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Stephen J. Donell, Permanent Receiver v. Renae Keppers

December 6, 2011

STEPHEN J. DONELL, PERMANENT RECEIVER
FOR LEARN WATERHOUSE, INC., ITS SUBSIDIARIES AND AFFILIATES,
PLAINTIFF,
v.
RENAE KEPPERS, DEFENDANT.



The opinion of the court was delivered by: Irma E. Gonzalez, Chief Judge United States District Court

ORDER

(1) GRANTING MOTION TO VACATE THE COURT'S AUGUST 29, 2011 (2) GRANTING MOTION FOR RECONSIDERATION [Doc. No. 15] (3) DENYING MOTION FOR DEFAULT JUDGMENT; AND Doc. No. 7] (4) DISMISSING COMPLAINT WITH PREJUDICE

Presently before the Court is Plaintiff Stephen J. Donell ("Plaintiff")'s motion to vacate the Court's August 29, 2011 Order denying Plaintiff's motion for default judgment without prejudice and Plaintiff's motion for reconsideration of his motion for default judgment. [Doc. No. 15.] After a thorough review of all submissions, and for the reasons stated below, the Court GRANTS Plaintiff's motion to vacate the Court's August 29, 2011 Order, GRANTS Plaintiff's motion for reconsideration of his motion for default judgment, DENIES Plaintiff's motion for default judgment, and DISMISSES WITH PREJUDICE Plaintiff's complaint.

BACKGROUND

Defendant Renae Keppers ("Defendant") allegedly obtained funds derived from a Ponzi scheme perpetrated by Learned Waterhouse, Inc. ("LWI"), its subsidiaries and affiliates, and its principals. [Doc. No. 1, Compl. ¶¶ 37-38.] All of LWI's payments to Defendant occurred on or before November 6, 2003. [Doc. No. 7-4, Declaration of James T. Schaefer ("Schaefer Decl.") ¶¶ 5-8, Exs. 2-4.]

Following the commencement of an action by the Securities and Exchange Commission ("SEC") against LWI and its affiliates, the district court appointed a receiver, Thomas F. Lennon, and that receiver was later succeeded by Plaintiff Stephen Donell. See SEC v. Learn Waterhouse, Inc., No. 04-cv-2037-W (LSP) (S.D. Cal., Order filed Oct. 12, 2004 [Doc. No. 9]); id. (Order filed Nov. 4, 2009 [Doc. No. 566]). Acting in his role as receiver, Plaintiff filed a complaint in this Court on December 20, 2010. [Compl.] Alleging that LWI's payments to Defendant amounted to fraudulent transfers, Plaintiff asserted three claims under California's Uniform Fraudulent Transfer Act ("UFTA"), and one claim for unjust enrichment. [Seeid.] When Defendant failed to respond to the complaint, and after the Clerk of Court entered default, Plaintiff filed a motion for default judgment. [Doc. Nos. 6-8.]

Because Plaintiff's complaint and motion revealed that approximately seven years passed between the fraudulent transfers and the filing of Plaintiff's complaint, on July 25, 2011, the Court ordered Plaintiff to show cause why each of his claims should not be dismissed as barred by the relevant statute of limitations. [Doc. No. 9.] Plaintiff filed a response to the order to show cause where he acknowledges that all but one of the fraudulent transfers took place outside the statute of limitations for fraudulent transfers, but nevertheless argues that he is entitled to recover $6,000 for a transfer that took place on November 6, 2003. [Doc. No. 10 at 4-5.] Plaintiff also argues in the response that his unjust enrichment claim is not barred by the relevant statute of limitations, which he contends Defendant waived. [See id. at 5-6.]

