Cotter v. Gwyn et al

Filing 113

ORDER AND REASONS denying Kaplan & Company's 86 Motion for Reconsideration. Signed by Judge Jane Triche Milazzo. (ecm)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA

PATRICK C. COTTER

CIVIL ACTION

VERSUS

NO. 15-4823

BRUCE A. GWYN ET AL.

SECTION H

ORDER AND REASONS
Before the Court is Defendant Kaplan & Company’s Motion for
Reconsideration (Doc. 86). For the foregoing reasons, the Motion is DENIED.
BACKGROUND
This matter arises out of the failure of a “commodity pool,” a type of
hedge fund that trades in commodities futures contracts. Level III Trading
Partners, L.P. (“Level III” or “the Fund”) was a commodity pool created in
February 2007 by Defendant Bruce A. Gwyn (“Gwyn”). Kaplan & Company
(“Kaplan”), a CPA firm, was retained by Gwyn to provide accounting and
auditing work for the Fund. The Trustee alleges that Kaplan aided Gwyn in
misappropriating investor funds and misleading investors regarding the value
of their investments. It failed to communicate to the limited partners its
assessment of the value of the Fund’s investments and thus assisted Gwyn in
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perpetuating the scheme. The Trustee brought claims against Kaplan for (1)
violation of § 10 of the 1934 Securities Exchange Act, (2) violation of state
securities laws, (3) professional malpractices and negligence, (4) aiding and
abetting Gwyn, (5) breach of contract, (6) civil conspiracy, and (7)
misrepresentation and omission. Kaplan filed a Motion to Dismiss, which this
Court granted in part. In particular, this Court held that it could not dismiss
the Trustee’s state law tort claims as perempted pursuant to Louisiana
Revised Statutes § 9:5604 because a finding of when Plaintiff should have
discovered his claim against Kaplan is a factual determination inappropriate
for resolution at the motion to dismiss stage. In addition, the Court held that
Illinois law applied to the Trustee’s professional malpractice claim and
therefore Louisiana’s accountant review panel law did not apply.
Kaplan has filed the instant Motion for Reconsideration specifically
disputing the two holdings identified above. This Court will address its
arguments in turn.
LEGAL STANDARD
Courts in this District generally analyze motions to reconsider
interlocutory orders under Rule 59(e). 1 A Rule 59(e) motion “[i]s not the proper
vehicle for rehashing evidence, legal theories, or arguments that could have
been offered or raised before the entry of judgment.” 2 Instead, Rule 59(e)
serves the narrow purpose of correcting “‘manifest error[s] of law or fact or . . .
presenting newly discovered evidence.’” 3 “‘Manifest error’ is one that ‘is plain

See Castrillo v. Am. Home Mortg. Servicing, Inc., No. 09–4369, 2010 WL 1424398, at *4 n.54
(E.D. La. Apr. 5, 2010) (collecting cases); Gulf Fleet, 282 F.R.D. at 152 n.40 (same).
2 Templet v. HydroChem, Inc., 367 F.3d 473, 479 (5th Cir. 2004) (citing Simon v. United
States, 891 F.2d 1154, 1159 (5th Cir. 1990)).
3 Advocare Int’l, LP v. Horizon Labs., Inc., 524 F.3d 679, 691 (5th Cir. 2008) (quoting
Rosenzweig v. Azurix Corp., 332 F.3d 854, 863 (5th Cir. 2003)).
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and indisputable, and that amounts to a complete disregard of the controlling
law.’” 4 In the Fifth Circuit, altering, amending, or reconsidering a judgment
under Rule 59(e) “[i]s an extraordinary remedy that should be used sparingly.” 5
While district courts have “considerable discretion in deciding whether to grant
or deny a motion to alter a judgment,” denial is favored. 6
LAW AND ANALYSIS
1. Peremption of Tort Claims
In its motion to dismiss, Kaplan argued that the Trustee’s claims were
subject to two peremptive periods set forth in Louisiana Revised Statutes §
9:5604, which states that:
No action for damages against any accountant duly licensed under
the laws of this state, or any firm as defined in R.S. 37:71, whether
based upon tort, or breach of contract, or otherwise, arising out of
an engagement to provide professional accounting service shall be
brought unless filed in a court of competent jurisdiction and proper
venue within one year from the date of the alleged act, omission,
or neglect, or within one year from the date that the alleged act,
omission, or neglect is discovered or should have been discovered;
however, even as to actions filed within one year from the date of
such discovery, in all events such actions shall be filed at the latest
within three years from the date of the alleged act, omission, or
neglect.
This Court held that, applicability of Louisiana law aside, it was unable to
make a determination regarding the passing of peremption without a factual
determination regarding when the claim arose.

