STATE OF INDIANA et al v. INDIANA STATE TEACHERS ASSOCIATION et al

Filing 219

ORDER - denying 215 Motion for Reconsideration. *** SEE ORDER ***. Signed by Judge Sarah Evans Barker on 4/17/2013. (CKM)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
STATE OF INDIANA ex rel. CHRIS
NAYLOR, INDIANA SECURITIES
COMMISSIONER,

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Plaintiff,
vs.
INDIANA STATE TEACHERS
ASSOCIATION, ISTA INSURANCE
TRUST, ISTA FINANCIAL SERVICES
CORPORATION, ISTA WELFARE
BENEFITS TRUST, ISTA
ADMINISTRATIVE SERVICES
CORPORATION, and NATIONAL
EDUCATION ASSOCIATION,
Defendants.

1:09-cv-01506-SEB-DML

ORDER DENYING DEFENDANT’S MOTION TO RECONSIDER
This entry resolves a renewed request relating to the much-publicized efforts of
Indiana school employees to recoup funds after one of the state’s major insurance trusts
collapsed. The dispute originated on December 2, 2009, when the State of Indiana,
through its Securities Commissioner (“the Commissioner”), filed a lawsuit in state court
against the Indiana State Teachers Association et al. (“the ISTA”) and the National
Education Association (“the NEA”). After Defendants removed the case to federal court
on December 9, 2009, on the ground that the NEA is a federally chartered corporation, we
assumed jurisdiction over the matter. Over a year later, the Commissioner filed his
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Amended Complaint [Docket No. 138], alleging four violations of the Indiana Uniform
Securities Act. He asserted these claims derivatively with respect to the NEA, asking the
Court to hold the NEA accountable for acts of Indiana’s four Unified Staff Service
Program employees (“the UniServ Directors”).1 We denied Defendants’ motion to
dismiss on April 28, 2010. Thereafter, the ISTA and the NEA filed separate motions for
summary judgment [Docket Nos. 170, 174], which we likewise denied by order dated
March 26, 2013 [Docket No. 206]. Now before us is the NEA’s Motion to Reconsider
[Docket No. 215], filed on April 9, 2013.
Bearing in mind the protracted nature of the proceedings and the substantial amount
of judicial ink previously applied in resolving the parties’ various motions, we need only
briefly recite the relevant facts. The focal point of this lawsuit is the ISTA Trust (“the
Trust”), which offered various health and disability insurance arrangements to Indiana
school employees. Under one such plan, the Collaborative Surplus Reserve (“CSR”)
Program, participating school districts could “receive a return on [their] . . . balances,2
calculated as a return on investment by ISTA and based, in part, on the return earned by
ISTA and the [Trust] on their investments.” Am. Compl. ¶ 15. The Commissioner
asserts that the CSR Program participants have been harmed by Defendants’ alleged failure
to disclose material information concerning the financial health of the Trust. According
to the Commissioner, Defendants did not divulge that the Trust had sustained substantial
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The Unified Staff Service Program provides the ISTA and similar organizations with staff
and support services needed to implement programs for educators. 2008 UniServ Agrmt. at 2.
2
According to the Commissioner, some school districts were promised guaranteed rates of
return. Am. Compl. ¶ 16.
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investment losses and, therefore, could not meet its obligations to CSR Program
participants. Id. ¶ 19. Putting aside theories of causation, it is undisputed that the Trust
did collapse in 2009. The NEA subsequently assumed control of the operations,
administration, and assets of the ISTA and its related entities by trusteeship.3 Id. ¶ 23.
Although most of the assertions in the Amended Complaint address the ISTA’s
allegedly unlawful conduct, the Commissioner also named the NEA as a defendant
“because of its operational control of the ISTA Entities” and “because [the NEA] paid,
directly or indirectly, compensation to UniServ Directors,” who allegedly violated the
Indiana Uniform Securities Act. Throughout this lawsuit, the Commissioner has argued
that the NEA, having breached its duty to supervise the UniServ Directors, must now be
held liable for the losses resulting from the Trust’s collapse. The NEA has similarly
maintained its resolve that: (1) the UniServ Directors were subject only to the supervision
and control of the ISTA; (2) the NEA was never duty-bound to supervise these individuals;
(3) the NEA never actually supervised these individuals; and (4) past financial assistance to
the ISTA does not justify a finding of liability against the NEA.
At summary judgment, we were unable to conclude that the NEA was entitled to
judgment as a matter of law. We denied NEA’s motion for summary judgment because,
in our view, the evidence in the record did not substantiate the NEA’s argument that it
lacked managerial rights over the UniServ Directors. Relying on the 2008 UniServ

