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Lone Star-Cardinal Motorcycle Ventures VIII, LLC v. BFC Worldwide Holdings, Inc.

United States District Court, N.D. Illinois, Eastern Division

October 26, 2016

LONE STAR-CARDINAL MOTORCYCLE VENTURES VIII, LLC and LONE STAR-CARDINAL MOTORCYCLE VENTURES X, LLC, Plaintiffs,
v.
BFC WORLDWIDE HOLDINGS, INC., BFC PROPERTIES, LLC, and CHARLES HASTINGS, Defendants.

          MEMORANDUM OPINION AND ORDER

          John J. Tharp, Jr., United States District Judge.

         As previously summarized, the parties-Lone Star and BFC (including Charles Hastings), for short-entered into an Asset Purchase Agreement and a Real Estate Purchase Agreement (together, the “agreement” or “contract”) to accomplish the sale of BFC's Harley Davidson motorcycle dealership and most of its assets. The deal faltered when BFC allegedly did not live up to its promises, and Lone Star invoked the contract's termination provision. Notwithstanding the termination, Lone Star soon threatened legal action if BFC did not complete the sale; when BFC refused, Lone Star brought this lawsuit. BFC moved for judgment on the pleadings on Count One of the complaint, which seeks specific performance of the contract. See Mot., ECF No. 33. This Court granted the motion, concluding as a matter of law that specific performance cannot be awarded in view of Lone Star's termination of the contract. See Mem. Op. & Order, ECF No. 49. Now, Lone Star moves for reconsideration of that decision and for leave to amend its complaint to, in short, scrub its references to termination and amend its legal theory to assert that no termination could have been accomplished without it having received its earnest money back and without BFC showing that it detrimentally relied on the notice; Lone Star further argues that it affirmed the contract and therefore nullified any termination. See Mot., ECF No. 50 & Proposed Amended Complaint, ECF No. 50-3.

         The Court assumes familiarity with the facts set forth in the original complaint (at which the motion for judgment on the pleadings and motion to reconsider are directed), as summarized in its prior opinion.[1] See Mem. Order & Op. 2-4, ECF No. 49. The premise of BFC's Rule 12(c) motion was that as a matter of law, Lone Star could not obtain specific performance of a contract that it had previously terminated (Lone Star's complaint and exhibits together admitted the termination). Lone Star argued in response that a “carve out provision” of the contract gives it the right to seek specific performance notwithstanding a termination; alternatively, it argued that that its termination letters simply repudiated the contract, and that it had subsequently retracted the repudiation. This Court ruled that Lone Star pled that it had terminated the contract, and that because it terminated, it could not compel specific performance. The Court also held that the contractual carve-out provisions Lone Star invoked did not preserve a right of specific performance after termination, that the complaint did not allege a “repudiation” by Lone Star that it could have retracted, and that this allegation, which did not appear in the complaint and was added only in Lone Star's brief in response to the motion, was inconsistent with the original complaint.

         A district court has discretion to reconsider an interlocutory judgment or order at any time prior to final judgment. Mintz v. Caterpillar Inc., 788 F.3d 673, 679 (7th Cir. 2015); Peirick v. Indiana Univ.-Purdue Univ. Indianapolis Athletics Dep't, 510 F.3d 681, 694 (7th Cir. 2007) (district court entitled to reconsider its initial denial of summary judgment, because the denial of summary judgment was interlocutory order that district court had broad authority to reconsider). But “[t]he authority of a district judge to reconsider a previous ruling in the same litigation . . . is governed by the doctrine of the law of the case, which authorizes such reconsideration if there is a compelling reason, such as a change in, or clarification of, law that makes clear that the earlier ruling was erroneous.” Santamarina v. Sears, Roebuck & Co., 466 F.3d 570, 571-72 (7th Cir. 2006).

