Munn v. APF Management Company, LLC.

Background

Molly Munn sued APF Management Company, LLC; Carl E. Petrillo; Gregory J. Petrillo; Matthew J. Petrillo; Selznick & Co. LLP; Joseph Klausner; and John Does 1-10. Her second amended complaint asserted three counts:

- Count I sought a declaration allowing her to inspect APF’s tax documents under state law. - Count II alleged that the Selznick Defendants and the Petrillo Defendants violated 26 U.S.C. § 7434. - Count III asserted a state-law claim for tortious interference and conspiracy to commit tortious interference with a potential business benefit against the Petrillo Defendants and the Selznick Defendants.

In an earlier order dated December 10, 2020, the court granted the defendants’ motions to dismiss Count II for failure to state a claim. The court also found no independent basis for federal subject-matter jurisdiction over Counts I and III and declined to exercise supplemental jurisdiction over them, dismissing those claims without prejudice. The court additionally stated that, even if it exercised jurisdiction over the state-law claims, Munn had abandoned them by failing to address the defendants’ dismissal arguments. Judgment was entered on December 11, 2020.

Motion for Reconsideration

Munn moved for reconsideration on January 11, 2021. She argued that the court had overlooked a federal issue because, in her view, the defendants’ defense depended on their interpretation of 26 U.S.C. § 704(d)(1), concerning the allocation of losses and tax basis in APF.

The court explained that reconsideration is an extraordinary remedy generally available only when there is an intervening change in controlling law, newly available evidence, or a need to correct clear error or prevent manifest injustice. A party generally may not use reconsideration to repeat arguments already decided or present new arguments that were not raised earlier.

The motion was untimely under Local Civil Rule 6.3 and Federal Rule of Civil Procedure 59(e), but the court treated it as a timely motion under Rule 60(b)(1), which can permit correction of a judicial mistake of law. The court denied relief to the extent Munn relied on Rules 59(e), 60(a), or 60(b)(6). It explained that Rule 60(a) concerns clerical errors, while Rule 60(b)(6) cannot be used when the asserted basis for relief fits the more specific Rule 60(b)(1).

Court’s Analysis

The court held that Munn had not identified a proper basis for reconsideration. Munn’s federal-tax argument had not been presented when the defendants’ motions to dismiss were considered, so the court could not have overlooked it. The court also stated that the defendants had not made the federal-tax issue their sole defense to the state-law claims and that Munn had not identified controlling authority the court overlooked.

The court further stated that, even if it considered the argument, it would not change the result. Count I concerned interpretations of APF’s operating agreement and state law. A possible federal defense generally does not make a state-law claim arise under federal law. The court also concluded that any federal issue potentially involved in Count III would not be substantial and would be too fact-specific to support federal jurisdiction.

Finally, the court stated that even if Munn were correct that her state-law claims arose under federal law, the claims would still be dismissed because the court had alternatively found that she abandoned them by failing to respond to the defendants’ arguments for dismissal.

Disposition

The court denied Munn’s motion for reconsideration and directed the Clerk of Court to terminate the motion. This opinion addressed reconsideration of the prior dismissal; it did not reopen the claims or alter the earlier dispositions.