THIS MATTER comes before the Court on the Plaintiff People's Trust Federal Credit Union's and Defendant National Credit Union Administration Board's Motion. The Court held a hearing on June 26, 2017. The primary issues are: (i) whether the Court should vacate the preliminary injunction hearing set for June 28, 2017, to allow for additional settlement talks; (ii) whether the Court should stay further proceedings in this case through the date of the new preliminary injunction hearing; and (iii) whether the Court should continue the temporary restraining order ("TRO") issued, see Memorandum Opinion and Order at 26,
FACTUAL BACKGROUND
The Court described the facts leading to this case and the early procedural history in the MOO. See MOO at 2-14,
As this case involves numerous financial institutions, the Court will first describe the parties before describing their interactions with each other. It will then explain the loans and contracts over which the parties are litigating. Finally, the Court describes the state foreclosure proceedings that People's Trust now seeks to settle.
1. The Parties.
People's Trust is a federally chartered and federally insured credit union with its principal place of business in Houston, Texas. See Complaint for Declaratory Judgment and to Compel Arbitration ¶ 1, at 1, filed June 20, 2016 (Doc. 1)("Complaint"). Until December 28, 2012, Chetco Federal Credit Union ("Chetco CU") was a federally chartered and insured credit union with its principal place of business in Brookings, Oregon. See Complaint ¶ 2, at 2. Until December, 2012, Chetco CU owned one-hundred percent of a credit union service organization, Commercial Lending Services, LLC, an Oregon limited liability company. See Complaint ¶ 3, at 2. The National Credit Union Administration ("NCUA") Board is a federal entity that Congress authorizes pursuant to
The Saddleback Ranch is real property located near Galisteo, New Mexico. See Complaint ¶ 6, at 2-3. Saddleback Ranch Estates, LLC, is a New Mexico limited liability company that Dan Silvestri, a Texas resident, managed. See Complaint ¶ 6, a 2-3. Alliant CU became the successor in interest to Continental Federal Credit Union ("Continental CU") when Continental Airlines and United Airlines merged. See Motion for TRO at 3.
2. The People's Trust Loans.
On June 17, 2008, People's Trust originated two loans. Saddleback Ranch executed a promissory note, which Silvestri guaranteed, to support the first loan for $12,406,250.00, which Saddleback Ranch secured (the "SRE Loan"). Complaint ¶ 6, at 2-3. See Motion for TRO at 2-3. People's Trust then issued a $3,600,000.00 loan for whiсh William P. Verkin executed a promissory note, which the properties located in New Mexico secured (the "Verkin Loan"). Complaint ¶ 7, at 3. See Motion for TRO at 2-3.
3. The Master Loan Participation Agreement.
People's Trust sold ninety percent of its interests in the SRE Loan and the Verkin Loan to Commercial Lending, a CU service organization ("CUSO"), which was a wholly owned subsidiary of Chetco CU until December 28, 2012. See Complaint ¶ 8, at 3-4; Motion for TRO ¶ 2, at 3.
On June 21, 2008, Commerсial Lending sold, assigned, and/or transferred its interests in the loans to Chetco CU, but remained the servicer on the loans. See Motion for TRO at 3. On June 24, 2008, Chetco CU sold a 36.27% interest in the SRE Loan to Continental CU. See Complaint ¶ 8, at 3-4; Motion for TRO at 3. As the successor in interest to Continental CU, Alliant CU now holds that 36.27% interest. See Motion for TRO at 3. Chetco CU retains a 53.73% interest in the SRE Loan and a ninety-percent interest in the Verkin Loan, with People's Trust holding a ten-percent interest in both loans. See Complaint ¶ 8, at 3-4; Motion for TRO at 3.