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The NEA officially began its trusteeship on May 20, 2009, installing Edward Sullivan as
the Trust’s acting chief executive officer and sole trustee. Am. Compl. ¶ 10.
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Agreement (a document placed in the record by the NEA), we made the factual finding
that:
The following aspects of the UniServ arrangement lead us to conclude that genuine
disputed issues of material fact remain: the UniServ Directors’ reliance on NEA
for a significant portion of their salary; the fact that the NEA could “use each
UniServ [Director] for up to 10 working days each year;” the NEA’s demonstrated
commitment to supervising the UniServ Directors’ career development activities;
and the NEA’s intermittent “review of the total statewide UniServ Program.”
Likewise, the NEA’s reservation of the right to “make the final decision” regarding
activities it funded belies its insistence that it did not supervise the UniServ
Directors. These aggregated facts, as well as the ISTA’s proffered testimony
regarding who the UniServ Directors regarded as their “supervisor,” preclude us at
this time from granting judgment as a matter of law in favor of the NEA.
Docket No. 206 at 30 (quoting 2008 UniServ Agrmt. at 4-5.). The NEA now objects to
the foregoing findings in its request for reconsideration of our denial of summary
judgment. Specifically, it argues that its lawsuit is the “classic case for reconsideration”
because “the Court’s denial of [its] motion for summary judgment . . . is predicated on . . .
the Court’s interpretation of provisions no party had addressed.” NEA Br. at 2.
The NEA brings its motion to reconsider pursuant to Federal Rule of Civil
Procedure 54(b), which provides, in relevant part, that “any order or other form of decision,
however designated, which adjudicates fewer than all the claims . . . is subject to revision at
any time before the entry of judgment adjudicating all the claims and the rights and
liabilities of all the parties.” Rule 54(b) affords a district court broad discretion to amend
an order before entering judgment as to all claims and parties. See Caisse Nationale de
Credit Agricole v. CBI Indus., Inc., 90 F.3d 1264, 1270 (7th Cir. 1996). Nevertheless,
motions for reconsideration “serve a limited function.” Publishers Res., Inc. v.
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Walker-Davis Publ’ns, Inc., 762 F.2d 557, 561 (7th Cir. 1985). Their narrow scope of
applicability emanates from the law of the case doctrine, which carries a “presumption
against reopening matters already decided [to] reflect[] interests in consistency, finality,
and the conservation of judicial resources,” Minch v. City of Chi., 486 F.3d 294, 301 (7th
Cir. 2007), but also authorizes the court to change its mind about a prior ruling.
Accordingly, motions for reconsideration may be granted “for ‘compelling reasons,’ such
as a change in the law which reveals that an earlier ruling was erroneous.” Solis v.
Current Dev. Corp., 557 F.3d 772, 780 (7th Cir. 2009); see also Santamarina v. Sears,
Roebuck & Co., 466 F.3d 570, 572 (7th Cir. 2006); Starcon Int’l, Inc. v. N.L.R.B., 450 F.3d
276, 278 (7th Cir. 2006). They may also be granted when the court misunderstands a
party, makes a decision outside the key issues before the court, or errs in apprehension (not
reasoning). Bank of Waunakee v. Rochester Cheese Sales, Inc., 906 F.2d 1185, 1191 (7th
Cir. 1990); United States v. ITT Educ. Servs., Inc., No. 1:07-cv-0867-TWP-MJD, 2012 WL
266943, at *8 (S.D. Ind. Jan. 30, 2012).
When ruling on a motion for reconsideration, “the threshold issue [for the court is]
whether the factual or legal landscape has changed since [the last decision].” Agostini v.
Felton, 521 U.S. 203, 216 (1997); see also Vidimos, Inc. v. Wysong Laser Co., 179 F.3d
1063, 1065 (7th Cir. 1999). The requirement of changed circumstances “empower[s] the
court to change course when a mistake has been made . . . [but] do[es] not empower
litigants to indefinitely prolong a case by allowing them to raise their arguments[] piece by
piece.” Solis, 557 F.3d at 780. Additionally, this type of motion it is neither a vehicle for
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arguments a party should previously have asserted nor “a second[] . . . or . . . third[] bite at
