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Amato v. KPMG LLP

August 14, 2006

PETER & DEBORAH AMATO, ET AL., PLAINTIFFS
v.
KPMG LLP, ET AL., DEFENDANTS



The opinion of the court was delivered by: Judge Jones

MEMORANDUM AND ORDER

THE BACKGROUND OF THIS ORDER IS AS FOLLOWS

Pending before the Court is a Motion for Reconsideration Directed to Footnotes 6 and 7 of the Court's June 13, 2006 Memorandum and Paragraph 1(A) of the Court's June 13, 2006 Order ("the Motion") (doc. 85) filed by Plaintiffs*fn1 on June 27, 2006.*fn2 For the reasons that follow, the Motion will be granted.

FACTUAL BACKGROUND/PROCEDURAL HISTORY

The factual background and procedural history of this case was thoroughly set forth in our June 13, 2006 Order and is well known to the parties. (Rec. Doc. 84). The following brief recitation of that history is sufficient for the purpose of reviewing the pending Motion.

On or about October 28, 2005, Plaintiffs filed a complaint against Defendants*fn3 in the Court of Common Pleas of Luzerne County, Pennsylvania alleging various misconduct relating to Plaintiffs' participation in an investment strategy known as Offshore Portfolio Investment Strategy ("OPIS"). By stipulation of the parties, the time for Defendants to respond to Plaintiffs' complaint was extended to January 6, 2006. On January 6, 2006, the Deutsche Bank Defendants, with the consent of all Defendants, removed the action to this Court.

Plaintiffs' complaint alleges that in 1998 they realized a significant capital gain from the sale of certain companies, including Keystone Automotive Warehouse. (Compl. ¶¶ 22-25). Plaintiffs are individuals who hoped to avoid tax liability by investing in a tax-advantaged investment strategy, OPIS, that was allegedly marketed to them by KPMG. Id. ¶¶ 25, 47, 48. Plaintiffs allege that they participated in the OPIS strategy after meeting with a representative of KPMG, who advised them that they could recognize significant tax benefits through their participation in OPIS. Id. ¶ 25. Subsequently, Plaintiffs claimed substantial tax losses on their tax returns. Id. ¶ 13. Plaintiff allege that the IRS and the Commonwealth of Pennsylvania later challenged such losses. Id. ¶¶ 32, 99-101.

In our June 13, 2006 Order, we denied Plaintiffs' Motion to Remand for Lack of Subject Matter Jurisdiction (doc. 23), granted in part and denied in part Motions to Compel Arbitration and Stay All Proceedings, or, Alternatively, for an Extension of Time to Respond to Plaintiffs' Complaint filed by Defendant KPMG (doc. 7) and Defendant Deutsche Bank (doc. 10), and we granted in part and denied in part Presidio Defendants' Motion to Stay Proceedings Pending Arbitration, or, Alternatively, for Additional Time to Respond to Complaint (doc. 8). In our June 13, 2006 Order, we also granted in part and denied in part Sidley Austin's Motion to Dismiss Plaintiffs' Complaint pursuant to Fed.R.Civ.P. 12(b)(6) (doc. 9). At issue in the instant Motion filed by Plaintiffs is our dismissal of Plaintiffs' claims for the recoupment of interest paid to the IRS. (Rec. Doc. 84 at 69, Paragraph 1(A)).

Plaintiffs filed the Motion on June 27, 2006, to which Sidley Austin filed a responsive submission. (Rec. Docs. 85, 87). Plaintiffs filed a reply brief on July 27, 2006. (Rec. Doc. 89). Accordingly, the Motion is ripe for disposition.

STANDARD OF REVIEW

Motions for reconsideration should be granted sparingly as federal courts have a strong interest in the finality of judgments. Burger King Corp. v. New England Hood & Duct Cleaning Co., 2000 U.S. Dist. LEXIS 1022, at *2 (E.D. Pa. 2000). "The purpose of a motion for reconsideration . . . is to correct manifest errors of law or fact or to present newly discovered evidence." Max's Seafood Café v. Quinteros, 176 F.3d 669, 677 (3d Cir. 1999) (quoting Harsco Corp. v. Zlotnicki, 779 F.2d 906, 909 (3d Cir. 1985), cert. denied, 476 U.S. 1171 (1986)). "Accordingly, a judgment may be altered or amended if the party seeking reconsideration shows at least one of the following grounds: (1) an intervening change in the controlling law; (2) the availability of new evidence that was not available when the court granted the motion for summary judgment; or (3) the need to correct a clear error of law or fact or to prevent manifest injustice." Id. (citing North River Ins. Co. v. CIGNA Reinsurance Co., 52 F.3d 1194, 1218 (3d Cir. 1995)).

DISCUSSION

Plaintiffs bring the Motion with respect to a discrete but important portion of our June 13, 2006 Order, specifically Plaintiffs' claim for recoupment of interest paid to the IRS. Plaintiffs initially argue that the issue of whether interest paid to the IRS may or may not be recovered as an element of damages was not squarely before the Court when we disposed of Sidley Austin's Motion to Dismiss. Plaintiffs subsequently assert that the recovery of interest that they paid to the IRS is a proper element of damages. In that regard, Plaintiffs direct the Court to a raging debate among various courts on this issue and maintain that the better view for the Court to adopt allows for recovery of interest depending upon the facts of the case. "We believe this Court, without the benefit of plaintiffs' illumination of an issue they did not deem to have been presented for decision, overlooked this important line of competing authority and ruled on an issue that, in fairness, required significant analysis and consideration. We respectfully submit that the issue of whether, although plaintiffs have stated a claim for professional malpractice, that claim (and the other claims against Sidley) may properly result in recovery of interest paid to the IRS as an aspect of damages should be left for another day." (Pls.' Mot. Reconsideration at 14).

In response, Sidley Austin argues that Plaintiffs' Motion should be denied outright by the Court because there is no appropriate basis for reconsideration. In addition, Sidley Austin maintains that its Motion to Dismiss was an appropriate forum for the Court's decision regarding whether the recovery of interest that Plaintiffs' paid to the IRS is a proper element of damages. Sidley Austin asserts that the Court had the power to dismiss the interest damages even in the absence of a motion made by Sidley Austin. Finally, Sidley Austin contends that reconsideration would be futile because the Court reached a correct decision. In that vein, Sidley Austin points to various courts ...


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