RedHawk Holdings Corp., et al v. Schreiber, et al
Filing
222
ORDER AND REASONS: IT IS ORDERED that RedHawk's 214 motion for reconsideration is DENIED. Signed by Judge Ivan L.R. Lemelle on 1/5/2022. (pp)
Case 2:17-cv-00819-ILRL-MBN Document 222 Filed 01/05/22 Page 1 of 9
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
REDHAWK HOLDINGS CORP., ET AL.
CIVIL ACTION
VERSUS
NO. 17-819
DANIEL J. SCHREIBER, ET AL.
SECTION “B”(5)
ORDER AND REASONS
Before the Court are plaintiff RedHawk Holdings Corporation
(“RedHawk”)’s motion for reconsideration of this Court’s Order and
Reasons at Record Document 211 (Rec. Doc. 214) and defendants’
response in opposition (Rec. Doc. 216).
For the reasons discussed below,
IT IS ORDERED that RedHawk’s motion for reconsideration (Rec.
Doc. 214) is DENIED.
I.
FACTS AND PROCEDURAL HISTORY
The facts of the underlying action have been well documented
on the record. Plaintiffs RedHawk Holdings Corporation (“RedHawk”)
and Beechwood Properties, LLC filed this lawsuit against Daniel J.
Schreiber, the former CEO and director of RedHawk, for, amongst
other claims, securities fraud. Rec. Docs. 1, 20. Schreiber filed
counterclaims
alleging
an
interference
with
his
ability
to
transfer his shares of RedHawk stock. Rec. Doc. 49. The parties
engaged in settlement discussions before the Magistrate Judge in
January
2019.
Rec.
Docs.
147,
148.
Shortly
thereafter,
the
undersigned was notified in February 2019 that a settlement had
1
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been reached. Rec. Doc. 149. This court subsequently dismissed the
action but retained jurisdiction to enforce the settlement upon a
showing of good cause. Rec. Doc. 150.
Under the settlement agreement, Schreiber would transfer all
his RedHawk stock back to RedHawk. Rec. Doc. 151-2 at 2. In
exchange, RedHawk agreed to pay $250,000 immediately upon signing
the agreement and issue two non-interest-bearing promissory notes
in the amount of $200,000 each to be paid on or before September
6, 2020 and September 5, 2021 respectively. Id. The agreement
contained an acceleration clause for the two promissory notes that
included several terms including (1) a thirty-day grace period
following any RedHawk default, after which all payments would be
immediately due and payable plus 18% interest and the greater of
reasonable attorneys’ fees or 10% of the amount due and (2) a
provision that if RedHawk issued any shares of any series or class
for cash while any amounts are due, 50% of the monetary proceeds
were to be paid to Schreiber to reduce the amount owed. Id. at 34.
A
few
months
after
confecting
the
settlement
agreement,
RedHawk issued on September 16, 2019 a SEC Form 8-8k and a press
release providing that it “completed the sale of $500,000 in
aggregate principal amount of new convertible notes,” and issued
a number of stock warrants that are exercisable in ten years for
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the purchase of an aggregate of 12.5 million shares of RedHawk
common stock. Rec. Doc. 151-1 at 3.
The
following
day,
Schreiber
informed
RedHawk
that
this
action triggered the acceleration clause because it failed to pay
Schreiber $250,000 from the proceeds of the sale and RedHawk was
now in default. Rec. Doc. 151-1 at 3. RedHawk responded it was not
in default because the transaction was for sale of convertible
notes and not for the sale of stocks. Id. at 4.
In
November
settlement
2019,
seeking
the
Schreiber
accelerated
filed
a
amounts
motion
of
the
to
enforce
notes
for
$400,000 plus 18% interest running from the date of the agreement,
and attorney fees of either the actual sums expended in pursuing
that payment or 10% of the amount due, whichever is greater.
RedHawk responded to the motion and this Court granted Schreiber
leave to reply. Rec. Docs. 157, 161. RedHawk opposed the motion
for leave and requested an opportunity to submit a sur-reply should
the Court grant it but leave to file a sur-reply was denied. See
Rec. Doc. 159.
In March 2020, this Court granted Schreiber’s motion to
enforce the settlement agreement, Rec. Doc. 162, and awarded
Schreiber
$519,495.78,
which
included
the
entire
accelerated
amount due on the notes plus 18% interest and attorneys’ fees.
