Partner Reinsurance Company Ltd. v.RPM Mortgage, Inc.et al

Background

Partner Reinsurance Company Ltd. asked the court to take two actions. First, it asked the court to lift the automatic 30-day stay on enforcing its judgment against LendUS LLC under Federal Rule of Civil Procedure 62(a). PartnerRe argued that LendUS’s announced sale to CrossCountry Mortgage created a risk that LendUS’s assets would be dissipated.

Second, PartnerRe asked to set a schedule for a motion seeking attorney’s fees under Rule 37(c), based on LendUS’s denial of a pretrial request for admission. The request asked defendants to admit that, after the Ohio Department of Insurance approved RPM’s Form A filing, all closing conditions had been satisfied except conditions that could be satisfied only at closing. In an earlier opinion after a bench trial, the court found that those closing conditions had been satisfied and ruled for PartnerRe.

Rule 62 Request

Rule 62(a) automatically stays enforcement of a judgment for 30 days unless the court orders otherwise. The rule’s advisory note identifies possible dissipation of the judgment debtor’s assets as one reason to end the stay.

The court declined to lift the stay. Only about 14 days remained, and PartnerRe had not provided more than a speculative basis for believing that waiting would impair collection. The court noted that LendUS had not filed for bankruptcy, there was no indication that bankruptcy was imminent, LendUS had not defaulted on a judgment or payment obligation, and the announced sale had been publicly reported before the court’s prior ruling. The court also noted that LendUS’s counsel represented in writing that LendUS had assets exceeding the judgment, and the court had no reason to discredit that representation.

The court stated that, after the 30-day period expired, it remained ready to take lawful action on an appropriate application by PartnerRe to enforce the judgment.

Rule 37(c) Fee Request

Rule 37(c)(2) can require a party that improperly denied a request for admission to pay the reasonable expenses, including attorney’s fees, incurred in proving the matter. But Rule 37(c)(2)(C) provides an exception when the responding party had a reasonable ground to believe it might prevail. The relevant question is whether the denial was reasonable when made, not simply whether the party ultimately prevailed at trial.

The court concluded that this principle made PartnerRe’s proposed fee application unlikely to succeed. Determining whether the closing conditions had been satisfied required difficult factual and legal judgments involving, among other things, the scope of Entitle’s obligations concerning books and records, communications, an Ohio regulation concerning Form A updates, participants’ knowledge of Entitle’s financial decline, and whether PartnerRe’s losses excused RPM from closing.

The court also emphasized that its trial findings depended partly on credibility determinations. Although it later found that Mr. Hirt had repeatedly dissembled in his testimony, that later assessment did not mean the defense had lacked a reasonable pretrial basis for evaluating his credibility differently.

The court further found that defendants had documents and testimony supporting non-frivolous arguments that some closing conditions remained unmet. The evidence included assertions that Entitle withheld updated projections, had communications with the Ohio Department of Insurance without defendants, and refused to communicate jointly with that agency. Although the court ultimately found that the evidence strongly favored PartnerRe, it concluded that the defense had reasonable grounds to deny the admission.

Disposition

The court declined PartnerRe’s request to lift the Rule 62 stay. It strongly discouraged PartnerRe from filing the proposed Rule 37 fee motion and stated that such a motion would likely be denied summarily, but it did not prohibit PartnerRe from filing it. If PartnerRe chose to proceed, its fee application was due July 8, 2022, LendUS’s response was due July 15, 2022, and the court did not authorize a reply.