U-Nest Holdings, Inc. v. Ascensus Coll. Sav. Recodkeeping Servs.

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U-NEST HOLDINGS, INC., Plaintiff, v. ASCENSUS COLLEGE SAVINGS RECORDKEEPING SERVICES, LLC, Defendant.

C. A. No. 19-659 WES

United States District Court, D. Rhode Island

February 8, 2023

MEMORANDUM AND ORDER

William E. Smith District Judge

Before the Court is Plaintiff's Motion for Relief from Judgment ECF. No. 38. For the reasons that follow, the motion is DENIED.

I. Background

United States Code Title 28, § 529 governs qualified tuition programs, which are tax-exempt education savings plans. Plaintiff U-Nest Holdings, Inc., (“U-Nest”) offers a mobile phone application (“app”) that allows users to save for their children's education using these so-called § 529 Plans. Second Am. Compl. ¶ 7 ECF No. 27. Through the app, U-Nest functions as a financial advisor. See Prelim. Inj . Hearing Tr. 10:11-12, ECF No. 36. Defendant Ascensus College Savings Recordkeeping Services, LLC, (“Ascensus”) manages a Rhode Island-sponsored qualified tuition program governed by § 529 (“RI Program”). Id. at ¶¶ 8-9. In this role, Ascensus “accepts paperwork from investors . . . and helps with the account opening processes, the account monitoring processes, more or less servicing [the plans].” Prelim. Inj. Hearing Tr. 6:20-23. Pursuant to an agreement with Ascensus, a non-party, Invesco, is the RI Program's distributor. Second Am. Compl. ¶ 10. As distributor, Invesco manages the municipal fund securities in the RI Program and “sets up the funds that will be the investments, that investors get shares in when they open an account and submit money to the plan.” Prelim. Inj. Hearing Tr. 7:6-9.

In May of 2018, before launching its app, U-Nest entered “an agreement for recommending 529 Plan Securities” with Invesco. Second Am. Compl. ¶ 11; Compl. Ex. B. Per that agreement, “U-Nest was authorized to recommend, on a non-exclusive basis, Invesco-managed municipal funds securities that are in the RI Program.” Second Am. Compl. ¶ 13. In October 2018, U-Nest released its app. Id. at ¶ 12. One year later, Invesco notified U-Nest that it was terminating their agreement, alleging that U-Nest had breached it.^[1] Id. at ¶¶ 23-24. Because of the termination, U-Nest would lose access to the RI Program. Id. At ¶¶ 25-30.

“Because [its] approximately 500 end-user account holders . . . would have been negatively impacted if Ascensus [acting through Invesco] were permitted to terminate U-Nest's access to its accounts on November 30, 2019, U-Nest filed an action in Rhode Island Superior Court on November 25, 2019 . . .” against both Ascensus and Invesco. Id. at ¶ 31. Days later, the parties entered a settlement agreement. Id. at ¶¶ 32-35. The agreement provided, inter alia, that U-Nest would retain access to account information regarding its existing RI Program clients until December 31, 2019. Id. at ¶ 34.

As a result of the dispute and settlement, U-Nest began transferring its RI Program accounts to a corollary program in New York (“NY Program”), which Ascensus also manages. Id. at ¶¶ 3638, 42. However, during the rollover process, the program distributor notified U-Nest that it could no longer roll over accounts and that all current accounts in the NY Program were "frozen.” Id. at ¶¶ 37-38. This termination occurred at least partly because Ascensus informed the NY Program distributor that U-Nest's accounts were "high risk.” Id. at ¶¶ 40-41.

Prior to the December 31 deadline, U-Nest initiated this case, alleging that Ascensus breached the settlement entered in the Rhode Island Superior Court case, engaged in anticompetitive conduct in violation of Federal and State laws, and tortiously interfered with contractual relations, requesting injunctive relief as well as compensatory damages. Id. at ¶¶ 49-148. On the same day, UNest filed an Emergency Motion for Preliminary Injunction, ECF No. 6, requesting relief from the December 31 deadline. Mem. Sup. Emergency Mot. Prelim. Inj. 1, ECF No. 6-1. U-Nest argued that Ascensus's actions with respect to U-Nest's participation in the NY Program had hindered its ability to transfer RI clients, requiring an extension of the deadline, and that without relief its clients would lose access to their accounts. Id. at 1-2.

On January 8, 2020, the Court held a hearing on U-Nest's Emergency Motion for Preliminary Injunctive Relief. During the hearing, U-Nest's attorney presented several theories explaining why Ascensus was “forcing out” U-Nest, including the theory that Ascensus was developing (or hoping to develop) an app similar to U-Nest's. Prelim. Inj. Hearing Tr. 21:8-12. In response, Ascensus's attorney stated: “[w]e're not developing [an app]; this isn't some conspiracy to knock U-Nest out....[W]e've got all these wild theories being spun; [o]h, we were developing an app. Well, where's the evidence that [Ascensus was] developing an app or these other things?” Id. at 52:20-22, 60:15-18. The Court denied the motion for preliminary injunction, determining that U-Nest had not established irreparable harm. Id. at 78:12-25, 79:125, 80:1-17.