Kaplan argued that the

Plaintiff should have been on notice of its claim against Kaplan by June 12,
2012 when the National Futures Association (“NFA”) took emergency action

Guy v. Crown Equip. Corp., 394 F.3d 320, 325 (5th Cir. 2004) (quoting Venegas–Hernandez
v. Sonolux Records, 370 F.3d 183, 195 (1st Cir. 2004)).
5 Templet, 367 F.3d at 479 (citations omitted).
6 Hale v. Townley, 45 F.3d 914, 921 (5th Cir. 1995).
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against Level III and Gwyn. The Trustee pointed out though that nothing in
the NFA’s notice suggested that Kaplan was engaged in any wrongful conduct.
This Court held therefore that a finding of when Plaintiff should have
discovered his claim against Kaplan was a factual determination inappropriate
for resolution at this stage.
Kaplan now argues that such a holding applied a “higher legal standard
than established by settled case law.” It argues that pursuant to Louisiana
case law, the NFA notice need not identify wrongful conduct to trigger the
running of peremption but need only communicate “sufficient information,
which, if pursued, will lead to the true condition of things.” Kaplan argues that
the notice from the NFA should have been “met with great alarm by its
recipients and was more than sufficient to ‘excite attention and prompt further
inquiry,’ which, if pursued, would have confirmed the problems with the fund,
and allowed Plaintiffs to file their allegations against Kaplan within one year.”
While the NFA notice certainly may have been sufficient to start the
running of peremption, this Court cannot see how such a determination is not
a question of fact. Kaplan asks this Court to decide whether and when Plaintiff
received sufficient information to “prompt further inquiry” based solely on the
allegations of the Complaint. Such a determination of what Plaintiff knew or
should have known and at what point is inappropriate at this stage. Indeed,
even the case on which Kaplan relies determined the plaintiff’s knowledge
after an evidentiary hearing on an exception of prescription. 7 Accordingly,
Kaplan has not identified any manifest error to warrant a change in this
Court’s prior opinion.

See Williams v. Pioneer Fishing & Rental Tools, Inc., 945 So. 2d 936, 939, (La. App. 3 Cir.
2006).
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2. Accountant Review Panel
In its motion to dismiss, Kaplan also argued that Plaintiff’s professional
malpractice claims are premature because they have not yet been submitted to
a public accountant review panel pursuant to Louisiana Revised Statutes §
37:105. The Court held that the accountant review panel requirement did not
apply because Illinois law applied to Plaintiff’s professional malpractice claims
pursuant to Louisiana’s choice of law rules, namely Civil C
ode article 3543.
Kaplan now argues in its Motion for Reconsideration that this Court
erred in not applying Louisiana law because Louisiana Revised Statutes §
9:5604(c) provides that all claims brought against an accounting firm must be
governed exclusively by Louisiana law regardless of the domiciles of the
parties. Kaplan made this identical argument in its Motion to Dismiss. This
Court expressly held that the accountant review panel rule is substantive, not
procedural, and that it does not apply because Louisiana substantive law does
not apply. In so holding, this Court rejected Kaplan’s argument that § 9:5604
was the appropriate provision to determine choice of law. Kaplan’s reassertion
of its identical arguments here has done nothing to change this Court’s opinion.
Louisiana Revised Statutes § 9:5604 states that:
Notwithstanding any other law to the contrary, in all actions
brought in this state against any accountant duly licensed under
the laws of this state, or any firm as defined in R.S. 37:71, whether
based on tort or breach of contract or otherwise arising out of an
engagement to provide professional accounting service, the
prescriptive and peremptive period shall be governed exclusively
by this Section and the scope of the accountant's duty to clients
and nonclients shall be determined exclusively by applicable
Louisiana rules of law, regardless of the domicile of the parties
involved.

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Accordingly, the statute expressly states only that Louisiana law will govern
prescription, peremption, and scope of duty in suits brought in Louisiana
against qualifying accounting firms. By its plain language, this statute does
not “expressly supersede[] all other laws to the contrary” as Kaplan contends.
Accordingly, Kaplan has not identified a manifest error made by this Court,
and its reassertion of identical arguments is an improper request for
reconsideration.
CONCLUSION
For the foregoing reasons, Kaplan’s Motion is DENIED.

New Orleans, Louisiana this 18th day of May, 2017.

_______________________________________
JANE TRICHE MILAZZO
UNITED STATES DISTRICT JUDGE

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