Executive Center III LLC v. Meieran et al

Filing 53

ORDER signed by Judge J P Stadtmueller on 1/23/12 denying 48 plaintiff's Motion for Reconsideration of 45 the court's 10/4/11 order. See Order. (cc: all counsel) (nm)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
EXECUTIVE CENTER III, LLC,
Plaintiff,
v.

Case No. 10-CV-263-JPS

ANDREW MEIERAN, and
ANDREW MEIERAN FAMILY TRUST,
Defendants.

ORDER

The plaintiff, a creditor of BRIC Executive, LLC (“BRIC”), filed this
suit against the defendants, former partial owners of BRIC, alleging that the
defendants received fraudulent transfers from BRIC in violation of a number
of sections of the Wisconsin Uniform Fraudulent Transfers Act (“WUFTA”).
(See Docket #1).
The defendants moved for summary judgment on those claims and,
on October 4, 2011, this Court entered an order granting summary judgment
on four of the plaintiff’s five claims. (See Docket #45). All of the dismissed
claims were made under WUFTA. (See, e.g., Docket #1, #45). The single claim
that the Court left intact related to whether the defendants owed a fiduciary
duty to the plaintiff. (See, e.g., Docket #1, #45).
Following entry of that order, the plaintiff moved the Court to
reconsider its summary judgment ruling on the plaintiff’s first and third
claims. (Docket #48, #50). The parties have now fully briefed the issue.
(Docket #50, #51, #52). For the following reasons, the Court will deny the
plaintiff’s motion for reconsideration.

1.

Factual Background
The facts in this case are rather complicated, due to a number of

simultaneous agreements that ultimately form the subject of this dispute. The
facts are only complicated further by the plaintiff’s motion for
reconsideration, in which they argue that the Court should consider newlypresented evidence and related facts.
In an attempt to set forth the facts as clearly as possible, the Court will
first address the agreements that existed between the entities in this case
without addressing the parties’ participation as members in each of the
entities. After addressing the agreements, the Court will turn to the parties’
membership in the multiple entities in this case.
1.1

Agreements Between Executive Center III, Meieran, and
BRIC

On November 1, 2007, the defendants entered into a transaction (“the
Agreement”) in which they received a 12.5% interest in BRIC. (Pl.’s Br. in
Supp. Mot. for Reconsid. 2). The Agreement called for the 12.5% interest to
be repurchased by March 1, 2008, for $250,000, plus 12% interest and a
number of penalty charges if the repurchase did not occur before the
March 1, 2008 deadline. (Pl.’s Br. in Supp. Mot. for Reconsid. 2). When
repurchase did not occur prior to March 1, 2008, the penalty provisions took
effect, resulting in the defendants being owed a total of $400,000 under the
Agreement. (See Pl.’s Br. in Supp. Mot. for Reconsid. 2).
Shortly thereafter, BRIC entered into real estate contracts with the
plaintiff. (Pl.’s Br. in Supp. Mot. for Reconsid. 2). The first contract called for
BRIC to sell its principle asset, an office building, to the plaintiff. (Pl.’s Br. in
Supp. Mot. for Reconsid. 2). The second contract required that, following the
sale, BRIC would lease an office suite in that building from the plaintiff,
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which would net the plaintiff approximately $150,000 in rent. (Pl.’s Br. in
Supp. Mot. for Reconsid. 2).
However, prior to the finalization of those contracts, BRIC entered an
agreement with the defendants to redeem the 12.5% interest in exchange for
the $400,000 debt owed to the defendants under the Agreement. (Pl.’s Br. in
Supp. Mot. for Reconsid. 2). Thus, after BRIC sold the office building to the
plaintiff, BRIC used $400,000 of the sale proceeds to redeem the defendants’
12.5% interest. (Pl.’s Br. in Supp. Mot. for Reconsid. 2).
That $400,000 payment left BRIC without substantial assets,
ultimately causing BRIC to default on its obligation to the plaintiff to rent
office space. (Pl.’s Br. in Supp. Mot. for Reconsid. 2). On that basis, the
plaintiff secured a $156,140.87 judgment against BRIC. (Pl.’s Br. in Supp. Mot.
for Reconsid. 2).
However, the plaintiff also brought this suit against the defendants,
arguing that the $400,000 payment from BRIC to the defendants was a
fraudulent transfer in violation of a number of sections of WUFTA. (Pl.’s Br.
in Supp. Mot. for Reconsid. 3).
The Court, in its October 4, 2011 summary judgment order, disagreed,
finding that the $400,000 payment from BRIC to the defendants was in
satisfaction of a claim that arose under the Agreement. (Order 9–11). Having
found that the $400,000 payment was made in satisfaction of a $400,000
antecedent debt, and thus was of reasonably equivalent value to forgiveness
of that debt, the Court found that the plaintiff’s WUFTA claims failed. (Order
9–11).
1.2

