Trinity Innovative Enterprises, LLC

4:09-bk-20579PaebNov 23, 2009

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UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
In re: TRINITY INNOVATIVE
ENTERPRISES, LLC,
Debtor
Case No. 09-20579REF
Chapter 7
STATEMENT IN SUPPORT OF ORDER DENYING DEBTOR'S
MOTIONS TO RECONSIDER
Debtor, Trinity Innovative Enterprises, LLC ("Debtor") has filed two
Motions To Reconsider, both of which are opposed by DirectBuy, Inc. ("DirectBuy").
Specifically, Debtor seeks reconsideration of: (1) My July 13, 2009 Order, through which
I denied Debtor's Motion To Assume Executory Contract With DirectBuy, Inc. Pursuant
to 11 u s e [sic]§365(a) ("the Motion To Assume"); and (2) my July 15, 2009 Order
through which I granted DirectBuy's Motion for Relief from the Automatic Stay To
Exercise Remedies Under the Franchise Agreement Due to Post-Petition Breaches by the
Debtor and/or for Adequate Protection (the parties refer to this motion as DirectBuy's
Third Stay Relief Motion; I will hereafter do the same). For the reasons that follow, I
deny both of Debtor's Motions To Reconsider.
A. Motions To Reconsider.
Neither the Federal Rules of Civil Procedure nor the Federal Rules of
Bankruptcy Procedure specifically refer to, or authorize the filing of, a motion to
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reconsider a court's decision. Nonetheless, a motion to reconsider, if filed within ten days
of the date of the decision sought to be reconsidered,' will generally be treated as a motion
to alter or amend a judgment under Fed. R. Civ. P., Rule 59(e). United States v. McGlorv.
202 F.3d 664, 668 (3d Cir. 2000). Rule 59(e) is made applicable to cases brought under
the Bankruptcy Code by Fed. R. Bankr. P., Rule 9023.
A motion to alter or amend a judgment is an extraordinary remedy that
should be used sparingly because of the strong interest in preserving the finality of a
court's decision and conserving scarce judicial resources. Selveras v. MA^ Cartagena de
Indias. 959 F. Supp. 270, 272 (E.D. Pa. 1997); In re Savoie. No. 05-13263DWS, 2006
WL 893610, at *1 (Bankr. E.D. Pa. March 9, 2006). The scope of Rule 59(e), therefore, is
very narrow and a party seeking reconsideration must provide compelling evidence that
the prior decision should be reconsidered. The Third Circuit has instructed that a proper
motion to alter or amend judgment must rely on one of three major grounds: (1) An
intervening change in controlling law; (2) the availability of new evidence not available
previously; or (3) the need to correct clear error of law or prevent manifest injustice.
North River Ins. Co. v. Ciena Reinsurace Co.. 52 F.3d 1194, 1218 (3d Cir. 1995). See
also Max's Seafood Cafe v. Ouinteros. 176 F.3d 669, 677 (3d Cir. 1999); Harsco Corp.
V. Zlotnicki. 779 F.2d 906, 909 (3d Cir. 1985); Keves v. Nat'l. R.R. Passenger Corp.. 766
F. Supp. 277, 280 (E.D. Pa. 1991).
'The Motions To Reconsider were both timely filed.
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In addition, a motion for reconsideration may not be used to advance new
arguments, issues, or facts not previously presented to the court. Williams v. City of
Pittsburgh. 32 F. Supp. 2d 236, 238 (W.D. Pa. 1998)("[T]he parties are not free to
relitigate issues the court has already decided."); Hower v. Wal-Mart Stores. Inc.. Civil
Action No. 08-1736, 2009 WL 2047892, at*2 (E.D. Pa. July 10, 2009). Nor is it "at the
disposal of an unsuccessfiil party to 'rehash' the same arguments and facts previously
presented." Keyes. 766 F. Supp. at 280. "'Dissatisfaction with the Court's ruling is not a
proper basis for reconsideration.'" Hower. 2009 WL 2047892, at*2 (citation omitted). As
the court stated in Ouaker Allov Casting Co. v. Gulfco Indus.. Inc.. 123 F.R.D. 282, 288
(N.D. 111. 1988), "this Court's opinions are not intended as mere first drafts, subject to
revision and reconsideration at a litigant's pleasure." See also Williams. 32 F. Supp. 2d at
238 ("[A] motion for reconsideration is not properly grounded in a request for a court to
rethink a decision it has already made, rightly or wrongly."); In re Kuhar. No. 04-
36627DWS, 2007 WL 2245912, at*2 (Bankr. E.D. Pa. Aug. 1, 2007)("'[W]hatever may
be the purpose of Rule 59(e) it. . . [was not] . . . intended to give the unhappy litigant one
additional chance to sway the judge."')(alteration in original)(citation omitted). I need not
reconsider repetitive arguments that have already been fUUy examined. Hower. 2009 WL
2047892, at*2.
