Westboro Properties, et al v. Credit Suisse First, et al
Filing
70
OPINION AND ORDER denying 60 Motion to Vacate.(Signed by Judge Melinda Harmon) Parties notified.(htippen, )
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
In Re Enron Corporation
Securities, Derivative &
"ERISA” Litigation
MARK NEWBY, et al.,
Plaintiffs,
VS.
ENRON CORPORATION, et al.,
Defendants
WESTBORO PROPERTIES, LLC,
et al.,
Plaintiffs,
VS.
CREDIT SUISSE FIRST BOSTON,
INC., et al.,
Defendants.
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MDL-1446
CIVIL ACTION NO. H-01-3624
CONSOLIDATED CASES
CIVIL ACTION NO. H-03-1276
OPINION AND ORDER
Pending before the Court in H-03-1276 is Plaintiffs Westboro
Properties,
LLC
and
Stonehurst
Capital,
Inc.’s
motion
for
reconsideration under Rule 59(e) and for leave to amend under Rule
15(a) (instrument #60), with a copy of their proposed Third Amended
Complaint attached.
They ask the Court to alter or amend its
Opinion and Order of Dismissal (#59), entered on January 6, 2011,
dismissing all claims against Deutsche
Bank Securities, Inc.
(“Deutsche Bank”) in Plaintiffs’ Second Amended Complaint (#33) for
failure to state a claim for which relief can be granted under
Federal Rules of Civil Procedure 12(b)(6) and 9(b) and closing this
case.
Plaintiffs seek to reinstate only their aiding and abetting
and conspiracy claims against Deutsche Bank, and not their common
law fraud cause of action nor their claims under the Texas Security
Act, New York’s Martin Act, and the federal Securities Act of 1933.
#60 at 4 n.3.
Standards of Review
Under Federal Rule of Civil Procedure 59(e), a party has
twenty-eight days after entry of a judgment to file a motion
requesting
the
court
to
alter
or
amend
that
judgment.
“Reconsideration of a judgment after its entry is an extraordinary
remedy that should be used sparingly.”
367 F.3d 473, 479 (5th Cir. 2004).
Templet v. HydroChem Inc.,
“[S]uch a 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.” Id., citing Simon v. United States, 891 F.2d 1154, 1159
(5th Cir. 1990). The Rule “‘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).
The court must balance two
competing interests in ruling on such a motion:
“1) the need to
bring litigation to an end; and 2) the need to render just
-2-
decisions on be basis of all the facts.”
Id., citing Lavespere v.
Niagra Mach. & Tool works, Inc., 910 F.2d 167, 174 (5th Cir. 1990),
abrogated on other grounds, Little v. Liquid Air Corp., 37 F.3d
1069, 1075 n.14 (5th Cir. 1994).
To prevail on a Rule 59(e) motion, the movant must clearly
establish one of three factors:
(1) in intervening change in the
law; (2) newly discovered evidence not previously available; or (3)
a manifest error of law or fact.
Schiller v. Physicians Resource
Group, Inc., 342 F.3d 563, 567 (5th Cir. 2003).
A motion based on
newly discovered evidence should only be granted if (1) the facts
discovered would probably change the outcome of the litigation, (2)
the facts are not only newly discovered, but could not have been
discovered previously by proper diligence, and (3) the facts are
not simply cumulative or impeaching.
Infusion Resources, Inc. v.
Minimed, Inc., 351 F.3d 688, 696-97 (5th Cir. 2003), cert. denied,
542 U.S. 920 (2004).
Federal Rule of Civil Procedure 15(a) provides in relevant
part,
A party may amend the party’s pleading once as a matter
of course at any time before a responsive pleading is
served or, if the pleading is one to which no responsive
pleading is permitted and the action has not been placed
upon the trial calendar, the party may so amend it at any
time within 20 days after it is served.
Otherwise a
party may amend the party’s pleading only by leave of
court or by written consent of the adverse party; and
leave shall be freely given when justice so requires.
-3-
A court has discretion in deciding whether to grant leave to amend.
Foman v. Davis, 371 U.S. 178, 181 (1962).