Rec. Doc. 179. RedHawk appealed the judgment and the Fifth Circuit
vacated and remanded to allow RedHawk to file a sur-reply and
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thereafter reconsider the instant motion to enforce settlement.
RedHawk Holdings Corp. v. Schreiber, 836 F. App’x 232, 233, 237
(5th Cir. 2020) (per curiam).
While the appeal was pending, RedHawk paid all principal
amounts due to Schreiber under the settlement agreement and notes
($400,000 for the remaining notes plus the $250,000 RedHawk paid
at
the
time
of
settlement).
Rec.
Doc.
208
at
3.
RedHawk
subsequently filed its sur-reply to the motion, Rec. Doc. 208, and
Schreiber responded. Rec. Doc. 210. Therefore, the only remaining
issue at the time was whether RedHawk breached the acceleration
provision of the settlement agreement, thereby entitling Schreiber
to
interest
and
attorneys’
fees
or
10%
of
the
amounts
due,
whichever is greater. 1 On September 23, 2021, the Court ruled that
RedHawk did breach the acceleration clause, and thus, Schreiber
was
entitled
to
an
additional
$101,490.27,
representing
contractual interest in the amount of 18% on the outstanding
principal debts, until they were paid, plus reasonable attorneys’
fees and costs incurred with its successful efforts to enforce the
settlement agreement or 10% of the amounts due, whichever is
greater. Rec. Doc. 211. Shortly after the Court’s ruling, Schreiber
filed a motion for attorneys’ fees and costs. Rec. Doc. 213.
RedHawk then filed a motion for reconsideration of the Court’s
While opposing entitlement issues, RedHawk did not appear to question
Schreiber’s statement that its current attorney fees in seeking enforcement are
greater than 10% of the amount allegedly due.
1
4
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Order granting Schreiber’s motion to enforce settlement (Rec. Doc.
211) and related Judgment (Rec. Doc. 212). Rec. Doc. 214.
II.
LAW AND ANALYSIS
A. Motion for Reconsideration Standard
A motion filed after judgment requesting that the court
reconsider a prior ruling is evaluated either as a motion to alter
or amend a judgment under Federal Rule of Civil Procedure 59(e) or
as
a
motion
for
relief
from
a
final
judgment,
order[,]
or
proceeding under Federal Rule of Civil Procedure 60(b). Tex. A&M
Rsch. Found. v. Magna Transp., Inc., 338 F.3d 394, 400 (5th Cir.
2003). If the motion is filed within twenty-eight days of the
judgment or order at issue, the motion can be brought under Rule
59(e). Id. When filed after, the motion falls under Rule 60(b).
Id.
A Rule 59(e) motion “calls into question the correctness of
a judgment.” In re Transtexas Gas Corp., 303 F.3d 571, 581 (5th
Cir. 2002). Rule 59(e) serves “the narrow purpose of allowing a
party to correct manifest errors of law or fact or to present newly
discovered evidence.” Atchafalaya Basinkeeper v. Bostick, 663 F.
App'x 291, 294 (5th Cir. 2016) (quoting Waltman v. Int'l Paper
Co., 875 F.2d 468, 473 (5th Cir. 1989)). Amending a judgment is
appropriate
under
Rule
59(e):
“(1)
where
there
has
been
an
intervening change in the controlling law; (2) where the movant
presents
newly
discovered
evidence
5
that
was
previously
Case 2:17-cv-00819-ILRL-MBN Document 222 Filed 01/05/22 Page 6 of 9
unavailable; or (3) to correct a manifest error of law or fact.”
Berezowsky v. Ojeda, 652 F. App'x 249, 251 (5th Cir. 2016) (quoting
Demahy v. Schwarz Pharma, Inc., 702 F.3d 177, 182 (5th Cir. 2012)).
Because Rule 59(e) has a “narrow purpose,” the Fifth Circuit has
observed that “[r]econsideration of a judgment after its entry is
an extraordinary remedy that should be used sparingly.” Templet v.