Membership in BRIC

To be sure, the Court’s finding of reasonably equivalent value—and
thus lack of any WUFTA violation—rested upon the assumption that the
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Agreement was valid. If the Agreement was invalid, then BRIC would not
have owed the defendants $400,000. If that were the case, then BRIC’s
$400,000 transfer would have been made purely in exchange for the
defendants’ 12.5% membership interest—likely not reasonably equivalent to
$400,000 in value and, thus, hypothetically constituting a violation of
WUFTA that would entitle the plaintiff to judgment against the defendants
for receipt of a fraudulent transfer.
As such, the plaintiff has requested that this Court reconsider its prior
summary judgment order, arguing that newly presented evidence regarding
membership shows that the Agreement was invalid.
The parties agree on a number of points in regard to membership.
First, the parties agree that, prior to the Agreement, Paula Heyes held a
membership interest in BRIC. (See Pl.’s Br. in Supp. Mot. for Reconsid. 3–4
(establishing that Paula Heyes entered into the Agreement to assign a
membership interest in BRIC, thus implying that—at some point prior to
entering that agreement—Paula Heyes held a membership interest)). In the
proposed findings of fact presented to this Court at the summary judgment
stage, the parties also agreed to the following pertinent facts:
1.

through the Agreement, Paula Heyes assigned her 12.5%
membership interest in BRIC to the defendants in exchange for
$250,000;

2.

through the Agreement, BRIC was required to pay the
defendants a $250,000 liquidating distribution by March 1,
2008, along with 12% interest and penalties if the March 1, 2008
deadline was not complied with; and

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3.

the parties did not comply with the March 1, 2008 deadline
and, thus, penalties applied, causing a total sum of $435,000 to
be owed to the defendants.

(See Pl.’s Br. in Supp. Mot. for Reconsid. at 3–4). Thus, according to these
agreed facts, so long as Paula Heyes had the authority to enter into the
Agreement with the defendants, then the Agreement was valid and BRIC
owed a $435,000 antecedent debt to the defendants. And, flowing from that
fact, so long as BRIC owed a $435,000 antecedent debt to the defendants, then
the defendants’ receipt of $400,000 in satisfaction of that debt was of
reasonably equivalent value and, therefore, not the receipt of a fraudulent
transfer under WUFTA.
However, this understanding rests on the assumption that Paula
Heyes had the authority to enter into the Agreement.
The plaintiff has now brought this motion for reconsideration arguing
that, in fact, Paula Heyes did not have such authority, making the Agreement
an ultra vires act, and thus invalid. (See Pl.’s Br. in Supp. Mot. for Reconsid.
8–10). Relying on a number of newly-presented documents, the plaintiff
states that Paula Heyes had assigned a 10% interest to her husband, David
Heyes, prior to her entering the Agreement with the defendants. (Pl.’s Br. in
Supp. Mot. for Reconsid. 9). The plaintiff also informs the Court that the
“10% interest was probably never transferred back” to Paula Heyes, and that
the Agreement was made without David Heyes signature. (Pl.’s Br. in Supp.
Mot. for Reconsid. 9). Thus, the plaintiff argues that David Heyes did not
consent to the Agreement, making the Agreement and ultra vires act and,
therefore, invalid. (Pl.’s Br. in Supp. Mot. for Reconsid. 9). Logically flowing
from that contention is the argument that, if the Agreement was invalid, then
the $435,000 antecedent debt was also invalid. That invalidity would thus
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mean that BRIC’s ultimate $400,000 transfer to the defendants was arguably
not of reasonably equivalent value and was, therefore, a fraudulent transfer
under WUFTA.1
2.