Since the language of
the rule “‘evinces a bias in favor of granting leave to amend,” the
court must find a “substantial reason” to deny such a request.
Ambulatory Infusion Therapy Specialists, Inc. v. Aetna Life Ins.
Co., Civ. A. No. H-05-4389, 2006 WL 2521411, *3 (S.D. Tex. Aug. 29,
2006), quoting Smith v. EMC Corp., 393 F.3d 590, 595 (5th Cir.
2004), and Mayeaux v. La. Health Serv. & Indem. Co., 376 F.3d 420,
425
(5th
Cir.
2004).
Factors
for
the
court
to
consider
in
determining whether there is a substantial reason to deny a motion
for leave to amend include “undue delay, bad faith or dilatory
motive
on
the
part
of
the
movant,
repeated
failure
to
cure
deficiencies by amendments previously allowed, undue prejudice to
the opposing party, and futility of amendment.”
Eckerd Corp., 3 F.3d 137, 139 (5th Cir. 1993).
Wimm v. Jack
The court should
deny leave to amend if it determines that “the proposed change
clearly is frivolous or advances a claim or defense that is legally
insufficient on its face . . . .”
6 Charles A. Wright, Arthur R.
Miller & Mary Kay Kane, Federal Practice and Proc. § 1487 (2d ed.
1990).
While Rule 15(a) does not establish a time limit for filing a
motion for leave to amend, “‘at some point, time delay on the part
of a plaintiff can be procedurally fatal.’”
-4-
Smith v. EMC Corp.,
393 F.3d at 595, quoting Whitaker v. City of Houston, 963 F.2d 831,
836 (5th Cir. 1992), in turn quoting Gregory v. Mitchell, 634 F.2d
199, 203 (5th Cir. 1981).
If there is substantial delay, the
plaintiff bears the burden of demonstrating that it was due to
oversight, inadvertence or excusable neglect, Id., citing Gregory,
634 F.2d 203.
“While Fed. R. Civ. P. 15(a) endows a district court with
‘virtually unlimited discretion’ to allow amendments before entry
of judgment, that discretion narrows considerably after entry of
judgment.” Vielma v. Eureka Co., 218 F.3d 458, 468 (5th Cir. 2000),
citing 6 Charles Alan Wright, Arthur R. Miller, Mary Kay Kane,
Federal Practice and Procedure § 1489 (2d ed. 1990 & Supp. 1999)(“A
number of courts, exercising their discretion under Rule 15(a) have
refused to allow a postjudgment amendment when the moving party had
an opportunity to assert the amendment during trial but waited
until after judgment before requesting leave.”).
“Post-judgment
amendment to a complaint can only occur once the judgment itself is
vacated under Fed. R. Civ. P. 59 or 60.”
Id., citing id. and
Dussouy v. Gulf Coast Inv. Corp., 660 F.2d 594, 597 n.1 (5th Cir.
1981); Benson v. St. Joseph Regional Health Center, 575 F.3d 242,
550 (5th Cir. 2009), cert. denied, 130 S. Ct. 1507 (2010).
Federal
of
Civil
Procedure
16(b)
governs
amendment
of
pleadings once a scheduling order’s deadline to amend has expired.
-5-
Fahim v. Marriott Hotel Servs., Inc., 551 F.3d 344, 348 (5th Cir.
2008); Marathon Financial Ins., Inc. v. Ford Motor Co., 591 F.3d
458, 470 (5th Cir. 2009).
According to Rule 16(b), which has a
stricter standard than Rule 15(a), once a scheduling order has been
entered, “it may be modified only for good cause and with the
judge’s consent.”
The party seeking leave to amend must “‘show
that the deadlines cannot reasonably be met, despite the diligence
of the party needing the extension.’”
Marathon, 591 F.3d at 470,
quoting S&W Enters., LLC v. Southtrust Bank of Ala., NA, 315 F.3d
533, 535 (5th Cir. 2003)(quoting 6A Charles Alan Wright, et al.,
Federal Practice and Procedure § 1522.1 (2d ed. 1990)).
