Court Opinion

ID: 4123623
Source: CourtListenerOpinion
Date Created: 2017-02-06 19:00:59.308828+00
Date Added: 2024-06-11T14:22:58.441710
License: Public Domain

NOT RECOMMENDED FOR PUBLICATION
                                File Name: 17a0093n.06

                                           No. 15-1924
                                                                                        FILED
                                                                                  Feb 06, 2017
                                                                              DEBORAH S. HUNT, Clerk
                          UNITED STATES COURT OF APPEALS
                               FOR THE SIXTH CIRCUIT

JPMORGAN CHASE BANK, N.A.,              )
                                        )
     Plaintiff-Appellee,                )
                                        )
                                                                 ON APPEAL FROM THE
v.                                      )
                                                                 UNITED STATES DISTRICT
                                        )
                                                                 COURT FOR THE EASTERN
LARRY J. WINGET and THE LARRY J. WINGET )
                                                                 DISTRICT OF MICHIGAN
LIVING TRUST,                           )
                                        )
     Defendants-Appellants.             )
                                        )

BEFORE:        KEITH, BATCHELDER, and CLAY, Circuit Judges.

       ALICE M. BATCHELDER, Circuit Judge. Before us is the latest episode in a long-

running saga that must now come to a close. JPMorgan Chase Bank, N.A. (“Chase”) seeks to

recover millions of dollars owed to it under a credit agreement between Chase and entities

owned and operated by Larry J. Winget (“Winget”). Some assets of these entities are held by

The Larry J. Winget Living Trust (the “Trust”). The district court reformed the credit agreement,

making the Trust’s exposure coextensive with Winget’s.            We reversed, holding that the

unambiguous terms of the contract did not support that limitation. See JPMorgan Chase Bank,

N.A. v. Winget, 602 F. App’x 246, 258–59 (6th Cir. 2015). We remanded with instructions to

enter judgment on behalf of Chase, and the district court did so. Despite our clear order, Winget

and the Trust now assert a new legal theory in an effort to avoid their liability. This attempt must
No. 15-1924
JP Morgan Chase Bank, N.A. v. Winget

fail, because our prior mandate foreclosed the argument they now seek to make. The district

court did not err in interpreting our mandate, so we AFFIRM its judgment.

                                                I.

                                                A.

        This is not the first time this case has been before this court. See JPMorgan Chase Bank,

N.A. v. Winget, 602 F. App’x 246 (6th Cir. 2015).         For purposes of this appeal, we will

summarize the pertinent facts and procedural history underlying this earlier decision.

        In 1999, Venture Holdings Company, LLC (“Venture”), an entity formed and controlled

by Winget, obtained $450 million to finance the purchase of a company in Europe. Chase served

as administrative agent for a number of lenders who contributed to the loan. The acquired

company became insolvent, however, triggering certain default and acceleration clauses in the

credit agreement. To avoid Venture’s default, the parties negotiated the Eighth Amendment to

the credit agreement. As we previously explained:

        In October 2002, the parties’ respective obligations under the amended agreement
        were codified into four documents: The Eighth Amendment, a Guaranty
        Agreement (“Guaranty”), and two Pledge Agreements.

        The opening paragraph of the Guaranty described both Winget personally and the
        Trust collectively as “the ‘Guarantor.’” Section 3 of the Guaranty contained the
        following provisions:

                [T]he Guarantor hereby absolutely and unconditionally guarantees, as
                primary obligor and not as surety, the full and punctual payment . . . and
                performance of the Secured Obligations, including without limitation any
                such Secured Obligations incurred or accrued during the pendency of any
                bankruptcy, insolvency, receivership, or other similar proceeding . . . .

                ***

                Notwithstanding anything herein or elsewhere to the contrary, no action
                will be brought for the repayment of the Guaranteed Obligations under
                this Guaranty and no judgment therefor will be obtained or enforced
                against Larry Winget other than with respect to the Pledged Stock

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No. 15-1924
JP Morgan Chase Bank, N.A. v. Winget

                 [described in the Pledge Agreements] in accordance with provisions of the
                 related pledge agreements . . . .

          Critically, although Section 3 specifically mentions that Winget’s personal
          exposure is limited, it does not mention the Trust at all.

Id. at 249 (alterations in original). Among other things, the pledge agreements mentioned in the

above quotation “granted the lenders security interests in the stock” of entities controlled by

Winget.

          Whether the parties intended Section 3 of the Guaranty to limit the Trust’s liability

became a key dispute later in the lawsuit and was an issue we addressed at length in the previous

appeal.