Discussion
As noted above, the Court accepts the plaintiff’s contention that if

David Heyes owned 10% of BRIC at the execution of the Agreement and did
not consent to the terms of the Agreement, then Paula Heyes’ entering the
Agreement was an invalid ultra vires act, making BRIC’s $400,000 transfer
fraudulent under WUFTA.
Thus, having established the legal significance of the facts and
evidence the plaintiff now hopes to introduce, the ultimate question that the
Court must answer is whether it should grant the plaintiff’s motion for
reconsideration based upon the newly-offered evidence.
Simply put, if the Court considers this new evidence, then it must
overturn its prior grant of summary judgment. If Paula Heyes’ entering the
Agreement was ultra vires, then—from a legal standpoint—BRIC’s $400,000
transfer would have been made in exchange for a 12.5% interest in BRIC, as
opposed to having been made in satisfaction of an antecedent debt. As such,
the reasonable equivalency of the $400,000 transfer to the 12.5% interest in
BRIC would be an issue of material fact to be decided by a factfinder.
On the other hand, if the Court finds that it should disregard this new
evidence, then its prior order of summary judgment may stand. The plaintiff
does not quarrel with the Court’s original analysis. Rather, the plaintiff
accepts that the analysis in the Court’s October 4, 2011 order is in fact correct,

1

As the Court discusses below, the reasonable equivalency of the $400,000
transfer and the 12.5% BRIC interest exchanged by the defendants would be an
issue of material fact to be decided by a factfinder.

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unless the Court considers the newly-offered evidence calls into dispute the
validity of the Agreement. (See Pl.’s Br. in Supp. Mot. for Reconsid. 8–11
(setting forth the plaintiff’s argument that the newly-offered evidence should
change the Court’s analysis, but never arguing that the Court’s original
decision was incorrect)).
Thus, the Court turns to the primary issue of whether it should grant
the plaintiff’s motion for reconsideration, take into account newly-offered
evidence, and consequently overturn its prior grant of summary judgment
on the plaintiff’s first and third claims.
2.1

Standard for Reconsideration

District courts have broad discretion to grant or deny motions for
reconsideration. Caisse Nationale de Credit Agricole v. CBI Industries, 90 F.3d
1264, 1270 (7th Cir. 1996). A district court’s decision on a motion for
reconsideration will not be reversed on appeal “absent an abuse of that
discretion.” Id.
Despite that broad discretion, district courts should grant motions for
reconsideration only in limited circumstances. That is because “‘[m]otions for
reconsideration serve a limited function: to correct manifest errors of law or
fact or to present newly discovered evidence.’” Id., at 1269 (7th Cir. 1996)
(quoting Keene Corp. v. Int’l Fidelity Ins. Co., 561 F. Supp. 656, 665 (N.D. Ill.
1982), aff’d, 736 F.2d 388 (7th Cir. 1984); citing Rothwell Cotton Co. v. Rosenthal
& Co., 827 F.2d 246, 251 (7th Cir. 1987)). As the plaintiff correctly states,
reconsideration is appropriate only in circumstances “where there is (1) an
intervening change in controlling law; (2) the availability of new evidence or
an expanded factual record; or (3) a need to correct clear error [of fact or
law] or to prevent manifest injustice.” (Pl.’s Br. in Supp. Mot. for Reconsid.
8 (citing Whitford v. Boglino, 63 F.3d 527, 530 (7th Cir. 1995), Geneva
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International Corp. v. Petrof, Spol, S.R.O., 608 F. Supp. 2d 993, 997–98 (N.D. Ill.
2009), Bank of Waunakee v. Rochester Cheese Sales, 906 F.2d 1185, 1191 (7th Cir.
1990), Rothwell Cotton Co., 827 F.2d at 251, United States v. Petersen Sand &
Gravel, Inc., 806 F. Supp. 1346, 1360 (N.D. Ill. 1992))).
2.2