In
determining whether “good cause” exists, the court should consider
four factors: “‘(1) the explanation for the failure to timely move
for leave to amend; (2) the importance of the amendment; (3)
potential
prejudice
in
allowing
the
amendment;
and
availability of continuance to cure such prejudice.’”
quoting Southwestern Bell Tel. Co. v. City of
(4)
the
Id.,
El Paso, 346 F.3d
541, 546 (5th Cir. 2003)(citing S&W Enterprises, 315 F.3d at 536).
Only if the movant demonstrates good cause for the modification
will the more liberal standard of Rule 15(a) then apply to the
district court’s decision whether to grant or deny leave to amend.
S&W Enterprises, 315 F.3d at 536.
-6-
A denial of a motion to amend is
reviewed for abuse of discretion. Cambridge Toxicology Group, Inc.
v. Exnicios, 495 F.3d 169, 177 (5th Cir. 2007).
Plaintiffs’ Motion for Reconsideration and Leave to Amend (#60)
Plaintiffs
explain
that
they
filed
their
First
Amended
Complaint in 2003 “solely to correct defendant entity names and
addresses,” and “not in response to a motion to dismiss or other
attack
on
the
merits
of
Plaintiffs’
allegations;
amendment was filed before discovery commenced.”
indeed
#60 at 2.
the
They
filed that motion for leave to amend, proposing and attaching what
became their Second Amended Complaint, on August 17, 2006, which
was granted on January 22, 2007.
After the motion to amend was
filed, but before it was granted, Andrew Fastow’s deposition was
taken in October-November 2006.
testimony
admitted
Enron’s
According to Plaintiffs, Fastow’s
fraud
participation in Enron’s fraud.
and
Deutsche
Bank’s
knowing
#67, Exhibit 1 at ¶¶ 34, 162-63,
199-246; see also Appendix E to Exhibit 1.1
Fastow testified that
Deutsche Bank “engaged in a scheme by employing structured finance
transactions and tax transactions that created a false appearance
of financial health by presenting a misleading picture of Enron’s
true business condition.”
#60 at 10. Deutsche Bank subsequently
filed its motion to dismiss (#33) on February 28, 2007, and it was
briefed by the parties.
1
#39, 30, 47, 48, 50, 51.
While Deutsche
The Exhibits to #60 were replaced by the Exhibits to #67.
-7-
Bank’s motion was pending, the Court entered opinions in other
Enron-related cases in which it indicated that valid and cognizable
claims existed against Deutsche Bank arising out of its dealings
with Enron.
Newby v. Enron Corp., 540 F. Supp. 2d 759, 798-99
(S.D. Tex. 2007)(statutory fraud claims); Newby v. Enron Corp., 623
F. Supp. 2d 798, 838-40 (S.D. Tex. 2009)(denying summary judgment
on
statutory
fraud
and
conspiracy
claims).2
Furthermore,
on
December 21, 2010 Deutsche Bank entered into a Non-Prosecution
Agreement (the “Agreement”) with the United States Department of
Justice (“DOJ”) regarding various tax transactions from 1996 to
2002, for which Deutsche Bank agreed to pay a fine of $553.6
million; Plaintiffs urge that this Agreement demonstrates Deutsche
Bank’s “participation in illegal, sham tax transactions during the
exact same time period it created and sold the Tax Transactions to
Enron.”
#60 at 8;
#67, Exhibit 1 at ¶¶ 814-829 and Appendix B.
Like the Fastow deposition, Plaintiffs argue that this Agreement
was not known and could not have been included at the time
Plaintiffs’ Second Amended Complaint was filed.
On January 6, 2011 the Court issued its Opinion and Order of
Dismissal (#59 at 57-58), finding that Plaintiffs failed to plead
fraud with particularity against both Enron and Deutsche Bank and
2
Deutsche Bank correctly points out that neither of these
cases related to Deutsche Bank and they are thus irrelevant.
-8-
dismissing in addition the derivative conspiracy, concerted action,
and aiding and abetting claims. Plaintiffs ask the Court to vacate
that opinion and allow it to re-plead because valid claims exist
and because of new evidence.
