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discussing amendment of 12(c) motions.
Summary of this case from Coleman v. Unified Government of WyandotteOpinion
Civil Action No. 99-2549-CM
February 21, 2002
MEMORANDUM AND ORDER
This suit arose out of the alleged competitive activities engaged in by plaintiff Brent Deck following his severance of employment with defendant Engineering Laminates ("EL"). Following the initiation of prior litigation, wherein EL sued plaintiff for engaging in competitive activities and plaintiff countersued under abuse of process, breach of contract, and fraud theories, the parties entered into a settlement agreement. Pursuant to that agreement, plaintiff agreed to dismiss his countersuit in exchange for EL's agreement to pay plaintiff $35,000 in annual installments, to be paid on December 1 of the upcoming years, with final payment due December 1, 1998. Defendants began making payments pursuant to the schedule, but failed to make the December 1, 1997 payment and indicated to plaintiff it did not intend to make any remaining payments. Plaintiff filed this lawsuit seeking restitution. Specifically, plaintiff sought recovery alleging state law breach of contract, fraud, and unjust enrichment, and alleging violations of the federal Racketeer Influenced and Corrupt Organizations Act of 1970 (RICO), 18 U.S.C. § 1961-68.
Upon a motion for judgment on the pleadings and for dismissal for lack of subject matter jurisdiction by defendants Elkin McCallum, Joan Fabrics Corporation, Joan Automotive Industries, Inc., Joan Laminates, Inc., Keith Illig, and Engineered Laminates, the court dismissed plaintiff's complaint in its entirety. In its order, the court ruled that plaintiff lacked standing to pursue his federal RICO claim. Moreover, based upon the dismissal of plaintiff's only federal claim, the court declined to exercise subject matter jurisdiction over plaintiff's remaining state law claims.
Pending before the court is plaintiff's motion for reconsideration of the court's order of dismissal (Doc. 100). As set forth below, the court denies plaintiff's motion.
Motion for Reconsideration
In accordance with local rule, a motion seeking reconsideration of a dispositive order or judgment must be filed pursuant to Fed.R.Civ.P. 59(e) or 60. D. Kan. Rule 7.2. A motion "filed within ten days of the district court's entry of judgment . . . is treated as a motion to alter or amend the judgment under Fed.R.Civ.P. 59(e)." Hatfield v. Bd. of County Comm'rs for Converse County, 52 F.3d 858, 861 (10th Cir. 1995). Here, plaintiff filed the pending motion within ten days of the entry of judgment in this case. Therefore, the court construes plaintiff's motion as a motion to alter or amend judgment pursuant to Rule 59(e).
The court entered its order dismissing plaintiff's complaint on April 10, 2001. The Clerk of the Court did not enter judgment on the case, however, until April 16, 2001. Plaintiff's motion was filed on April 25, 2001 — nine days following the entry of judgment.
A Rule 59(e) motion to alter or amend judgment is essentially a motion for reconsideration. Henry v. Office of Thrift Supervision, No. 92-4272, 1993 WL 545195, at *1 (D.Kan. Dec. 28, 1993) (citing Hilst v. Bowen, 874 F.2d 725, 726 (10th Cir. 1989)), aff'd, 43 F.3d 507 (10th Cir. 1994). Rule 59 allows a party to allege fundamental legal errors that require the court to reconsider an earlier decision. Federated Mut. Ins. Co. v. Botkin Grain Co., 856 F. Supp. 607, 609 (D.Kan. 1994). "A Rule 59(e) motion to alter or amend the judgment should be granted only to correct manifest errors of law or to present newly discovered evidence." Phelps, 122 F.3d at 1324 (internal quotations omitted).
A party cannot invoke Rule 59(e) to raise arguments or evidence that should have been raised in the first instance or to rehash arguments previously considered and rejected by the court. Federated Mut. Ins. Co., 856 F. Supp. at 609. Whether to grant or deny a Rule 59(e) motion is committed to the district court's sound discretion. Phelps, 122 F.3d at 1324.
Discussion
Plaintiff's Arguments
Plaintiff asserts he is entitled to reconsideration of the court's dismissal order. Plaintiff asserts five separate arguments. First, plaintiff argues that the court's citation of Bankers Trust Co. v. Rhoades, 741 F.2d 511 (2d Cir. 1984) was in error. Second, plaintiff asserts the court erroneously "overlook[ed]" cases cited by plaintiff "which establish proximate cause for plaintiff's injuries." (Pl.'s Mot. at 1). Third, plaintiff asserts he is entitled "to judgment on all issues in one action" pursuant to "Rule 54(b), Rule 54(c), Rule 8, and 28 U.S.C. (sic) § 1367." (Id.) Fourth, plaintiff argues defendants' motion for judgment on the pleadings was untimely. And fifth, plaintiff asserts that because any insufficiency in his pleading "resulted in no prejudice to defendants," he should be granted leave to amend his complaint. (Id.).
