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United States v. Custom Mechanical Systems, Corp.

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

October 4, 2017

UNITED STATES OF AMERICA for the use and benefit of SUSTAINABLE MODULAR MANAGEMENT, INC., Plaintiff,
v.
CUSTOM MECHANICAL SYSTEMS, CORP. also known as CMS CORPORATION, LEXON INSURANCE COMPANY, Defendants. CUSTOM MECHANICAL SYSTEMS, CORP., Counter Claimant,
v.
SUSTAINABLE MODULAR MANAGEMENT, INC., Counter Defendants. CUSTOM MECHANICAL SYSTEMS, CORP., Third Party Plaintiff,
v.
GREAT AMERICAN INSURANCE COMPANY, Third Party Defendants.

          ORDER ON PLAINTIFF'S MOTION TO AMEND JUDGMENT

          Hon. Jane Magnus-Stinson, Chief Judge

         This case involves the Miller Act, which requires bonds for certain types of government construction contracts. Subcontractor Sustainable Modular Management, Inc. (“SMM”) brought suit against prime contractor Custom Mechanical Systems, Corp., also known as CMS Corporation (“CMS”), and surety Lexon Insurance Company (“Lexon”), related to a construction project at a Marine Corps Base in Hawaii. SMM alleged breach of contract and quantum meruit claims against CMS and a payment bond claim against Lexon. [Filing No. 14 at 4-5.] On May 5, 2017, this Court dismissed several of SMM's claims against CMS and Lexon. [Filing No. 59.] SMM then filed a Motion to Alter or Amend Judgment pursuant to Rule 59(e) of the Federal Rules of Civil Procedure, [Filing No. 63], which is now ripe for the Court's review. In addition, CMS and Lexon filed a Motion to file a Sur-Reply in opposition to SMM's Motion, [Filing No. 72], which the Court will also consider herein.

         I.

         Legal Standard

         SMM styled their Motion a “Motion to Alter or Amend Judgment, ” citing Rule 59(e) of the Federal Rules of Civil Procedure. [Filing No. 63 at 1.] Rule 59(e), however, only applies when a party seeks the reconsideration of a ruling that was accompanied with a final judgment. See Fed.R.Civ.P. 59(e); see also Coleman v. Labor & Indus. Review Comm'n of Wisconsin, 860 F.3d 461, 472 (7th Cir. 2017) (explaining that “an order disposing of less than all claims of all parties does not qualify as a final judgment unless the district court enters a Rule 54(b) certification that there is no just reason for delay and that the judgment is indeed final for the party and claim so certified”); Abcarian v. McDonald, 617 F.3d 931, 943 (7th Cir. 2010) (“We have often held that the simple dismissal of a complaint does not terminate the litigation”) (quotation omitted). In its order dismissing several of SMM's claims, the Court noted that if SMM declined to file a Second Amended Complaint, then CMS should advise whether the Court could enter final judgment in its favor. [Filing No. 59 at 17.] On May 22, 2017, SMM filed an Amended Complaint, [Filing No. 61], and, as a result, the Court has not yet issued judgment in this case. Therefore, the Court cannot consider SMM's Motion under Rule 59(e). Instead, the Court will construe SMM's Motion as a motion to reconsider. The Seventh Circuit has noted that “[t]echnically, a ‘Motion to Reconsider' does not exist under the Federal Rules of Civil Procedure.” GHSC Assocs. Ltd. P'ship v. Wal-Mart Stores, Inc., 29 Fed.Appx. 382, 384 (7th Cir. 2002). However, Rule 54(b) of the Federal Rules of Civil Procedure “governs non-final orders and permits revision at any time prior to the entry of judgment. . . .” Galvan v. Norberg, 678 F.3d 581, 587 n.3 (7th Cir. 2012). Under Rule 54(b), the Court may exercise its inherent authority to reconsider or revise its interlocutory orders. Bell v. Taylor, 2015 WL 13229553, at *2 (S.D. Ind. Dec. 4, 2015). Such motions to reconsider perform “a valuable function” in the limited circumstances wherein the Court has: (1) patently misunderstood a party, (2) made a decision outside the adversarial issues presented to the Court by the parties, or (3) made an error not of reasoning but of apprehension. Bank of Waunakee v. Rochester Cheese Sales, Inc., 906 F.2d 1185, 1191 (7th Cir. 1990). In addition, a motion to reconsider may be appropriate when a controlling or significant change in the law or facts has occurred since the submission of the issue to the Court. Id. Because such problems “rarely arise, ” a motion to reconsider “should be equally rare.” Id. at 1191.