Because the Court ruled on the pleadings without resolution by
trial or presentation of evidence, Plaintiffs maintain that the
facts mirror those in Dussouy, 660 F.2d 594 and the Court should
consider the motion in light of Rule 15(a) rather than Rule 59(e)
alone.
They claim that they asked for the opportunity to amend
their pleadings between the time Deutsche Bank filed its motion to
dismiss (February 28, 2007) and the time when the Court issued its
ruling (January 6, 2011) in reliance on the scheduling order dated
July 11, 2003, entered in Newby (H-01-3624 #1561, and amended on
July 11, 2003, #4848),3 with which this action was consolidated for
pretrial discovery.
They urge that they sought the Court’s
3
This action (#7) was consolidated into Newby on May 13, 2003
for pretrial proceedings.
The July 11, 2003 scheduling order
(#1561 in Newby) governed all the consolidated or coordinated
cases. It stayed the filing of amended pleadings until the class
certification motion in Newby was resolved. The Court granted Lead
Plaintiff’s motion for class certification on July 5, 2006 (#4836).
On July 11, 2006 the Court amended the scheduling order (#4848) and
required plaintiffs in the consolidated and coordinated cases to
either proceed under the consolidated amended complaint in Newby
and/or Tittle and dismiss their initial pleadings or to “opt out”
of the class and proceed under their own pleadings or request leave
to amend those initial pleadings within thirty days of filing their
“opt-out” statement of election.
#4848 at 3.
Plaintiffs here
opted out of the Newby class on July 21, 2006 (#4879, 4880 in
Newby).
-9-
guidance through a motion for a status conference and a motion for
a telephone conference (#52, #57 (supplement to #52), and #58),
which were denied by the Court on the grounds of its heavy docket.
In
a footnote Plaintiffs state that they “did not amend their
pleadings at that time believing the amendment to be procedurally
improper based on the scheduling orders (#1561 and #4848) in
[Newby], as amended.”
#60 at 3 n.2.
They further claim that after
the Newby class action, “which has so consumed the Court’s docket,”
was resolved, “Plaintiffs anticipated that the time had come to
move forward on the action against Deutsche Bank.
However on
January 6, 2011 the Court issued its Opinion and Order of Dismissal
. . . .”
#60 at 4.
They plead, “If Plaintiffs erred in their
reliance on (or misunderstood) the limits of the court’s Scheduling
Order, [they] respectfully request leave to amend their pleadings
at this stage.”
#60 at 7.
Plaintiffs urge that their amendment would not be futile
because their proposed Third Amended Complaint details Enron’s
fraud and outlines Deutsche Bank’s role in it.
Moreover new
evidence supports such claims.
In addition, they claim that the Court erred in its decision
by not considering the statements contained in the Osprey offering
memoranda against Deutsche Bank.
In Ouaknine v. MacFarlane, 897
F.2d 75, 89 (2d Cir. 1990), the Second Circuit held that a
- 10 -
“reference
to
an
offering
memorandum
satisfies
[Rule]
9(b)’s
requirement of identifying “time, place, speaker, and content of
representation,
affiliates
where,
participating
as
in
here,
the
defendants
offer
of
are
insiders
securities.”
or
The
memoranda with false representations about Enron’s financial health
and about the “arms-length” nature of the transactions between
Enron and its Special Purpose Entities were given to investor
Plaintiffs as part of an overall scheme to induce them to purchase
the securities.
Although they did not buy the Notes being offered
by the memoranda, Plaintiffs contend that the memoranda support
their claim of conspiracy to commit fraud and meet Rule 9(b)’s
requirement of pleading with particularity.
Plaintiffs also argue
that the Court erred in finding that they failed to plead scienter
adequately because they alleged that Deutsche Bank received fees
and did not provide complete and truthful information about the
securities being offered for sale.
King County v. IKB Deutsche
Industriebank AG, No. 09-Civ-8381 (SAS), 2010 U.S. Dist. LEXIS, at
*11-12 (S.D.N.Y. Oct. 29, 2010)(finding that plaintiffs adequately
alleged scienter where Morgan Stanley received $15 million in fees,
where it had influence over rating agencies, and where it knew the
portfolio was not a safe, stable investment, that the ratings
process was flawed, and that the ratings agencies could not issue
an objective rating).
