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Capitol Justice, LLC v. Wachovia Corp.

March 31, 2009

CAPITOL JUSTICE, LLC, ET AL., PLAINTIFFS,
v.
WACHOVIA CORPORATION, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Royce C. Lamberth, Chief Judge

MEMORANDUM OPINION

Now before the Court is plaintiffs' Motion [32] for Reconsideration of Dismissal of Count II of the Amended Complaint. Having considered the motion, the opposition and reply thereto, and the applicable law, the Court will deny plaintiffs' motion for the reasons explained herein.

I. FACTUAL AND PROCEDURAL BACKGROUND

The facts of this case were laid out in detail in the Court's original opinion, but those pertinent to this motion for reconsideration will be recounted here. Plaintiffs sought a real estate loan from defendants. Defendants sent plaintiffs a "Term Sheet" (Am. Compl. Ex. A) setting forth proposed terms for the loan. In accordance with the Term Sheet, plaintiffs paid defendant a $20,000 "Good Faith Deposit." Plaintiffs and defendants then entered into a Forward Rate Lock Agreement ("RLA"), which locked in the terms for the eventual loan. (See Am. Compl. Ex. B.)

As part of the RLA plaintiffs transferred to defendant a "Mandatory Lock Fee" of $1,790,000, bringing plaintiffs' total deposit to $1,810,000. The RLA was not a binding agreement to actually fund the loan; in fact, its terms explicitly contemplated the possibility that the loan would not fund. The parties later entered into a Loan Commitment Agreement ("LCA"), which did commit defendants to funding the loan. (See Am. Compl. Ex. C.) But the LCA included a Material Adverse Change ("MAC") provision, which allowed defendants to terminate the LCA "in the event of any material adverse change in the financial condition of the Property, Borrower, [or] Borrower's managers or [owners] . . . ." (Id. at ¶1.15.)

On November 16, 2007-before the loan funded-defendants terminated the LCA pursuant to the MAC provision. On December 3, 2007, defendants partially refunded plaintiffs' deposit. At issue in this motion is the amount deducted from plaintiffs' deposit in relation to the hedging arrangements defendants had entered into with the deposit funds. The statement accompanying the partial refund indicated that defendants had obtained $672,166 in proceeds from the hedging arrangement but had incurred $682,171 in "carry" charges, for a net loss of $10,005. (See Opp'n Ex. A.) That $10,005 loss was deducted from the refund of plaintiffs' deposit.

Plaintiffs sued defendants alleging, among other things, that defendants fraudulently terminated the LCA and breached same, breached the RLA, and violated their fiduciary duty and their duty of good faith and fair dealing. Plaintiffs also sought an accounting of their deposit and refund. Upon defendants' motion [21] the Court dismissed eight of plaintiffs' ten counts, leaving plaintiffs with Count I (alleging breach of the LCA) and Count X (seeking an accounting). (Mem. Op. & Order [30] (June 11, 2008).) Plaintiffs move to reconsider the Court's dismissal of Count II, which alleged breach of the RLA.

II. LEGAL STANDARD

Under Federal Rule of Civil Procedure 54(e), an order that adjudicates fewer than all claims can be revised at any time before the final judgment. The Court may revise its order "as justice requires." Cobell v. Norton, 224 F.R.D. 266, 272 (D.D.C. 2004) (Lamberth, J.). This Court has explained that standard as including situations "when the Court has patently misunderstood a party, has made a decision outside the adversarial issues presented to the Court by the parties, has made an error not of reasoning but of apprehension, or where a controlling or significant change in the law or facts [has occurred] since the submission of the issue to the Court." Singh v. George Washington University, 383 F. Supp. 2d 99, 101 (D.D.C. 2005) (Lamberth, J.) (quoting Cobell, 224 F.R.D. at 272) (internal quotation marks omitted). "The district court's discretion to reconsider a non-final ruling is, however, limited by the law of the case doctrine and 'subject to the caveat that where litigants have once battled for the court's decision, they should neither be required, nor without good reason permitted, to battle for it again.'" In re Ski Train Fire in Kaprun, Austria, on November 11, 2004, 224 F.R.D. 543, 546 (S.D.N.Y. 2004) (quoting Official Comm. of the Unsecured Creditors of Color Tile, Inc. v. Coopers & Lybrand, 322 F.3d 147, 167 (2d Cir. 2003)).

III. DISCUSSION

A. The Court Did Not Err in Concluding That In This Case "Carry Costs" Constituted Breakage Costs and Were Properly Deducted

Plaintiffs contend that the Court erred in concluding that defendants properly deducted the $682,171 in "carry" charges as Breakage Costs, leaving plaintiffs without a plausible claim for breach of the RLA. Upon reconsideration, the Court finds no error.

Plaintiffs' main argument is that "carry" charges are not included within the definition of Breakage Costs. Defendants do not contest plaintiffs' characterization of "carry" charges as charges incurred in the maintenance of the hedging arrangement. (See Mot. at 6.) Section 3 of the RLA contains the definition of Breakage Costs:

In the event that . . . the Loan . . . shall not be closed or funded by Wachovia for any reason . . . Borrowers acknowledge that Wachovia may suffer or incur damages, losses, liabilities, costs, fees, and expenses (including breakage, unwind and ...


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