Greenwich Investment Management Incorporated v. Aegis Capital Corporation et al

Filing 157

ORDER: IT IS THEREFORE ORDERED denying Plaintiff's Motion to Alter or Amend Judgment (Doc. 152 ). This matter remains closed. Signed by Judge John J Tuchi on 10/23/2024. (JAMA) Modified on 10/23/2024 add WO (JAMA).

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Greenwich
Incorporated,

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Investment

Management

Plaintiff,

No. CV-22-00129-PHX-JJT
ORDER

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v.
Aegis Capital Corporation, et al.,
Defendants.

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At issue is Plaintiff Greenwich Investment Management Inc.’s Motion to Alter or

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Amend Judgment (Doc. 152, Mot.), to which Defendants Aegis Capital Corp. and

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Municipal Capital Markets Group, Inc. filed a Response (Doc. 153, Resp.) and Plaintiff

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filed a Reply (Doc. 155, Reply). The Court finds it appropriate to resolve the Motion

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without oral argument. LRCiv 7.2(f).

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In an Order (Doc. 141) and Judgment (Doc. 142), the Court dismissed Plaintiff’s

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claims in this action for lack of subject matter jurisdiction. The Court found Plaintiff lacked

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constitutional standing to bring its claims because it had no legal title to, or proprietary

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interest in, its claims—and thus suffered no injury-in-fact—when it filed the Complaint.

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(Doc. 141 at 8–9 (citing, inter alia, W.R. Huff Asset Management Co., LLC v. Deloitte &

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Touche LLP, 549 F.3d 100 (2d Cir. 2008)).) The Court also denied Plaintiff’s request to

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amend the Complaint under Federal Rule of Civil Procedure 15(a). Although the Court

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observed that case law supported the proposition that the Court could construe Plaintiff’s

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request to amend as a request to supplement under Rule 15(d), the Court found that Plaintiff

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engaged “at least in dilatory tactics by concealing the lack of a basis” for Plaintiff’s injury-

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in-fact and that, as a result, Defendants suffered undue prejudice, rendering leave to amend

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the Complaint inappropriate in this instance. (Doc. 141 at 13–14.)

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Plaintiff now asks the Court to amend or alter the judgment under Federal Rule of

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Civil Procedure 59(e). “Amending a judgment after its entry remains ‘an extraordinary

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remedy which should be used sparingly.’” Allstate Ins. Co. v. Herron, 634 F.3d 1101, 1111

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(9th Cir. 2011) (quoting McDowell v. Calderon, 197 F.3d 1253, 1255 n.1 (9th Cir. 1999)).

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“Since specific grounds for a motion to amend or alter are not listed in the rule, the district

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court enjoys considerable discretion in granting or denying the motion.” Id. Nonetheless,

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the Ninth Circuit has defined several grounds on which a Rule 59(e) motion may be

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granted:
(1) if such motion is necessary to correct manifest errors of law or fact upon
which the judgment rests; (2) if such motion is necessary to present newly
discovered or previously unavailable evidence; (3) if such motion is
necessary to prevent manifest injustice; or (4) if the amendment is justified
by an intervening change in controlling law.

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Id.

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Plaintiff contends the Court’s ruling in its prior Order was clearly erroneous and

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manifestly unjust. (Mot. at 1.) Specifically, Plaintiff argues that (1) the undersigned’s

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ruling was inconsistent with comments made by the judge previously assigned to this

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matter, District Judge Michael T. Liburdi, “foreshadowing” an authorization for Plaintiff

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to “amend” its Complaint; and (2) Plaintiff did not have the opportunity to respond to

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“Defendants’ overstated claims of prejudice.” (Mot. at 1.)

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As the Court set forth in its prior Order (Doc. 141), in the Complaint, filed

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January 24, 2022, Plaintiff—an investment adviser—alleged that it purchased all the

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municipal bonds (forming the basis of its claims) at the initial issuance, “some for its own

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account and some for its clients.” (Doc. 1, Compl. ¶ 32.) It is this alleged purchase on its

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own behalf at the initial issuance that appeared to be the basis of Plaintiff’s standing to

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bring claims for damages subsequently suffered. But as Defendants have shown and the

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Court found, Plaintiff purchased no bonds for its own account at the initial issuance, and

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the allegation in the Complaint forming the basis of Plaintiff’s injury-in-fact in this matter

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was false. (Doc. 141.) To misallege the fact on which standing depends was more than just

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what Plaintiff characterizes as “inartful pleading.”