Plaintiffs’ allegations are the same.
- 11 -
Finally, contend Plaintiffs, manifest injustice will result if
the Opinion and Order of Dismissal is not vacated. Plaintiffs were
defrauded of millions of dollars by Enron and its co-conspirators.
If given the opportunity, Plaintiffs can plead the specifics of the
fraud more accurately and the complicity of Deutsche Bank.
Their
Third Amended Complaint alleges that Fastow testified that Deutsche
Bank was being overpaid and was aware of, and complicit in, Enron’s
fraud.
#67, Exhibit 1 at ¶¶ 34, 162-63, 199-246, and Appendix E.
Deutsche Bank’s Opposition (#62)
Insisting that the Court correctly disposed of all the claims
against Deutsche Bank, Deutsche Bank asserts that Plaintiffs’ only
challenges are that the Court erred by not considering statements
in the Osprey offering memoranda and by not pleading scienter as to
Deutsche Bank.
Deutsche Bank insists that Plaintiffs fail to
demonstrate any manifest errors of law by the Court in the Opinion
and Order of Dismissal.
Deutsche Bank points out that the Court discussed in detail
the statements in the Osprey Offering memoranda related to Deutsche
Bank and ruled that Plaintiffs’ allegations were insufficient
because they failed to show that any Deutsche Bank representative
knew that the statements contained in the memoranda were false, no
less that Deutsche Bank, with scienter, created, drafted, or
directed the drafting of either of the memoranda.
- 12 -
The Court
agrees.
It discussed scienter (#59 at 46-48) and Plaintiffs’
failure to allege facts demonstrating that any representative of
Deutsche
Bank
made
a
misrepresentation
or
had
the
requisite
fraudulent intent (id. at 135-41).
Moreover, Deutsche Bank maintains that all these issues were
briefed extensively by the parties; a motion for reconsideration
should not rehash arguments considered and rejected by the Court.
Instead the Opinion and Order of Dismissal should be affirmed. The
Court agrees that Plaintiffs improperly seek to reargue resolved
issues in their motion.
Citing
a
Second
Circuit
case,
Quaknine
v.
MacFarlane,
Plaintiffs claim that the Court failed to attribute statements in
the Osprey offering memoranda to Deutsche Bank based on its status
as an “insider or affiliate” of Enron.
Deutsche Bank points out
that Plaintiffs failed to allege in their Second Amended Complaint
and in their proposed Third Amended Complaint that Deutsche Bank
was an Enron insider and therefore this argument should be ignored.
The Court agrees and would further point out that this pleading
deficiency at this stage of the litigation is all the more evident
because discovery has long ago been completed.
Second Deutsche Bank insists that the “new” evidence raised by
Plaintiffs was known to Plaintiffs years before the Opinion and
Order of Dismissal was issued; Plaintiffs have not met their burden
- 13 -
of showing that this evidence was unavailable to them before the
Court dismissed their claims.
Plaintiffs’ vague claim of manifest
injustice fails because they were given an unrestricted opportunity
to investigate and argue their case, but failed to exercise due
diligence to include the alleged “new” evidence earlier.
There is
no manifest injustice for purposes of a Rule 59(e) motion “where,
as here, a party could easily have avoided the outcome, but instead
elected not to act until after a final order had been entered.”
In
re Young, No. 08-41515, 2009 WL 2855766, *4 (Bankr. E.D. Tex. Sept.
2, 2009), citing Lightfoot v. District of Columbia, 355 F. Supp. 2d
414, 422 (D.D.C. 2005).
Specifically, for their claim of new
evidence Plaintiffs rely in large part on the September 28, 2006
Sworn Declaration of Andrew Fastow (“Fastow Declaration,” Appendix
F)
and
his
October
23-November
2,
2006
deposition
testimony
(“Fastow Testimony,” Appendix E),4 taken four years before the
Opinion and Order of Dismissal was issued.