In addition, because neither Plaintiff's complaint nor his motion for default judgment established that the Court has personal jurisdiction over Defendant, on August 10, 2011, the Court ordered Plaintiff to show cause why the matter should not be dismissed for lack of personal jurisdiction. [Doc. No. 12.] Plaintiff filed a response to the order to show cause where he argued that the Court has personal jurisdiction over Defendant through the interplay of Federal Rule of Civil Procedure 4(k)(1)(D), 28 U.S.C. § 1692, and 28 U.S.C. § 754. [Doc. No. 13.]

On August 29, 2011, the Court denied without prejudice Plaintiff's motion for default judgment and dismissed without prejudice the action for lack of personal jurisdiction. [Doc. No. 14.] Specifically, the Court found that Plaintiff failed to show that a copy of the complaint in the original SEC action had been filed in the District of Minnesota in compliance with 28 U.S.C. § 754. [Id. at 4.] In the order, the Court did not address whether Plaintiff's claims were barred by the relevant statute of limitations. [See id.] By the present motion, Plaintiff seeks an order vacating the Court's August 29, 2011 order denying his motion for default judgment and dismissing the action for lack of personal jurisdiction. [Doc. No. 15.] In addition, Plaintiff seeks reconsideration of his motion for default judgment. [Id.]

DISCUSSION

I. Plaintiff's Motion to Vacate and Motion for Reconsideration

A district court may reconsider a prior order "under either Federal Rule of Civil Procedure 59(e) (motion to alter or amend a judgment) or Rule 60(b) (relief from judgment)." Sch. Dist. No. 1J v. ACandS, Inc., 5 F.3d 1255, 1263 (9th Cir. 1993). Under either theory a court's decision to grant or deny a motion for reconsideration is reviewed for abuse of discretion. Id.

Plaintiff moves for relief pursuant to Federal Rule of Civil Procedure 60(b). [Doc. No. 15-1 at 6-7.] "Rule 60(b) provides for reconsideration only upon a showing of (1) mistake, surprise, or excusable neglect; (2) newly discovered evidence; (3) fraud; (4) a void judgment; (5) a satisfied or discharged judgment; or (6) extraordinary circumstances which would justify relief." Sch. Dist. No. 1J, 5 F.3d at 1263 (internal quotation marks omitted).

Plaintiff argues that both subsection (2)--"newly discovered evidence"--and subsection (6)--"extraordinary circumstances"--apply to the present situation. [Doc. No. 15-1 at 6-7.] Newly discovered evidence for purposes of Rule 60(b)(2) is evidence that was not "in the moving party's possession at the time . . . or could [not] have been discovered with reasonable diligence." Coastal Transfer Co. v. Toyota Motor Sales, U.S.A., Inc., 833 F.2d 208, 21 (9th Cir. 1987). Rule 60(b)(6) allows the Court to relieve a party from an order for any reason that justifies relief. Rule 60(b)(6) "is to be used sparingly as an equitable remedy to prevent manifest injustice and is to be utilized only where extraordinary circumstances . . ." exist. Harvest v. Castro, 531 F.3d 737, 749 (9th Cir. 2008) (internal quotations marks and citation omitted).

In the Court's prior order, the Court found that Plaintiff failed to show that a copy of the complaint in the original SEC action had been filed in the District of Minnesota in compliance with 28 U.S.C. ยง 754. [Doc. No. 14.] This conclusion was based on the Court's review of the docket in SEC v. Learn Waterhouse, Inc., 04-mc-63 (D. Minn., filed Oct. 18, 2004), which showed that only the order appointing Lennon as the receiver was filed in the District of Minnesota. In support of his motions, Plaintiff has presented evidence showing that the SEC complaint was indeed filed, and the complaint not appearing on the docket appears to be due to a clerical error by the intake clerk in the District of Minnesota. Specifically, Plaintiff has presented a copy of the original SEC complaint bearing a stamp showing that it was received by the clerk of the District of Minnesota on October 18, 2004. [Doc. No. 15-2, Declaration of Catherine Schiaffo ("Schiaffo Decl.") Ex. A.] This time stamp is sufficient evidence to show that the complaint was indeed filed in that district. See ...


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