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Becnel v. Deutsche Bank AG

December 21, 2011

THOMAS R. BECNEL AND JARDINE VENTURES, LLC, PLAINTIFFS,
v.
DEUTSCHE BANK AG AND DEUTSCHE BANK SECURITIES, INC., DEFENDANTS.



The opinion of the court was delivered by: Shira A. Scheindlin, U.S.D.J.

OPINION AND ORDER

I. INTRODUCTION

Thomas R. Becnel and Jardine Ventures, LLC (collectively, "Becnel") sued Deutsche Bank AG and Deutsche Bank Securities, Inc. (collectively, "Deutsche Bank") for state-law claims of fraud, conspirace to commit fraud, fraudulent concealment, aiding and abetting fraud, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, breach of contract and breach of the implied duty of good faith and fair dealing. Deutsche Bank filed a motion to dismiss Becnel's complaint as time-barred, which this Court granted on ("September Opinion").*fn1 The Clerk of the Court entered final judgment on September 8, 2011 ("September Judgment").*fn2

Becnel now moves under Federal Rules of Civil Procedure 59 and 60 to alter or amend the September Judgment.*fn3 Specifically, Becnel seeks reinstatement of his fraud claim, or, in the alternative, leave to amend the complaint in order to assert a modified theory of fraud. For the reasons stated below, the motion is denied.

II. BACKGROUND

The background to this motion is fully set forth in the September Opinion. Briefly stated, Becnel claimed that Deutsche Bank conspired with Presidio Growth LLC and Presidio Advisory Services, LLC ("Presidio") in order to persuade him to take part in a tax shelter program known as the Hubbard Strategic Investment Fund, which operated according to the BLIPS Strategy devised by the KPMG accounting firm. As a part of that strategy, Becnel took out a loan from Deutsche Bank, which, along with Presidio, charged Bencel fees to manage the loan proceeds. Becnel's original complaint alleged that those loans were a sham because Deutsche Bank never relinquished control of the loan proceeds. Accordingly, Becnel claimed that any fees that Deutsche Bank and Presidio charged to manage the loan proceeds were fraudulent.*fn4

Instead of persisting in the claim that the loan from Deutsche Bank was a sham in toto, Becnel seeks leave to modify his theory of fraud. He would now allege solely that while Deutsche Bank did in fact create a loan, the loan it created was a single-tier market-rate loan, instead of a dual-tier above-market loan with a loan premium, even though he paid Deutsche Bank to create a loan premium.*fn5 Specifically, he alleges that Presidio conspired with Deutsche Bank to enter into interest rate swaps that "effectively converted the loans [from nominally above-market rate loans with a loan premium] to variable-rate loans at market rates, with no premium," and that Deutsche Bank concealed its knowledge of that conversion.*fn6 Finally, Becnel claims that he could not have learned the information necessary to support this modified theory of fraud until December 2010.*fn7

III. APPLICABLE LAW

A. Post-Judgment Leave to Amend Under Rule 15

Except for amendments as of right under Federal Rule of Civil Procedure 15(a)(1), a party must obtain the court's permission to amend a pleading. Although Rule 15(a)(2) states that "[t]he court should freely give leave [to amend] when justice so requires," the Second Circuit states that "Rule 15's liberality must be tempered by considerations of finality" when leave to file an amended complaint is sought post-judgment.*fn8 Accordingly, "[a] party seeking to file an amended complaint post[-]judgment must first have the judgment vacated or set aside pursuant to [Rule 59(e) or 60(b)]."*fn9 This is so because Rule 15's "liberal amendment policy [should not] be employed in a way that is contrary to the philosophy favoring finality of judgments and the expeditious termination of litigation."*fn10 Nonetheless, "the liberal spirit of Rule 15 [does not necessarily dissolve] as soon as final judgment is entered."*fn11 Accordingly, the Second Circuit holds that it is reversible error for a court to address only concerns of finality without also taking into "account the nature of the proposed amendment," in light of the "strong preference for resolving disputes on the merits."*fn12

B. Newly Discovered Evidence Under Rules 59(e) and 60(b)

While Rule 59(e) does not explicitly list the grounds on which reconsideration may be granted, one ground on which courts will generally grant a Rule 59(e) motion is "the availability of new evidence."*fn13 Additionally, under Rule 60(b)(2), a party may seek reconsideration on the basis of "newly discovered evidence that, with reasonable diligence, could not have been discovered in time to move for a new trial under Rule 59(b)."*fn14

Whether relief is sought under Rule 59(e) or Rule 60(b)(2), courts apply the same strict standard for determining what qualifies as "newly discovered evidence." In order to meet that standard, the moving party must demonstrate that

(1) the newly discovered evidence was of facts that existed at the time of trial or other dispositive proceeding, (2) the movant must have been justifiably ignorant of them despite due diligence, (3) the evidence must be admissible and of such importance that it probably would have changed the ...


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