U-Nest now claims that it relied on these statements in deciding “to quickly compromise and settle its antitrust claims against Ascensus rather than further pursue those claims.” Mem. Supp. Mot. Relief from J. 2, ECF No. 38-1. The parties executed a settlement agreement in early 2020 (“2020 settlement”). Id. at 2. On January 17, 2020, U-Nest filed a stipulation of dismissal, and on January 22, the Court entered the stipulation and terminated this case.

Just over a year later, Ascensus debuted its own 529 education savings mobile app.^[2] 21-cv-00204-WES-PAS, Compl. Ex. B, ECF No. 1-2. U-Nest contends that the release of this app proves that Ascensus's attorney lied during the preliminary injunction hearing because one year is not enough time to develop an app of this type. Mem. Supp. Mot. Relief from J. 3. Thus, in May of 2021, three months after Ascensus announced its app, U-Nest filed another suit against Ascensus in this Court (“2021 case”), in which it claimed that the 2020 settlement agreement did not foreclose the suit. See 21-cv-00204-WES-PAS Compl. ¶¶ 121-23, ECF No. 1.

Thereafter, Ascensus filed a motion to dismiss the case, arguing insufficient pleading and that the 2020 settlement barred the claims. 21-cv-00204-WES-PAS Mem. Supp. Mot. Dismiss 1, ECF No. 21-1. In response, U-Nest argued that the 2020 settlement must be set aside due to fraud, because Ascensus's counsel had lied about not developing an app. 21-cv-00204-WES-PAS Obj. Mot. Dismiss 16, ECF No. 25. On March 21, 2022, following a hearing on the matter, the Court, McElroy, J.,^[3] determined that U-Nest's only route to a release from the 2020 settlement was a motion for relief from judgment in this, the original, case. 21-cv-00204-WES-PAS Mem. & Order 16, ECF No. 30. Thus, the Court denied the motion to dismiss and stayed the 2021 case so that U-Nest could file a motion for relief from judgment in the present case. Two months later, on May 16, U-Nest filed the present motion for relief, arguing that Ascensus's attorney had lied about its app development during the preliminary injunction hearing and that U-Nest had relied on those statements when deciding to enter the settlement agreement.

III. Discussion

A motion for relief from judgment is governed by Federal Rule of Civil Procedure 60. The applicable section of the Rule provides:

On motion and just terms, the court may relieve a party or its legal representative from a final judgment, order, or proceeding for the following reasons:

(1) mistake, inadvertence, surprise, or excusable neglect;

(2) newly discovered evidence that, with reasonable diligence, could not have been discovered in time to move for a new trial under Rule 59(b);

(3) fraud (whether previously called intrinsic or extrinsic), misrepresentation, or misconduct by an opposing party;

(4) the judgment is void;

(5) the judgment has been satisfied, released, or discharged; it is based on an earlier judgment that has been reversed or vacated; or applying it prospectively is no longer equitable; or

(6) any other reason that justifies relief.

Fed R. Civ. P. 60(b). Rule 60(c) provides that “[a] motion under Rule 60(b) must be made within a reasonable time--and for reasons (1), (2), and (3) no more than a year after the entry of the judgment or order or the date of the proceeding.”

Initially, U-Nest described its motion as being brought pursuant to Rule 60(b)(6) and, therefore, argued that the motion was subject only to the reasonableness requirement and not the one-year time bar. The Court has previously determined, however, that this motion is properly described as a Rule 60(b)(3) motion, as it is based on allegations of fraud.^[4] Dec. 12, 2022 Text Order.

“Relief under Rule 60(b) ‘is extraordinary in nature' and thus, ‘motions invoking that rule should be granted sparingly.'” Unibank for Sav. v. 999 Priv. Jet, LLC, 31 F.4th 1, 8 (1st Cir. 2022) (quoting Karak v. Bursaw Oil Corp., 288 F.3d 15, 19 (1st Cir. 2002)). Generally, “Rule 60(b) motions should not be granted unless the party seeking relief can show (1) that the motion was timely, (2) that exceptional circumstances justifying relief exist, (3) that the other party would not be unfairly prejudiced, and (4) that there is a potentially meritorious claim or defense.” Roosevelt REO PR II Corp. v. Del Llano-Jimenez, 765 Fed.Appx. 459, 461 (1st Cir. 2019). Analysis of these is guided by the relevant subsection of Rule 60(b). When reviewing these motions, “[c]ourts are not to ‘give credence to [a] movant's bald assertions, unsubstantiated conclusions, periphrastic circumlocutions, or hyperbolic rodomontade.'” Id. (quoting Teamsters, Chauffeurs, Warehousemen & Helpers Union, Local No. 59 v. Superline Transp. Co., 953 F.2d 17, 20 (1st Cir. 1992)...