Rapillo v. Fingerhut

Background

John and Heidi Rapillo sued Barry Fingerhut, several Fingerhut-Holzer entities, and David Holzer. The Rapillos alleged that they gave money to Holzer for investment in various ventures, but Holzer instead kept and used most of the money for himself. Their amended complaint asserted federal securities claims, including controlling-person liability under Section 20(a) of the Securities Exchange Act and claims under Section 10(b) and Rule 10b-5, as well as state-law claims for fraud, conversion, and breach of fiduciary duty.

The court previously granted summary judgment to the defendants other than Holzer. Summary judgment is a decision made without a trial when the evidence does not allow a reasonable jury to find for the opposing party. The court previously found, among other things, that the Rapillos had not shown that Fingerhut or the other defendants knew about their arrangement with Holzer or knew that Holzer was misappropriating their money. The court also rejected theories involving controlling-person liability, aiding and abetting, employer responsibility, piercing the corporate veil, conversion, and aiding and abetting conversion. Holzer later defaulted, and the court entered a default judgment against him on September 11, 2019.

Motion for reconsideration

The Rapillos proceeded without a lawyer when they filed the motion at issue. They asked the court to reconsider the earlier summary-judgment decision under Rule 60(b)(6), which permits relief for an extraordinary circumstance or another reason that justifies relief. They argued that their former lawyer, Robert Conway, had failed to present and explain important evidence.

The court explained that reconsideration is an extraordinary remedy. It generally requires the moving party to identify controlling law or evidence that the court overlooked and that could reasonably change the result. The court also stated that a motion for reconsideration is not a chance to repeat arguments already rejected or raise facts and arguments that could have been presented earlier.

Court’s reasoning

Judge Broderick found that the Rapillos did not show the kind of extreme attorney failure required for relief under Rule 60(b)(6). Conway had appeared throughout the litigation, participated in discovery, and filed a substantial opposition to the summary-judgment motion. The court said that even if he had failed to emphasize some evidence, that would not amount to abandoning the case or being unable to provide adequate representation.

The court also found that much of the evidence submitted with the reconsideration motion had already been submitted during the summary-judgment proceedings or had been presented in another form. The court considered one document—the February 18, 2009 affirmation of Shannon Rowe—to appear newly submitted, but concluded that the evidence as a whole did not change the central finding that there was no evidence that the defendants knew about Holzer’s misappropriation of the Rapillos’ funds.

The court rejected the Rapillos’ argument that transfers from Holzer to Fingerhut or Fingerhut-Holzer Partners showed that the defendants knew the money belonged to the Rapillos and was intended for investment. It likewise found that evidence of Holzer’s debt to Fingerhut, Fingerhut’s desire to be repaid, and Holzer’s use of the Rapillos’ money to make payments did not show that Fingerhut knew Holzer was misappropriating the Rapillos’ particular funds or that Fingerhut controlled or participated in the misappropriation.

Disposition

The court denied the Rapillos’ motion for reconsideration. The clerk was directed to terminate the motion at Document 137 and enter judgment for Barry Fingerhut, Fingerhut-Holzer Partners LLC, Fingerhut-Holzer Equities, Inc., Fingerhut-Holzer, Inc., Fingerhut-Holzer Fund L.P., Geo Capital Partners, Inc., Fingerhut-Holzer The Waverly I, LLC, and Fingerhut-Holzer The Waverly II, LLC. The clerk was also directed to mail the opinion and order to the pro se plaintiffs.