Application of Reconsideration Standard to Plaintiff’s
Newly-Offered Evidence

Because the plaintiff has not argued that there has been any
intervening change in the controlling law, the Court will look only to
whether the plaintiff’s newly-offered evidence qualifies for reconsideration
under either the second or third of the above-listed circumstances.
2.2.1

Availability of New Evidence or an Expanded Factual
Record

Motions for reconsideration “‘cannot in any case be employed as a
vehicle to introduce new evidence that could have been adduced during the
pendency of the summary judgment motion.’” Caisse Nationale, 90 F.3d at
1269 (quoting Keene Corp., 561 F. Supp. at 665; citing DeBruyne v. Equitable Life
Assurance Soc’y, 920 F.2d 457, 471 (7th Cir. 1990), Manor Healthcare Corp. v.
Guzzo, 894 F.2d 919, 922 n. 4 (7th Cir. 1990)). To support such a motion, the
moving party must show not only that: (1) the evidence is newly discovered;
but also that, (2) “‘it could not with reasonable diligence have discovered and
produced such evidence’” while the summary judgment motion was
pending. Caisse Nationale, 90 F.3d at 1269 (quoting Englehard Indus., Inc. v.
Research Instrumental Corp., 324 F.2s 347, 352 (9th Cir. 1963), cert. denied, 377
U.S. 923 (1964)). In other words, it is not enough to show only that one has
obtained new evidence; rather, the party moving the Court for
reconsideration must also show that the evidence was not reasonably
available at the time the original summary judgment motion was pending.

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The plaintiff cannot satisfy that requirement here. While the plaintiff
has presented the Court with new evidence, the plaintiff has not offered a
satisfactory explanation as to how or why the newly-offered evidence could
not, with reasonable diligence, have been discovered and produced during
the pendency of the original summary judgment motion. (Pl.’s Br. in Supp.
Mot. for Reconsid. 8–10). To be sure, the plaintiff does offer new evidence
that David Heyes may have owned a portion of BRIC at the time the
Agreement was entered, and that he may not have consented to the
Agreement. (Pl.’s Br. in Supp. Mot. for Reconsid. 8–9).
But that alone is not enough. In an attempt to justify its failure to
initially produce this evidence, the plaintiff argues that “more than two years
had passed between the production of the evidence in the bankruptcy
litigation.” (Pl.’s Br. in Supp. Mot. for Reconsid. 9). The plaintiff also informs
the Court that “[i]t was only by an indirect path…that counsel was led back
to these documents.” (Pl.’s Br. in Supp. Mot. for Reconsid. 9). However, as far
as the Court can tell, the documents were disclosed in discovery and in
possession of the plaintiff during the pendency of the defendants’ motion for
summary judgment. In fact, rather than agreeing to the defendants’ proposed
findings of fact as related to Paula Heyes’ entering the Agreement (see Pl.’s
Br. in Supp. Mot. for Reconsid. 3–4), it seems that the plaintiff could have
fairly easily (and should have) located these documents and disclosed them to
the Court as evidence to support a denial of those proposed facts. With
reasonable diligence, the plaintiff could have discovered and disclosed those
documents to the Court while that motion was pending. Thus, given that the
plaintiff had access to the documents at that time, its having unreasonably
overlooked them is not adequate to justify this Court’s reconsideration.

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“A party seeking to defeat a motion for summary judgment is
required to ‘wheel out all its artillery to defeat it,’” and any “[b]elated factual
or legal attacks are viewed with great suspicion.” Caisse Nationale, 90 F.3d at
1270 (quoting Employers Ins. of Wausau v. Bodi-Wachs Aviation Ins. Agency, 846
F. Supp 677, 685 (N.D. Ill. 1994); citing Ryan v. Chromalloy Am. Corp., 877 F.2d
598, 603–04 (7th Cir. 1989), In re Oil Spill, 794 F. Supp. 261, 267 (N.D. Ill. 1992),
aff’d, 4 F.3d 997 (7th Cir. 1993), Publishers Resource v. Walker-Davis Publications,
762 F.2d 557, 561 (7th Cir. 1985), Bally Export Corp. v. Balicar Ltd., 804 F.2d 398,
404 (7th Cir. 1986)). Here, it seems that, by its own unreasonable mistake, the
plaintiff left its pistol at home before heading off to the duel. Absent some
justification for that mistake, which the plaintiff has not presented, the Court
will not grant the plaintiff a rematch.
2.2.2

