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Tharp v. Catron Interior Systems, Inc.

United States District Court, S.D. Indiana, Indianapolis Division

December 12, 2016

DAVID THARP, Board of Trustees Chairman, on behalf of INDIANA/KENTUCKY/OHIO REGIONAL COUNCIL OF CARPENTERS PENSION FUND, et al. Plaintiffs,
v.
CATRON INTERIOR SYSTEMS, INC., Defendant.

          ENTRY ON MOTION FOR RECONSIDERATION AND MOTION TO STRIKE SURREPLY

          TANYA WALTON PRATT, JUDGE

         This matter is before the Court on the Plaintiffs' Motion for Reconsideration filed pursuant to Federal Rule of Civil Procedure 59(e) (Filing No. 78) and Motion to Strike Surreply (Filing No. 85). The Plaintiffs in this case are: (1) Dave Tharp, Board of Trustees Chairman, and Doug Robinson, Board of Trustees Secretary, on behalf of Indiana/Kentucky/Ohio Regional Council of Carpenters Pension Fund (the “Pension Fund”); (2) Dave Tharp, Board of Trustees Chairman, on behalf of Indiana/Kentucky/Ohio Regional Council of Carpenters Defined Contribution Pension Trust Fund (the “Annuity Fund”); (3) Dave Tharp, Board of Trustees Co-Chairman, and William Nix, Board of Trustees Co-Chairman, on behalf of Indiana/Kentucky/Ohio Regional Council of Carpenters Welfare Fund (the “Welfare Fund”); (4) Dave Tharp, Board of Trustees Chairman, and Joe Coar, Board of Trustees Secretary, on behalf of Indiana Carpenters Apprenticeship Fund and Journeyman Upgrade Program (“JATC”); (5) Douglas J. McCarron, Board of Trustees Chairman, on behalf of United Brotherhood of Carpenters Apprenticeship Training Fund of North America (“UBCJA”); and (6) Indiana/Kentucky/Ohio Regional Council of Carpenters (“the Union”). The Pension Fund, Annuity Fund, Welfare Fund, JATC, and UBCJA will be collectively referred to as the “Plaintiff Trust Funds”. The Plaintiff Trust Funds and the Union will be collectively referred to as the “Plaintiffs.”

         The Plaintiff Trust Funds initiated this action against Defendant Catron Interior Systems, Inc. (“Catron”), alleging violations of the Employment Retirement Income Security Act (“ERISA”), 29 U.S.C. §§ 1132 and 1145, and the Union's claims were brought under 29 U.S.C. § 185. The Plaintiffs initiated this litigation to compel Catron to allow the Plaintiffs' payroll auditor to examine all necessary books and records to complete a payroll audit for the period of January 1, 2011 through December 31, 2012, and to seek payment for any delinquent contributions uncovered by the audit.

         After the Court ordered Catron to submit to an audit, the Plaintiffs' auditor completed the audit for 2011 and 2012, and the Plaintiffs filed with the Court a status report on the auditor's findings. Catron filed a response, disputing the findings and conclusions of the auditor. On December 18, 2015, the parties appeared by counsel before the Court and presented evidence and argument in support of their positions on the alleged delinquent contributions and the results of the audit. Following the hearing, the parties submitted proposed findings of fact and conclusions of law (Filing No. 72; Filing No. 73). On March 2, 2016, the Court issued its Order regarding the audit and the delinquent contributions owed to the Plaintiffs (Filing No. 74). The Court determined that Catron was liable to the Plaintiffs for $117, 740.15. However, this amount was offset by $95, 367.50 owed to Catron based on a series of market recovery fund grant contracts. Thus, the Court awarded Plaintiffs $22, 372.65. Id. at 11. The Plaintiffs' Motion for Reconsideration followed twenty-six days after the Court's Order. For the following reasons, the Motion is set for an evidentiary hearing to build a complete record, which will then allow the Court to issue an appropriate ruling on the Motion for Reconsideration.

         I. LEGAL STANDARD

         Although motions to reconsider are not specifically authorized by the Federal Rules of Civil Procedure, courts in the Seventh Circuit apply Rule 59(e) or Rule 60(b) standards to these motions. Smith v. Utah Valley Univ., 2015 U.S. Dist. LEXIS 70271, at *3-4 (S.D. Ind. June 1, 2015). A motion to alter or amend under Rule 59(e) “must be filed no later than 28 days after the entry of the judgment.” Fed.R.Civ.P. 59(e). If timely filed, a motion styled as a motion to reconsider should be considered under Rule 59(e). Kiswani v. Phoenix Sec. Agency, Inc., 584 F.3d 741, 742 (7th Cir. 2009). The Plaintiffs' “Motion for Reconsideration” was filed twenty-six days after the Court issued its Order. Therefore, the Court will analyze the Motion as a motion to alter or amend under Rule 59(e).

