Kapila v Grant Thornton LLP

Filing 41

ORDER granting in part and denying in part 28 Amended Motion for Reconsideration. Signed by Judge Robert N. Scola, Jr. on 8/23/2017. (pes)

United States District Court
for the
Southern District of Florida
Sonneet R. Kapila, Liquidating Trustee )
)
of the SMF Energy Liquidating Trust,
)
Plaintiff,
) Civil Action No. 14-61194-Civ-Scola
v.
)
)
Grant Thornton, LLP, Defendant.
)
Order on Motion for Reconsideration
Plaintiff Sonneet R. Kapila, as the liquidating trustee of the SMF Energy
Liquidating Trust, asks the Court to reconsider its order granting partial
summary judgment in Defendant Grant Thornton, LLP’s favor. For the reasons
that follow, the Trustee’s motion (ECF No. 28) is denied in part and granted
in part.
1. Standard of review
Contrary to the Trustee’s suggestions, even in a pre-judgment posture,
“in the interests of finality and conservation of scarce judicial resources,
reconsideration of an order is an extraordinary remedy that is employed
sparingly.” Gipson v. Mattox, 511 F. Supp. 2d 1182, 1185 (S.D. Ala. 2007). A
motion to reconsider is “appropriate where, for example, the Court has patently
misunderstood a party, or has made a decision outside the adversarial issues
presented to the Court by the parties, or has made an error not of reasoning
but of apprehension.” Z.K. Marine Inc. v. M/V Archigetis, 808 F. Supp. 1561,
1563 (S.D. Fla. 1992) (Hoeveler, J.) (citation omitted). “Simply put, a party may
move for reconsideration only when one of the following has occurred: an
intervening change in controlling law, the availability of new evidence, or the
need to correct clear error or prevent manifest injustice.” Longcrier v. HL-A Co.,
595 F. Supp. 2d 1218, 1247 (S.D. Ala. 2008) (quoting Vidinliev v. Carey Int’l,
Inc., No. CIV.A. 107CV762-TWT, 2008 WL 5459335, at *1 (N.D. Ga. Dec. 15,
2008)). However, “[s]uch problems rarely arise and the motion to reconsider
should be equally rare.” Z.K. Marine Inc. v. M/V Archigetis, 808 F. Supp. 1561,
1563 (S.D. Fla. 1992) (Hoeveler, J.) (citation omitted). Certainly if any of these
situations arise, a court has broad discretion to reconsider a previously issued
order. Absent any of these conditions, however, a motion to reconsider is not
ordinarily warranted.

2. The Trustee’s motion for reconsideration is largely denied.
The Court granted partial summary judgment in Grant Thornton’s favor
based on the application of the in pari delicto doctrine to this case. The Trustee
submits that the Court’s order “contains manifest errors of law and fact” and
should be vacated upon reconsideration. (Pl.’s Mot. at 6.) The bulk of the
Trustee’s argument, however, merely rehashes issues that the Court has
already considered. The Trustee disagrees with the Court’s evaluation of the
facts, including which facts the Court deemed material and which it didn’t, as
well as the Court’s application of the relevant law to these facts. The Trustee’s
criticisms of the Court’s reasoning, however, even if valid, merely seek, for the
most part, to relitigate issues that have already been decided.
For example, the Trustee submits that the Court’s analysis of whether
the parties were engaged in the “same wrongdoing” was “contrary to Florida
law.” (Def.’s Am. Mot. at 6.) However, in doing so, the Trustee merely rehashes
arguments that were already considered by the Court. The Court, in its order,
concluded that, for purposes of reviewing the parties’ cross-motions for
summary judgment, both parties were engaged in the same wrongdoing: to wit,
the improper overbilling scheme and financial misrepresentations to SMF
Energy’s customers. The Trustee disagrees, finding that the requirement that
the parties be engaged in the “same wrongdoing” is more nuanced. But the
Court’s and the Trustee’s divergent views and interpretation of the relevant
caselaw regarding the definition of the “same wrongdoing” do not, without
more, warrant the Court’s reconsidering its order.
Similarly, the Trustee quarrels with the Court’s analysis of Seidman &
Seidman v. Gee, 625 So. 2d 1, 3 (Fla. 2d DCA 1992). The Court relied on this
case to support a number of points: to rebut the Trustee’s argument that a
defendant who has a duty to detect alleged wrongdoing is absolutely foreclosed
from shielding itself from liability through an in pari delicto defense; that
Florida law generally supports the notion that a corporation should be
prevented from shifting responsibility for its own fraud to its auditors; and that
Florida law looks to whether the wrongdoing was against third parties rather
than the company itself. Again, the Trustee and the Court interpret this case
differently: this was just as apparent when the Court considered the parties’
objections to the bankruptcy court’s report and recommendation as it is now.
The Court and Trustee construe the findings and holdings of this case
differently. Again, the mere existence of this tension does not amount to
manifest error; merely a difference of opinion.
Likewise, the Trustee complains about the Court’s treatment of his
imputation arguments, contending that the Court gave the analysis “short