         II.

         Discussion

         A. Defendants' Motion for Leave to File a Sur-Reply [Filing No. 72]

         At the outset, the Court notes that CMS and Lexon (collectively, “Defendants”) filed a Motion to File a Sur-Reply. [Filing No. 72.] “The decision to permit the filing of a surreply is purely discretionary and should generally be allowed only for valid reasons, such as when the movant raises new arguments in a reply brief.” Meraz-Camacho v. United States, 417 Fed.Appx. 558, 559 (7th Cir. 2011). Defendants argue that SMM raised a new issue in its reply brief by requesting to amend its Complaint. [Filing No. 72 at 3.] SMM opposes Defendants' Motion, claiming that it raised no new issues in its reply and had explicitly requested to amend its pleading in the original motion. [Filing No. 78 at 2.] Comparing the two documents filed by SMM - its brief in support of it Motion to Reconsider, [Filing No. 64], and its reply brief, [Filing No. 71] - reveals that the former makes brief mention of amending the Complaint, while the latter contains a detailed argument to that effect, including citations to Seventh Circuit authority. As such, the Court exercises its discretion to consider Defendants' proposed surreply in order to allow Defendants to respond to the substantive arguments set forth in SMM's reply. Defendants' Motion for Leave to File a Sur-Reply is therefore GRANTED.[1]

         B. SMM's Motion to Reconsider [Filing No. 63]

         In support of its Motion to Reconsider, SMM makes both procedural and substantive arguments. SMM first argues that the Court “misapplied the standard” of review for a Rule 12(b)(6) motion to dismiss, [Filing No. 64 at 2], and that, at a minimum, the Court should have allowed SMM to “replead its claim in its Second Amended Complaint, stating in more detail the factual basis of its claims for additional compensation, ” [Filing No. 64 at 4]. Substantively, SMM argues that the Court and Defendants relied upon the wrong portions of the contracts at issue to determine SMM's claims for additional compensation. [Filing No. 64 at 7-9 (arguing that SMM's claims for additional compensation are governed by Section 6.5 of the contracts, rather than Sections 6.1, 6.2 or 6.6).] In addition, SMM argues that “strict application” of certain contract provisions was “modified by the parties' conduct.” [Filing No. 64 at 10-13.]

         In response, Defendants argue that SMM's Motion to Reconsider fails to articulate any basis under FRCP Rule 59 and constitutes an inappropriate second bite at the apple. [Filing No. 67 at 4-6.] In addition, Defendants state that SMM “presented its ‘new' evidence without making any showing that the evidence was ‘unavailable'” when SMM responded to the Motion to Dismiss. [Filing No. 67 at 6.] Regarding SMM's argument that it should have been allowed to amend its Complaint, Defendants point out that SMM never attempted to do so while the Motion to Dismiss was pending. [Filing No. 67 at 6, n.2.] Finally, Defendants respond to SMM's substantive contractual arguments by arguing that SMM cannot show contractual entitlement to additional costs. [Filing No. 67 at 6-17.]

         In its reply, SMM requests to re-plead its claim and states that, “[w]hether styled as a Rule 59(e) motion or a motion for reconsideration, SMM believes that several viable theories of liability are available to show a right to relief for compensation related to the additional work.” [Filing No. 71 at 4.]

         In its surreply, Defendants allege that SMM's arguments in its Motion to Reconsider differ significantly from its arguments in opposition to the Motion to Dismiss and that any attempt on SMM's part to amend its Complaint is futile. [Filing No. 72-1 at 3-4.] Further, Defendants reiterate that SMM never filed a motion for leave ...


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