Shuffle Tech Int'l, LLC v. Wolff Gaming, Inc.

• Decision Date: 09 July 2014
• Docket Number: No. 13–3576.,13–3576.
• Citation: 757 F.3d 708
• Parties: SHUFFLE TECH INTERNATIONAL, LLC, Plaintiff–Appellant, v. WOLFF GAMING, INC., Defendant–Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

757 F.3d 708

SHUFFLE TECH INTERNATIONAL, LLC, Plaintiff–Appellant,

v.WOLFF GAMING, INC., Defendant–Appellee.

No. 13–3576.

United States Court of Appeals, Seventh Circuit.

Argued April 22, 2014.

Decided July 9, 2014.

Jeffrey R. Rosenberg, O'Halloran, Kosoff, Geitner & Cook, LLC, Northbrook, IL, for Plaintiff–Appellant.

Peter Ordower, Chicago, IL, for Defendant–Appellee.

Before POSNER, WILLIAMS, and TINDER, Circuit Judges.

POSNER, Circuit Judge.

Rule 60(a) of the Federal Rules of Civil Procedure authorizes a district court to “correct a clerical mistake or a mistake arising from oversight or omission whenever one is found in a judgment, order, or other part of the record. The court may do so on motion or on its own, with or without notice.” (The rule goes on to provide that the court may not do this without the permission of the appellate court if an appeal from the judgment, order, etc., sought to be corrected has been docketed, but that provision is not applicable to this case.) Rule 60(b) authorizes a court to “relieve a party or its legal representative from a final judgment, order, or proceeding” for various reasons including “mistake, inadvertence, surprise, or excusable neglect,” or “any other reason that justifies relief,” but only “on motion” of a party. The appellant, Shuffle Tech, argues that the correction made by the district judge in this case of an error in her judgment exceeded her authority under either subsection of the rule.

Shuffle Tech makes “consumer grade” automatic card-shuffling equipment. The appellee, Wolff Gaming, distributes “casino grade” gaming equipment. In 2010 the parties signed a letter of intent expressing their “mutual commitment to proceed with the draft Development & Distribution Agreement.” The draft agreement described a deal in which Shuffle Tech, with financial assistance from Wolff, would develop casino-grade shuffling equipment, while Wolff would become the exclusive distributor of the equipment in the Western Hemisphere.

The deal was a flop. In the following year, before the development of the new shuffling equipment was completed, Shuffle Tech wrote Wolff proposing that the parties “settle all outstanding business ... and go [their] separate ways.” A couple of months later Shuffle Tech brought this diversity suit (governed by Illinois law), seeking a declaratory judgment that the draft agreement was not an enforceable contract but the letter of intent was and Wolff had broken it. Wolff counterclaimed, charging breach of contract, fraud, unjust enrichment, and other wrongdoing. The district judge granted summary judgment in favor of Shuffle Tech with respect both to its claim for declaratory relief and to Wolff's counterclaims, but granted summary judgment in favor of Wolff with respect to Shuffle Tech's claim for breach of contract. So when the dust settled, the judge had, in effect, by granting only the declaratory relief sought by Shuffle Tech and rejecting the parties' other claims, simply rescinded the draft agreement. The question presented by the appeal is whether the rescission obligated Shuffle Tech to return the earnest money that it had received from Wolff in connection with the draft agreement.

The parties' letter of intent had provided that “as evidence of Wolff Gaming's commitment to proceed, Wolff Gaming agrees immediately [to] pay $100,000 toward the total $525,000 initial commitment described in the draft Agreement. This earnest money is to be held by Shuffle Tech and may be used to proceed with the project; however, in the event that a final Agreement cannot be signed within 90 days, Wolff Gaming may request the return of the entire $100,000 paid as earnest money, and said earnest [money] will be refunded within 15 days of said request.” Wolff paid the $100,000 in earnest money as agreed in the letter of intent, later paying an additional $24,940 in earnest money at Shuffle Tech's request.

Shuffle Tech's claim for declaratory relief asked “for entry of a judgment declaring that the ... DRAFT ‘Development and Distribution Agreement’ does not constitute a binding contract” and that “Shuffle Tech's only obligation to Wolff is to refund $124,940 advanced to Shuffle Tech as earnest money pursuant to the ... Letter of Intent.” In other words, Shuffle Tech was acknowledging that if the agreement was rescinded it would have to return the earnest money to Wolff. But the district judge's grant of declaratory relief failed to mention the earnest money. On the basis of the judge's grant of summary judgment, however, which as we said denied all relief except rescission, and of the earnest-money provision of the letter of intent, Wolff asked Shuffle Tech to return the $124,940, and when Shuffle Tech ignored the request Wolff filed a motion under Rule 60 (not specifying which subsection of the rule the motion was being filed under) that the court order Shuffle Tech to refund the earnest money. In response, the district judge entered a postjudgment order that “amended [the final judgment] to specify that Shuffle Tech must pay [Wolff Gaming] $124,940 within fifteen days.” The order did not mention Rule 60 or any other ground for the amendment. Shuffle Tech appeals from the final judgment as thus amended, denying any obligation to return the earnest money.

Rule 60(a) as we said allows a district judge to “correct a clerical mistake or a mistake arising from oversight or omission whenever one is found in a judgment,” and to do so “on motion or on [his or her] own, with or without notice” to the parties. When the ground for changing the judgment is not a trivial error but fraud, newly discovered evidence, excusable neglect, or some like ground that is likely to raise issues that may benefit from an adversary presentation, Rule 60(b) comes into play and requires that the ground be asserted by motion of a party (which also was done in this case—in fact Wolff filed two such motions, although only one mentioned Rule 60).

Thus “if the flaw lies in the translation of the original meaning to the judgment, then Rule 60(a) allows a correction; [but] if the judgment captures the original meaning but is infected by error, then the parties must seek another source of authority to correct the mistake.” United States v. Griffin, 782 F.2d 1393, 1396–97 (7th Cir.1986); see Rivera v. PNS Stores, Inc., 647 F.3d 188, 193–94 (5th Cir.2011); 11 Charles Alan Wright et al., Federal Practice & Procedure § 2854, p. 302 (3d ed.2012). Rule 60(b) is the usual other source, but as we said it authorizes the district court only to “relieve a party or its...