         The purpose of a motion to alter or amend judgment under Rule 59(e) is to ask the Court to reconsider matters “properly encompassed in a decision on the merits.” Osterneck v. Ernst & Whinney, 489 U.S. 169, 174 (1989). “A Rule 59(e) motion will be successful only where the movant clearly establishes: (1) that the court committed a manifest error of law or fact, or (2) that newly discovered evidence precluded entry of judgment.” Cincinnati Life Ins. Co. v. Beyrer, 722 F.3d 939, 954 (7th Cir. 2013) (citation and quotation marks omitted). Relief pursuant to a Rule 59(e) motion to alter or amend is an “extraordinary remed[y] reserved for the exceptional case.” Foster v. DeLuca, 545 F.3d 582, 584 (7th Cir. 2008). A Rule 59(e) motion may be used “to draw the district court's attention to a manifest error of law or fact or to newly discovered evidence.” United States v. Resnick, 594 F.3d 562, 568 (7th Cir. 2010). A manifest error “is not demonstrated by the disappointment of the losing party. It is the wholesale disregard, misapplication, or failure to recognize controlling precedent.” Oto v. Metropolitan Life Ins. Co., 224 F.3d 601, 606 (7th Cir. 2000) (citation and quotation marks omitted). Furthermore, “a Rule 59(e) motion is not an opportunity to relitigate motions or present arguments, issues, or facts that could and should have been presented earlier.” Brownstone Publ'g, LLC v. AT&T, Inc., 2009 U.S. Dist. LEXIS 25485, at *7 (S.D. Ind. Mar. 24, 2009).

         II. DISCUSSION

         In their Motion for Reconsideration, the Plaintiffs contend that the Court erred by allowing Catron to assert its “setoff defense;” that Catron misrepresented facts when it claimed it had not been paid $95, 367.50 in market recovery funds; that if a setoff is warranted, any setoff should apply only to the Union and not to the Plaintiff Trust Funds; and that the Court erred by discounting the amount of contributions owed to the Union based on a misunderstanding of Exhibit 5 (Filing No. 79 at 2-4). The Court will address each contention in turn.

         A. Allowing the “Setoff Defense”

         The Plaintiffs argue that the Court erred by allowing Catron to assert its “setoff defense” because Catron never pled an affirmative defense or counterclaim for a setoff in its Answer, and the first time Catron raised it was at the damages hearing. The Plaintiffs explain that they were not given a reasonable opportunity to respond to the setoff argument because it was not timely raised in an amended answer or prior to the damages hearing. They assert, “[i]n order to present a setoff defense, a party must appropriately plead such a request, either by affirmative defense or counter-claim, by failing to do so Defendant waived any such claim in this action.” (Filing No. 79 at 5-6.) Relying on guidance from the Seventh Circuit, the Plaintiffs assert that a “defendant should not be permitted to ‘lie behind a log' and ambush a plaintiff with an unexpected defense.” Venters v. City of Delphi, 123 F.3d 956, 968 (7th Cir. 1997).

         However, Venters also notes that “as with other pleadings, the district court has the discretion to allow an answer to be amended to assert an affirmative defense not raised at the outset, ” and “[t]he pertinence of a particular defense may only become apparent after discovery, for example, in which case it would be reasonable for the court to permit the belated assertion of that defense.” Id. at 967. “The purpose of [the pleading] rule, as courts have long recognized, is to avoid surprise and undue prejudice to the plaintiff by providing her notice and the opportunity to demonstrate why the defense should not prevail.” Id.

         In response to the Plaintiffs' argument, Catron explains that it was not aware that it would be necessary to assert any claim for setoff until sixteen months after the dispositive motions deadline had passed because the Plaintiffs waited more than two years to disclose the audit results to Catron. Catron explains that the Plaintiffs performed their audit of Catron on February 27, 2013. The dispositive motions deadline in this case was December 31, 2013. After obtaining leave of Court, the Plaintiffs filed their summary judgment motion on February 24, 2014, after the deadline. The Court ordered another audit, which occurred on January 27, 2015. The results of this audit and the February 2013 audit were not disclosed to Catron until April 8, 2015, almost sixteen months after the dispositive motions deadline. Catron disputed the audit results, and the Court set the dispute for a damages hearing. While preparing for the damages hearing, Catron discovered that the Plaintiffs did not include a setoff for the market recovery fund grants in the audit results. Catron asserts that it could not have raised the setoff earlier as an affirmative defense or counterclaim because the Plaintiffs delayed disclosing the audit results, which gave notice to Catron that the market recovery fund grants were not accounted for in the results. Catron explains that the damages hearing presented the first opportunity for it to raise the claim for setoff.

         At the damages hearing, over the Plaintiffs' objection, the Court admitted into evidence the market recovery fund grants offered by Catron as Exhibit 8. Testimony regarding the market recovery fund grants was given. The Court took into account the market ...


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