Plaintiffs’ counsel
attended and participated in Fastow’s deposition, but did not seek
leave to amend following that deposition even though the Court did
4
In its July 11, 2006 amended scheduling order (#4848 in
Newby) the Court ordered plaintiff electing to proceed outside the
class and seeking to amend their pleadings to file their motions
for leave to amend within thirty days after they filed their
statement of election. Plaintiff filed their “opt-out” statement
on July 21, 2006, giving notice that they would seek to amend.
(#4879, 4880 in Newby). Plaintiffs filed their motion for leave to
amend (#26 in this action), with their proposed Second Amended
Complaint, on August 17, 2006.
- 14 -
not rule on their earlier motion for leave to amend (#26) until
January 22, 2007, when the Court granted it (#32).
The same day
Plaintiffs filed their Second Amended Complaint without any mention
of the Fastow statements (#33).
Deutsche Bank filed its motion to
dismiss (#39) on February 28, 2007.
The parties exchanged briefs
between April 6, 2007 and June 18, 2007 (#46, 47, 48, 50, 51).
The
Court did not grant Deutsche Bank’s motion and close the case (#59)
until January 6, 2011 while Plaintiffs remained silent about the
Fastow testimony.
As for the Agreement (Appendix B) between Deutsche Bank and
the DOJ, Deutsche Bank insists the Agreement introduced nothing
new.
Deutsche Bank’s conduct from 1997-2001, which was discussed
in it, was publicly disclosed by Deutsche Bank and widely reported
in the press beginning at least by February 2006,5 well before
5
Deutsche Bank cites Securities and Exchange Commission form
20, filed by Deutsche Bank March 23, 2006, at 105 (disclosing that
the DOJ was conducting a
criminal investigation, involving
Deutsche Bank, of tax-oriented transactions executed from 19972001); Lynnley Browning, Legal Costs of Shelter Case Hurt Deutsche
Bank Profit, N.Y. Times, Mar. 10, 2006, Section C (available at
2006 WLNR 4023358)(reporting Deutsche Bank’s announcement that it
had “reduced its 2005 earnings by nearly $300 million to cover
newly discovered legal costs related to its role in creating and
selling questionable tax shelters . . .after uncovering
‘significant new information related to certain legal exposures’
concerning ‘tax-oriented transactions’ from 1997 to 2001"); Lynnley
Browning, Deutsche Bank Said to Seek Settlement on Tax Shelters,
N.Y. Times, Feb. 24, 2006, Section C (available at 2006 WLNR
3195492)(reporting Deutsche Bank’s announcement that it was “in
talks with the Justice Department in an effort to settle a criminal
investigation over the bank’s role in questionable tax shelters”).
- 15 -
Plaintiffs filed their proposed Second Amended Complaint in August
2006, and almost five years before the Opinion and Order of
Dismissal issued.
Moreover, that Agreement had nothing to do with
Enron-related tax transactions.
Plaintiffs’ contention that they did not seek leave to amend
earlier because they misunderstood the limits of the Court’s July
2003 Scheduling Order and because the Court denied their motions
for a status conference and a telephone conference (#52, 57, 58)
also
does
not
support
Plaintiffs
motion
for
reconsideration.
Deutsche Bank points out that these motions do not reflect a desire
or intention to amend their pleadings; nor do they mention the
evidence that Plaintiffs now cite and that was in Plaintiffs’
possession when they filed these motions.
The Court concurs that
the motions do not raise the question of amendment.
Third, even if the evidence were “new,” it does not cure the
fatal pleading defects in the Second Amended Complaint, so the
motion for leave to amend to have a fourth bite of the apple should
be denied.
The proposed Third Amended Complaint “is a mere
restatement of Plaintiff’s inadequate allegations, with the belated
inclusion of (immaterial) references to the Fastow Testimony” and
the Agreement.
Deutsche Bank states that these disclosures have been updated and
reported on in the press regularly ever since Plaintiffs moved for
leave to file their Second Amended Complaint in August 2006.
