to plead a cause of action for conspiracy to commit fraud as to Pratpal Bagga and Ravinder Chawla.

Counts X and XV (Alter Ego): Leave to amend these Counts will be denied.

Counts XI and XIII (Breach of Fiduciary Duty): Leave to amend these Counts will be denied.

The request for clarification is addressed, but the Trust's suggested interpretation of the language in question is rejected.

Standard for Reconsideration

The Court begins with the request for reconsideration. Such relief is normally granted for one of four reasons: that there has been an intervening change in controlling law; that the movant has available newly discovered evidence not previously available; that the challenged ruling is clearly wrong as to the law; or that it risks a manifest injustice. North River Ins. Co. v. CIGNA Reinsurance Co., 52 F.3d 1194, 1218 (3d Cir.1995). "The purpose of a motion for reconsideration is to correct manifest errors of law or fact or to present newly discovered evidence." In re Wile, 310 B.R. 514, 516 (Bankr.E.D.Pa. 2004) citing Harsco Corp. v. Zlotnicki, 779 F.2d 906, 909 (3d Cir.1985), cert. denied, 476 U.S. 1171, 106 S.Ct. 2895, 90 L.Ed.2d 982 (1986). As stated by the court in Keyes v. National Railroad Passenger Corporation, 766 F.Supp. 277, 280 (E.D.Pa.1991): "The purpose of a Rule 59(e) motion is to allow the court to reevaluate the basis of its decision. ... Motions for reconsideration are not at the disposal of an unsuccessful party to `rehash' the same arguments and facts previously presented." See also Reich v. Compton, 834 F.Supp. 753, 755 (E.D.Pa.1993), aff'd in part, rev'd in part on other grounds, 57 F.3d 270, 272 (3rd Cir.1995). "[Whatever may be the purpose of Rule 59(e) it ... [was not] ... intended to give the unhappy litigant one additional chance to sway the judge." Durkin v. Taylor, 444 F.Supp. 879, 889 (E.D.Va.1977). "Federal courts should grant such motions sparingly because of their strong interest in finality of judgment." Selaras v. M/V Cartagena de Indias, 959 F.Supp. 270, 272 (E.D.Pa.1997) quoting Continental Cas. Co. v. Diversified Indus., Inc., 884 F.Supp. 937, 943 (E.D.Pa.1995). The decision whether to grant or deny a Rule 59(e) Motion is entrusted to the sound discretion of the Court. In re Eagle Enterprises, Inc., 259 B.R. 73, 76 (Bankr.E.D.Pa.2001)

The Arguments for Reconsideration

Plaintiffs' opening brief never specifically states which of the foregoing traditional bases—i.e., change in the law, new evidence, legal error, or manifest injustice— warrants reconsideration. They frame the issue instead, as being that the Court's adverse summary judgment ruling relative to the RICO claims being asserted by the Trust was the result of a mutual mistake on the part of the Trust and its counter-party, Captec, such that reconsideration should be given and a different result obtain. The Trust argues that, although it may have never received an express, written assignment of Captec's legal claims, that, nevertheless, was what the parties intended. Plaintiffs' Brief, 2. Indeed, to confirm that fact (and their alleged mutual mistake) the two parties have recently memorialized their intention in the form of a Confirmation and Clarification Agreement. Id., 5. As a result, the Trust maintains, the Court should reform the assignment agreement to reflect the parties' true bargain. Moreover, the Trust adds, due process requires that the real party in interests—Captec—be allowed to ratify the Plaintiffs decision to file the RICO claims.

Defendants' response steers the discussion back to the strictures of Rule 59(e). They make a number of points. First, they stress that the evidence which the Trust now offers as to the original intent regarding an assignment of RICO claims is not newly discovered but, rather, newly manufactured in response to the adverse summary judgment ruling, and that it should therefore be disregarded; second, they argue that, aside from the evidentiary proffer's dubious timing, Defendants would be prejudiced if the Court were to consider it; third, they argue that this new evidence is proof positive that Defendants lack what the Third Circuit specifically required in Lerman v. Joyce Int'l, Inc., 10 F.3d 106 (3d Cir.1993) as the predicate for an assignee to assert RICO claims; to wit: that the legal rights in question have been expressly assigned; fourth, they argue that the request for reformation is equitable in nature and is, therefore, not properly brought before the Court via a Motion; finally, they argue that reformation would require joinder of a non-debtor party, thereby depriving the Court of jurisdiction. See generally Defendants' Brief, 7-22.

These arguments prompted the Trust to shift ground somewhat. In a reply brief, it rejoins with two points: first, the Trust clarifies that the thrust or basis of the instant motion is to prevent what it asserts will be a manifest injustice; second, the Trust reiterates and stresses to the Court that the agreement recently entered into between Captec and the Trust does no more than "clarify" what was originally intended by those parties with regard to the assignment of legal claims. At oral argument the Trust confirmed that its motion was essentially premised on "fairness." It asks the Court to reform the original assignment to reflect the true intent of the parties. See Transcript of Hearing ("T.") 4-22-08, 6-7.

The Court finds the Trust's arguments unpersuasive. However unfair the February 6 ruling may appear to the Trust, it seeks to establish its present position by introducing new evidence. The gravamen of its position is based on an argument as to what the parties are alleged to have originally intended regarding Captec's legal claims and a new document designed to elucidate that intention. This tactic must fail. If the parties originally intended to assign legal claims, but mistakenly neglected to do so, this clearly should have been the central thesis of the Trust's original response. The Trust's original contention, however, a position which it both vigorously and adamantly advocated, was that the original documents were sufficient on their face for purposes of assigning the subject RICO claims. Unfortunately for the Trust, in hindsight the best defense laid not in waging a good offense. Put differently, when its affirmative strategy failed it, the Trust...