Gleason, et al v. Markel American Insurance Company

Filing 47

MEMORANDUM OPINION AND ORDER denying 44 MOTION for Reconsideration re 43 Judgment, 42 Memorandum & Opinion,, Order, pursuant to Rule 59(e) filed by Julie Gleason, Tom Gleason. Signed by District Judge Amos L. Mazzant, III on 8/10/2018. (daj, )

United States District Court
EASTERN DISTRICT OF TEXAS
SHERMAN DIVISION

TOM GLEASON and JULIE GLEASON
v.
MARKEL AMERICAN INSURANCE
COMPANY

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Civil Action No. 4:17-CV-00163
Judge Mazzant

MEMORANDUM OPINION AND ORDER
Pending before the Court is Plaintiffs’ Motion for Partial Reconsideration, or in the
Alternative, Motion to Alter or Amend the Final Judgment (Dkt. #44). After considering the
motion and the relevant pleadings, the Court finds that the motion should be denied.
BACKGROUND
Plaintiffs Tom Gleason and Julie Gleason (“the Gleasons”) owned interests in a few closely
held companies. Through these companies, the Gleasons indirectly owned Oregon Ice Cream,
LLC (“the Company”) and entered an agreement to sell their interest to OIC Holdings, LLC
(“OIC”) on October 1, 2014. OIC alleged that the Gleasons made false representations during the
negotiations and in the Equity Interest Purchase Agreement (the “Purchase Agreement”). Based
on this transaction, OIC brought suit against the Gleasons in the 336th Judicial District Court of
Collin County, Texas (“OIC Suit”). OIC filed its First Amended Petition and Request for
Disclosure on June 8, 2016 (“the underlying Petition” or “the Petition”).
Defendant Markel American Insurance Company issued a For Profit Management Liability
Policy No. ML-815039 (the “Policy”) to the Company. 1 The Policy was effective for claims made

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Tom and Julie Gleason were officers of the Company.

between August 31, 2014, and October 2, 2020, for “Wrongful Acts” that occurred before October
2, 2014. The relevant portion of the policy for the present motion is are as follows:
Section IV – EXCLUSIONS
The Insurer shall not be liable under this Coverage Part to pay any Loss on account of,
and shall not be obligated to defend, any Claim made against any Insured:
...
K. based upon, arising out of or in any way involving (i) the actual, alleged or attempted
purchase or sale, or offer or solicitation of an offer to purchase or sell, any debt or equity
securities, or (ii) the actual or alleged violation of any federal, state, local or common or
foreign law relating to debt or equity securities; provided this exclusion shall not apply to
any Claim:
1. based upon, arising out of or in any way involving the purchase or sale, or offer or
solicitation of an offer to purchase or sell, any debt or equity securities in a
private[ ]placement transaction exempt from registration under the Securities Act
of 1933, as amended.
(Dkt. #20, Exhibit A at pp. 26–29).
On January 22, 2016, the Gleasons submitted their claim under the Policy to Defendant.
On March 15, 2016, Defendant acknowledged the Gleasons as Insured Persons under the Policy,
but denied coverage asserting that there was no “Wrongful Act” by the Company because the
allegations contained in the OIC Suit did not assert the Gleasons were acting as officers or directors
(“insured capacity”) and that even if there were a “Wrongful Act,” Exclusion K precluded
coverage.
On February 3, 2017, the Gleasons filed the present suit in the 366th Judicial District Court
of Collin County, Texas, alleging a breach of contract and extra-contractual claims based on
Defendant’s denial of coverage. On March 6, 2017, Defendant filed its Notice of Removal
(Dkt. #1). On September 15, 2017, Defendant filed its motion for summary judgment (Dkt. #20).
Further, on September 18, 2017, the Gleasons filed their motion for partial summary judgment