          In March 2003, Venture filed for Chapter 11 bankruptcy, triggering a default under the

Eighth Amendment.        The bankruptcy court entered a sale order pursuant to § 363 of the

Bankruptcy Code in April 2005. Following the sale, approximately $375 million of Venture’s

debt remained outstanding under the credit agreement.

          In 2008, Chase commenced this action, suing on the “full amount of the Guaranteed

Obligations.” Counts I and II sought to enforce the Guaranty against the Trust and Winget,

respectively. Count III sought to enforce the pledge agreements against both Winget and the

Trust. After a failed motion for judgment on the pleadings, Winget and the Trust responded by

asserting affirmative defenses, including one for judicial estoppel, and a counterclaim to reform

Section 3 of the Guaranty to limit Chase’s recovery under the Guaranty to $50 million from

Winget and the Trust.

          Eventually, the parties filed cross-motions for summary judgment—Chase on its claims

against the Trust and Winget, and Winget and the Trust on their reformation counterclaim. The

district court denied Chase’s motion, and Winget and the Trust withdrew their motion. The

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No. 15-1924
JP Morgan Chase Bank, N.A. v. Winget

counterclaim for reformation went to a bench trial, and the district court found that the parties

had made a mutual mistake in not adding the Trust to Section 3. Explaining that it had the

“power to correct” the mistake, id. at 252, the district court reformed the agreement to read that

“no action will be brought for the repayment of the Guaranty Obligations under this Guaranty

and no judgment therefore . . . will [sic] obtained or enforced against Larry Winget and The

Larry J. Winget Living Trust other than with respect to the Pledged Stock.”

        Later in the proceedings below, the court granted summary judgment for Chase on two

defenses that Winget and the Trust had raised regarding Counts II and III. At this point, Chase

moved for entry of final judgment, which the district court granted, because “there remain[ed] no

factual issues for trial and no defenses to judgment.” In its order, the district court reiterated its

reformation decision and entered judgment against each of Winget and the Trust for

approximately $425 million, while limiting recourse to the terms of the reformed Guaranty.

        The parties filed cross-appeals, with Chase arguing that the district court erred in

reforming “the parties’ agreement to make the Trust’s exposure coextensive with Winget’s.” Id.

at 255. Applying Michigan contract law, we reversed that decision, because the terms of the

contract were not ambiguous and there was no mutual mistake that justified the equitable remedy

of rescission. Id. at 255–59. We therefore concluded that

        The agreement executed by Winget, the Trust, and Chase “reflect[ed] the parties’
        intent as a matter of law,” and contrary to the district court’s conclusion, the
        parties did not agree to treat Winget and the Trust as one and the same. Rather,
        the plain text of Section 3 names Winget, and only Winget, as having limited
        exposure. The district court’s decision to rewrite the parties’ agreement to add a
        term must be reversed. We therefore remand this case to the district court with
        instructions to enter judgment on behalf of Chase on Count I of Chase’s
        complaint, consistent with our holding.

Id. at 258–59 (alteration in original) (citation omitted).

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JP Morgan Chase Bank, N.A. v. Winget

                                                 B.

        On remand, Winget and the Trust sought to avoid this increased exposure by asserting an

affirmative defense of judicial estoppel, which had lain dormant throughout this case. After

careful review of the record, we find that Winget and the Trust did not pursue this defense at any

time from its initial inclusion in their Answer until a member of the previous panel of this court

raised it during oral arguments.       Below, we summarize the events underlying the judicial

estoppel claim, the question asked during oral arguments, and the issue raised in the district court

leading to the present appeal.

                                                 1.

        In this appeal, Winget argues that Chase should be judicially estopped from seeking the

full amount of the Guaranty from the Trust based on a representation made to the bankruptcy

court during the Chapter 7 bankruptcy proceedings of NM Holdings (a successor to Venture).

There, Chase, as agent for the Senior Lenders, moved for relief from the automatic stay in order

to recover $3.5 million held by the estate, which Chase claimed as collateral. Chase argued that

the estate had no equity in this collateral due to a $350 million deficiency under the Credit

Agreement. The bankruptcy court held a hearing on September 13, 2006.