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B. Motion To Reconsider July 15. 2009 Order Denying Debtor's Motion To
Assume.
I first address Debtor's Motion To Reconsider the July 13, 2009 Order
denying the Motion To Assume ("Motion To Reconsider July 13, 2009 Order"). Debtor
does not argue that reconsideration is required because of an intervening change in
controlling law or to correct a clear error of law or prevent manifest injustice. Instead,
Debtor maintains that my decision should be reconsidered because Debtor claims to have
newly discovered evidence. Debtor believes its new evidence shows "that the Court was
misled by an attorney fiinctioning as a witness." Debtor's Brief Regarding Undecided
Motions, filed on September 18, 2009, docket entry 233, at p. 3.
This alleged "newly discovered evidence," however, is not really "new." It
was readily available to Debtor through discovery or otherwise prior to the May 27, 2009
hearing on which my July 13, 2009 decision was based. To qualify as "newly
discovered," for the purposes of Rule 59(e), the evidence must not have been available to
the party proponent at any time prior to entry of the court's decision. Bradley v. Work.
154 F.3d 704, 709 (7* Cir. 1988); United States ex rel. Atkinson v. Pennsvlvania
Shipbuilding Co.. No. Civ. A. 94-7316, 2004 WL 2095442, at*l (E.D. Pa. Sept. 16,
2004). Courts consistently hold that "new evidence" is not new for purposes of Rule
59(e) if a party either possessed the evidence, or could have possessed it, prior to entry of
the court's decision. Bailev v. United Airlines. 279 F.3d 194, 201 (3d Cir. 2002);
Bradley, 154 F.3d at 709; Harsco Corp.. 779 F.2d at 909; Atkinson. 2004 WL 2095442,
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at* 1. "To warrant a new trial the evidence must not have been known to the movant at the
time of trial; and, moreover, the movant must have been excusably ignorant of the facts,
i.e., the evidence must be such that it was not discoverable by diligent search." Savoie.
2006 WL 893610, at *2 (quoting 6A Moore, Moore's Federal Practice. T|59.08[3], at 59-
101 to 59-102 (2d Ed. 1995).
The alleged "newly discovered" evidence offered by Debtor consists of
(1) A Uniform Franchise Offering Circular, dated October 30,
2003, that was allegedly given to Tom and Joyce Giacchi (the
principals of Debtor) by DirectBuy in 2004 (Exhibit D-30);
(2) a Uniform Franchise Offering Circular, dated October 28,
2005, that was allegedly provided to Harvey Zimmerman (who
has been employed by Debtor for 3'/2 years) by DirectBuy in
2006 (Exhibit D-31);
(3) a DirectBuy Uniform Franchise Offering Circular dated
October 31, 2007 that Debtor received through discovery from
counsel for DirectBuy (Exhibit D-34); and
(4) a DirectBuy Uniform Franchise Offering Circular dated
October 31, 2007, as amended January 31, 2008, that Debtor
received through discovery from counsel for DirectBuy
(Exhibit D-35).'
None of this evidence is truly "newly discovered," as required by Rule
^Debtor declined to offer Exhibits D-33 and D-37 into evidence and I sustained
DirectBuy's objection to the admissibility of Exhibit D-36. Exhibit D-32, which was admitted
into evidence, is a chart that compares various provisions of Exhibit D-30 (the franchise offering
circular provided to the Giacchis) and Exhibit D-31 (the franchise offering circular provided to
Mr. Zimerman). Exhibit D-32 is simply an aid to highlight the differences between the two
offering circulars and was not offered as "newly discovered evidence." DirectBuy objected to the
admissibility of Exhibits D-34 and D-3 5 because they were not identified or raised as potential
issues in Debtor's Motion To Reconsider. I took this objection under advisement. I will now
admit these documents into evidence as Debtor requested. Exhibits D-34 and D-35 are
admissible, but they are not persuasive on the issue before me and have very little relevance to
this dispute.