HydroChem Inc., 367 F.3d 473, 479 (5th Cir. 2004). Thus, a motion
for reconsideration “is not the proper vehicle for rehashing
evidence, legal theories, or arguments that could have been offered
or raised before the entry of judgment.” Id. “When there exists no
independent
reason
for
reconsideration
other
than
mere
disagreement with a prior order, reconsideration is a waste of
judicial time and resources and should not be granted.” Ferraro v.
Liberty Mut. Ins. Co., No. 13-4992, 2014 WL 5324987, at *1 (E.D.
La. Oct. 17, 2014).
B. Whether the Court’s Ruling Contained Manifest Error of
Fact
RedHawk filed its motion within the twenty-eight-day period,
and thus, the Court evaluates its motion under Rule 59(e). See
Rec. Docs. 211, 212, 214. RedHawk argues that reconsideration of
this Court’s ruling on Schreiber’s motion for enforcement of
settlement (Rec. Doc. 211) is warranted “to correct manifest error
of
fact.”
Rec.
Doc.
214-1
at
4.
demonstrate any manifest error.
6
RedHawk,
however,
fails
to
Case 2:17-cv-00819-ILRL-MBN Document 222 Filed 01/05/22 Page 7 of 9
In
RedHawk’s
supplemental
briefing
opposing
Schreiber’s
motion for settlement enforcement, RedHawk acknowledges various
transactions occurring in 2019, as it does in its instant motion,
and states: “the issuances in these conversions were not ‘for
cash’, and the proceeds were received prior to the Settlement
Agreement. As such, the acceleration provision was not triggered.”
Rec. Doc. 208 at 5. The Court then explicitly acknowledged this
argument in its Order granting Schreiber’s motion to enforce
settlement and concluded:
the aforementioned transactions considered in its
totality triggered the acceleration clause because once
RedHawk’s notes are converted or warrants are exercised,
a confirmed sale of shares has occurred and, rather than
paying the amount due on the note, RedHawk must use 50%
of monetary proceeds received from the issuance to
reduce debts owed to Schreiber. Using convertible notes
or warrants to blatantly evade the acceleration clause
cannot be condoned when RedHawk’s SEC filings identify
multiple instances where it converted notes into shares
without making any payments to reduce its debt to
Schreiber.
Rec. Doc. 211 at 10-11. RedHawk may be disappointed that the Court
does not share its interpretation of the parties’ settlement
agreement, but that is not an excuse to recycle arguments that the
Court has already addressed in its prior ruling. See Ferraro, 2014
WL 5324987, at *1 (explaining that a motion for reconsideration is
not the proper vehicle for “a mere disagreement with a prior
order”). RedHawk admitted that the issue before the Court in
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Schreiber’s
motion
for
settlement
enforcement
was
“how
to
interpret the parties’ agreement–to determine the elements of the
acceleration provision.” The Court did just that in its prior
Order, and with regard to the credible evidence in the record,
found
that
the
convertible
note
transactions
triggered
the
acceleration clause in the parties’ settlement agreement. See Rec.
Doc. 211 at 10-11; see also Rec. Doc. 151-2 at 3-4.
RedHawk
now
asserts
that
“[t]he
contract
clearly
and
unambiguously shows that the intent of the parties was to allow
for earlier repayment to Schreiber if and only if RedHawk issued
stock
for
cash
after
the
effective
date
of
the
Settlement
Agreement.” Rec. Doc. 214-1 at 5. But the Court already stated
that
“[t]he
plain
and
expansive
language
of
the
agreement’s
acceleration clause did not condition when cash would be received
for the converted equity (shares of stock) so long as the issuance
of that equity occurred ‘while any amounts are due to Schreiber.’”
Rec. Doc. 211 at 12. The parties’ settlement agreement does not
clearly show any fact to the contrary. See Rec. Doc. 151-2 at 4.
RedHawk’s disagreement with the Court’s interpretation of the
parties’ settlement agreement does not mean the Court made any
clear or unmistakable error of fact. See, e.g., Hunt Bldg. Co.,
Ltd. v. John Hancock Life Ins. Co. (U.S.A.), No. EP—11-CV-00295DCG, 2013 WL 12094199, at *3-4 (W.D. Tex. Aug. 12, 2013). Thus,
8
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RedHawk fails to prove this Court’s prior ruling contained any
manifest error.
New Orleans, Louisiana this 5th day of January, 2022
___________________________________
SENIOR UNITED STATES DISTRICT JUDGE
9
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