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Lillie v. Stanford Trust Co.

United States District Court, M.D. Louisiana

August 15, 2019

TROY LILLIE ET AL.
v.
STANFORD TRUST CO. ET AL.

          RULING AND ORDER

          BRIAN A. JACKSON JUDGE.

         Before the Court is the Motion for Reconsideration (Doc. 147) of the Court's Ruling (Doc. 146) denying Plaintiffs' Motion for a Federal Rule of Civil Procedure 56(d) Continuance (Doc. 130) and granting SEI's Motion for Summary-Judgment (Doc. 127).[1] Also before the Court is Plaintiffs' Memorandum in Response (Doc. 149) to the Court's directive that Plaintiffs show cause why the Court should not grant summary judgment in favor of the Insurer Defendants.[2] For the reasons that follow, the Court DENIES Plaintiffs' Motion for Reconsideration (Doc. 147), GRANTS summary judgment in favor of the Insurer Defendants under Federal Rule of Civil Procedure 56(f), and by separate order ENTERS JUDGMENT against Plaintiffs in accordance with Federal Rule of Civil Procedure 58.

         I. BACKGROUND

         The Court stated the facts of this case in a prior ruling and will not restate them here. (Doc. 146 at pp. 1-15). At issue now is the soundness of the Court's ruling denying Plaintiffs' request for a Rule 56(d) continuance and granting SEI's motion for summary judgment. (Id.).

         That ruling rested on two conclusions. (Id.). The first: Plaintiffs failed to show that they were entitled to a Rule 56(d) continuance under the law of this Circuit. (Id. at p. 8). The second: SEI met its Rule 56(a) burden by pointing to the absence of evidence supporting the control element of Plaintiffs' control-person claim under Section 714(B) of the Louisiana Securities Law, and Plaintiffs offered no evidence of control in rebuttal. (Id. at p. 13).

         As for the first conclusion, the Court denied Plaintiffs' request for a Rule 56(d) continuance on the ground that Plaintiffs' supporting declaration was deficient. (Doc. 146 at pp. 7-8). The Court began by explaining that, under the law of this Circuit, the party requesting a Rule 56(d) continuance must "set forth a plausible basis for believing that specified facts, susceptible of collection within a reasonable time frame, probably exist and indicate how the emergent facts, if adduced, will influence the outcome of the pending summary judgment motion." (Id. at p. 7) (citing Am. Family Life Assur. Co. of Columbus v. Biles, 714 F.3d 887, 894 (5th Cir. 2013)).

         The Court next considered the declaration submitted by Plaintiffs' lead counsel, Philip Preis. (Id.). The Court found the declaration deficient in several respects; the declaration failed to (1) identify "specified facts" further discovery may disclose, (2) "set forth a plausible basis" for believing that the unspecified facts were "susceptible of collection within a reasonable time frame," and (3) state that the unspecified facts would "influence the outcome" of SEI's summary judgment motion. (Id.). Because the Preis Declaration did not establish what Rule 56(d) and the law of this Circuit require, the Court denied Plaintiffs' Rule 56(d) continuance request and proceeded to the merits.[3] (Id. at p. 8).

         As for the second conclusion, the Court granted SEI's motion for summary judgment on the ground that SEI offered evidence that it lacked control over Stanford Trust Company's securities-law violations, and Plaintiffs offered no relevant evidence in rebuttal. (Id. at pp. 9-13). Central to that conclusion were the contract between SEI and Stanford Trust Company and the testimony of Al Del Pizzo, then-President of SEI Private Trust. (Id.). Based on that contract and testimony, the Court found that SEI met its initial burden of pointing to the absence of evidence supporting the control element of Plaintiffs' Section 714(B) control-person claim. (Id. at p. 11) (citing In re La. Crawfish Producers, 852 F.3d 456, 462 (5th Cir. 2017)).