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59(e). All of this evidence was either already in Debtor's possession or could have been
in Debtor's possession through discovery and a diligent search by the May 27, 2009
hearing. The 2003 Uniform Franchise Offering Circular (Exhibit D-30) had been in the
possession of Debtor and its principals since the date it was provided to them by
DirectBuy in 2004. The 2005 Uniform Franchise Offering Circular (Exhibit D-31) was in
the possession of one of Debtor's key employees, Mr. Zimmerman, since the date it was
given to him by DirectBuy in 2006. Clearly, these two documents were available to
Debtor prior to the May 27, 2009 hearing. The other two documents, the 2007 and 2008
DirectBuy Uniform Franchise Offering Circulars (Exhibits D-34 and D-35) while perhaps
not in the possession of Debtor or any of its agents or employees as of May 27, 2009, were
clearly discoverable by Debtor prior to the hearing through diligent search or discovery. I
therefore find that none of these documents constitute "newly discovered" evidence as that
term is used in Rule 59(e), and Debtor's Motion To Reconsider my July 13, 2009 decision
must therefore be denied.
Even if I were to treat all of this evidence as "newly discovered," however, I
would deny Debtor's Motion To Reconsider my July 13, 2009 Order because the "newly
discovered" evidence has no probative value and, therefore, even if considered, it would
not have changed the outcome of this proceeding. As the District Court stated in In re
Reading Broadcasting. Inc.. 386 B.R. 562, 567 (E.D. Pa. 2008):
Newly discovered evidence refers to evidence that: (1) is
material and not merely cumulative; (2) was not discoverable
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before trial through the exercise of reasonable diligence; and
(3) would probably have changed the outcome of the trial.
Compass Technology. Inc. v. Tseng Laboratories. Inc.. 71
F.3d 1125, 1130 (3d Cir. 1995). The movant bears a "heavy
burden," which requires "more than a showing of the potential
significance of the new evidence." Bohus v. Beloff. 950 F.2d
919, 930 (3d Cir. 1991)(quoting PHsco v. Union R. Co.. 379
F.2d 15, 17 (3d Cir. 1967), certdemed, 389 U.S. 1014, 88
S.Ct. 590, 19 L.Ed.2d 660 (1967). Relief should only be
granted when extraordinary justifying circumstances are
present. Id.
Debtor argues that the Uniform Franchise Offering Circulars provided to the
Giacchis and Mr. Zimmerman (Exhibits D-30 and D-31) show that a Marketing and
Legislative Fund existed at DirectBuy. These documents. Debtor maintains, therefore
contradict the testimony proffered by C. Joseph Yast, Esquire, at the May 27, 2009
hearing held on Debtor's Motion To Assume. During the hearing, Mr. Yast testified that
no Marketing and Legislative Fund had existed at DirectBuy in the preceding three years,
going back to May 27, 2006. Nothing in Exhibits D-30 and D-31, however, contradicts
Mr. Yast's testimony because both of these Uniform Franchise Offering Circulars were
prepared well before May 27, 2006. The Uniform Franchise Offering Circular given to
the Giacchis was dated October 30, 2003.^ The Uniform Franchise Offering Circular
given to Mr. Zimmerman was dated October 28, 2005.'* At best, these exhibits might
demonstrate that a Marketing and Legislative Fund might have existed in October 2003
' Exhibit D-30.
^Exhibit D-31.
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and in October 2005. These exhibits do not impeach Mr. Yast's testimony that no
Marketing and Legislative Fund existed at DirectBuy for the three years preceding the
May 27, 2009 hearing.
In any event, the existence or non-existence of a Marketing and Legislative
Fund is not relevant to the issues I decided in my July 13, 2009 decision. I found in my
July 13, 2009 decision that Mr. Yast "credibly testified that Direct Buy [sic] had no
Marketing and Legislative Fund and had not billed Debtor, or any of its other franchisees,
for contributions to a Marketing and Legislative Fund during the past three years."
Statement in Support of the Order Dated July 13, 2009, Determining That the Franchise
Agreement Between Debtor and Direct Buy [sic] Was Validly Terminated Pre-Petition
("July 13, 2009 Statemenf'), at p. 7. All of the Uniform Franchise Offering Circulars
offered by Debtor as newly discovered evidence, (Exhibits D-30, D-31, D-34 and D-35),
actually corroborate this testimony because they each show in Item 6 that DirectBuy was
not collecting contributions from its franchisees for a Marketing and Legislative Fund at
the time each of the Uniform Franchise Offering Circulars was prepared. Each Circular
recites that DirectBuy might require contributions from its franchisees for the Marketing
and Legislative Fund in the future, but this does not contradict Mr. Yast's testimony that
no such contributions were actually required. I also determined that "Mr. Yast fiirther
[credibly] testified that the amounts that Debtor and other franchisees were being charged
for sales leads had nothing to do with the Marketing and Legislative Fund and did not
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represent contributions to that Fund." July 13, 2009 Statement, at pp. 7-8.