4. The Insolvency and Foreclosure Proceedings.
On or around September 23, 2010, the debtor stopped making payments on the SRE Loan. See Motion for TRO at 4. Similarly, on or around November 1, 2010, the debtor ceased payments on the Verkin Loan. See Motion for TRO at 4. On September 23, 2011, the NCUA Board named itself Chetco CU's conservator pursuant to its statutory authority under
After the SRE Loan and the Verkin Loan went into default, People's Trust filed an action on October 11, 2011 in the First Judicial Court, Santa Fe County, New Mеxico. Case No. D-0101-CV-2011-003141 (the "Foreclosure Action"). See Complaint ¶ 11, at 4. People's Trust sought to foreclose its mortgages and to recover its loans. See Complaint ¶ 11, at 4. On December 28, 2012, the NCUA Board named itself Chetco CU's liquidating agent. See Complaint ¶ 4, at 2; Motion for TRO at 4.
5. The State Court Litigation and the Settlement Agreement.
The current litigation involves the underlying state court action. Accordingly, the Court will describe the state litigation and the proposed settlement agreement. The Court will then describe the earlier federal litigation involved in this case. Since 2012, both Chetco CU's liquidation and the Foreclosure Action have progressed. In July, 2015, as trial approached in the Foreclosure Action, disagreements arose between the interest holders. Specifically, shortly before the August 17, 2015, trial setting of the Foreclosure Action, People's Trust asked the NCUA Board and Alliant CU to approve the proposed settlement agreement in the underlying foreclosure action between People's Trust and the debtors in the Foreclosure Action (the "Settlement Agreement"). See Complaint ¶¶ 12-13, at 4-5. See Motion for TRO at 4-5. Both the NCUA Board and Alliant CU declined. See Complaint ¶¶ 12-13, at 4-5; Motion for TRO at 4-5. People's Trust asserted that the Settlement Agreement was "subject either to the approval of the other participants in the loans (NCUA Board and Alliant), or a determination, in arbitration, that People's has the right, pursuant to the provisions of the Master Agreement, to settle without the approval of the NCUA Board and Alliant." Complaint ¶ 12, at 4 (emphasis added). See Motion for TRO at 5 (noting that "the
6. The AAA and Oregon Proceedings.
On April 4, 2016, People's Trust filed a demand for arbitration with AAA seeking a declaratory judgment that People's Trust -- without the other interest holders' approval -- has the power and authority to settle the Foreclosure Action and to perform its obligations under the Settlement Agreement. See Complaint ¶ 13, at 5; Motion for TRO at 5-6. People's Trust also sought a declaration that the Settlement Agreement is reasonable. See Motion for TRO at 5-6.
On April 19, 2016, the NCUA Board filed an objection to the arbitration with the AAA. See Motion for TRO at 6. It objected to the arbitration on the basis that "there is no contract with an arbitration provision by or among all of the parties, none of the relevant contracts provide for an arbitration administered by the AAA Denver, Colorado office, and none set the venue in New Mexico or Arizona." Motion for TRO at 6-7 (emphasis in original).
On April 19, 2016, the NCUA Board informed People's Trust that it must submit the dispute regarding the authority to settle the Foreclosure Action for resolution under the administrative claims process pursuant to the Federal Credit Union Act,
PROCEDURAL BACKGROUND
After Judge Mosman dismissed the Oregon case, People's Trust preemptively filed an action in the United States District Court for the District of New Mexico. The Court will summarize the initial filings in this case and leading to the TRO as background for the issues raised in this Memorandum Opinion. The Court will then discuss the Motion and describe the issues before the Court in this matter.
1. The Complaint and Answer.
People's Trust filed the Complaint to prevent the NCUA Board from suing People's Trust in the District of New Mexico, and renewing its motions for a TRO and a preliminary injunction. See Complaint ¶ 14, at 5. People's Trust asks for a declaratory judgment that "the AAA arbitration panel, not this Court or any other court or tribunal, including NCUA BOARD's administrative tribunal, is to determine the existence, applicability, and binding effect of the Arbitration Clause." Complaint ¶ 29, at 10-11. It further seeks "a judgment compelling arbitration and staying this case pending the outcome of the arbitration." Complaint ¶ 31, at 11.
