Christopher Boling v. Prospect Funding Holdings LLC

Filing 42

MEMORANDUM OPINION AND ORDER by Judge Greg N. Stivers on 4/21/2016 denying 34 Motion for Reconsideration re re 31 Order on Motion to Dismiss for Failure to State a Claim, Order on Motion for Partial Summary Judgment. cc: Counsel, Phillip D. Stern(JWM) Modified to edit distribution on 4/21/2016 (JWM).

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
BOWLING GREEN DIVISION
CIVIL ACTION NO. 1:14-CV-00081-GNS-HBB

CHRISTOPHER BOLING

PLAINTIFF

V.

PROSPECT FUNDING HOLDINGS, LLC

DEFENDANT

MEMORANDUM OPINION AND ORDER
This matter is before the Court on Defendant’s Motion to Reconsider (DN 34). The
motion has been completely briefed and is now ripe for a decision.1 For the reasons outlined
below, the motion is DENIED.
I.

STATEMENT OF FACTS AND CLAIMS

On May 23, 2008, Plaintiff Christopher Boling (“Boling”) suffered severe burns to his
right hand and a posterior dislocation of his right shoulder after vapors escaping from a gas can
ignited upon coming into contact with a hot metal eye bolt. (Am. Compl. ¶¶ 9-11, DN 7). At the
time of his injury, Plaintiff was married to Holly Boling, who is not a party to this action.2 (Am
Compl. ¶ 13).

1

While the caption of the motion requests an oral argument, Prospect has not filed a motion for
oral argument as required by LR 7.1(f). The Court nevertheless concludes that oral argument is
not necessary to address the issues raised in Prospect’s motion.
2
Under the terms of the Bolings’ divorce property settlement agreement, Plaintiff’s portion of
any recovery for his personal injury claim against Blitz USA was to be considered his nonmarital property. (Pl.’s Counter Mot. for Partial Summ. J. & Resp. to Def.’s Mot. to Dismiss,
Ex. 5, DN 20-5). According to Boling, his ex-wife will not receive any funds from his personal
injury settlement. (Pl.’s Mem. in Supp. of Counter Mot. for Partial Summ. J. & Resp. to Def.’s
Mot. to Dismiss 11, DN 20-1).
1

As a result of his injuries, the Bolings filed suit against the gas can manufacturer, Blitz
USA, in this Court.3 During the course of their litigation against Blitz USA, the Bolings entered
into a series of agreements to obtain advances on his potential personal injury recovery with
Prospect Funding Holdings, LLC (“Prospect”) and Cambridge Management Group, LLC
(“CMG”).4 (Compl. Exs. A-D, DN 1-1 to 1-4). The financial terms of these agreements are
summarized as follows:
Date

Lender

October 2009

CMG

March 2010

CMG

May 2012

Prospect

April 2013

Amount of Loan & Fees
$10,000.00 plus fees of $1,275.00
plus additional costs
$5,000.00 plus fees of $825.00 plus
additional costs
$5,000.00 plus fees of $1,025.00
plus additional costs
$10,000.00 plus fees of $1,800.00
plus additional costs

Prospect

(Compl. ¶¶ 14-31; Compl. Ex. A, at 1; Compl. Ex. B, at 1; Comp. Ex. C, at 1; Comp. Ex. D, at
1). By their terms, amounts advanced under these agreements accrue interest at a rate of 4.9%
per month; as of August 22, 2014, the total amount owed to Prospect was $340,405.00. (Compl.
Ex. A, at 2; Compl. Ex. B, at 2; Comp. Ex. C, at 1; Comp. Ex. D, at 1; Compl. Ex. F, at 1-2, DN
1-6).
On June 19, 2014, Boling filed this lawsuit against Prospect seeking a declaratory
judgment that the agreements are to be interpreted by and deemed unenforceable under Kentucky
law. (Compl. ¶¶ 43, 45). Subsequently, on September 4, 2014, Prospect filed suit against the

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Boling v. Blitz USA, Inc., Civil Action No. 1:09-CV-00067-JHM-ERG. As alleged in the
Amended Complaint, Boling has settled his claim with Blitz USA, but the proceeds of the
settlement are tied up in bankruptcy. (Am. Compl. ¶ 38).
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As alleged in the Complaint, Prospect acquired the loan agreements between Boling and CMG
in 2013. (Compl. ¶ 32).
2