         Although styled as a motion for reconsideration, most of Lone Star's arguments are not based on the rulings made as to it its original complaint and the arguments Lone Star presented in opposition to the Rule 12(c) motion;[2] instead, in arguing that it is entitled to seek specific performance, it changes its legal theories based upon a proposed amended complaint, which it requests leave to file. In other words, Lone Star really doesn't want this Court to “reconsider” what it held as to the first complaint. It wants to leave the first complaint behind and change its allegations so that it can proceed upon a new legal theory that is inconsistent with its prior allegations. The combination of the motion to reconsider and motion for leave to amend has led to a confusing morass of arguments, some tied to the original complaint and others tied to the proposed amended complaint. This procedural maneuver was ill-considered.[3]

         In its motion for reconsideration, to the extent it actually addresses BFC's Rule 12(c) motion against the original complaint, Lone Star says, in essence, that the Court got its ruling all wrong (although it nowhere argues that “a change in, or clarification of, ” the law since occurred, or that any reason other than its disagreement with the Court's rulings necessitates reconsideration). It first argues that, contrary to the Court's understanding, it did not argue “that it can specifically enforce a terminated contract.” Mem. 2, ECF No. 52; Reply 6, ECF No. 65. This argument can be quickly dispatched as revisionist history. Lone Star most certainly argued that under the contracts, a termination resulting from a default by BFC does not waive Lone Star's equitable or legal rights, including the right of specific performance (the subject of Count One). Mem. 8-12, ECF No. 45. Indeed, the heading of its first argument summarized its primary theory of relief as follows: “The Express Terms Of The Agreement Allow Lone Star To Terminate In Order to Protect Its $100, 000 In Earnest Money Then Sue For Specific Performance.” Id. at 8. The argument that followed expanded on this premise. It is simply not tenable for Lone Star to suggest now that its prominent argument that it could specifically enforce a terminated contract was a figment of the Court's imagination.

         Relatedly, Lone Star contends that the Court's “finding” that Lone Star canceled the contract was erroneous. That was not a “finding” by the Court; it was a description of Lone Star's own allegations in its pleading, including the exhibits to the Complaint. The facts alleged by the non-movant were taken to be true, as required, and that included the allegation (and judicial admission[4]) that Lone Star expressly invoked the contract's termination provisions and exercised its termination rights. See Mem. Op. & Order 9-10, ECF No. 49. That Lone Star continued to assert in its original complaint that it had terminated the contract but was nevertheless entitled to the remedy of specific performance is at odds with its new position that it retracted its termination of the agreements or affirmed them post-termination.

         Lone Star further argues (now) that as a matter of law, no termination occurred because it “never received any benefit from the termination.” Mem. 4, ECF No. 52. There are at least two problems with this argument. First, Lone Star never made this argument in opposition to the Rule 12(c) motion. Again, it argued only: (1) that under the contract it could terminate and then seek specific performance; and (2) alternatively, that it had repudiated the contract and then retracted the repudiation, allowing it to seek specific performance. A motion to reconsider is not a vehicle for raising arguments that could have been made the first time. Arguments that are raised for the first time in in support of a motion for reconsideration are generally deemed to be waived. Mungo v. Taylor, 355 F.3d 969, 978 (7th Cir. 2004); Johnson v. Orkin, LLC, 556 F.App'x 543, 545 (7th Cir. 2014). In responding to the Rule 12(c) motion, Lone Star did not argue that “there was no termination because it never received any benefit, ” i.e., the return of its escrow money, and the Court will not consider that argument for the first time on a motion to reconsider.

         Second, the argument that Lone Star received “no benefit” from terminating the contract because its earnest money was not returned assumes that termination provided no other benefit. That argument is counter-intuitive and inconsistent with the allegations of both the original and proposed amended complaints, which allege that Lone Star terminated the agreements “to prevent from being bound to accept the Property without a legal Special Use [permit] as well as to protect the Earnest Money, Plaintiffs sent the Due Diligence Period Extension Request” and acknowledge that the “failure of Defendants to provide all of their Financial Disclosures to Plaintiffs . . . was a reason why Plaintiffs sent the Due Diligence Extension Request.” Compl. ¶ 20, Mot. Ex. 1, ECF No. 50-1 & Prop. Am. Compl. ¶ 24, Mot. Ex. 3, ECF 50-3; Prop. Am. Compl. ¶ 42, Mot. Ex. 3, ECF 50-3. Having acknowledged these other reasons it terminated the agreements, Lone Star does not and cannot explain why the ability to avoid contractual liability without assurance that a special use permit had been granted, and without the benefit of full financial disclosure, and without losing its earnest money, were not “benefits” that Lone Star derived from terminating the deal.