2. The TRO.
In the Motion for TRO and the Defendant's Opposed Supplemental Motion for Temporary Restraining Order and Motion for Emergency Hearing, filed August 1, 2016 (Doc. 16), the NCUA Board asks for a TRO and a preliminary injunction preventing People's Trust from taking any further actions in the AAA arbitration proceeding or steps to advance a settlement in the Foreclosure Action. See Motion at 9-13. On July 16, 2016, this Court granted the TRO, and the Court scheduled a preliminary injunction hearing for August 23, 2016. See MOO at 25,
3. The Motion.
Peoplе's Trust and the NCUA Board filed another Joint Motion to Stay Case and to Continue Temporary Restraining Orders and Hearing on Preliminary Injunction on June 23, 2017, asking the Court again "to vacate the preliminary injunction
4. The Hearing.
The Court held a hearing on the Motion on June 26, 2017. See Draft Transcript of Hearing at 2:2 (taken June 26, 2017)(Court)("Tr.").
The Court tried to assess Alliant CU's interest in the preliminary injunction hearing. See Tr. at 7:22-25 (Court); id. at 9:5-20 (Court, Kelеher). People's Trust explained its view that Alliant CU had no interest in the TRO or a preliminary injunction hearing, because People's Trust had no reason to proceed with the arbitration now that the NCUA Board and People's Trust had reached an agreement. See Tr. at 8:1-8 (Jontz). In the NCUA Board's opinion, Alliant CU should have no interest in a preliminary injunction hearing, because People's Trust has ceased trying to settle the Foreclosure Action on the original terms and Alliant CU would not be a party to the arbitration. See Tr. at 8:20-9:4 (Hisey). Alliant CU cited three reasons for holding the hearing: (i) Alliant CU's settlement negotiations have reached an impasse; (ii) the delays in the preliminary injunction hearing frustrate Alliant CU; and (iii) Alliant CU had not known that People's Trust and the NCUA Board had reached a deal. See Tr. at 9:21-10:15 (Keleher). Alliant CU took the position that an agreement about the loan could not compromise Alliant CU's collateral without its consent. See Tr. at 10:25-11:5 (Keleher). Alliant CU stated that, if the NCUA Board and People's Trust have reached an agreement, Alliant CU wants to see the stipulated preliminary injunction order. See Tr. at 11:5-11-14 (Keleher).
The Court observed that Alliant CU's main desire is that the other two parties "put together a preliminary injunction rather than continuing to extend the stay,
5. The Agreed Order and Preliminary Injunction.
The day following the hearing, June 27, 2017, the parties submitted and the Court entered the Agreed Order and Preliminary Injunction at 1-2, filed June 27, 2017 (Doc. 53)("Agreed Order"). The Agreed Order stayed the arbitration in this case. Agreed Order at 1.
6. The Order.
The Court recorded its Order. In the Order, the Court indicated that it would more fully explain its rationale for its decision. Order at 1 n.1. Accordingly, the Court issues this Memorandum Opinion expanding on its reasoning for the decision in the Order.
LAW REGARDING REQUESTS FOR A TEMPORARY RESTRAINING ORDER
The requirements for a TRO issuance are essentially the same as those for a preliminary injunction order. See Herrera v. Santa Fe Pub. Sch.,
To establish its right to preliminary relief under rule 65(b), a moving party must demonstrate that "immediate and irreparable injury, loss, or damage will result" unless a court issues the order. Fed. R. Civ. P. 65(b). A moving party must "establish that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest." Winter v. Nat. Res. Def. Council, Inc.,
In other words, in determining whether to grant injunctive relief, a court considers the following four factors:
(i) whether the moving party will suffer irreparable injury unless the injunction issues; (ii) whether there is a substantial likelihood that the moving party will eventually prevail on the merits; (iii) whether the threatened injury to the moving party outweighs whatever damage the proposed injunction mаy cause the opposing party; and (iv) whether the injunction, if issued, would not be adverse to the public interest.