Bolings in the Superior Court of New Jersey, Chancery Division, and October 3, 2014, Boling
removed that action to the U.S. District Court for the District of New Jersey.5
Prospect then moved to dismiss this action based upon lack of personal jurisdiction, the
failure to join an indispensable party, the Colorado River abstention doctrine, and the doctrine of
forum non conveniens. (Def.’s Mot. to Dismiss 10-22, DN 16). Boling moved for partial
summary judgment as to the forum selection and choice of law provisions in the agreements.
(Pl.’s Mem. in Supp. of Mot. for Partial Summ. J. & Resp. to Mot. to Dismiss 32-36, DN 20).
This Court denied Prospect’s Motion to Dismiss, and granted Plaintiff’s Motion for Partial
Summary Judgment. (Mem. Op. & Order 1, DN 31). In the present motion, Prospect requests
that the Court revisit specific aspects of that decision.
II.

JURISDICTION

This Court has subject-matter jurisdiction of this matter based upon diversity jurisdiction.
See 28 U.S.C. § 1332.
III.

STANDARD

Under Federal Rule of Civil Procedure 59(e), the court may grant a motion to alter or
amend “if there is a clear error of law, newly discovered evidence, an intervening change in
controlling law, or to prevent manifest injustice.” GenCorp v. Am. Int’l, 178 F.3d 804, 834 (6th
Cir. 1999) (citations omitted). “To constitute newly discovered evidence, the evidence must have
been previously unavailable.” Id. Importantly, however, “[a] motion under Rule 59(e) is not an
opportunity to re-argue a case.” Sault Ste. Marie Tribe of Chippewa Indians v. Engler, 146 F.3d
367, 374 (6th Cir. 1998). To prevail, the moving party bears “[t]he burden of demonstrating the

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On May 11, 2015, that court ordered the transfer of the New Jersey action to this Court on the
basis of the first-to-file rule. After that court denied Prospect’s motion to reconsider, the case
was transferred to this Court and assigned Civil Action No. 1:15-CV-00112-GNS.
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existence of a manifest error of fact or law.” Doe v. Patton, 381 F. Supp. 2d 595, 605 (E.D. Ky.
2005), aff’d sub nom. Doe v. Magoffin Cty. Fiscal Court, 174 F. App’x 962 (6th Cir. 2006).
IV.

DISCUSSION

In its motion, Prospect alleges that the Court’s prior decision is based upon mistakes of
fact and law. (Def.’s Mem. in Supp. of Mot. to Reconsider 3-13). As outlined below, these
arguments do not support reconsideration of the Court’s prior decision.
A.

Mistake of Fact

In essence, Prospect takes issue with the Court’s characterization of its agreements with
Boling as nonrecourse loans. (Def.’s Mem. in Supp. of Mot. to Reconsider 3-5). Under the
terms of those agreements, Prospect made advances on Boling’s future personal-injury recovery,
and if Boling had no recovery, he owed nothing to Prospect. (Compl. Ex. A, at 1-2; Compl. Ex.
B, at 1-2; Compl. Ex. C, at 1; Compl. Ex. D, at 1). If Boling were to make a recovery the total
amount advanced would be subject to interest accruing at a rate of 4.9% per month plus fees of
roughly 12.75% and 20% of the amount advanced. (Compl. Ex. A, at 1-2; Compl. Ex. B, at 1-2;
Compl. Ex. C, at 1; Compl. Ex. D, at 1).
The Court believes that the terms of those agreements speak for themselves. The Court
declines to reconsider its prior ruling based upon Prospect’s dissatisfaction with the Court’s
characterization of the nature of agreements as nonrecourse loans in the context of the dispositive
motions filed at the outset of this litigation.
B.

Mistake of Law

In arguing mistake of law as a basis for reconsideration, Prospect reiterates its prior
unsuccessful argument that Kentucky is not the proper forum for this litigation. (Def.’s Mem. in
Supp. of Mot. to Reconsider 5-10).