         Further, this argument is based upon facts outside the pleadings-the original complaint and exhibits. The only suggestion that Lone Star did not receive a benefit is in an affidavit of Lone Star's counsel, Stephen Ryd, which was attached to Lone-Star's response brief opposing the 12(c) motion. Ryd Aff. ¶ 30, ECF No. 45-2. In its response brief, Lone Star tried to rely on the attorney's affidavit to interpret the meaning of the contract. The Court rejected that approach, explaining that the contract language was unambiguous and, further, that it could not consider matters outside the pleadings on a motion under Rule 12(c) without converting it into a summary-judgment motion. Mem Op. & Order 6 n.2, ECF No. 49. The Court disregarded the plaintiffs' extrinsic evidence (Exhibits B and C to its response brief) for that reason. See Fed. R. Civ. P. 12(d); Doss v. Clearwater Title Co., 551 F.3d 634, 640 (7th Cir. 2008). In its current motion to reconsider, Lone-Star again tries to sneak in the same extrinsic evidence (or alternatively to rely upon assertions in its as-yet unaccepted proposed amended complaint), to support the proposition that it did not receive its earnest money and therefore did not effectively terminate the agreements. But no such allegation appears in pleadings under consideration. The same is true for Lone Start's argument that “specific performance is not inconsistent with the December 14 letters.” Reply 4, ECF No. 65. In making this argument, Lone Star explicitly relies on the allegations in the “Proposed Pleading, ” which has nothing do with whether the original ruling requires reconsideration.

         Lone Star also says that the Court misconstrued its alternative argument that it repudiated the contract then retracted the repudiation, requiring BFC to consummate the deal. Lone Star says that it made a “lawful repudiation, ” not one that was a breach of the contract, and therefore that a premise of the Court's ruling-that repudiated by Lone Star was inconsistent with its allegations that fully performed-was faulty. It further argues that it reaffirmed the contracts before any detrimental reliance by BFC, which negated any termination and allowed it to then seek specific performance. But all that is just to say that Lone Star's “repudiation” was justified by BCF's conduct, in which case it was no different than a justifiable unilateral termination under the terms of the agreements.[5] Whether one calls Lone Star's action a “repudiation” of the contract rather than a termination does not change the fact (based on Lone Star's allegations) that it was a justifiable unilateral act that ended the parties' ongoing contractual obligations to each other. As Lone Star's own letters stated, as of 4:50 p.m. on December 14, 2015, the agreements had “no further force and effect.” Mot. Ex. 5, ECF No. 50-1.

         Lone Star insists now that a termination, like repudiation, can be (and was) retracted. Mem. 6, ECF No. 52; Reply, 8-11, ECF No. 65. But once again, it never raised this argument in opposition to the Rule 12(c) motion (to the contrary, as the Court observed in its original opinion, Lone Star's lead argument originally was that it had both terminated the contract and preserved its right to seek specific performance). The present argument is not based upon any new law or facts pertinent to the original complaint; it is premised on the new proposed complaint. The argument therefore is waived as to the Court's reconsideration of its prior ruling. Only an amendment of the complaint-not “reconsideration”-could allow Lone Star to advance the argument that it terminated the contract but then retracted the termination.

         Finally, Lone Star's contention that it did not “intend” to foreclose its right of specific performance when it sent termination notices that expressly invoked the termination provisions of the contracts, and therefore did not “effectuate[] an election of remedies, ” Mem. 8. ECF No. 52, is impenetrable. Its intent notwithstanding, according to its own original pleadings, Lone Star did terminate the contract. As the Court previously concluded, the contract does not permit the terminated agreement to be specifically performed even if Lone Star believed it had accomplished that marvel in drafting the agreements.

         There is, then, no compelling justification to change the prior ruling on the motion for judgment on the pleadings. Lone Star does not cite any change in, or clarification of, law, and its new arguments could have been presented to the Court in its original response but were not, or otherwise are based upon a new pleading, not the complaint as to which reconsideration is requested. Beyond those arguments, Lone Star simply explains its disagreement with the Court's ruling and rehashes (or rewords) issues already decided. See Ahmed v. Ashcroft, 388 F.3d 247, 249 (7th Cir. 2004) (“A motion that merely republishes the reasons that had failed to convince the tribunal in the first place gives the tribunal no reason to change its mind.”). For example, Lone Star insists, contrary to this Court's ruling, that the contracts and its correspondence are not inconsistent ...


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