I therefore found that "Debtor's reliance on Section 3.03 of the Franchise
Agreement [which dealt with contributions that DirectBuy could require franchisees to
make to the Marketing and Legislative Fund in the future] to attack the validity of its
$189,677.08 Delinquent Debt owed to Direct Buy [sic] is therefore fundamentally flawed
and misplaced." Id- at p.8. The existence or non-existence of a Marketing and Legislative
Fund, therefore, was and is not relevant to the issues I decided in my July 13, 2009
decision, and could not impact my decision.
The main issue presented by Debtor's Motion To Assume was whether
DirectBuy had validly terminated its franchise agreement with Debtor before Debtor filed
its bankruptcy petition.^ The answer to this question depended on whether Debtor was
delinquent in amounts owed to DirectBuy on June 19, 2008, when DirectBuy exercised its
right to terminate the franchise agreement with Debtor. Based on the evidence presented
at the hearings held on Debtor's Motion To Assume, I specifically rejected Debtor's
argument that DirectBuy improperly billed it for certain charges.^
^Other issues were raised in Debtor's Motion To Assume, which I also decided in my July
13, 2009 Statement. Debtor does not argue that its alleged "newly discovered" evidence is
relevant to these other issues and I specifically find that it is not.
^Debtor had argued that DirectBuy's ability to charge its franchisees for sales leads was
limited by a 3% cap referred to in Section 3.03 of the parties' Franchise Agreement. Under
Section 3.03, Debtor agreed to contribute, at such times as DirectBuy might designate, $1,000
per fiscal year to a Marketing and Legislative Fund. Section 3.03 gives DirectBuy the right to
increase this fee, provided that DirectBuy does not increase the amount of a franchisee's
contributions to more than 3% of the gross amounts that the franchisee charges for new
memberships. I specifically found credible, however, Mr. Yast's testimony that, in the preceding
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Instead, I found that DirectBuy properly billed Debtor for all charges and
that Debtor was in fact delinquent in its payment of amounts owed to DirectBuy on June
19, 2008. As a result, I concluded that DirectBuy validly terminated its franchise
agreement with Debtor before Debtor filed this bankruptcy petition and that Debtor
therefore could not assume the franchise agreement. None of the alleged "newly
discovered" evidence proffered by Debtor contradicts this finding and conclusion, but
instead constitutes Debtor's attempt to "rehash" the same arguments it raised prior to my
July 13, 2009 decision. For these reasons. Debtor's alleged "newly discovered" evidence
would not have changed my July 13 decision. Debtor's Motion To Reconsider my July
13, 2009 Order must therefore be denied.^
three years, no Marketing and Legislative Fund existed and DirectBuy had not billed Debtor or
any of its other franchisees for contributions to such Fund.
I also found that the amounts that DirectBuy was billing Debtor and other franchisees for
sales leads had nothing to do with any Marketing and Legislative Fund and did not represent
contributions to such a Fund. I therefore found Debtor's reliance on Section 3.03 in its attack on
the validity of the debt alleged to be owed to DirectBuy unpersuasive and fundamentally flawed.
Similarly, Debtor attempts to convince me that its alleged "newly discovered" evidence stands in
opposition to my decision that Debtor was delinquent in the amounts it owed to DirectBuy on
June 19, 2008. This argument is again based upon Debtor's erroneous assumption that its
indebtedness to DirectBuy is somehow tied to Section 3.03 of the Franchise Agreement and a
Marketing and Legislative Fund. It remains equally unpersuasive. In fact. Debtor is improperly
rehashing the same arguments it previously presented. Keyes. 766 F. Supp. at 280; Hower. 2009
WL 2047892, at*2. See also Williams. 32 F. Supp. 2d at 238; In re Kuhar. 2007 WL 2245912,
at*2. While, I "need not 'reconsider repetitive arguments that have [already] been fully
examined,'" Hower, 2009 WL 2047892, at*2 (citation omitted), I have given Debtor the benefit
of every doubt. I have examined the alleged "newly discovered" evidence that Debtor submitted
as well as the arguments Debtor raises in its Motion and brief Upon such review, however, I
conclude that Debtor's arguments are erroneous and not persuasive.