Court's Prior Order
In its order of dismissal, the court found that plaintiff lacked standing to pursue his federal RICO claims. Specifically, the court found plaintiff's allegations, even when accepted as true, failed to establish the causation and injury elements necessary to confer standing. (Ct.'s Order at 4-8); see Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985) (to have standing to bring a RICO claim, plaintiff must have "been injured in his business or property by the conduct constituting the violation"); Schrag v. Dinges, No. 94-3005, 1995 WL 675475, at *4 (10th Cir. 1995) (a plaintiff who asserts a violation of 18 U.S.C. § 1962 "only has standing if, and can only recover to the extent that, he has been injured in his business or property by the conduct constituting the violation") (citing Sedima , 473 U.S. at 496); O'Malley v. O'Neill, 887 F.2d 1557, 1561 (11th Cir. 1989) (to have standing, plaintiff must show (1) a violation of § 1962; (2) injury to business or property; and (3) causation of the injury by the violation); Masters v. Daniels Int'l Corp., No. 87-1290-C, 1991 WL 107410, at *4 (D.Kan. May 31, 1991) (same).
In its order, the court found plaintiff's allegations failed to establish that the alleged predicate RICO acts were the proximate cause of his injuries. The court also found plaintiff's allegations failed to establish that he suffered the necessary proprietary type of damage necessary to confer standing. Plaintiff now asserts the court's analysis was flawed.
RICO — Injury to Business or Property
Second Circuit Opinion
In its opinion, this court cited the Second Circuit's Bankers Trust Co. v. Rhoades decision for the proposition that the injury alleged by plaintiff under his RICO claim must cause a proprietary type of damage to his property or business to satisfy the applicable standing requirement. (Ct.'s Order at 7) (citing Bankers Trust Co., 741 F.2d 511 (2d Cir. 1984)). Although this 1984 opinion was later reversed by a Second Circuit's 1988 opinion of the same name, the reversal did not affect the proposition for which the 1984 opinion was cited by this court. See Bankers Trust Co. v. Rhoades, 859 F.2d 1096 (2d Cir. 1988). Therefore, although the court recognizes it should have noted the subsequent history of the 1984 decision in its opinion, its failure to do so does not affect the appropriateness of its rulings regarding plaintiff's lack of standing to maintain his RICO claim. Therefore, the court denies plaintiff's motion on this basis.
The Bankers Trust Co. decision issued by the Second Circuit in 1984 has been superceded by a subsequent Second Circuit case. In 1985, the United States Supreme Court granted certiorari and vacated the 1984 Bankers Trust Co. decision, remanding it to the Second Circuit for further consideration in light of two Supreme Court decisions issued in 1985. Bankers Trust Co. v. Rhoades, 473 U.S. 922, 922 (1985). Subsequently, in 1988 the Second Circuit reversed its 1984 decision. Bankers Trust Co. v. Rhoades, 859 F.2d 1096 (2d Cir. 1988). In its 1988 decision, the Second Circuit recognized the Supreme Court's holding in Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 495-96 (1985), that RICO does not require an "amorphous `racketeering injury.'" Id. at 495. However, this holding does not detract from the general proposition, cited by this court, that a RICO plaintiff must suffer a proprietary type of injury to have standing to sue under the statute. See 18 U.S.C. § 1964(c) ("Any person injured in his business or property by reason of a violation of section 1962 of this chapter may sue therefor. . . .") (emphasis added). Proprietary rights are those rights which are a "part of a person's estate, assets, or property, as opposed to a right arising from the person's legal status." Black's Law Dictionary 1323-24 (7th ed. 1999).
However, given the subsequent history of the Second Circuit's decision, the court hereby modifies its order of April 10, 2001 (Doc. 98) as follows: the citation to Bankers Trust Co. v. Rhoades, 741 F.2d 511 (2d Cir. 1984) on page 7 shall be modified to read Bankers Trust Co. v. Rhoades, 741 F.2d 511 (2d Cir. 1984), vacated on other grounds, 473 U.S. 922, 922 (1985).
New Case Law Cited by Plaintiff
In his motion, plaintiff cites to Malley-Duff Associates, Inc. v. Crown Life Insurance Co., 792 F.2d 341 (3d Cir. 1986), for the proposition that he suffered an injury because his right to pursue a cause of action against defendants was impaired. In Malley-Duff, the Third Circuit found that "a cause of action . . . is a form of `property,' and when it arises out of the termination of a business, we think it is not unfair to characterize conduct tending to impair it as `business injury'" within the context of a RICO claim. Malley-Duff, 792 F.2d at 354.
