ATX Debt Fund 1, LLC v. Paul

Background

ATX Debt Fund 1, LLC sued Natin Paul for breaching a loan guaranty. In an earlier ruling, the Court granted summary judgment to ATX on liability and directed ATX to submit a proposed judgment identifying the damages due under the guaranty. The Court’s earlier rulings had also dismissed Paul’s counterclaims.

The Court considered two matters: Paul’s motion for reconsideration under Local Civil Rule 6.3 and Federal Rule of Civil Procedure 60(b)(2) and (6), and ATX’s request for entry of judgment based on its proposed damages calculations.

Motion for Reconsideration

ATX argued that Paul’s motion was untimely under Local Civil Rule 6.3 because he filed it 23 days after the Court’s decision, rather than within the rule’s 14-day period. The Court nevertheless considered the motion under Rule 60 because that rule permits a motion to be made within a reasonable time and can apply before the damages award makes the summary-judgment ruling final for appeal purposes.

The Court denied reconsideration. It held that Paul did not satisfy Rule 60(b)(2), which permits relief for newly discovered evidence only when the evidence could not have been found earlier despite reasonable diligence, is admissible and important enough likely to change the result, and is not merely cumulative or impeaching. The Court concluded that Paul had possessed the evidence before the summary-judgment decision, or that the evidence would not probably have changed the result. The Court also stated that the evidence concerned defenses largely covered by the guaranty’s waiver provision and arguments about ATX’s conduct that the Court had already rejected.

The Court also rejected Paul’s argument that it had overlooked controlling law. It concluded that Paul was seeking to relitigate issues already decided, including the interpretation of the waiver, the preclusive effect of another court’s ruling, fraud-based defenses, the $53 million property valuation, and alleged successor-liability arguments that Paul had not previously raised. The Court stated that Rule 60 cannot be used as a substitute for an appeal or to present new arguments.

Proposed Judgment and Damages

The Court generally agreed with ATX’s categories of recoverable damages but required changes to its proposed judgment. The Court declined to disturb the $53 million valuation used to calculate damages.

The Court rejected Paul’s arguments that claim-preclusion doctrines barred ATX from recovering attorney’s fees. It found that the Texas proceeding cited by Paul involved a sanctions motion rather than the same claim for attorney’s fees and that ATX’s deficiency-judgment claim was not a compulsory counterclaim in that proceeding.

The Court found that the attorney’s fees and costs requested by ATX were generally reasonable. It approved Polsinelli PC’s hourly rates but reduced Gibson Dunn & Crutcher LLP’s hourly rates by 10 percent across the board. The Court also found the number of hours reasonable and nonduplicative after reviewing detailed billing records privately. Under Section 1.8 of the guaranty, the Court concluded that ATX could recover fees and costs incurred in enforcing or preserving its rights, including work connected with other actions that challenged those rights.

The Court agreed with Paul, however, that ATX could not recover a 5 percent late fee on the attorney’s fees. It found that the loan agreement’s late-fee provision applied to regularly scheduled payments due under the loan documents, and did not establish a due date for attorney’s fees awarded in the first instance.

Disposition

Defendant Paul’s motion for reconsideration was DENIED. Plaintiff ATX was directed to file a revised proposed judgment within 14 days, accounting for the 10 percent reduction in Gibson Dunn’s rates and removing the 5 percent late fee on attorney’s fees. ATX was also directed to file supporting documentation showing the total fees and costs requested from each firm and monthly breakdowns. The Clerk was directed to close the motion at ECF No. 237. Judge J. Paul Oetken did not enter the final damages judgment in this opinion; he ordered ATX to submit a revised proposal.