Matter of Midland Mechanical Contractors, Inc., Bankruptcy No. A93-62925-WHD. Adversary No. 95-6067A.

• Decision Date: 13 September 1996
• Docket Number: Bankruptcy No. A93-62925-WHD. Adversary No. 95-6067A.
• Citation: 200 BR 453
• Parties: In the Matter of MIDLAND MECHANICAL CONTRACTORS, INC., Debtor. Richard D. ELLENBERG, as Trustee of Midland Mechanical Contractors, Inc., Plaintiff, v. BOARD OF REGENTS OF the UNIVERSITY SYSTEM OF GEORGIA, d/b/a Georgia State University, Defendant.
• Court: U.S. Bankruptcy Court — Northern District of Georgia

200 B.R. 453 (1996)

In the Matter of MIDLAND MECHANICAL CONTRACTORS, INC., Debtor Richard D. ELLENBERG, as Trustee of Midland Mechanical Contractors, Inc., Plaintiff, v. BOARD OF REGENTS OF the UNIVERSITY SYSTEM OF GEORGIA, d/b/a Georgia State University, Defendant.

Bankruptcy No. A93-62925-WHD. Adversary No. 95-6067A.

United States Bankruptcy Court, N.D. Georgia, Atlanta Division.

September 13, 1996.

Michael J. Bowers, Attorney General, George P. Shingler, Deputy Attorney General, Jeffrey Davis, Assistant Attorney General, Atlanta, GA, for Defendant.

Richard D. Ellenberg, Tamara Miles Ogier, Ellenberg & Associates, P.C., Atlanta, GA, for Plaintiff.

ORDER

W. HOMER DRAKE, Jr., Bankruptcy Judge.

Currently before the Court is a Motion for Reconsideration by the Board of Regents of the University System of Georgia (hereinafter "the Board of Regents" or "the Board"). By this Motion, the Board seeks review of an Order dated April 17, 1996, wherein the Court refused to vacate a judgment previously entered against it in this proceeding. This matter gives rise to a core proceeding within the Court's jurisdiction, see 28 U.S.C. § 157(b)(2)(A) & (O), and it shall be disposed of in accordance with the following reasoning.

FACTUAL BACKGROUND

This adversary proceeding relates to a prepetition contract between the Board of Regents and Midland Mechanical Contractors, Inc. (hereinafter "the Debtor") for the installation of certain sprinkler systems in the Georgia State University complex. When the Debtor filed for bankruptcy protection without fully completing performance under that agreement, the Board of Regents filed a Motion for Order Directing Debtor in Possession to Assume or Reject Contract. Protracted negotiations ensued and, after agreeing that the contract would be assumed, the parties presented a Consent Order to that effect for the Court's approval. On September 8, 1993, the Court signed this Consent Order Granting Motion for Order Directing Debtor in Possession to Assume Contract.

Soon afterwards, the parties reached an impasse regarding certain change order claims that had been submitted by the Debtor under their agreement. Negotiations having failed and the Board of Regents having continued to refuse all his demands for payment, on January 26, 1995, Richard D. Ellenberg (hereinafter "the Trustee") filed the present adversary proceeding in his capacity as Chapter 7 Trustee for the Debtor. The gravamen of the Trustee's complaint was simple — that the Board of Regents owed the Debtor a sum certain for change orders under the agreement, that this obligation had been breached, and that judgment should be entered accordingly.

As counsel for the Board of Regents, State Attorney General Michael J. Bowers (hereinafter "the Attorney General") filed an Answer contesting the Debtor's substantive right to payment under the contract and challenging the constitutionality of such a suit for damages against the State of Georgia. Through subsequent interrogatory responses, the Attorney General stated an intention to withdraw his second challenge relating to the Board of Regents Eleventh Amendment immunity from suit. The Attorney General never actually followed through with his promise of withdrawal, yet the parties appear to have thereafter treated the immunity question as a dead issue, focusing instead upon the Board of Regent's liability under the agreement.

The parties ultimately submitted this substantive question of liability for the Court's consideration through Cross Motions for Summary Judgment. After considering the factual circumstances of the case in light of applicable state law, the Court concluded that no material questions of fact existed, and it found the Trustee entitled to judgment as a matter of law. Consequently, through an Order dated January 11, 1996, the Court entered a judgment in this proceeding in favor of the Trustee and against the Board of Regents.

Some two months later, the Board of Regents filed a Rule 60(b) Motion for Relief from Final Judgment, submitting that circumstances of "excusable neglect" had prevented its counsel, the Attorney General, from either appealing the Court's January Order or seeking reconsideration thereof within the time period proscribed by Federal Rule. Thus, the Board of Regents asked that the Court vacate and re-enter the judgment against it in order to commence a new appeal period for its benefit. Finding that the Federal Rules did not contemplate such a substitution of judgments and that, in any event, the Board of Regents had not made any showing of "excusable neglect" warranting relief under Rule 60(b)(1), the Court denied this Motion through an Order dated April 16, 1996.