the apple.” Id. It is well-settled throughout our federal court system that “[t]here must be
an end to litigation someday.” Ackermann v. United States, 340 U.S. 193, 198 (1950).
Therefore, a party who finds himself paddling upstream after a ruling adverse to his
interests may not use a motion for reconsideration as a life raft—especially not when his
own strategic choices engendered his dilemma. See Good Luck Nursing Home, Inc. v.
Harris, 636 F.2d 572, 577 (D.C. Cir. 1980).
Bearing in mind our circuit’s stance that motions to reconsider should be scarce
because controlling changes in the law or facts after submission of issues to the court
“rarely arise,” we can make short work of the NEA’s motion. Bank of Waunakee, 906
F.2d at 1191. The NEA’s argument is not grounded in intervening authority, new and
previously undiscoverable evidence, or changed circumstances weighty enough to bypass
the law of the case doctrine. See Vidimos, Inc., 179 F.3d at 1065. In fact, the crux of the
NEA’s motion is that it has not had the opportunity to address the evidence upon which the
Court relied at summary judgment—i.e., four provisions of the 2008 UniServ Agreement.
NEA Br. at 2. This argument is both puzzling and preposterous. As we noted supra, the
2008 UniServ Agreement is part of the evidentiary record because the NEA included it as
an exhibit in support of its motion for summary judgment. See Docket No. 175 Ex. 3
(“Exhibit B—UniServ Agreement 2008”). That all parties have enjoyed access to this
document since April 13, 2012 belies the NEA’s assertion that it was somehow unavailable
to anyone during the remainder of the briefing schedule. Furthermore, having placed this
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document before the Court, it is disingenuous of the NEA to argue now that the Court’s
references to it were improper. A district court is not required to ignore contractual
provisions—especially not when the language therein bears directly on a disputed issue.
S. Ill. Riverboat Casino Cruises, Inc. v. Triangle Insulation & Sheet Metal Co., 302 F.3d
667, 677 (7th Cir. 2002). Rather, the court is obligated to raise topics the parties have
overlooked; “the judge is on the bench . . . because of superior legal background, expertise,
or credentials, and for that reason ‘[should] not sit as a passive observer who functions
solely when called upon by the parties.’” Jones v. Page, 76 F.3d 831, 850 (7th Cir.
1996) (quoting Gonzalez v. Volvo of Am. Corp., 734 F.2d 1221, 1225 (7th Cir. 1984)).
Here, the excerpts of the 2008 UniServ Agreement upon which we relied in our
March 26, 2013 order are decidedly not “outside the adversarial issues presented to the
Court by the parties.” NEA Br. at 3 (quoting Bank of Waunakee, 906 F.2d at 1191). The
NEA’s request for judgment as a matter of law focused on the issue of whether it “had
sufficient connection with an alleged violation of the Indiana [Uniform] Securities Act.”
NEA S.J. Br. at 6. We therefore examined whether the record evidence established “that
[the] NEA neither participated [n]or controlled or supervised” the UniServ Directors. Id.
Fully apprised of the parties’ submissions, we concluded that several aspects of the 2008
UniServ Agreement (compensation, decisionmaking, supervising career development, and
“using” the services of a UniServ Director up to ten working days per year) pertained
directly to the NEA’s core adversarial issues. The NEA has failed to provide any new,
significant, contradictory, or binding case law that might persuade us otherwise at this
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juncture; rather, it merely balks at a decision that was contrary to its own stated interests.
We say again that genuine issues of material fact remain concerning the NEA’s role in the
Trust collapse; consequently, any determination of the NEA’s liability in this lawsuit must
be reserved for the jury at trial. Our prior ruling on the NEA’s motion for summary
judgment stands, and the NEA’s Motion for Reconsideration is, therefore, DENIED.
IT IS SO ORDERED.
04/17/2013
Date: __________________________________
_______________________________
SARAH EVANS BARKER, JUDGE
United States District Court
Southern District of Indiana

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Kyle N Roehler
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