Shuffle Tech International, LLC v. Wolff Gaming, Inc.

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 13-3576
SHUFFLE TECH INTERNATIONAL, LLC,
Plaintiff-Appellant,
v.
WOLFF GAMING, INC.,
Defendant-Appellee.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 11 C 7358 — Elaine E. Bucklo, Judge.
____________________
ARGUED APRIL 22, 2014 — DECIDED JULY 9, 2014
____________________
Before POSNER, WILLIAMS, and TINDER, Circuit Judges.
POSNER, Circuit Judge. Rule 60(a) of the Federal Rules of
Civil Procedure authorizes a district court to “correct a
clerical mistake or a mistake arising from oversight or
omission whenever one is found in a judgment, order, or
other part of the record. The court may do so on motion or
on its own, with or without notice.” (The rule goes on to
provide that the court may not do this without the
permission of the appellate court if an appeal from the
2 No. 13-3576
judgment, order, etc., sought to be corrected has been
docketed, but that provision is not applicable to this case.)
Rule 60(b) authorizes a court to “relieve a party or its legal
representative from a final judgment, order, or proceeding”
for various reasons including “mistake, inadvertence,
surprise, or excusable neglect,” or “any other reason that
justifies relief,” but only “on motion” of a party. The
appellant, Shuffle Tech, argues that the correction made by
the district judge in this case of an error in her judgment
exceeded her authority under either subsection of the rule.
Shuffle Tech makes “consumer grade” automatic card-
shuffling equipment. The appellee, Wolff Gaming,
distributes “casino grade” gaming equipment. In 2010 the
parties signed a letter of intent expressing their “mutual
commitment to proceed with the draft Development &
Distribution Agreement.” The draft agreement described a
deal in which Shuffle Tech, with financial assistance from
Wolff, would develop casino-grade shuffling equipment,
while Wolff would become the exclusive distributor of the
equipment in the Western Hemisphere.
The deal was a flop. In the following year, before the
development of the new shuffling equipment was
completed, Shuffle Tech wrote Wolff proposing that the
parties “settle all outstanding business … and go [their]
separate ways.” A couple of months later Shuffle Tech
brought this diversity suit (governed by Illinois law),
seeking a declaratory judgment that the draft agreement was
not an enforceable contract but the letter of intent was and
Wolff had broken it. Wolff counterclaimed, charging breach
of contract, fraud, unjust enrichment, and other wrongdoing.
The district judge granted summary judgment in favor of
No. 13-3576 3
Shuffle Tech with respect both to its claim for declaratory
relief and to Wolff’s counterclaims, but granted summary
judgment in favor of Wolff with respect to Shuffle Tech’s
claim for breach of contract. So when the dust settled, the
judge had, in effect, by granting only the declaratory relief
sought by Shuffle Tech and rejecting the parties’ other
claims, simply rescinded the draft agreement. The question
presented by the appeal is whether the rescission obligated
Shuffle Tech to return the earnest money that it had received
from Wolff in connection with the draft agreement.
The parties’ letter of intent had provided that “as
evidence of Wolff Gaming’s commitment to proceed, Wolff
Gaming agrees immediately [to] pay $100,000 toward the
total $525,000 initial commitment described in the draft
Agreement. This earnest money is to be held by Shuffle Tech
and may be used to proceed with the project; however, in the
event that a final Agreement cannot be signed within 90
days, Wolff Gaming may request the return of the entire
$100,000 paid as earnest money, and said earnest [money]
will be refunded within 15 days of said request.” Wolff paid
the $100,000 in earnest money as agreed in the letter of
intent, later paying an additional $24,940 in earnest money at
Shuffle Tech’s request.
Shuffle Tech’s claim for declaratory relief asked “for entry
of a judgment declaring that the … DRAFT ‘Development
and Distribution Agreement’ does not constitute a binding
contract” and that “Shuffle Tech’s only obligation to Wolff is
to refund $124,940 advanced to Shuffle Tech as earnest
money pursuant to the … Letter of Intent.” In other words,
Shuffle Tech was acknowledging that if the agreement was
rescinded it would have to return the earnest money to
4 No. 13-3576
Wolff. But the district judge’s grant of declaratory relief
failed to mention the earnest money. On the basis of the
judge’s grant of summary judgment, however, which as we
said denied all relief except rescission, and of the earnest-
money provision of the letter of intent, Wolff asked Shuffle
Tech to return the $124,940, and when Shuffle Tech ignored
the request Wolff filed a motion under Rule 60 (not
specifying which subsection of the rule the motion was being
filed under) that the court order Shuffle Tech to refund the
earnest money. In response, the district judge entered a
postjudgment order that “amended [the final judgment] to
specify that Shuffle Tech must pay [Wolff Gaming] $124,940
within fifteen days.” The order did not mention Rule 60 or
any other ground for the amendment. Shuffle Tech appeals
from the final judgment as thus amended, denying any
obligation to return the earnest money.
Rule 60(a) as we said allows a district judge to “correct a
clerical mistake or a mistake arising from oversight or
omission whenever one is found in a judgment,” and to do
so “on motion or on [his or her] own, with or without
notice” to the parties. When the ground for changing the
judgment is not a trivial error but fraud, newly discovered
evidence, excusable neglect, or some like ground that is
likely to raise issues that may benefit from an adversary
presentation, Rule 60(b) comes into play and requires that
the ground be asserted by motion of a party (which also was
done in this case—in fact Wolff filed two such motions,
although only one mentioned Rule 60).
