Good stuff out of the Fourth Circuit this week–the Court published an opinion addressing two delightfully nerdy topics, Rule 59 motions and the mandate rule, JTH Tax, Inc. v. Aime

Full disclosure: Before reading this opinion, I did not know that the mandate rule was a thing.

I mean, I could have derived it–it seems like a bad idea to ask a lower court to overrule a higher court’s opinion earlier in the exact same case?–but I didn’t know there was actually a rule saying that you can’t do that. Now I do. So I am literally a better lawyer than I was when I started the opinion. Read on if you are dumb like me and could use a powerup.


Let’s streamline the facts to get to the good stuff. Gregory Aime ran nine tax franchises under agreements with Liberty Tax (which is what we’ll call JTH Tax, Inc. and SiempreTax+ LLC). Those contracts required him to maintain an Electronic Filing Identification Number, or “EFIN.”* The IRS revoked Aime’s EFIN, giving Liberty Tax the authority to terminate the contract. But instead, the parties negotiated a new Purchase and Sale Agreement. Under that Agreement, Liberty Tax would buy back Aime’s franchises but he would have the option to repurchase them if his EFIN was restored by May 8, 2016. Liberty Tax would then owe him any profits it had earned in the meantime. Despite these terms, Liberty Tax immediately went about selling the franchises to a third party. The district court found that it had never intended to honor Aime’s buyback option. And Aime, for his part, did not manage to get his EFIN restored until September, well after the deadline. Their relationship soured and litigation ensued.

After a bench trial, the district court found that Liberty Tax had breached the Agreement, awarding damages of more than $2.7 million. The district court found that Liberty Tax had agreed to extend the option deadline from May until September.

On appeal (the first time around), the Fourth Circuit held that the parties had not agreed to extend the buyback deadline because the offer to extend it came with no new consideration. So Aime was not entitled to lost-profit damages based on the option. The Fourth Circuit remanded for a recalculation of damages.

On remand, the parties agreed that breach-of-contract damages amounted to a shade under $250,000. Aime argued that he was also entitled to damages for breach of the implied covenant of good faith and fair dealing. Those damages, he said, included the previously awarded lost profits. The district court disagreed. It awarded Aime the agreed contract damages but denied his request for damages flowing from the breach of the implied covenant.

Aime moved for reconsideration under Rule 59(e). He argued that the damages he sought we not lost profits after all but were instead disgorgement damages. A few months later, Aime filed a motion to amend the judgment (and increase his damages) based on newly discovered evidence–namely, new evidence of unpaid rent that Liberty Tax was liable for, which came to light based on a New York state court judgment. The district court denied the former ruling but granted the latter. Both parties appealed.


Aime argued that the district court had erred by denying disgorgement damages. The Fourth Circuit thought otherwise. Chief Judge Gregory wrote for the panel, which also included Judges Diaz and Richardson.

To begin with, the Court faulted Aime for raising the issue for the first time in a motion to reconsider–after years of litigation, a bench trial, an appeal, and a damages proceeding on remand. Reconsideration is an extraordinary remedy, to be used sparingly–and in all events only when the movant shows

  1. An intervening change in the law,
  2. Newly discovered evidence, or
  3. A clear error of judgment or a manifest injustice

Rule 59 motion are not to be used to raise arguments that could have been made before judgment, or to argue a case under a new legal theory that the party could have pressed in the first instance. Yet that was precisely what Aime had done here.

Beyond that, the mandate rule barred Aime’s argument. The mandate rule is an overpowered version of the law-of-the-case doctrine. It requires a lower court to faithfully apply the mandate of a higher court, which controls everything in its scope. Thus, no issue that is conclusively determined in the first appeal is remanded. Nor, for that matter, is any issue that could have been raised in the first appeal (because it is waived). Both prongs blocked Aime’s disgorgement argument here.

Liberty Tax, for its part, argued that the district court had abused its discretion by granting Aime’s motion to increase his damages award based on newly discovered evidence. It pointed out that because Aime could have found the evidence during litigation, it did not qualify as “newly discovered” under Rule 59(e). The Fourth Circuit agreed. When a motion for reconsideration is based on newly discovered evidence, that evidence must not have been discoverable pre-judgment through reasonable diligence. It’s the movant’s burden to show that the evidence meets this test. Here, Aime submitted a declaration that he first discovered the judgment in 2019. But his declaration said nothing about when he discovered the underlying unpaid rent. Nor did it address his efforts to do so. Thus, Aime failed to meet his burden.

So that’s Aime: Nothing earthshaking, but a handy new treatment of some appellate topics.


* All the good legal writing people will tell you to stop using so many acronyms. I make an exception here because I think “EFIN” probably sounds like “effin’.” Also, I am a child and it is a wonder that my bar license has not been revoked.