        During the hearing, Chase told the court that Venture would still owe a deficiency even

after combining all the sources of repayment to which Chase had a security claim. Winget and

the Trust quote a representation by Chase’s counsel to the Bankruptcy Court:

        Your Honor is aware and the settlement agreement reflects the fact that
        the . . . pre-petition senior lenders have a limited recourse guarantee against stock
        interests, equity interests in South Africa, Venture South Africa and Australia.
        Those are entities owned by Mr. Winget and the pre-petition senior lenders have
        the right to enforce against those stock pledges for the maximum amount of
        $50,000,000. And those guarantees are the subject of litigation and are pending in
        District Court here in—here in Michigan. . . . Bottom line, Your Honor, by our
        calculation . . . if the senior lenders succeed in collecting the full $50,000,000 on

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No. 15-1924
JP Morgan Chase Bank, N.A. v. Winget

        their guarantees against South Africa and Australia, and we do believe we will
        collect that $50,000,000, and if tax refunds in the neighborhood of a few hundred
        thousand dollars are collected, and if it is also determined that the pre-petition
        lenders have valid liens on each of these categories of property because that has
        not been conceded by the trustee, we would recover approximately $148,000,000
        . . . leaving a deficiency of two hundred and twenty-eight million, nine hundred
        and some thousand . . . .

The bankruptcy court lifted the stay.

                                                2.

        During oral arguments for the earlier appeal, Winget and the Trust’s attorney referred to

this statement to the bankruptcy court. The attorney characterized the statement as follows:

“[Chase] said they held only a limited guaranty of $50 million.” At this point, we asked, “Isn’t

that judicial estoppel?” Winget and the Trust’s attorney stated that it should be “the end of the

discussion” because it “is certainly potentially a fraud on the court.” Chase’s attorney replied by

arguing that the statement was about the amount it could “recover if we execute[d] on all the

collateral.” He continued, “[T]here’s an unlimited full recourse guaranty but you don’t know

what the Trust owns. What you have is . . . a pledge of the assets, and that pledge can be

canceled for $50 million bucks. So the most conservative statement of what they could recover

was $50 million and that’s what they always used.” He also explained that in the context of the

bankruptcy proceeding, the question before the court was not about the Guaranty’s meaning, but

rather about the $50 million value of the pledge securing the Guaranty.

        Finally, at the end of oral arguments, Chase’s counsel explained that judicial estoppel had

not been raised in the district court and that it was not an issue on appeal. The former point is

not quite accurate, as Winget and the Trust had raised the affirmative defense in their Answer,

but we think that—as we explain in the next paragraph—the supplemental briefing adequately

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No. 15-1924
JP Morgan Chase Bank, N.A. v. Winget

corrected any misunderstanding. The latter point is quite accurate and, we think, explains why

we did not address judicial estoppel in our prior opinion.

        Following oral arguments, Winget and the Trust sought permission to file supplemental

briefing on judicial estoppel. Chase opposed the request, but we allowed Winget and the Trust to

file the supplemental brief. The brief alerted us to (1) the fact that Winget and the Trust had

asserted the affirmative defense in their Answer and (2) the nature of the statement made by

Chase’s counsel in the bankruptcy hearing. But we mentioned neither the supplemental briefing

nor judicial estoppel in our opinion reversing the district court and remanding for entry of

judgment.

                                                 3.

        On remand, Winget and the Trust moved to invoke judicial estoppel to prevent Chase

from seeking more than $50 million in damages, while Chase filed a motion for entry of an

amended final judgment. The district court granted Chase’s motion and denied the motion for

estoppel. The court explained that “defendants are attempting to seek relief that is contrary to

the Sixth Circuit’s decision. The [c]ourt at this stage in the case is limited to entering a judgment

in plaintiff’s favor on Count I.” Recognizing that we did not specify the amount for which to

enter judgment in favor of Chase, the district court added that “it was not necessary to do so in

order to resolve the issue of reformation.” Indeed, the district court pointed to our recognition

“that [our] decision allowed for recovery to the full extent of the Guaranteed Obligations—i.e.,

more than $50 million—against the Winget Trust.”

        The district court also concluded that “[h]ad the Sixth Circuit intended the . . .

consideration of [Winget’s and the Trust’s] judicial estoppel defense,” we would have said so. It

explained that their request for post-argument supplemental briefing and our decision not to

                                                -7-
No. 15-1924
JP Morgan Chase Bank, N.A. v. Winget

mention judicial estoppel were together sufficient to show that we had rejected the estoppel

argument by implication. The district court denied the motion to judicially estop Chase from

seeking damages over $50 million, granted Chase’s motion for entry of an amended final

judgment, and entered final judgment. After a motion for rehearing was denied, Winget and the

Trust timely appealed.

                                                 II.

        Having reviewed the facts underlying this dispute and its procedural history, we now turn

to the issue on appeal. Winget and the Trust contend that our earlier decision left an opening for

the district court to consider their judicial estoppel defense because it had not yet been

adjudicated. Chase responds that the mandate was clear and did not give the district court the

discretion to entertain the defense. For the following reasons, we agree with Chase and hold that

the district court correctly interpreted our mandate.