         Next, the Court found that Plaintiffs failed to come forward with evidence of control. (Id. at p. 13). Instead, the Court observed, Plaintiffs advanced erroneous theories of Section 714(B) liability. (Id. at pp. 11-13). For example, Plaintiffs repeatedly-and incorrectly-theorized that SEI could have Section 714(B) liability for "enabling" R. Allen Stanford's Ponzi scheme. (Id.). The Court explained that "enabling" is not the standard; control is. (Id. at pp. 11-12) (citing LA. Rev. STAT. § 51:702(4) and Heck v. Triche, 775 F.3d 265, 283 (5th Cir. 2014)). Plaintiffs also tried to swap proof of an alleged "cradle-to-grave relationship" for actual evidence of control. (Id. at p. 12). The Court explained that SEI's Section 714(B) liability turns on its ability to control Stanford Trust Company's securities-law violations, not on the duration of the business relationship between the entities. (Id.). Finally, Plaintiffs argued that SEI could have Section 714(B) liability because it failed to perform due diligence on the marketing and valuation of the Stanford International Bank certificates of deposit. (Id.). This too was erroneous. As the Court explained, a Section 714(B) defendant's due diligence does not become relevant until that defendant is adjudged a control person. (Id. at p. 13) (citing Tran-s Pac. Interactive, Inc. v. U.S. Telemetry Corp., 2017 WL 1376592, at *6, 2016-1298 (La. Ct. App. 1st Cir. 4/12/17), reh'g denied (May 1, 2017), writ denied, 2017-0914 (La. 9/29/17), 227 So. 3d 294).

         Based on Plaintiffs' erroneous interpretation of Section 714(B) and failure to marshal relevant evidence of control, the Court concluded that Plaintiffs failed to show a genuine dispute of material fact warranting trial. (Doc. 146 at p. 13). The Court accordingly entered summary judgment in SEI's favor. (Id.).

         Now, Plaintiffs move the Court to reconsider. (Doc. 147). Plaintiffs contend the Court improperly applied Section 714(B) and in so doing "unjustly depriv[ed]" them of the chance to test their claims to a jury. (Docs. 147 at p. 1; 147-2 at p. 1). Plaintiffs also point to what they call a "startling admission" that SEI described itself as a "Business Service Provider" for Stanford Trust Company. (Doc. 147-2 at p. 2).

         According to Plaintiffs, this "startling admission" derives from documents SEI produced in spring 2019-well beyond the close of summary judgment briefing. (Id.). SEI opposes. (Doc. 154). It contends that Plaintiffs have long known it was a "Business Service Provider" for Stanford Trust Company and that Plaintiffs offer no valid reason-legal or otherwise-for reconsideration. (Doc. 154 at pp. 1-14).

         II. LEGAL STANDARDS

         A. Reconsideration

         The Court may revise an interlocutory order at any time for any reason before entering judgment. United States v. Renda, 709 F.3d 472, 479 (5th Cir. 2013). The Court's Ruling (Doc. 146) did not adjudicate all claims or decide the rights and liabilities of all parties; it is therefore interlocutory. See FED R. CIV. P. 54(b), Because requests to reconsider interlocutory orders under Rule 54(b) require the Court to consider the policies behind Rule 59(e) requests to alter or amend judgment, the Court applies the Rule 59(e) standard to Rule 54(b) motions to reconsider. See, e.g., eTool Deu., Inc. v. Nat'l Semiconductor Corp., 881 F. Supp. 2d 745, 748 (E.D. Tex. 2012). To support relief under that standard, Plaintiffs must "clearly establish" that the Court's ruling was "manifestly erroneous" or offer newly discovered evidence justifying reconsideration. Schiller v. Physicians Res. Grp., Inc., 342 F.3d 563, 567 (5th Cir. 2003).

         B. Sua Sponte Summary Judgment

         After giving notice and a reasonable time to respond, the Court may grant summary judgment for a nonmovant. FED. R. ClV. P. 56(f); see Celotex Corp. v. Catrett,477 U.S. 317, 326 (1986) ("[D]istrict courts are widely acknowledged to possess the power to enter summary judgments sua sponte, so long as the ...


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