CitiMortgage, Inc. v. Chicago Bancorp, Inc.

Filing 233

MEMORANDUM AND ORDER. (see order for details) IT IS HEREBY ORDERED that additional defendants' motion for reconsideration [#221 ] is denied. IT IS FURTHER ORDERED that plaintiff's motion for leave to file surreply [#229 ] is denied. Signed by District Judge Catherine D. Perry on 11/19/2014. (CBL)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
CITIMORTGAGE, INC.,
Plaintiff,
vs.
CHICAGO BANCORP, INC.,
Defendant.

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Case No. 4:12 CV 246 CDP

MEMORANDUM AND ORDER
This action is before the court on a motion to reconsider filed by four
defendants recently dismissed: The Federal Savings Bank, National Bancorp
Holding, Inc., and John and Stephen Calk. These defendants request that I
reconsider my order granting plaintiff CMI’s motion to voluntarily dismiss them
from this case. See Fed. R. Civ. P. 41(a)(2). For the reasons stated below, I will
deny the motion.
CMI initially instituted this suit against Chicago Bancorp for breach of a
contract concerning the sale of defective mortgage loans. On July 2, 2013, the
court allowed CMI to add veil-piercing-type claims against four additional
defendants upon a showing that Chicago Bancorp had become insolvent, or nearly
so, by fraudulently transferring its assets to these other persons and entities.

A year later, on August 19, 2014, CMI moved to dismiss those additional
claims and parties. Its stated reason for its motion was that, in the interim, it had
brought a second suit against Chicago Bancorp concerning another group of
allegedly defective mortgage loans. CMI had decided to take Chicago Bancorp at
its word that it would retain enough assets to pay a fully unfavorable judgment in
this case and would pursue the additional defendants in the second suit, which
could result in a potentially much larger judgment (which, it claimed, there is no
evidence Chicago Bancorp has the assets to pay). CMI argued that the dismissal
would therefore serve judicial economy by litigating the veil-piercing-type claims
only where they could directly impact the collectability of a judgment.
The additional defendants vehemently opposed the Rule 41(a)(2) motion and
continue to do so now. They argue that CMI has other, less appropriate reasons for
seeking the voluntary dismissal. For one, they say, CMI seeks a more favorable
forum. Although CMI prevailed on many of its claims at the summary judgment
stage, I found issues of fact preventing judgment on several claims. The additional
defendants argue that even this minor setback is unprecedented in a case of this
type, and so CMI has balked at bringing the additional claims here.
Second, the voluntary dismissal motion came just ten days before the close
of discovery. The additional defendants speculate that because CMI failed to
conduct any discovery on the additional claims during the year they were pending
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in this court, it wanted more time to do so somewhere else. Further, the additional
defendants point out that they had just served discovery on CMI concerning the
additional claims, including a Rule 30(b)(6) notice, which CMI had protested
vigorously. Dismissing the claims, say the defendants, allowed CMI to avoid
producing its corporate witness in a timely fashion and otherwise providing
responses to discovery to which the additional defendants are legally entitled.
I.

Motion for Reconsideration
The Federal Rules of Civil Procedure generally do not set standards for a