^Debtor argues in its brief that its alleged "newly discovered" evidence shows that Debtor
was being billed for internet leads and other advertising and marketing costs in accordance with a
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C. Motion To Reconsider July 15, 2009 Order Granting DirectBuy's Third
Stay Relief Motion.
I next turn to Debtor's Motion To Reconsider the July 15, 2009 Order
granting DirectBuy's Third Stay Relief Motion. Debtor does not argue that
reconsideration of this decision is required because of some intervening change in
controlling law or the need either to correct a clear error of law or to prevent manifest
injustice. North River Ins. Co.. 52 F.3d at 1218; Harsco Corp.. 779 F.2d at 909; Keves.
766 F. Supp. at 280. Nor does Debtor argue that reconsideration is necessary because it
has newly discovered evidence that is likely to change the outcome of this decision.^
Reading Broadcasting. 386 B.R. at 567; see also North River Ins. Co.. 52 F.3d at 1218;
Harsco Corp.. 779 F.2d at 909; Keyes. 766 F. Supp. at 280. Rather, Debtor argues that
reconsideration is necessary because I abused my discretion by deciding DirectBuy's
Third Stay Relief Motion, prior to ruling on DirectBuy's Second Stay Relief Motion.
My July 15, 2009 decision granting DirectBuy's Third Stay Relief Motion
was based on my finding that relief was warranted for the following reasons. First, I
found that DirectBuy clearly established that Debtor was in default on its post-petition
"'unilateral' addendum to the franchise agreement." Debtor's Brief Regarding Undecided
Motions, filed on September 18, 2009, docket entry 233, at p.l 1. Nothing in the documents
Debtor introduced as "newly discovered" evidence, however, supports this conclusion.
*To the extent Debtor relies on the alleged "newly discovered" evidence it proffered in
support of its Motion To Reconsider my July 13, 2009 Order, I reiterate the above discussion in
support of my denial of that Motion: (1.) The alleged "newly discovered" evidence is not new;
and (2.) the alleged "newly discovered" evidence would not alter the outcome of this proceeding.
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obligations to DirectBuy. Second, I also found that Debtor had little, if any, likelihood of
reorganizing because it had agreed to reject the lease it held on its only operating location.
Third, I had previously determined, in my July 13, 2009 Statement and Order, that
DirectBuy had validly terminated the franchise agreement it held with Debtor and that
Debtor therefore could not assume the franchise agreement. Not only did Debtor have no
location from which to operate its business, but Debtor also had no right to operate a
DirectBuy franchise. Furthermore, Debtor was in default on its post-petition obligations
to DirectBuy. Given this impossible situation for Debtor, I concluded that DirectBuy had
established "cause" for relief from the automatic stay to exercise its remedies under the
franchise agreement.
While Debtor again argues that my July 13, 2009 decision to deny Debtor's
Motion To Assume the DirectBuy franchise agreement was improper, for the reasons set
forth above in this Statement, I reject Debtor's arguments as an attempt to "rehash"
arguments it already made. I conclude that my July 13, 2009 decision was correct.
Accordingly, Debtor has no rights under the DirectBuy franchise agreement and cannot
operate a DirectBuy franchise.
Debtor next argues that DirectBuy was withholding sufficient sums to cover
the amount of Debtor's post-petition delinquency. The evidence shows otherwise, despite
Debtor's attempt to "rehash" its prior argument that the amount it owes DirectBuy is
linked to Section 3.03 of the parties' Franchise Agreement (the section that deals with the
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Marketing and Legislative Fund). I reiterate, once again, my discussion above and I reject
this argument both as erroneous and as an improper ground for reconsideration.
The facts before me follow: Debtor's franchise agreement with DirectBuy
terminated pre-petition; Debtor rejected the lease it held on its only operating location; and
Debtor was in default on its post-petition obligations to DirectBuy. I find and conclude
that Debtor clearly had little, if any, likelihood of reorganizing and that DirectBuy had
established cause for relief from the automatic stay to exercise its remedies under the
franchise agreement. These findings and conclusions were not and are not erroneous.
Debtor's Motion To Reconsider my July 15, 2009 Order and decision must therefore be
denied.
An appropriate Order follows.
BY THE COURT
Date: November 23, 2009
RICHARD E. FEHDNG
United States Bankruptcy Judge
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