Herrera v. Santa Fe Pub. Sch.,
The likelihood-of-success and irreparable-harm factors are "the most critical" in the analysis. Nken v. Holder,
The Court has written several times on the topic of TROs and preliminary injunctions. In O Centro Espirita Beneficiente Uniao Do Vegetal v. Duke,
LAW REGARDING PRELIMINARY INJUNCTIONS
"It is well settled that a preliminary injunction is an extraordinary remedy, and that it should not be issued unless the movant's right to relief is clear and unequivocal." Kikumura v. Hurley,
"[T]he limited purpose of a preliminary injunction 'is merely to preserve the relative positions of the parties until a trial on the merits can be held ....' " Schrier v. Univ. of Colo.,
The Tenth Circuit "characterize[s] an injunction as mandatory if the requested relief 'affirmatively require[s] the nonmovant to act in a particular way, and as a result ... place[s] the issuing court in a position where it may have to provide ongoing supervision to assure the nonmovant is abiding by the injunction.' " Schrier v. Univ. of Colorado,(all alterations but first in Schrier v. Univ. of Colo. )(quoting O Centro Espirita Beneficiente Uniao Do Vegetal v. Ashcroft, 389 F.3d [973] at 979 [ (10th Cir. 2004) ] ). The Tenth Circuit has thus disclaimed -- or at least augmented -- the simpler and more intuitive way of defining these terms, i.e., that a prohibitory injunction is one in which the court orders the enjoined party not to do something, and a mandatory injunction is one in which the court orders the enjoined party to do something. 427 F.3d at 1261
Salazar v. San Juan Cty. Det. Ctr., No. CV 15-0417 JB/LF,
"[I]n an action for money damages, the district court does not have the power to issue a preliminary injunction ...." United States ex rel. Rahman v. Oncology Assocs.,
LAW REGARDING RULE 16 SCHEDULING
Rule 16(b) of the Federal Rules of Civil Procedure provides: "Except in categories of actions exempted by local rule, the district judge ... must issue a scheduling order after receiving the parties' report under Rule 26(f) .... The scheduling order must limit the time to join other parties, amend the pleadings, complete discovery, and file motions." Fed. R. Civ. P. 16(b). While rule 15 of the Federal Rules of Civil Procedure governs amendments to pleadings generally, rule 16 governs amendments to scheduling orders. See Bylin v. Billings,
The Tenth Circuit has noted that the "good cause" standard of rule 16 is "an arguably more stringent standard than the standards for amending a pleading under Rule 15." Bylin v. Billings,
Motions to extend the deadline for expert reports are also considered under the rule 16"good cause" standard. Conroy v. Schafer, No. 06-0867,
LAW REGARDING GOOD CAUSE AND EXCUSABLE NEGLECT
The Tenth Circuit has "recognized the interrelation between 'excusable neglect' and 'good cause.' " Pulsecard, Inc. v. Discover Card Servs. Inc.,
[W]ithout attempting a rigid or all-encompassing definition of "good cause," it would appear to require at least as much as would be required to show excusable neglect, as to which simple inadvertence or mistake of counsel or ignorance of the rules usually does not suffice, and some showing of "good faith on the part of the party seeking the enlargement and somereasonable basis for noncompliance within the time specified" is normally required.
In general, the phrases "good cause" and "excusable neglect" are assumed to have the same meaning in various statutory contexts. Courts generally presume that a drafter of a statute intends identical language in statutes with similar purposes to have the same meaning. See Merrill Lynch, Pierce, Fenner & Smith v. Dabit,
In the civil rule 16 context, the Court has stated that the good-cause inquiry focuses on the diligence of the party seeking to amend a scheduling deadline. See Walker v. THI of N.M. at Hobbs Ctr.,
Where a party is diligent in its discovery efforts and nevertheless cannot comply with the scheduling order, the Court has found good cause to modify the scheduling order if the requesting party timely brings forward its request. For example, in Advanced Optics Electronics, Incorporated. v. Robins, the Court found that, where the defendant did not conduct discovery or make any good-faith discovery requests, and where the defendant did not make efforts "diligent or otherwise" to conduct discovery, the defendant did not show good cause to modify the scheduling order.
