United States District Court, W.D. Kentucky, Louisville Division
MEMORANDUM OPINION AND ORDER
J. Hale, Judge United States District Court.
Farmers Bank filed two motions for summary judgment, (Docket
No. 59; D.N. 60) and the Court granted both motions. (D.N.
84) Plaintiff Hurd Family Partnership now moves the Court to
alter or vacate its judgment pursuant to Rule 59(e). (D.N.
87) Because the plaintiff makes arguments that should have
been raised earlier without alleging any errors of law or
fact, presenting new evidence, introducing an intervening
change in controlling law, or arguing that there will be
manifest injustice, the Court will deny the plaintiff's
motion to alter or vacate the Order.
because of the death of Defendant William Bennett Collett,
Sr., the Partnership has filed an unopposed motion to
substitute Defendant William Collett, Jr. in the place of his
father. (D.N. 90) The Court will grant this motion.
the facts are undisputed, and remain unchanged from the
Court's Memorandum and Opinion issued on March 10, 2016.
(D.N. 84) Therefore, the facts will not be repeated here,
except for what is necessary for resolution of the instant
motion. Plaintiff Hurd Family Partnership was a minority
owner of Freedom Holding. (D.N. 59-1, PageID # 341)
Defendants W. Bennett Collett, Sr. and W. Bennett Collett,
Jr. owned the remainder of Freedom Holding's stock.
(Id.) In early 2008, the Colletts asked King
Southern Bank for a loan to be used to exercise stock options
in Freedom Holding's subsidiary. (Id., PageID #
343) After negotiating with the Colletts, King Southern
agreed to loan $1.3 million to Freedom Holding.
(Id.) In February or March 2008, Jim King, president
of King Southern, contacted Farmers to gauge its interest in
buying the $1.3 million loan to Freedom Holding.
(Id.) King was worried about a conflict of interest
because, in addition to being the president of King Southern
Bank, he also provided accounting services to Freedom Holding
and its subsidiary as a Certified Public Accountant.
(Id.) Instead of buying the loan outright, however,
King Southern and Farmers agreed to the terms of a loan
participation agreement: Farmers provided $650, 000 of the
loan and its sister bank, Leitchfield Deposit Bank, provided
the other $650, 000. (Id., PageID # 345)
March 2010, Jim King essentially asked Farmers to buy out the
participation agreement with King Southern and make a new
loan in the same principal amount directly to Freedom
Holding. (Id., PageID # 349) Farmers agreed and
completed a transaction in March 2010 that resulted in it
becoming the lending bank from that point forward.
(Id.) The loan became delinquent in February 2013,
and the Partnership eventually filed the instant action
claiming that Farmers had a duty to determine that the loans
were properly used for Freedom Holding's corporate
purposes. (Id., PageID # 350) It further alleged
that the Freedom Holding's board of directors failed to
approve the loan properly, and that King Southern and Farmers
were aware of the ultra vires purpose behind the loan.
filed two motions for summary judgment. The first motion
requested judgment against the Partnership on its claims that
Farmers improperly loaned money to Freedom Holding in 2008.
(Docket No. 59) The second motion requested judgment on
Farmers' cross-claims against two of Farmers'
co-defendants, W. Bennett Collett, Sr. and Freedom Holding.
(D.N. 60) Collett, Sr. and Freedom Holding admitted that
Farmers Bank was entitled to summary judgment and did not
“dispute the amount sought.” (D.N. 63, PageID #
Court granted both motions for summary judgment. (D.N. 84)
The Court found that “Farmers was just a participant in
the original loan, ” and thus did not owe any duty to
the Partnership. (Id., PageID # 618) Specifically,
the Court held that the participation agreement at issue met
the Sixth Circuit's four-factor AutoStyle
definition of a “true” participation agreement.
(Id., PageID # 620) Therefore, “there was no
relationship between Farmers and Freedom Holding, ” and
Farmers did not owe Freedom Holding or the Partnership any
duty. (Id., PageID # 622) The Court found that it
was irrelevant that Farmers ultimately bought out its
participation agreement in 2010 because “by then, the
harms the Partnership complain[ed] of had already been
done.” (Id.) Finally, the Court rejected the
plaintiff's argument that Farmers was liable under
Kentucky's ultra vires statute. (Id., PageID #
622-23) The Court held that it would be inequitable to apply
this statute because “Farmers was not responsible for
the underwriting on this loan; at the outset, it merely
participated in the loan.” (Id., PageID # 623)
response to the Court's Memorandum Opinion and Order, the
Hurd Family Partnership now moves the Court to alter or
vacate its judgment pursuant to Rule 59(e). (D.N. 87) The
Partnership argues that the judgment should be altered or
vacated because (1) the Partnership should be considered a
third-party beneficiary of the participation agreement, (2)
Farmers did not simply buy out King Southern, they
“ratified” the agreement, and thus were put
“in the shoes of [King Southern] as of the date of the
original loan, ” (3) the agreement does not meet the
AutoStyle definition of a “true”
participation agreement, and (4) the loan “fell within
the doctrine of ultra vires” because “it
was actually a loan for the benefit of the Colletts and
others not even owners of Freedom Holding.” (See
responds that the Partnership has not established grounds for
altering or vacating the judgment pursuant to Rule 59(e)
because its first three arguments are new arguments that were
previously unraised, and the fourth argument is “a
rehashing of an old argument.” (D.N. 88, PageID # 645)
Furthermore, Farmers contends that each argument fails as a
matter of law. (See D.N. 88)
Partnership has also filed an unopposed motion to substitute
Defendant William Bennett Collett, Jr. in the place of
Defendant William Bennett Collett, Sr. due to the death of
the elder Collett. (Docket No. 90)
Motion to Alter or Vacate Judgment
Rule 59(e) “the court may grant a motion to alter or
amend ‘if there is a clear error of law, newly
discovered evidence, an intervening change in controlling
law, or to prevent manifest injustice.'” Boling
v. Prospect Funding Holdings, LLC, No.
1:14-CV-00081-GNS-HBB, 2016 WL 1611383, at *2 (W.D. Ky. Apr.
21, 2016) (citing GenCorp v. Am. Int'l, 178 F.3d
804, 834 (6th Cir. 1999) (citations omitted)). “The
moving party bears ‘[t]he burden of demonstrating the
existence of a manifest error of fact or law.'”
Id. at *2 (citing Doe v. Patton, 381
F.Supp.2d 595, 605 (E.D. Ky. 2005), aff'd sub nom.
Doe v. Magoffin Cty. Fiscal Court, 174 F. App'x 962
(6th Cir. 2006)). Notably, “the rule does not afford
‘defeated litigants a second chance to convince the
court to rule in his or her favor by presenting new
explanation, new legal theories, or proof.'”
Ohio Midland, Inc. v. Proctor, No. 2:05-CV-1097,
2012 WL 580407, at *1 (S.D. Ohio Feb. 22, 2012) (citing
Burnley v. Bosch Ams. Corp., 75 F. App'x 329,
333 (6th Cir. 2003)); see also Whitehead v. Bowen,
301 F. App'x 484, 489 (6th Cir. 2008) (“A motion
under Rule 59(e) does not simply provide an opportunity to
reargue a case.”); Ky. Petrol. ...