Thus “if the flaw lies in the translation of the original
meaning to the judgment, then Rule 60(a) allows a
correction; [but] if the judgment captures the original
No. 13-3576 5
meaning but is infected by error, then the parties must seek
another source of authority to correct the mistake.” United
States v. Griffin, 782 F.2d 1393, 1396–97 (7th Cir. 1986); see
Rivera v. PNS Stores, Inc., 647 F.3d 188, 193–94 (5th Cir. 2011);
11 Charles Alan Wright et al., Federal Practice & Procedure
§ 2854, p. 302 (3d ed. 2012). Rule 60(b) is the usual other
source, but as we said it authorizes the district court only to
“relieve a party or its legal representative from a final
judgment, order, or proceeding,” and that is not the nature
of the relief sought by Wolff. Wolff wanted affirmative
relief—an order that Shuffle Tech refund the earnest money.
That is not available under Rule 60(b). See United States v.
$119,980.00, 680 F.2d 106, 107 (11th Cir. 1982); Delay v.
Gordon, 475 F.3d 1039, 1044–45 (9th Cir. 2007). But it can be
available under Rule 60(a) because that rule authorizes
corrections necessary to restore the original meaning of the
judgment, and such corrections may require affirmative
relief—as in this case, as we’ll see.
The importance of limitations on the reach of Rule 60 lies
in the fact that a correction authorized by Rule 60(a) may be
made at any time—even years after the original judgment—
and while Rule 60(b) has deadlines, see Rule 60(c)(1), they
are generous. The possibility that a correction might be
sought long after a final judgment is rendered creates a risk
that, if made, the correction will frustrate a reliance interest
generated by a reasonable reading of that original judgment.
United States v. Griffin, supra, 782 F.2d at 1397–98; Wright et
al., supra, § 2851, p. 286 (“the rule attempts to strike a proper
balance between the conflicting principles that litigation
must be brought to an end and that justice should be done”);
id. § 2857, p. 322 (“discretion ordinarily should incline
toward granting rather than denying relief, especially if no
6 No. 13-3576
intervening rights have attached in reliance upon the
judgment and no actual injustice will ensue”). There was no
danger that the correction sought by Wolff would
undermine a reliance interest of Shuffle Tech. Shuffle Tech
could not reasonably have relied on an interpretation of the
final judgment that would have relieved it of any duty to
refund the earnest money even though the draft agreement
was being rescinded. For when a contract is rescinded, the
parties are to be placed in the position they would occupy
had there never been a contract. Horan v. Blowitz, 148 N.E.2d
445, 449 (Ill. 1958); Puskar v. Hughes, 533 N.E.2d 962, 966–67
(Ill. App. 1989); Goldberg v. 401 North Wabash Venture LLC,
2014 WL 2579939, at *5–6 (7th Cir. June 10, 2014); Fleming v.
United States Postal Service AMF O’Hare, 27 F.3d 259, 262 (7th
Cir. 1994). (Both Goldberg, at *5, and Fleming, at 262, make
clear that this is both the federal rule and the Illinois rule.)
Furthermore, the shorter the interval between the final
judgment and the correction of it, the less likelihood there is
of upsetting a reliance interest—and in this case the order
amending the final judgment followed the entry of the
judgment by only 29 days.
Shuffle Tech insists that when it said in asking for
declaratory relief that its “only obligation to Wolff [was] to
refund $124,940 advanced to Shuffle Tech as earnest money
pursuant to the … Letter of Intent,” it was referring only to
the obligation created by the letter of intent, and that the
obligation had lapsed when, in response to its offer to return
the earnest money in exchange for dissolution of the draft
agreement, Wolff did not ask for the money. Therefore, it
continues, to obtain the return of the earnest money Wolff
had to sue for it, as it did in its counterclaim accusing Shuffle
No. 13-3576 7
Tech of unjust enrichment—and the district judge dismissed
that claim along with Wolff’s other counterclaims.
But Shuffle Tech overlooks the fact that Wolff was
resisting Shuffle Tech’s effort by means of its claim for
declaratory relief to dissolve the draft agreement. Wolff’s
position was that it was an enforceable contract. If so, Shuffle
Tech’s retaining the earnest money while refusing to perform
the contract was indeed unjust enrichment. When the judge
ruled that the contract was unenforceable, the claim of
unjust enrichment fell away. That left a dissolved contract—
and therefore no ground for Shuffle Tech’s retention of the
earnest money even though it would not have been unjustly
enriched by retaining it had the contract been enforceable.
Shuffle Tech denied that the agreement remained in force; its
claim for declaratory relief successfully sought a judgment
declaring the contract unenforceable. With that judgment
rendered and the contract thus rescinded, all that remained
to be done was for Shuffle Tech to return the earnest money.
So the judge’s correction of her judgment just made
explicit what the parties must have assumed—that with the
draft agreement rescinded the earnest money had to be
returned. The judge’s failure to mention Rule 60(a) when she
made the correction was inconsequential. But she did rather
muddy the waters when she said that Shuffle Tech’s
“obligation to repay the earnest money arises not out of any
claim by [Wolff], but out of [Shuffle Tech’s] own claim for
declaratory relief. If all [Shuffle Tech] wanted out of this
action was a declaration that it was not bound by the Draft
Agreement, it could have limited its declaratory claim to that
issue and remained silent about any obligations it believed it
had under the Letter of Intent. It did not. Instead, [it]
8 No. 13-3576
invoked the court’s authority to declare specifically that it
was obligated to return the earnest money.” This makes it
seem as if Shuffle Tech wanted to refund the earnest money;
obviously it did not. It merely recognized that it could not
obtain rescission of the contract, as sought in its claim for
declaratory relief, without acknowledging an obligation to
return the earnest money, for otherwise rescission would not
place the parties in the position they would be occupying
had there never been a contract. Shuffle Tech’s attempt to
back out of that concession, merely because the district judge
had initially failed to mention it, was a tactic rightly blocked
by Rule 60(a).
AFFIRMED.