However, plaintiff did not cite to this Third Circuit case or make this specific argument in the initial briefing of this issue. Therefore, it cannot serve as a basis for his motion for reconsideration. Federated Mut. Ins. Co., 856 F. Supp. at 609 (a party cannot invoke Rule 59(e) to raise arguments that should have been raised in the first instance). Moreover, the Third Circuit's characterization of an "injury to business or property" has not been adopted, or even addressed, by the Tenth Circuit. Plaintiff's motion is denied on this basis.
RICO — Proximate Cause
Plaintiff asserts that the court disregarded six cases from the initial briefing "which point to defendants' criminal acts as the proximate cause of Decks (sic) injuries." (Pl.'s Mot. at 9). First, the court notes that the absence of a case citation from the court's order does not mean the court did not consider the case in its examination of the issues presented. Second, the court is not convinced that any of the cases previously cited by plaintiff support his assertion that the predicate acts alleged are the proximate cause of the injuries he has alleged, as required to establish standing to maintain his RICO claim. Moreover, plaintiff's arguments amount to a reiteration of his prior arguments, which may not serve as a basis for his motion for reconsideration. Federated Mut. Ins. Co., 856 F. Supp. at 609 (party cannot invoke Rule 59(e) to rehash arguments previously considered and rejected by the court). Plaintiff's motion is denied on this basis.
Plaintiff's Additional Arguments
1. Entitlement to Judgment on All Issues in One Action
Plaintiff appears to be seeking reconsideration of the court's decision to dismiss plaintiff's state law claims for lack of subject matter jurisdiction, pursuant to defendants' Fed.R.Civ.P. 12(b)(1) motion. Plaintiff seems to argue that the ripeness doctrine does not affect his right to have "judgment on all issues in one action." (Pl.'s Mot. at 1). In addition, plaintiff asserts that "Rule 54(b), Rule 54(c), Rule 8, and 28 U.S.C. (sic) § 1367 entitle plaintiff to judgment on all issues in one action." (Id.). The court disagrees.
First, the court notes that its initial order of dismissal did not address the ripeness doctrine. Therefore, plaintiff's arguments addressed to it are not relevant for purposes of the court's consideration of plaintiff's motion for reconsideration of that order. Second, the court notes that it properly declined to exercise its discretion pursuant to 28 U.S.C. § 1367.
Section 1367(a) provides that "in any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution." By raising a federal RICO claim, plaintiff's complaint raised a federal question of law. Therefore, the court had "original jurisdiction" over the action, as it arose "under the . . . laws . . . of the United States." 28 U.S.C. § 1367 ("The district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States."). However, § 1367(c)(3) also provides that the "district courts may decline to exercise supplemental jurisdiction over a claim under subsection (a) if . . . (3) the district court has dismissed all claims over which it has original jurisdiction. . . ." 28 U.S.C. § 1367(c)(3) (emphasis added).
Here, once the court dismissed plaintiff's only federal claim, the court had no "original jurisdiction" over any of the remaining claims. Therefore, the court had discretion whether to exercise subject matter jurisdiction over plaintiff's pendent state law claims. Pursuant to § 1367(c), the court properly declined to exercise jurisdiction over these pendent claims. Therefore, the court finds plaintiff is not "entitled" to have all of his claims adjudicated in one cause of action. Plaintiff's motion is denied on this basis.
Alleged Untimeliness of Original Motion
Plaintiff asserts that defendants untimely moved for dismissal of plaintiff's case. However, because this is a new argument, not raised in the plaintiff's initial briefing, it cannot serve as the basis for the court's reconsideration of its order. Federated Mut. Ins. Co., 856 S. Supp. at 609 (party cannot invoke Rule 59(e) to raise arguments that should have been raised in the first instance).
Even if the court were to consider plaintiff's new timeliness argument, the court is unpersuaded that defendants filed an untimely motion. Plaintiff asserts that "the deadline for motions for failure to state a claim preceded defendants' motion by nearly 3 months, and defendants requested no leave to file out of time." (Pl.'s Mot. at 1). Presumably, plaintiff's argument relies upon the scheduling order entered in this case providing that "all motions to dismiss for lack of jurisdiction, venue, or proprietary of the parties or failure to state a claim upon which relief may be granted shall be filed on or before November 17, 2000." (Sched. Order at 2, ¶ g). On February 14, 2001, defendants filed a "motion for judgment on the pleadings and dismissal for lack of subject matter jurisdiction."