court to analyze a motion to reconsider. In this case, the defendants did not bring
their motion pursuant to a particular rule. Nonetheless, Rule 54(b) “governs
reconsideration of orders that do not constitute final judgments in a case.” Singh v.
George Washington Univ., 383 F. Supp. 2d 99, 101 (D.D.C. 2005). Under Rule
54(b), an interlocutory order “may be revised at any time before the entry of a
judgment adjudicating all the claims and all the parties’ rights and responsibilities.”
Because the voluntary dismissal here “adjudicate[d] fewer than all the claims” and
applied to “fewer than all the parties,” it is interlocutory and may be modified “any
time prior to the entry of judgment.” K.C.1986 Ltd. P’ship v. Reade Mfg., 472 F.3d
1009, 1117 (8th Cir. 2007).
District courts have substantial discretion in deciding whether to reconsider
an interlocutory order under Rule 54(b). Wells’ Dairy, Inc. v. Travelers Indem. Co.
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of Illinois, 336 F. Supp. 2d 906, 909 (N.D. Iowa 2004). However, motions to
reconsider “serve a limited function: to correct manifest errors of law or fact or to
present newly discovered evidence.” Hagerman v. Yukon Energy Corp., 839 F.2d
407, 414 (8th Cir. 1988).
Here, the additional defendants classify as new evidence an email exchange
between the parties’ attorneys. The exchange allegedly reveals that CMI’s “real
purpose” to dismiss the additional defendants was to “fix its lack of diligence” in
conducting discovery on the veil-piercing-type claims. Even read generously, the
email exchange does not demonstrate CMI’s illicit motive for dismissing the
additional defendants. But no matter its import, the email exchange is not new
evidence. CMI submitted it as an exhibit to its motion for a protective order against
the Rule 30(b)(6) notice on August 28. (See Doc. 217-3.) It was before the court
when I considered the parties’ positions and allowed CMI to dismiss the additional
defendants five days later, on September 2. See Harris v. Moore, 2:04CV73 ERW,
2008 WL 880006, at *2 (E.D. Mo. Mar. 28, 2008) (motion to reconsider denied
where court reviewed the portions of deposition testimony highlighted by moving
party but did not find any new evidence not already presented to court).
Even if this email exchange properly supported the additional defendants’
motion to reconsider, the motion would fail. In determining whether to permit a
plaintiff to voluntarily dismiss claims under Federal Rule of Civil Procedure
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41(a)(2), a court must consider “whether the party has presented a proper
explanation for its desire to dismiss; whether a dismissal would result in a waste of
judicial time and effort; and whether a dismissal will prejudice the defendants.”
Donner v. Alcoa, Inc., 709 F.3d 694, 697 (8th Cir. 2013).
The additional defendants rely on Donner to support their argument that
voluntary dismissal should be denied if a party’s “real reason” is to seek a more
favorable forum. In Donner, a Missouri citizen who contracted pulmonary fibrosis
from working with aluminum sued Alcoa, the out-of-state manufacturer of the
aluminum. Id. at 695. He did not sue his employer factory; instead, he elected to
receive workers’ compensation benefits. When a Missouri appellate court decided
a case allowing a similar employee to elect to sue his employer rather than receive
workers’ comp benefits, the citizen moved to voluntarily dismiss his suit so he
could sue both the employer factory and Alcoa in state court. The addition of the
factory, also a Missouri citizen, would have destroyed federal diversity
jurisdiction.
The district court permitted the employee to voluntarily dismiss, but the
Eighth Circuit reversed. The Circuit Court held that the district court had abused
its discretion by failing to consider if the claim against the factory was legally
viable. In fact, it was not, because the citizen had already elected to receive
workers’ comp benefits, and so the Missouri appellate case was inapposite. The
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court held that the “overall circumstances” – including some suspicious timing
and “an attempt to advance a nonviable claim” – suggested strongly that the
citizen’s motive was “merely to seek a more favorable forum.” Id. at 699.
Here, the additional defendants do not suggest – nor could they – that CMI’s
claims are nonviable in the second case. Whatever CMI’s surreptitious motivation
for wishing to dismiss its additional claims, the relevant factors are accounted for.
See Mullen v. Heinkel Filtering Systems, Inc., -- F.3d ----, 2014 WL 5353924 (8th
Cir. Oct. 22, 2014) (though adverse ruling on deadline extension “may have
precipitated the motion for voluntary dismissal,” dismissal was still appropriate). I
continue to believe that a full presentation of the veil-piercing-type claims is more
appropriate in the second suit, where they are more central to the dispute. Far from
wasting judicial time and effort, the dismissal serves economy by streamlining the
adjudication of these claims; they need only be presented once rather than twice.
Finally, it is true that CMI could have voluntarily dismissed these claims earlier.
But the additional defendants are not legally prejudiced by the dismissal by having
to re-serve their discovery requests or defend these claims in a second action. See
Mullen, 2014 WL 5353924 (citing Kern v. TXO Prod. Corp., 738 F.2d 968, 970
(8th Cir. 1984)); see also Hoffmann v. Alside, Inc., 596 F.2d 822, 823 (8th Cir.
1979) (party opposing dismissal must provide “more than a showing that [moving
party] will gain a tactical advantage by his action”).
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II.

Alternative Motion to Certify Issue for Interlocutory Appeal
Under 28 U.S.C. § 1292, a court certifies for immediate appeal an order not

otherwise appealable if it is of the opinion “that such order involves a controlling
question of law as to which there is substantial ground for difference of opinion
and that an immediate appeal from the order may materially advance the ultimate
termination of the litigation.” Courts should grant permission to allow
interlocutory appeals “sparingly and with discrimination” because “most often
such appeals result in additional burdens on both the court and the litigants.”
Union Cnty., Iowa v. Piper Jaffray & Co., Inc., 525 F.3d 643, 646 (8th Cir. 2008)
(quoting White v. Nix, 43 F.3d 374, 376 (8th Cir. 1994)). The party seeking an
interlocutory appeal “bears the heavy burden of demonstrating the case is an
exceptional one in which immediate appeal is warranted.” Id. A lack of precedent
directly addressing the issue in dispute does not constitute substantial ground for
difference of opinion. Union Cnty., 525 F.3d at 647.
Here, interlocutory appeal under Section 1292(b) is not appropriate.
Chicago Bancorp argues that the controlling question of law at issue here is
“whether a demonstrably false reason” is sufficient to support voluntary dismissal
under Rule 41(a)(2). But the email exchange submitted by Chicago Bancorp
simply does not show that CMI’s stated reasons for voluntary dismissal are

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“demonstrably false.” As such, its alternative motion to certify this order for
immediate appeal is denied.
III.

Surreply
CMI moved to file a surreply on Chicago Bancorp’s motion to reconsider,

which Chicago Bancorp opposes. I do not usually permit surreplies, and I agree
with Chicago Bancorp that CMI’s proposed surreply was duplicative, so it is
neither necessary nor helpful. I did not consider it in ruling on the motion to
reconsider.
Accordingly,
IT IS HEREBY ORDERED that additional defendants’ motion for
reconsideration [#221] is denied.
IT IS FURTHER ORDERED that plaintiff’s motion for leave to file
surreply [#229] is denied.

CATHERINE D. PERRY
UNITED STATES DISTRICT JUDGE
Dated this 19th day of November, 2014.

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