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Mosing v. Boston

United States District Court, W.D. Louisiana, Lafayette Division

April 27, 2017

KENDALL GARRETT MOSING, ET AL.
v.
ROBERT BOSTON, ET AL.

          HICKS JUDGE

          MEMORANDUM RULING

          PATRICK J. HANNA UNITED STATES MAGISTRATE JUDGE

         Two related motions are currently pending before this Court: (1) defendant Zloop Inc.'s motion (Rec. Doc. 108), which seeks to withdraw two earlier motions, one that sought to transfer this action to North Carolina (Rec. Doc. 11) and one that sought to transfer the action to Delaware (Rec. Doc. 84); and (2) the motion (Rec. Doc. 121), which was filed by plaintiffs Kendall Garrett Mosing, Zloop LA, LLC, and Zloop, Inc., seeking to have this Court's order transferring this matter to North Carolina (Rec. Doc. 70) reconsidered and rescinded. Both motions are opposed, and oral argument was heard on April 20, 2017. Considering the evidence, the law, and the arguments of the parties, and for the reasons fully explained below, the motion for reconsideration and rescission (Rec. Doc. 121) is GRANTED, this Court's prior transfer order (Rec. Doc. 70) is VACATED, and the motion to withdraw the prior motions (Rec. Doc. 108) is DENIED AS MOOT.

         Background

         This is an action originally brought by Zloop LA, LLC and its sole owner Kendall G. Mosing against Robert Boston, Robert LaBarge, and their company Zloop, LLC (which was succeeded by Zloop, Inc.). In their complaint, the plaintiffs alleged that the defendants violated various state and federal securities laws, violated the Louisiana Business Opportunity Law, La. R.S. 51:1821 et seq., and violated the Louisiana Unfair Trade Practices Act, La. R.S. 51:1401. The plaintiffs also alleged that the defendants are liable for fraud, conversion, breach of contract, negligent misrepresentation, and detrimental reliance. The court has subject-matter jurisdiction over this action because the parties are diverse in citizenship and the amount in controversy exceeds the jurisdictional threshold; alternatively, the court has subject-matter jurisdiction because the plaintiffs' complaint alleged that the defendants violated federal securities laws.

         In their complaint, the plaintiffs detailed a long and complicated chronology of events allegedly including fraud, deception, misrepresentation, forgery, and other dishonest acts by the defendants that were allegedly used in an effort to induce Mosing to invest in Zloop franchises that recycle electronic waste for profit, to loan money to Zloop, and to establish lines of credit for Zloop that were secured by Mosing's money. More particularly, the plaintiffs alleged that, beginning in September 2012, the defendants began making overtures to Mosing regarding prospects for Zloop franchises. On October 4, 2012, Mosing signed franchise disclosure documents related to the possible purchase of three Louisiana Zloop franchises.[1] Those documents disclosed various aspects of the contemplated franchise agreements and included provisions specifying that any action brought by either party against the other would be required to be brought in North Carolina.[2] The page on which these provisions appear bears Mosing's initials “KGM” in the bottom right corner, [3] and Mosing's full signature as “franchisee” appears at end of the franchise disclosure document.[4]

         A few days after signing the franchise disclosure document, Mosing signed three franchise agreements for the purchase of Louisiana franchises by three limited liability companies, Zloop LA-T1, LLC; Zloop LA-T2, LLC; and Zloop LA-T3, LLC, which the plaintiffs assert were not in existence at that time and ultimately were never formed. Mosing initialed each page of the franchise agreements.[5] Each franchise agreement contains the following identical provision, at Article XXIV(B): “The parties agree that any action brought by either party against the other in any court, whether federal or state, shall be brought within the State of North Carolina and do hereby waive all questions of personal jurisdiction or venue for the purpose of carrying out this provision.”[6]

         The defendants filed a motion in November 2014, seeking to have this lawsuit transferred to North Carolina, consistent with the forum-selection clauses in the franchise agreements.[7] The defendants asserted that the plaintiffs violated the mandatory North Carolina forum-selection clauses by filing suit in this court. This Court found that the forum-selection clauses were mandatory, valid, applicable to the parties, and applicable to the plaintiffs' claims. This Court further found that enforcement of the forum-selection clauses was reasonable under the circumstances presented. This Court granted the defendants' motion to transfer venue under 28 U.S.C. § 1404(a) and ordered that this action be transferred to the United States District Court for the Western District of North Carolina.[8]

         Mosing and Zloop LA, LLC appealed this Court's ruling to the district judge.[9]While the appeal was pending, Zloop, LLC and two other related entities, Zloop Nevada, LLC, and Zloop Knitting Mill, LLC, sought bankruptcy protection in Delaware. The bankruptcy court confirmed[10] a Chapter 11 Liquidation Plan in which Mosing was awarded a $40 million unsecured claim and control over the prosecution of Zloop, Inc.'s claims against third parties including Boston and LaBarge. The effect of the plan is that Zloop, Inc. has been realigned as a plaintiff in this lawsuit.

         The motion to transfer the suit to North Carolina was filed before the bankruptcy proceeding was initiated and before the realignment of the parties. It was filed jointly by all three parties who were then defendants in this suit, i.e., Zloop, LLC and/or Zloop, Inc., Boston, and LaBarge.[11] The motion to transfer the case to Delaware was filed after the bankruptcy proceeding began, and it was filed by Zloop, Inc., Boston, and LaBarge.[12] However, only Zloop, Inc. filed the instant motion to withdraw the two earlier motions to transfer, [13] and it is the plaintiffs, i.e., Mosing, Zloop LA, LLC, and Zloop, Inc., who seek reconsideration and rescission of this Court's order transferring the case to North Carolina.[14] Boston and LaBarge oppose both pending motions.