shrift.” Again, the Trustee merely expresses his disagreement with the Court’s
evaluation of the issue. The same is true of the Trustee’s complaint about the
Court’s consideration of whether SMF Energy’s billing scheme was a detriment
or a benefit to the company. The Trustee has not presented any valid
justification for the Court’s reconsideration of these issues.
Additionally, the Trustee raises some arguments for the first time in his
motion for reconsideration. For example, the Trustee submits that Florida’s
comparative-fault statute indicates the state’s legislative policy against
applying the in pari delicto defense in cases like this. Without any justification
for the issue not being raised sooner, the Court will not evaluate an argument
for the first time on a motion to reconsider. The Trustee mentioned publicpolicy issues generally, and only in passing, without reference to the specific
Florida statute, in both its motion for summary judgment and its objections to
the report and recommendations. But the Court did not find the vaguely
asserted proposition compelling in reviewing the bankruptcy court’s report and
recommendations and finds no reason to revisit that issue now.
Lastly, in its motion for reconsideration, the Trustee contends that the
applicability of the in pari delicto defense in this case “is simply not a matter
that can be adjudicated by summary judgment under these facts.” (Def.’s Mot.
at 9.) The Court notes that, not only is this a new argument, but it conflicts
with the Trustee’s summary-judgment motion wherein he argued the opposite,
contending that the Court could, based on the undisputed facts, enter partial
summary judgment in his favor on the in pari delicto defense issue. In re SMF
Energy, Case No. 14-01162-RBR, Trustee’s Motion for Partial Summ. J., Bankr.
ECF No. 219, 2–3 (Jun. 13, 2016). The Court will therefore not consider the
Trustee’s arguments in this regard.
3. The Trustee’s motion for reconsideration is granted in part.
The Trustee complains that the Court failed to consider his displacement
argument. The Trustee did not raise this issue in his objections but did
address it in his motion for summary judgment. To the extent that this part of
the Trustee’s argument required the Court’s de novo review, as part of the
Court’s assessment of the in pari delicto issue, the Court considers it now.
Where a trustee or receiver of a corporation is the plaintiff rather than
the corporation itself, the application of the in pari delicto doctrine becomes
more complicated. Some courts have permitted receivers to pursue claims
without being subject to an in pari delicto defense. See Scholes v. Lehmann, 56
F.3d 750, 754 (7th Cir. 1995) (“The appointment of the receiver removed the
wrongdoer from the scene.”) Most courts, however, have not extended this
treatment to bankruptcy trustees. In other words, most courts have concluded

that a bankruptcy trustee, standing in the shoes of a debtor, is, unlike a
receiver, subject to an in pari delicto defense. Official Comm. of Unsecured
Creditors v. R.F. Lafferty & Co., 267 F.3d 340, 358 (3d Cir. 2001) (“unlike
bankruptcy trustees, receivers are not subject to the limits of section 541,”
which provides that the trustee “stands in the shoes” of the debtor). The Court
is not persuaded by the Trustee that the unique facts in this case warrant
departing from the substantial weight of binding and persuasive authority that
favors allowing an in pari delicto defense to be asserted against a trustee in
bankruptcy. Official Comm. of Unsecured Creditors of PSA, Inc. v. Edwards, 437
F.3d 1145, 1150 (11th Cir. 2006) (“If a claim of [the debtor] would have been
subject to the defense of in pari delicto at the commencement of the
bankruptcy, then the same claim, when asserted by the trustee, is subject to
the same affirmative defense.”); e.g., Pearlman v. Alexis, No. 09-20865-CIV,
2009 WL 3161830, at *4 (S.D. Fla. Sept. 25, 2009) (Hurley, J.) (acknowledging
that “the defense has been asserted effectively against trustees” though “it
usually does not apply in cases involving court-appointed receivers”).
4. Conclusion
As detailed above, the Court denies in part and grants in part the
Trustee’s amended motion for reconsideration. (ECF No. 28). Although the
Court has reconsidered one aspect of its order, it reaches the same result and
therefore does not disturb its order on the bankruptcy court’s report and
recommendation (ECF No. 20).
Done and ordered, in chambers at Miami, Florida, on August 23, 2017.
_______________________________
Robert N. Scola, Jr.
United States District Judge