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Plaintiff now argues that it “never asserted that it purchased bonds for itself during

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the initial offering.” (Mot. at 12.) That is simply untrue, as it is contradicted by Plaintiff’s

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own allegations in the Complaint—the very place Plaintiff is obligated to plead facts

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sufficient to demonstrate its standing. See Spokeo, Inc. v. Robins, 578 U.S. 330, 338 (2016)

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(stating that, at the pleading stage, “the plaintiff must ‘clearly allege facts demonstrating’

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each element” of constitutional standing (quoting Warth v. Seldin, 422 U.S. 490, 518

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(1975)). In any event, construing the allegation in the Complaint to mean Plaintiff bought

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two bonds on the secondary market after Defendant Harvest Gold Silica, Inc. (“HGS”) was

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declared insolvent—as Plaintiff suggests—would not have demonstrated Plaintiff’s injury-

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in-fact, because the alleged damage to those who purchased bonds at the initial offering

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was already suffered. At bottom, Plaintiff only asked to “amend” the Complaint to allege

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substantiated facts going to its standing on August 11, 2023—almost a year after the

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deadline to amend set forth in the Scheduling Order (Doc. 29)—in response to Defendants’

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Motion to Dismiss. (Doc. 109.) The facts surrounding this procedural history form the

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foundation of the Court’s finding that Plaintiff engaged “at least in dilatory tactics by

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concealing the lack of a basis” for Plaintiff’s injury-in-fact.

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Plaintiff bases much of its present motion on the notion that its efforts to allege facts

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sufficient to demonstrate injury-in-fact depended on how and when Defendants raised the

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issue of standing. (E.g., Mot. at 13.) But the burden was not on Defendants to show Plaintiff

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lacked standing; the burden was always on Plaintiff to bring claims only if it had suffered

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an injury-in-fact. See Spokeo, 578 U.S. at 338. In other words, as the Court stated supra

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and in its prior Order (Doc. 141), for the Court to have subject matter jurisdiction over

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Plaintiff’s claims in the Complaint, Plaintiff must have suffered an injury-in-fact at the

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time it filed the Complaint. It misled Defendants and the Court by way of its allegations in

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the Complaint, and its subsequent, and tardy, effort to “obtain” standing and “amend” the

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Complaint would have changed the complexion of this case 20 months after the Complaint

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was filed.

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The Court has reviewed Plaintiff’s submittal of the record of Judge Liburdi’s

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statements in a July 10, 2023 hearing. (Mot. at 6 & Ex. 1.) The statements reveal that Judge

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Liburdi neither granted leave to “amend” nor evaluated the factors pertinent to such a

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request, and any reliance by Plaintiff on what it now terms “foreshadowing” was

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misplaced.

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Under Foman v. Davis, 371 U.S. 178, 182 (1962), the Court has also reviewed the

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competing arguments regarding prejudice that Defendant would suffer if the Court had

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allowed this case to go forward. The Court does not find it erred in its prior Order

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(Doc. 141) in crediting Defendants’ assertions that they have already expended substantial

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resources in this case, including in discovery, based on the mistaken belief arising from

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Plaintiff’s allegations in the Complaint that Plaintiff suffered damages after it purchased

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bonds for its own account on the initial offering. The Court also credits Defendants’

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assertions that, based on what would be the new complexion of this case, they would need

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to conduct substantial additional discovery and engage in associated motion practice “to

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assess the validity of the assignments Plaintiff has sought to obtain, whether they were

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obtained freely and fairly from current/former clients with adequate disclosure of the

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circumstances, whether consideration was given for those assignments, and whether

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Plaintiff may properly sue on behalf of the client-assignors.” (Doc. 140 at 5; see also Resp.

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at 13–14.) This includes discovery as to whether the client-assignors “purchased bonds in

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connection with the offering in July 2019, as opposed to in secondary market transactions,

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and whether Plaintiff has valid assignments for all of them.” (Doc. 140 at 6; see also Resp.

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at 13–14.)

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In sum, Plaintiff has not satisfactorily demonstrated that the Court should alter or

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amend its Order (Doc. 141) or Judgment (Doc. 142) under Rule 59(e).

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IT IS THEREFORE ORDERED denying Plaintiff’s Motion to Alter or Amend
Judgment (Doc. 152). This matter remains closed.
Dated this 23rd day of October, 2024.

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Honorable John J. Tuchi
United States District Judge

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