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(Dkt. #22). On January 24, 2018, the Court issued its Memorandum Opinion and Order (“the
Court’s Order”) granting Defendant’s motion for summary judgment, denying Plaintiffs’ partial
motion, and dismissing the Plaintiffs’ claims with prejudice (Dkt. #42) and the corresponding final
judgment (Dkt. #43).
On February 21, 2018, Plaintiffs filed the present motion to reconsider the Court’s Order
(Dkt. #44). On March 8, 2018, Defendant filed its response to the motion for reconsideration
(Dkt. #45). Plaintiffs filed their reply on March 13, 2018 (Dkt. #46).
LEGAL STANDARD
A motion seeking reconsideration may be construed under Federal Rule of Civil Procedure
54(b), 59(e), or 60(b) depending on the circumstances. “The Fifth Circuit recently explained that
‘Rule 59(e) governs motions to alter or amend a final judgment,’ while ‘Rule 54(b) allows parties
to seek reconsideration of interlocutory orders and authorizes the district court to revise at any time
any order or other decision that does not end the action.’” Dolores Lozano v. Baylor Univ., No.
6:16-CV-403-RP, 2018 WL 3552351, at *1 (W.D. Tex. July 24, 2018) (quoting Austin v. Kroger
Tex., L.P., 864 F.3d 326, 336 (5th Cir. 2017)). Further, “‘[i]nterlocutory orders,’ such as grants of
partial summary judgment, ‘are not within the provisions of 60(b), but are left within the plenary
power of the court that rendered them to afford such relief from them as justice requires [pursuant
to Rule 54(b)].” McKay v. Novartis Pharm. Corp., 751 F.3d 694, 701 (5th Cir. 2014) (quoting
Zimzores v. Veterans Admin., 778 F.2d 264, 266 (5th Cir. 1985)) (citing Bon Air Hotel, Inc. v.
Time, Inc., 426 F.2d 585, 862 (5th Cir. 1970)).
A motion seeking reconsideration of a final judgment that is filed within 28 days of the
judgment is considered under Rule 59(e). See Shepherd v. Int’l Paper Co., 372 F.3d 326, 328 n.1
(5th Cir. 2004); Milazzo v. Young, No. 6:11-CV-350-JKG, 2012 WL 1867099, at *1 (E.D. Tex.

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May 21, 2012). Such a motion “‘calls into question the correctness of a judgment.’” Templet v.
HydroChem Inc., 367 F.3d 473, 478 (5th Cir. 2004) (quoting In re Transtexas Gas Corp., 303 F.3d
571, 581 (5th Cir. 2002)). Here, Plaintiffs filed their Motion for Reconsideration within 28 days
and accordingly the Court analyzes the motion under Rule 59(e).
A Rule 59(e) motion is “not the proper vehicle for rehashing evidence, legal theories, or
arguments that could have been offered or raised before the entry of judgment.” Templet, 367 F.3d
at 479 (citing Simon v. United States, 891 F.2d 1154, 1159 (5th Cir. 1990)). “Rule 59(e) ‘serve[s]
the narrow purpose of allowing a party to correct manifest errors of law or fact or to present newly
discovered evidence.’” Id. (quoting Waltman v. Int’l Paper Co., 875 F.2d 468, 473 (5th Cir.
1989)). “Relief under Rule 59(e) is also appropriate when there has been an intervening change
in the controlling law.” Milazzo, 2012 WL 1867099, at *1 (citing Schiller v. Physicians Res. Grp.,
342 F.3d 563, 567 (5th Cir. 2003)). “Altering, amending, or reconsidering a judgment is an
extraordinary remedy that courts should use sparingly.” Id. (citing Templet, 367 F.3d at 479).
ANALYSIS
In the Court’s Order, the Court found Defendant did not have a duty to defend the Gleasons
in the OIC Suit because the transaction was excluded from coverage pursuant to Exclusion K. The
Court further found that the transaction that was the basis of the OIC Suit did not fall into the
exception of Exclusion K as a private placement transaction exempted from registration under the
Securities Act of 1933, as amended. The Court reasoned that the Gleason’s claimed exemptions
from registration under the Securities Act of 1933, as amended—Section 4(a)(2) of the Securities
Act of 1933 and Rule 506 of Regulation D to the Securities Act of 1933—required the Gleasons
to be “issuers” and that, in this instance, “the Gleasons [were] not issuers because no was security
issued in this transaction.” (Dkt. #42 at p. 12).