Need to Correct Clear Error of Fact or Law or to
Prevent Manifest Injustice

Having found that the availability of new evidence does not support
the plaintiff’s motion for reconsideration, the Court now turns to whether it
should grant that motion in order to correct “clear” error or to prevent
“manifest” injustice.
In the situation at hand, the Court does not believe that the newlypresented evidence shows that such a “clear” error of fact exists or that
“manifest” injustice will result if the Court refuses to reconsider the matter.
It is not, in fact, “clear” that David Heyes: (1) owned any portion of BRIC at
the time the Agreement was entered; or that (2) David Heyes did not support
such Agreement. Actually—to the contrary—the plaintiff openly admits that
it is not clear that David Heyes held a membership interest at the time the
Agreement was entered; the plaintiff twice states only that David Heyes
“probably” or “likely” never reconveyed his interest to Paula Heyes. (Pl.’s Br.
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in Supp. Mot. for Reconsid. 6, 9). Furthermore, the plaintiff presents no
evidence that David Heyes did not actually consent to the Agreement.
Looking only to the dealings between David and Paula Heyes, which consist
of a joint filing of bankruptcy (Nordholm Aff., Ex. C) as well as the transfer
of a 10% interest in BRIC for what appears to be no consideration (Nordholm
Aff., Ex. B), it is clear that the two individuals are closely allied. While it
cannot be said definitively that David Heyes consented to the Agreement, the
plaintiff also has not shown any evidence to establish that he did not so
consent. Thus, there is no “clear” error of fact that would be rectified by
granting the plaintiff’s motion for reconsideration.
Further, the Court does not believe that any “manifest” injustice will
result if it denies the motion. Accepting the plaintiff’s definition of “manifest”
as “evident, clear, plain…” the Court finds that no clear injustice will be
perpetrated by refusing to reconsider its initial order. (Pl.’s Br. in Supp. Mot.
for Reconsid. 10 (citing Webster’s New Universal Unabridged Dictionary Deluxe
Second Edition, 1983)). The plaintiff argues that “[i]t should be evident, plain
and obvious to one’s understanding that it is wrong to dismiss Plaintiff’s
First and Third causes of action based on an act done in violation of state
law.” (Pl.’s Br. in Supp. Mot. for Reconsid. 11). But, the Court must again
state that it does not believe that such a violation is in the least evident, plain,
or clear from the newly-presented evidence. At best, that evidence draws into
question whether the Agreement was invalid; but, such a conclusion is
certainly not clear.
In reality, the Court finds it would be a much clearer injustice to strike
an otherwise validly-entered contract on the purely legal-fictional grounds
that David Heyes temporarily held a membership interest in BRIC at a time
when his closely-related ally, Paula Heyes, with whom he appears to have
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had a continuing close business relationship, entered that contract with the
defendants. The terms of the contract, so far as the Court can tell, were fair.
Thus, it would be just as much (if not more) of a clear injustice to now strike
that contract on purely technical grounds, as it would be to find the contract
invalid under state law based on the fairly flimsy, late-arriving evidence the
plaintiff now offers.
3.

Conclusion
For these reasons, the Court concludes that it should deny the

plaintiff’s motion for reconsideration. The plaintiff has not offered any
compelling reason why its newly-offered evidence qualifies for
reconsideration under any of the limited circumstances acknowledged in this
circuit’s case law. Therefore, the Court denies the plaintiff’s motion, leaving
intact the Court’s prior order granting summary judgment to the defendants
on the plaintiff’s first, second, third, and fifth claims.
Accordingly,
IT IS ORDERED that the plaintiff’s motion for reconsideration
(Docket #48) of the Court’s October 4, 2011 order (Docket #45) be and the
same is hereby DENIED.
Dated at Milwaukee, Wisconsin, this 23rd day of January, 2012.
BY THE COURT:

J.P. Stadtmueller
U.S. District Judge

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