- 16 -
Furthermore, Deutsche Bank points out that if the Court does
consider Plaintiffs’ motion for leave to amend, the proper standard
is the “good cause” standard under Rule 16(b) because the Court did
enter a Scheduling Order, which long ago expired.
agrees.
The Court
Deutsche Bank maintains that the four factors identified
in Marathon for considering whether there is good cause here weigh
heavily in favor of denying amendment.
Plaintiffs lack a valid
explanation for failure to timely seek leave to amend their
allegations to include the Fastow Testimony and the Agreement.
They
cannot
show
that
they
exercised
diligence
to
meet
deadlines and that the deadlines could not have been met.
the
The
evidence was available before dismissal; Plaintiffs knew about the
Fastow testimony for over four years before the Opinion and Order
of Dismissal issued, and the Agreement was publicly disclosed and
reported by the press even before Plaintiffs filed their Second
Amended Complaint.
Nor would the “new evidence” cure the defects,
as Fastow was unable to testify that any particular Deutsche Bank
employee actually knew of Enron’s fraud and knowingly assisted or
agreed with Enron to perpetrate a fraud upon the Osprey Trust
investors. As for the Agreement, Plaintiffs fail to allege how the
conduct it covered relates in any way to the fraud they allege was
committed
by
Enron.
Plaintiffs’
allegedly
“new”
allegations
concerning Peggy Capomaggi and her deposition testimony on November
- 17 -
21, 2005, Thomas Finley’s deposition testimony on September 21-22,
2005, and Brain McGuire’s testimony on November 2-3, 2005, came
from discovery that Plaintiffs obtained long before they filed
their Second Amended Complaint.
would be futile.
Thus permitting the amendment
Moreover, argues Deutsche Bank, at this late
juncture permitting the filing of a Third Amended Complaint would
prejudice Deutsche Bank because discovery has been closed since
November
30,
2005,
allowing
amendment
would
further
delay
resolution of this case, and amendment would lead to further motion
practice
at
considerable
additional
cost
to
Deutsche
Bank.
Finally, the availability of a continuance would not cure the
prejudice to Deutsche Bank because the case is closed.
Plaintiffs’ Reply (#65)
Plaintiffs’ reply argues that they have shown good cause under
Rule 16, so the Court must apply the more liberal standards of Rule
15.
They have a legitimate explanation for their delay, because
they did not sit idly by:
they amended their complaint by the
deadline after opting out of the Newby class action and they
believed that the Court’s scheduling order required resolution of
the Newby matters before any subsequent amendment and resolution of
any legal issues in cases not proceeding under the consolidated
Newby and Tittle complaints.
Their amendments are “important”
because they will meet the requirements of Rule 9(b) and they argue
- 18 -
that dismissal under Rule 9(b) before allowing a party to replead
is highly unusual.6
Court’s Decision
The Court concludes that Plaintiffs’ Rule 59(e) motion must be
denied because they have failed to show that the evidence they now
submit was “newly discovered,” that had they been properly diligent
they could have moved to amend based on it before this Court
dismissed this action, and that the evidence would probably change
the outcome of their suit against Deutsche Bank. Deutsche Bank, in
contrast, has demonstrated that the cited evidence was not newly
discovered, but that it was or should have been known to Plaintiffs
well before dismissal of the claims against Deutsche Bank. Because
the Court denies their request for reconsideration, it need not
reach the issue of leave to amend under Rule 16.
Court
observes
that
the
same
deficiencies
Nevertheless the
demonstrate
that
Plaintiffs have not established good cause because they failed to
show
that
they
exercised
diligence
and
that
they
could
not
reasonably have filed a motion for leave to amend long before the
Court’s Opinion and Order of Dismissal was issued.
Accordingly the Court
6
Apparently they do not find their prior amendments to
suffice.
- 19 -
ORDERS that Plaintiffs’ motion for reconsideration under Rule
59(e) and for leave to amend under Rule 15(a) (instrument #60) is
DENIED.
SIGNED at Houston, Texas, this
9th
day of
August , 2011.
___________________________
MELINDA HARMON
UNITED STATES DISTRICT JUDGE
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