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Plaintiffs ask the Court to reconsider the holding that this transaction does not fit into the
exception to Exclusion K because the Court did not analyze its third claimed exemption—Section
4(a)(1) of the Securities Act of 1933. Plaintiffs maintain that, even if they are not issuers, they are
exempt from registration under Section 4(a)(1), which states “transactions by any person other
than an issuer, underwriter, or dealer” are exempt transactions. 15 U.S.C. 77d(a)(1). Plaintiffs
assert that this argument is detailed in their response to Defendants’ motion for summary judgment
paragraphs fifty-one through fifty-seven and the Court failed to address it.
Paragraphs fifty-one through fifty-six engage in a discussion of the term “private
placement,” its ordinary meaning, and the possibility that the term did not require the Gleasons to
be “issuers.” Paragraph fifty-seven reads as follows
Having confirmed that the sale of the membership interest was a “private
placement,” the exemption to Exclusion K requires only that the transaction “be
exempt from registration under the Securities Act of 1993, as amended.” 15 U.S.C.
§ 77d – Exempted Transactions, provides the exemptions to registration under the
Securities Act of 1993, as amended. The first exemption [to registration under the
Securities Act of 1933, as amended] is to any “transactions by any person other
than an issuer, underwriter, or dealer.” [Defendant] has taken the position that the
Gleasons are not issuers. And a review of the definitions of “underwriter” and
“broker” reveals that the Gleasons were neither of those in the transaction at issue.
Accordingly, the transaction at issue was exempt for registration under the
Securities Act of 1993, as amended.” [sic]
(Dkt. #26 at p. 21).
The Court found that any argument that the definition of private placement did not require
the Gleasons to be “issuers” was belied by the Gleasons reliance on Section 4(a)(2) and Rule 506,
which required the Gleasons to be “issuers” (Dkt. #42 at p. 12). However, because of the lack of
argument and support offered by Plaintiffs, the Court did not include Section 4(a)(1) in its analysis.
As demonstrated above, Plaintiffs never explicitly cited 15 U.S.C. § 77d(a)(1) as the provision it
relied upon, never referenced this as Section 4(a)(1), never cited any case law, and did not provide

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a definition of “underwriter” or “dealer”.

The only argument that the Gleasons were not

“underwriter[s]” was made in a conclusory fashion and they presented no argument, even in a
conclusory fashion, that Plaintiffs were not “dealer[s]”. This is in stark contrast to their motion
for reconsideration, which now contains a definition of “underwriter”, a definition of “dealer”, and
provides case and statute citations to support these arguments (See Dkt. #44 at pp. 7–8).
Plaintiffs’ argument under Section 4(a)(1) in their response was not enough for Plaintiffs
to meet their summary judgment burden or even enough to be considered a fully briefed argument
that would be proper for the Court to include in its analysis. See United States v. Volksen, 766
F.2d 190, 193 (5th Cir. 1985); Ragland v. Dallas Cty. Cmty. Coll. Dist., No. 3:16-CV-722-L, 2017
WL 1196863, at *5 (N.D. Tex. Mar. 31, 2017); Kostic v. Tex. A & M Univ. at Commerce, 11 F.
Supp. 3d 699, 735 (N.D. Tex. 2014) (citing Petrie v. City of Grapevine, 904 F. Supp. 2d 569, 585
(N.D. Tex. 2012)). While the only evidence Plaintiffs might need is the “eight corners”, as
contended by Plaintiffs, the Court is not required to scour the “eight corners”, case law, and statutes
to make and develop Plaintiffs’ arguments for them. As such this is an argument that was not
offered to the Court prior to judgment but “could have been offered or raised before the entry of
judgment,” and is not appropriate to raise in a Rule 59(e) motion for reconsideration. Templet,
367 F.3d at 479 (citing Simon, 891 F.2d at 1159).
If anything, the Court could construe this motion as a supplemental motion for summary
judgment, presenting a new argument for the Court’s consideration. However, the motion was
filed on February 21, 2018, and all dispositive motions were due to be filed by August 31, 2017
(Dkt. #12). Therefore, if this were to be construed as a motion for summary judgment, it was filed
late pursuant to the Court’s scheduling order and without seeking leave of Court. Thus, even

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construed as a supplemental motion for summary judgment, the Court finds it should be denied as
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it is untimely and inappropriate at this late stage.
CONCLUSION
It is therefore ORDERED that Plaintiffs’ Motion for Partial Reconsideration, or in the
Alternative, Motion to Alter or Amend the Final Judgment (Dkt. #44) is hereby DENIED.
SIGNED this 10th day of August, 2018.

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AMOS L. MAZZANT
UNITED STATES DISTRICT JUDGE

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