The court finds defendants' motion for judgment on the pleadings was not untimely. Defendants did not move the court to dismiss plaintiff's complaint pursuant to Fed.R.Civ.P. 12(b)(6) for "failure to state a claim upon which relief can be granted." Instead, defendants sought judgment on the pleadings pursuant to 12(c) and dismissal for lack of subject matter jurisdiction pursuant to 12(b)(1). The scheduling order provided that "[a]ny dispositive motions not otherwise provided herein and supportive memoranda shall be filed on or before April 13, 2001." (Sched. Order at 3, ¶ 1). Considering the February 14, 2001, filing date of defendants' motion, the court finds it was not untimely submitted.
In addition, the court finds defendants' motion for dismissal for lack of subject matter jurisdiction was not untimely. It is clear that the scheduling order provided that "all motions to dismiss for lack of jurisdiction . . . shall be filed on or before November 17, 2000," (Sched. Order at 2, ¶ g). However, the court notes that a party may not waive its right to assert the court's lack of subject matter jurisdiction over a plaintiff's case. The Supreme Court has declared "`a party does not waive [subject matter jurisdiction] by failing to challenge jurisdiction early in the proceedings.'" Seymore v. Shawver Sons, Inc., 111 F.3d 794, 800 (10th Cir. 1997) (quoting Ins. Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee , 456 U.S. 694, 702 (1982)).
Moreover, defendants' motion for dismissal based on lack of subject matter jurisdiction pursuant to 28 U.S.C. § 1367(c) was not ripe for the court's consideration until after the court ruled on defendants' motion for judgment on the pleadings. The court had no basis for its dismissal of plaintiff's state law claims for lack of subject matter jurisdiction until it had dismissed the only claim over which it had original jurisdiction — plaintiff's RICO claim. Therefore, the court finds defendants' motion for dismissal for lack of subject matter jurisdiction was not untimely submitted. Plaintiff's motion is denied on these bases.
Request for Leave to Amend
Plaintiff asserts that if there was "any insufficiency" in his pleadings, "it resulted in no prejudice to defendants" and pursuant to "Rule 15(a) and simple justice, any dismissal under these circumstances should be with leave to amend." (Pl.'s Mot. at 1). The court disagrees.
Federal Rule of Civil Procedure 15(a) provides that, if the pleadings are closed, a plaintiff may amend its complaint only upon leave of court or consent of the other party, although such leave "shall be freely given when justice so requires." Fed.R.Civ.P. 15(a). Granting leave to amend is a matter for the district court's discretion. Triplett v. LeFlore County, Okla., 712 F.2d 444, 446 (10th Cir. 1983). "In dismissing a complaint for failure to state a claim, the court should grant leave to amend freely `if it appears at all possible that the plaintiff can correct the defect.'" Id. (quoting 3 James W. Moore, Federal Practice ¶ 15.10 (1983)).
Where a party files a Fed.R.Civ.P. 12(b) motion challenging the procedural pleading requirements of the federal rules, "courts typically allow a plaintiff leave to amend his complaint in order to cure the defective pleading." Bushnell Corp. v. ITT Corp., 973 F. Supp. 1276, 1282 (D.Kan. 1997). In contrast, where a party has filed a Fed.R.Civ.P. 12(c) motion, challenging not the procedural requirements of the federal rules but the substance of the complaint, amendment may not be appropriate. Where a Rule 12(c) motion challenging the substance of a complaint is granted "plaintiff loses not for failure to plead certain facts, but because the facts that have been alleged, accepted as true for purposes of the motion, nonetheless do not give rise to liability under a recognized cause of action." Id. Where a Rule 12(c) motion is "substantive," amendment is not necessary under Rule 15(a) where it is not "`possible that the plaintiff can correct the defect.'" Triplett, 712 F.2d at 446 (quoting 3 James W. Moore, Federal Practice ¶ 15.10 (1983)).
In their motion for judgment on the pleadings, defendants did not make a procedural challenge to plaintiff's complaint. Instead, defendants made a substantive challenge to plaintiff's RICO claim by asserting that, given the facts alleged by plaintiff, he was not able to establish standing to maintain the federal claim. The court agreed with the defendants by finding plaintiff lacked standing to maintain his federal RICO claim. Therefore, given the substantive failure of plaintiff's complaint, the court finds that amendment would not cure the substantive defect. Plaintiff's motion is denied on this basis.
Order
IT IS THEREFORE ORDERED that plaintiff's motion for reconsideration (Doc. 100) is denied. In addition, the court's order of April 10, 2001 (Doc. 98) shall be modified as follows: the citation to Bankers Trust Co. v. Rhoades, 741 F.2d 511 (2d Cir. 1984) on page 7 shall be modified to read Bankers Trust Co. v. Rhoades, 741 F.2d 511 (2d Cir. 1984), vacated on other grounds, 473 U.S. 922, 922 (1985).
IT IS SO ORDERED.