In the wake of that April 16th Order, the Board of Regents now has timely filed a Motion for Reconsideration, advancing therein a new and independent basis for its Rule 60(b) Motion for Relief from Judgment. In particular, the Board cites an intervening decision in Seminole Tribe of Florida v. Florida, ___ U.S. ___, 116 S.Ct. 1114, 134 L.Ed.2d 252 (1996), to suggest that Bankruptcy Code section 106's abrogation of Eleventh Amendment immunity stems from an invalid exercise of Congress' Article I power. To the extent that section 106 has no force in view of the Seminole decision, the Board of Regents next submits that the Court could obtain jurisdiction over it only if Georgia somehow had waived its Eleventh Amendment protection in this proceeding. The Board of Regents further contends that no such waiver took place, and it consequently reasons that the judgment rendered herein must be set aside as void for want of jurisdiction under Federal Rule of Civil Procedure 60(b)(4). Having afforded both the Trustee and the Board of Regents substantial opportunity to brief these points of law, and having given the arguments produced thereby its careful consideration, the Court now turns its attention to the procedural and substantive merits of the Board's Motion.

DISCUSSION

1. The Procedural Appropriateness of Using the Eleventh Amendment to Justify Reviewing the Motion to Vacate at this Late Stage in the Proceedings

Before addressing the substance of the Eleventh Amendment challenge now advanced by the Board, the Court first must assess its procedural workability, i.e., it must be determined whether the Seminole decision and the Board's Motion relying thereon have come at a point too late in these proceedings to justify relief from the Court's prior judgment. Federal Rule of Civil Procedure 59(e) grants bankruptcy courts license to reconsider orders and judgments after their entry. See Fed.R.Civ.P. 59(e) (made applicable in bankruptcy by Fed. R.Bankr.P. 9023); see also Fed.R.Bankr.P. 9002 (references, like that of Federal Rule of Civil Procedure 59(e), to the alteration or amendment of a "judgment" shall be read to include reconsideration of any order appealable to an appellate court); see also NationsBank v. Blier (In re Creative Goldsmiths), 178 B.R. 87, 90-91 (Bankr.D.Md.1995) (applying Rule 59(e) in bankruptcy). Understandably, however, the goal of this provision is limited to the correction of any manifest errors of law or misapprehension of fact. See Hutchinson v. Staton, 994 F.2d 1076, 1081 (4th Cir.1993); Lux v. Spotswood Constr. Loans, 176 B.R. 416, 420 (E.D.Va.), aff'd, 43 F.3d 1467 (4th Cir.1994).

This Rule is not designed to furnish a vehicle by which a disappointed party may reargue matters already argued and disposed of, nor is it aimed at providing a mechanism by which new arguments or legal theories, which could and should have been raised prior to the issuance of judgment, can be later advanced.

See In re DEF Inv., Inc., 186 B.R. 671, 680-81 (Bankr.D.Minn.1995) (citing Bannister v. Armontrout, 4 F.3d 1434, 1440 (8th Cir. 1993)); see also Concordia College Corp. v. W.R. Grace, 999 F.2d 326, 330 (8th Cir.1993), cert. denied, 510 U.S. 1093, 114 S.Ct. 926, 127 L.Ed.2d 218 (1994); Dale & Selby Superette & Deli v. Dep't of Agric., 838 F.Supp. 1346, 1348 (D.Minn.1993); DeGidio v. Pung, 125 F.R.D. 503, 505 (D.Minn.1989); Fed. Deposit Ins. Corp. v. World Univ., Inc., 978 F.2d 10, 16 (1st Cir.1992). Attempts to take a "second bite at the apple," to introduce new legal theories, or to pad the record for an appeal, constitute an abuse of the Rule 59(e) motion which the Court normally will not condone. See id. Thus, the Court will grant a Rule 59(e) motion only under extraordinary circumstances, such as a change in the law or the facts upon which it based its decision. See Wilson v. Runyon, 981 F.2d 987, 989 (8th Cir.1992), cert. denied, 508 U.S. 975, 113 S.Ct. 2968, 125 L.Ed.2d 668 (1993); Dale & Selby, 838 F.Supp. at 1347-48.

Here, the Trustee strenuously argues that the Board should not be permitted to add, through a Motion to Reconsider, a new theory for vacating the judgment at issue. Indeed, to the extent that the Board of Regents relied solely upon a theory of "excusable neglect" to justify its original Motion to Vacate, the Trustee appears to find this newly advanced Eleventh Amendment challenge wholly inappropriate for a subsequent Motion to Reconsider. As such, he contends, irrespective of that decision's impact upon the Court's original jurisdiction, the Board of Regents cannot now rely upon the Seminole holding as a foundation for its Motion to Reconsider.

In most cases, the Court would agree with the Trustee's assertion. Litigants should not be permitted to base a Motion to Reconsider upon some theory not argued within their original Motion to Vacate. See Concordia College, 999 F.2d at 330; Dale & Selby Superette & Deli, 838 F.Supp. at 1348; In re DEF Inv., Inc., 186 B.R. at 680-81. Nevertheless, the instant case marks an exception to that general rule, since the "new theory" of Eleventh Amendment immunity now advanced by the Board of Regents strikes at the heart of the Court's own jurisdiction, and it, therefore, may be presented at any stage of the proceedings. See...