         Analysis

         The plaintiffs argue that there are two reasons why this motion for reconsideration and rescission of this Court's transfer order should be granted. First, they argue that new facts justify reconsideration and rescission of the ruling. Second, they argue that the Delaware bankruptcy court already decided this issue, precluding this Court from addressing the issue any further.

         A. The Applicable Standard for Reconsideration under the Federal Rules of Civil Procedure

         The plaintiffs argue that this Court's earlier transfer order (Rec. Doc. 70) can be reconsidered under Rule 54(b) of the Federal Rules of Civil Procedure. Although the Federal Rules of Civil Procedure do not expressly recognize a motion for reconsideration, [15] Rule 54(b) states that “any order. . . that adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties. . . may be revised at any time before the entry of a judgment adjudicating all the claims and all the parties' rights and liabilities.” Therefore, the Fifth Circuit Court of Appeals has held that a motion for reconsideration filed within twenty-eight days after the entry of judgment or the issuance of an interlocutory order is treated as a motion to alter or amend judgment under Rule 59(e), while a motion for reconsideration that is filed more than twenty-eight days after the entry of judgment or the issuance of an order is treated as a motion seeking relief from judgment under Rule 60(b).[16] In this case, the court's transfer order was issued on June 25, 2015, and the motion for reconsideration and rescission was filed on January 18, 2017, long after the twenty-eight day deadline elapsed. Therefore, the instant motion must be treated as a motion seeking relief under Rule 60(b).

         “The purpose of Rule 60(b) is to balance the principle of finality of a judgment with the interest of the court in seeing that justice is done in light of all the facts.”[17]It states that “[o]n motion and just terms, the court may relieve a party. . . from a[n] . . . order” for certain specified reasons. Among the reasons listed in the rule is “newly discovered evidence.”[18] In this case, the plaintiffs contend that this Court should reconsider and rescind its prior ruling “based on the new information provided, ”[19] “given the new evidence, ”[20] and “based on the new facts.”[21] “Under Rule 60(b)(2), ‘[t]o succeed on a motion for relief from judgment based on newly discovered evidence, our law provides that a movant must demonstrate: (1) that it exercised due diligence in obtaining the information; and (2) that the evidence is material and controlling and clearly would have produced a different result if present before the original judgment.'”[22] Rule 60(b)(2) does not permit reconsideration of a judgment or order due to the discovery new evidence “if the evidence is merely cumulative or impeaching and would not have changed the result.”[23] Furthermore, Rule 60(b) motions are committed to the sound discretion of the district court.[24]

         B. New Evidence Requires Reconsideration of this Court's Prior Ruling

         The new evidence that the movers contend mandates reconsideration and rescission of this Court's transfer order is an “Agreement to Amend and Modify Contracts” that was executed on November 28 and 29, 2016. In the context of the bankruptcy proceeding for Zloop, Inc. (formerly Zloop, LLC), Zloop Nevada, LLC, and Zloop Knitting Mill, LLC, an “Agreement to Amend and Modify Contracts”[25]was executed by William H. Henrich, the Chief Restructuring Office of Zloop, Inc., and Kendall G. Mosing, on his own behalf and also on behalf of Zloop LA, LLC. The “Agreement to Amend and Modify Contracts” defined the term “The Zloop Litigation” to mean the instant lawsuit, and it defined the term “The Parties” to mean Zloop, Inc. and Kendall G. Mosing, in his individual capacity and in his capacity as the sole member and manager of Zloop LA, LLC. The “Agreement to Amend and Modify Contracts” amended various contracts, including but not limited to the franchise disclosure agreement and the three franchise agreements executed by Kendall G. Mosing in 2012 that were the basis of this Court's prior ruling that transferred this case to North Carolina.

         In the “Agreement to Amend and Modify Contracts, ” the parties retroactively amended the venue and forum-selection provisions of the franchise disclosure agreement and franchise agreements to specify that “any disputes between any of The Parties shall be resolved in the United States District Court for the Western District of Louisiana, or a district court in Lafayette Parish, Louisiana if federal court is unavailable for any reason.”[26] The “Agreement to Amend and Modify Contracts” further states that:

Zloop, Inc. retroactively consents to the jurisdiction of The Zloop Litigation, or any other dispute between the Parties, in the United States District Court for the Western District of Louisiana, or a district court in Lafayette Parish, Louisiana if such federal court is unavailable for any reason. Zloop, Inc. hereby retroactively waives any and all arguments under any and all forum selection clauses or otherwise seeking to preclude litigation in Louisiana regardless of when said agreement was originally entered.[27]

         The “Agreement to Amend and Modify Contracts” also states:

All of The Parties agree that litigation of The Zloop Litigation anywhere outside the United States District Court for the Western District of Louisiana would be unreasonable, and that The Zloop Litigation should remain in the United States District Court for the Western District of Louisiana for the reasons set forth in the APPEAL OF MAGISTRATE JUDGMENT DECISION filed by Kendall G. Mosing and Zloop LA, LLC in The Zloop Litigation.[28]

         The “Agreement to Amend and Modify Contracts” was executed on November 28 and 29, 2016, approximately a year and a half after this Court issued the order transferring this lawsuit to North Carolina.

         The “Agreement to Amend and Modify Contracts” and the retroactively modified contracts referenced therein constitutes new evidence that was not available at the time this Court's transfer order was issued. This new evidence is material and controlling, and it clearly would have produced a different result if it had been presented to this Court at the time that the transfer order was issued. Therefore, the existence of this new evidence requires this Court to reconsider its transfer order.

         C. Res Judicata Principles Require Rescission of this ...


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