Antitrust Law Daily Wrap Up, RICO—N.D. Tex.: Attorney’s failure to update email address in ECF system was factor in denying motion to set aside dismissal of RICO case, (Jul 17, 2015)

By Michael Menzhuber, J.D., LL.M.

An investor was unable to set aside the dismissal of his civil Racketeer Influenced and Corrupt Organizations Act (RICO) case against a group of oil well developers. The federal district court in Dallas determined that the investor’s failure to file an amended complaint within the deadline date was, among other things, not excused by his attorney’s claim that the court did not send an email filing to her changed email address (Acosta v. Insignia Energy Group, Inc., July 14, 2015, Fitzwater, S.).

Background. Francisco Acosta, an investor, filed a RICO claim against oil well developers for allegedly misrepresenting profit potential for the purpose of inducing him to invest in the drilling of two Louisiana oil wells. In October 2014, the court dismissed Acosta’s civil RICO claim and declined to exercise supplemental jurisdiction over his state-law claims. The court granted Acosta leave to file a second amended complaint within 28 days of the date of the filing of the dismissal. After six months elapsed from the filing, during which Acosta failed to file a second amended complaint, the court dismissed Acosta’s action. Acosta subsequently moved to set aside the dismissal of his case, reinstate the case, reverse the judgment of the court, and set new deadlines.

Acosta’s counsel alleged that she never received an email notification of the filing of the original case and presumed that the case had been stagnant since August 1, 2014. She asserted that she had provided an updated email address to the United States Bankruptcy Court for the District of Texas and assumed that the district court was aware of her email address change.

The defendants in the case opposed the motion and argued that Acosta was not entitled to relief under Federal Rule of Civil Procedure 60(b) because: (1) he failed to sufficiently address the elements that he was required to show in order to be entitled to relief; and (2) his counsel’s ignorance of rules, such as requiring the prompt changing of email information in ECF, was not a basis for relief. The court determined that, because Acosta’s motion was filed more than 28 days after the entry of judgment, it was required to be treated as a Rule 60(b) motion.

Rule 60(b). Rule 60(b)(1) permits a district court to grant relief from a final judgment for mistake, inadvertence, surprise, or excusable neglect. In determining whether to set aside a judgment for inadvertence or excusable neglect, a court considers three factors: (1) the extent of prejudice to the nonmovant should the judgment be set aside; (2) the merits of the asserted defense; and (3) the culpability of the movant’s conduct.

According to the court, because any defendant would suffer some sort of prejudice if a judgment dismissing the case was set aside, the determination as to the extent of prejudice rests with whether the prejudice is unfair. The prejudice was not unfair because Acosta’s state law claims were dismissed without prejudice and the defendants were still obligated to defend these claims in court. If the defendants were compensated for the fees and costs that they incurred in responding to Acosta’s motion, prejudice to them by granting the motion was not unfair.

The court noted that it could refuse to set aside a default judgment under Rule 60(b)(1) in the absence of a meritorious defense. Because Acosta was a plaintiff, not a defendant, the court considered instead the merits of his civil RICO claim. The court determined that this factor weighed against granting his motion because he made no effort to demonstrate that he had a meritorious claim.

In addressing the culpability of Acosta’s conduct, Acosta’s basis for relief was that his attorney believed the district court used the same email address as the one she updated with the bankruptcy court. Because it did not, her attorney did not receive an email filing of the dismissal order. The court determined that, in relying on this basis to justify relief, Acosta was conceding that his counsel changed her email without updating it in the ECF. Accordingly, the court determined that this factor also weighed against granting Acosta’s motion.

The case is No. 3:13-CV-0861-D.

Attorneys: D. Kristine Skocpol-Saleh (Law Office of Kristine Skocpol-Saleh) for Francisco Acosta. Craig P. Henderson (Wolf & Henderson, PC) for Insignia Energy Group Inc., Addison Capital Inc., Benchmark Operating Company LLC, IEG Permian Basin LLC, Sabine Partnership #1 Ltd., and Lewis II Holdings LLC.

Companies: Insignia Energy Group Inc.; Addison Capital Inc.; Benchmark Operating Company LLC; IEG Permian Basin LLC; Sabine Partnership #1 Ltd.; Lewis II Holdings LLC

Cases: RICO TexasNews