Overall, good cause requires diligence and a conscientious attempt to comply with the Court's scheduling order. When parties have not done so, the Court has not found good cause. In Montoya v. Sheldon,
The [plaintiffs] filed this case on April 15, 2010. Because [Plaintiff] D. Montoya had seen the physician before that date, the fact that the [plaintiffs] are only now bringing the physician forward as a newly identified expert witness, over two years later, and over one and a half years after the deadline to disclose expert witnesses, does not evidence circumstances in which the Court can find excusable neglect nor good cause.
The Tenth Circuit has previously considered the meaning of "excusable neglect" in the context of relief from a final judgment, order, or proceeding under rule 60(b) of the Federal Rules of Civil Procedure. United States v. Timbers Pres.,
is at bottom an equitable one, taking account of all relevant circumstances surrounding the party's omission." Relevant factors include "the danger of prejudice to the [opposing party], the length of the delay and its potential impact on judicial proceedings, the reason for the delay, including whether it was within the reasonable control of the movant, and whether the movant acted in good faith.
Jennings v. Rivers,
The relevant factors that the Tenth Circuit used in Jennings v. Rivers with regard to 60(b)(1) have been used to determine whether excusable neglect exists in a number of other contexts. See Pioneer,
The Court has applied the Pioneer factors to find that a party demonstrated excusable neglect when its attorney failed to respond to a motion for summary judgment, because its attorney mistakenly thought that the Court's vacating a scheduling order meant there was no deadline for filing responsive pleadings. See Estate of Anderson v. Denny's, Inc.,
By contrast, the Court has denied a plaintiff's request for an extension of time to name an expert witness against a defendant, when the plaintiff asserted that he had waited to name an expert witness until a second defendant joined the case, because, before the second defendant entered the case, a scheduling order was in effect, and the plaintiff should have known that he would need to nаme an expert witness against the defendant already in the case. See Scull v. Mgmt. & Training Corp., No. CIV 11-0207 JB/RHS,
In Stark-Romero v. Nat'l R.R. Passenger Co (AMTRAK),
ANALYSIS
The Court concludes that, under rule 65, its oral ruling remains correct that Alliant CU has a right to a preliminary injunction hearing or, at least, need not agree to extend deadlines, so the Court properly denied the Motion, because Alliant CU does not agree to the relief requested.
Notes
The Court's citations to the hearing transcript refer to the court reporter's original, unedited version. Any final transcript may contain slightly different page and/or line numbers.
The Agreed Order's language tracks the Court's MOO. See MOO at 25,
The Agreed Order's language tracks the Court's MOO. See MOO at 25,
Rule 4(m) provides:
If a defendant is not served within 120 days after the complaint is filed, the court -- on motion or on its own after notice to the plaintiff -- must dismiss the action without prejudice against that defendant or order that service be made within a specified time. But if the plaintiff shows good cause for the failure, the court must extend the time for service for an appropriate period. This subdivision (m) does not apply to service in a foreign country under Rule 4(f) or 4(j)(1).
Fed. R. Civ. P. 4(m). In Broitman v. Kirkland (In re Kirkland), the Tenth Circuit interpreted rule 4(j), which was largely identical. See
Hamilton v. Water Whole International Corporation is an unpublished opinion, but the Court can rely оn an unpublished opinion to the extent its reasoned analysis is persuasive in the case before it. See 10th Cir. R. 32.1(A), 28 U.S.C. ("Unpublished decisions are not precedential, but may be cited for their persuasive value."). The Tenth Circuit has stated:
In this circuit, unpublished orders are not binding precedent, ... [a]nd we have generally determined that citation to unpublished opinions is not favored. However, if an unpublished opinion or order and judgment has persuasive value with respect to a material issue in a case and would assist the court in its disposition, we allow a citation to that decision.
United States v. Austin,
The Court notes, however, that the Agreed Order substantially grants the relief that the Motion requests in that the Agreed Order stays the proceedings, and continues the TRO until final judgment is entered, allowing the parties to continue settlement negotiations. See Agreed Order ¶¶ 1-2, at 1-2.