In support of this argument, argues that the Court

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erroneously relied upon Incline Energy, LLC v. Stice, No. 3:09-CV-58-H, 2009 WL 19725038
(W.D. Ky. 2009). (Def.’s Mem. in Supp. of Mot. to Reconsider 10). According to Prospect,
Stice and one of the cases it relied upon—Breeding v. Massachusetts Indemnity & Life Insurance
Co., 633 S.W.2d 717 (Ky. 1982)—did not involve contracts with choice of law provisions.
(Def.’s Mem. in Supp. of Mot. to Reconsider 10). In Wallace Hardware Co. v. Abrams, 223
F.3d 382 (6th Cir. 2000), the Sixth Circuit predicted that the Kentucky Supreme Court would
apply Section 187 of the Restatement (Second) of Conflicts of Laws in analyzing a contractual
choice of law provision. Thus, based upon Abrams, Prospect asserts that Section 187 of the
Restatement (Second) of Conflicts of Laws—not Section 188—provides the proper basis for this
Court’s analysis of the enforceability of the choice of law provision in this case. (Def.’s Mem. in
Supp. of Mot. to Reconsider 10-13).
In making this argument, Prospect does not cite to this Court’s decision in Wells Fargo
Fin. Leasing, Inc. v. Griffin, 970 F. Supp. 2d 700 (W.D. Ky. 2013), which undermines Prospect’s
position. In Griffin, this Court explained how the Sixth Circuit’s prediction in Abrams turned out
to be incorrect, stating:
Recent decisions by Kentucky’s highest court have shown this prediction to be
mistaken and, instead, have affirmed the application of § 188’s most-significantrelationship test, even where the parties have expressly agreed to have their
contractual rights and duties governed by a particular state’s laws. In its 2009
decision in Saleba v. Schrand, the Kentucky Supreme Court made no distinction
between contractual disputes where the underlying contract contained an explicit
choice-of-law clause and those that did not, stating: “First and foremost,
Kentucky has consistently applied § 188 of the Restatement (Second) of Conflict
of Laws to resolve choice of law issues that arise in contract disputes.” 300
S.W.3d at 181 (emphasis in original). But there was no express choice-of-law
provision at issue in Saleba, and the Kentucky Court ultimately found that the
underlying dispute (which dealt with the discoverability of allegedly privileged
communications) was neither a tort nor a contract issue. Id. However, the
Kentucky Supreme Court’s subsequent 2012 decision in Schnuerle makes clear
Kentucky’s position as to which analytic framework—§ 187 or § 188—is

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appropriate in instances where the underlying contract contains a choice-of-law
provision.
Schnuerle dealt with a service agreement that contained an arbitration clause that
contained an express choice-of-law provision designating that the law of New
York would apply to the construction, interpretation, and enforcement of that
agreement. 376 S.W.3d at 566. Relying on Breeding, the Jefferson Circuit Court
declined to apply the choice-of-law provision and, instead, applied Kentucky law
to determine whether the arbitration clause was enforceable. The Kentucky Court
of Appeals, without specifically addressing the choice-of-law issue, also applied
Kentucky law, thereby implicitly affirming the circuit court on that point. On
discretionary review, the Kentucky Supreme Court affirmed the circuit court’s
reliance on Breeding and its application of § 188’s most-significant-relationship
test: “The Breeding decision held that Kentucky law should apply because
Kentucky had the greater interest in, and the most significant relationship to, the
transaction and the parties. Upon application of Breeding, we agree with the
circuit court’s conclusion that Kentucky law governs our evaluation of the Service
Agreement.” Id. at 566-67. Then, after applying several of the factors outlined in
§ 188(2), the Kentucky Court concluded that “there can be no doubt that
Kentucky has ‘the greater interest and the most significant relationship to the
transaction and the parties.’” Id. at 567. The Kentucky Court made no mention
of § 187, and, instead, focused its entire discussion on relative interests of
Kentucky and New York, apparently affording no weight whatsoever to the
parties’ contractual choice-of-law provision. See id.
Therefore, while the Court understands the Sixth Circuit’s logic in predicting that
Kentucky courts would adopt § 187, in light of these recent decisions by
Kentucky’s highest court, the Court will decline to follow that prediction and, in
accordance with Schnuerle, instead apply § 188’s most-significant-relationship
test . . . .
Id. at 709-10. Thus, while the guaranties in Griffin did include choice of law provisions, this
Court still relied upon Section 188 in determining the enforceability of those provisions. See id.
at 710.
While Prospect disagrees with this Court’s reliance upon Stice, this Court properly relied
upon Stice, in applying Section 188 of the Restatement (Second) of Conflicts of Laws for the
reasons outlined in Griffin. Likewise, this Court did not err in concluding that Kentucky has the
most substantial relationship to the agreements in this case.

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V.

CONCLUSION

For the foregoing reasons, IT IS HEREBY ORDERED that Defendant’s Motion to
Reconsider (DN 34) is DENIED.

Greg N. Stivers, Judge
United States District Court
April 21, 2016

cc:

counsel of record

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