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Alpenglow Botanicals, LLC v. United States

United States District Court, D. Colorado

April 28, 2017



          RAYMOND P. MOORE United States District Judge.

         On December 1, 2016, this Court entered an Opinion, inter alia, denying plaintiffs', Alpenglow Botanicals, LLC (“Alpenglow”), Charles Williams, and Justin Williams (collectively, “plaintiffs”), motion for summary judgment and granting defendant's, the United States of America (“defendant”), motion to dismiss. (ECF No. 48.) Final judgment was entered the same day. (ECF No. 49.) Twenty-eight days later plaintiffs filed a motion to alter or amend judgment (“the motion to alter”) pursuant to Fed.R.Civ.P. 59(e) (“Rule 59(e)”). (ECF No. 50.) Attached to the motion to alter was a proposed amended version of plaintiffs' Complaint. (ECF Nos. 50-2, 50-3.)[1] Defendant has now filed a response, and plaintiffs have filed a reply. (ECF Nos. 53, 54.)

         I. Legal Standard

         Motions attacking a final judgment that are filed within 28 days of entry of the same are reviewed under Rule 59(e). See Servants of the Paraclete v. Does, 204 F.3d 1005, 1012 (10th Cir. 2000) (discussing a prior version of Rule 59(e)); see also Fed.R.Civ.P. 59(e) (“A motion to alter or amend a judgment must be filed no later than 28 days after the entry of the judgment.”). Grounds justifying a motion to alter or amend judgment under Rule 59(e) include “(1) an intervening change in the controlling law, (2) new evidence previously unavailable, and (3) the need to correct clear error or prevent manifest injustice.” Servants of the Paraclete, 204 F.3d at 1012.

         II. Discussion

         A. Arguments Related to Amending the Operative Complaint

         Plaintiffs assert that this Court misapprehended controlling law when it failed to consider three issues raised for the first time outside of their operative Complaint as a request to amend the Complaint, citing Pater v. City of Casper, 646 F.3d 1290 (10th Cir. 2011). (ECF No. 50 at 2-3.) Plaintiffs further assert that leave to amend should be granted because this case is in its early stages, and there would be no prejudice to the parties. (Id. at 3.)

         Plaintiffs arguments fail in all respects. First, the Court did not fail to consider plaintiffs' newly raised allegations. The Court more than thoroughly considered each, and found that plaintiffs had failed to raise those allegations in their operative Complaint. (ECF No. 48 at 11, 13-15.) Pater requires nothing more. In Pater, the Tenth Circuit Court of Appeals explained that an issue raised for the first time in a motion for summary judgment “may properly be considered a request to amend the complaint….” Pater, 646 F.3d at 1299 (emphasis added). Notably, in Pater, the district court did not address an argument “[p]resumably” because it had been raised for the first time in a motion for summary judgment. The Tenth Circuit, thus, construed the district court's refusal to address the new issue as a denial of plaintiff's request to amend, and concluded that the court did not err in failing to consider the issue. Id. In this light, Pater certainly does not require the Court to address in writing newly raised issues. This is especially the case, here, where plaintiffs are represented by counsel. If plaintiffs wished to add new allegations to their operative Complaint, then they should have requested leave to do so. Otherwise, the Court would have been forced to engage in its own debate as to the legal merit of plaintiffs' undisclosed request. The Court would have been forced to conjure up plaintiffs' arguments in favor of amending the Complaint, defendant's response in opposition, and then decide which of the Court's split personalities had won. The Court does not find such a contention to be the controlling law. As such, the Court does not find that it has misapprehended controlling law.

         Second, even if the Court were predisposed to now consider plaintiffs' request for leave to amend their Complaint, the Court would not grant the request. As the Court stated in its December 1, 2016 Opinion with respect to plaintiffs' newly raised argument about defendant's having a lack of evidence to apply 26 U.S.C. § 280E (“§ 280E”), plaintiffs could have raised that argument when they first brought this case. (ECF No. 48 at 14-15.) To the extent it was not clear in that earlier Opinion, the same is true of the other two issues plaintiffs newly raised.

         Plaintiffs' first newly raised argument concerns whether defendant disallowed costs of goods sold under “IRC 263A”. (ECF No. 50 at 2.) As the allegations in the proposed amended Complaint make clear, defendant issued a Form 921 on December 11, 2014, denying all ordinary and necessary business deductions, including the cost of goods sold. (ECF No. 55-2 at ¶ 9.) The same allegation (minus reference to cost of goods sold), citing to the same Form 921, was made in the iteration of the Complaint (the first amended complaint) considered in the Court's December 1, 2016 Opinion. (See ECF No. 30-1 at ¶ 9.) Plaintiffs' request with respect to this argument is particularly egregious because, in allowing the first amended complaint to become the operative Complaint, the Court allowed plaintiffs to more fully delineate the “nature of the deductions” at issue. (See ECF No. 30 at 1-2.) Despite purporting to do that, plaintiffs failed to include § 263A costs, even though those costs were specifically included in the exhibit attached to the first amended complaint. (See ECF No. 30-2 at 1.) As such, plaintiffs could have easily raised this claim when they first filed this case.

         The same is true of plaintiffs' third newly raised argument that § 280E violates the Eighth Amendment. (ECF No. 50 at 2.) As the Court explained in its December 1, 2016 Opinion, that argument was raised in the operative Complaint, but plaintiffs failed to allege that § 280E would deal a fatal blow to its business and would stamp out all of Colorado's legalized marijuana industry. (ECF No. 48 at 13.) Instead, in the operative Complaint all that plaintiffs alleged, conclusorily, was that § 280E was a “forfeiture provision requiring the forfeiture of the entirety of a taxpayer's income and capital.” (See ECF No. 30-1 at ¶ 24.) Given that the alleged forfeitures in this case took place, at the latest, in May 2015 when defendant denied Alpenglow's refund claim (see id. at ¶ 15), plaintiffs could have easily made the new allegations, which were raised for the first time in their response to the motion to dismiss, in the original complaint or the first amended complaint.[2]

         As the Tenth Circuit stated in Pater, “untimeliness alone is a sufficient reason to deny leave to amend when the party filing the motion has no adequate explanation for the delay.” Pater, 646 F.3d at 1299 (quoting Frank v. U.S. West, Inc., 3 F.3d 1357, 1365-66 (10th Cir. 1993)) (ellipsis omitted).[3] Here, Plaintiffs do not attempt to explain their delay. (See generally ECF No. 50.) Instead, construing the motion to alter kindly, it appears that plaintiffs believe that the first and third new arguments/allegations were sufficiently raised in the first amended complaint. (See ECF No. 50 at 3-4.) In light of the discussion herein and in the December 1, 2016 Opinion that is clearly not the case.

         As for the second new argument, concerning defendant's alleged lack of evidence to support application of § 280E, although, arguably, indications of defendant's lack of evidence may have arisen during the course of this litigation, as plaintiffs asserted in their motion for summary judgment, the Notice of Deficiency had no findings of fact establishing plaintiffs' purported trafficking in a controlled substance. (See ECF No. 40 at 15.) Given that plaintiffs further assert that the Notice of Deficiency was issued “about December 11, 2014” (id. at 4), it cannot be said that plaintiffs were without facts necessary to raise a claim related to an alleged lack of evidence.

         As a result, the Court finds that plaintiffs are not entitled to leave to amend their Complaint because they have failed to provide any reason (let alone an adequate one) for why they delayed in raising the ...

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