        We review de novo the interpretation of our mandates. United States v. Parks, 700 F.3d
775, 777 (6th Cir. 2012). “Traditionally, the mandate rule instructs that the district court is

without authority to expand its inquiry beyond the matters forming the basis of the appellate

court’s remand.” United States v. Campbell, 168 F.3d 263, 265 (6th Cir. 1999). If the circuit

court wishes to remand with limited instructions, the court “must sufficiently outline the

procedure the district court is to follow. The chain of intended events should be articulated with

particularity.” Id. at 268. In reviewing whether a district court complied with a mandate, the

court examines the entirety of the previously entered opinion to determine whether and how the

appellate court limited the remand. See Carter v. Mitchell, 829 F.3d 455, 463 (6th Cir. 2016).

        We have reviewed our previous opinion and find no error in the district court’s

interpretation of the opinion’s mandate. Our instructions to enter judgment on behalf of Chase

                                                 -8-
No. 15-1924
JP Morgan Chase Bank, N.A. v. Winget

left no room for the district court “to expand its inquiry” to the judicial estoppel defense.

Campbell, 168 F.3d at 265. At two points, we clearly stated that entry of judgment was

appropriate and gave the district court a specific instruction to do so. See Winget, 602 F. App’x

at 259 (“We therefore remand this case to the district court with instructions to enter judgment on

behalf of Chase on Count I of Chase’s complaint, consistent with our holding.”); id. at 266 (“As

for Chase’s claim regarding the district court’s reformation decision, we reverse the judgment of

the district court and remand with instructions to enter judgment in favor of Chase on Count I of

Chase’s complaint.”). The mandate simply left no leeway for the district court to conduct any

further proceedings or to consider any additional arguments. Although we do not go so far as to

say that the post-argument supplemental briefing properly placed the judicial estoppel argument

before us in that first appeal, we do think that the briefing alerted us to the issue. If we had

wanted the district court to consider it, we would have said so. The district court properly

interpreted our order as an instruction to enter judgment on behalf of Chase on its claim against

the Trust without further proceedings.

        Beyond the clear remand language, the substance of our prior opinion bolsters this

conclusion. First, we not only reversed the district court’s reformation decision on Count I, we

also affirmed the entry of judgment on Counts II and III. An affirmance of judgment on those

counts coupled with an instruction to enter judgment on Count I leads to the inescapable

conclusion that we intended our prior opinion to be the last word in this matter, aside from an

amendment to the entry of judgment. Second, as the district court recognized, our reversal of the

reformation decision specifically “allowed for recovery to the full extent of the Guaranteed

Obligations—i.e., more than $50 million—against the Winget Trust.” Winget, 602 F. App’x at

259. Our decision did not reverse the amount of liability; it reversed only the limitation on

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No. 15-1924
JP Morgan Chase Bank, N.A. v. Winget

Chase’s recourse as to that liability.     Winget’s and the Trust’s liability had already been

determined by the district court’s previous entry of judgment, so the remand was to require the

district court to amend the judgment to remove the improper limitation on Chase’s ability to

collect.

           Finally, we note that Winget and the Trust had the opportunity to raise the judicial

estoppel defense at various stages of this litigation. Indeed, the record indicates that they

referred to these facts in their motion for summary judgment on Count I of the complaint and

Count I of the counterclaim, which was later withdrawn; their opposition to Chase’s motion for

summary judgment on Count I of the Complaint and Count I of the Counterclaim; and their brief

in the earlier Sixth Circuit appeal. Although they referenced these facts, they never asserted the

judicial estoppel defense. For this reason, Winget’s and the Living Trust’s reliance on Exxon

Chemical Patents, Inc. v. Lubrizol Corp., 137 F.3d 1475 (Fed. Cir. 1998), is unavailing. In

Exxon, a patent infringement suit, the plaintiff asserted two theories of claim construction until a

court ruling rendered one moot. When that ruling was reversed by the Federal Circuit, the

district court did not allow a new trial on remand. On appeal, the Federal Circuit reversed and

explained that the theory was no longer moot and “became a critical issue in the case only after”

the first appeal. Id. at 1479. Here, by contrast, no decision by the district court ever rendered the

judicial estoppel claim moot, nor did judicial estoppel become critical only after we reversed the

district court’s initial reformation decision. Winget and the Trust relied on the facts underlying

the affirmative defense while letting the affirmative defense itself languish on the pages of their

answer. We are left with the conclusion that Winget and the Trust decided—either intentionally

or inadvertently—not to pursue the judicial estoppel claim until a member of our court raised it

in a question.

                                                -10-
No. 15-1924
JP Morgan Chase Bank, N.A. v. Winget

                                              III.

        For these reasons, we AFFIRM the judgment of the district court.

                                              -11-