author: CUMMINGS, Circuit Judge.

text:
    Tomra HINKLE, a minor, by Patricia HINKLE, her mother and next friend, Patricia Hinkle, individually, and Thomas Hinkle, individually, Plaintiffs-Appellants, v. William HENDERSON, M.D., Defendant-Appellee.
    No. 95-3149.
    United States Court of Appeals, Seventh Circuit.
    Argued March 29, 1996.
    Decided May 31, 1996.

      Lance Wittry, Cheryl A. Planck, Indianapolis, IN, for Plaintiffs-Appellants.
    Richard E. Stites (argued), Livingston, Barger, Brandt & Schroeder, Bloomington, IL, for Defendant-Appellee.
    Before CUMMINGS, MANION and EVANS, Circuit Judges.
   CUMMINGS, Circuit Judge.

This diversity medical malpractice case raises an interesting question of Illinois law. Illinois has adopted a special statute of limitations for medical malpractice actions that contains a standard limitation period in which an action must be brought after a plaintiff discovers his injury. The statute also establishes an outside time limit in which an action must be brought, unaffected by a plaintiff’s knowledge of his injuries, known as a statute of repose. The question presented is whether the Illinois savings statute, which gives plaintiffs one additional year to refile a case when the first case is dismissed on certain procedural grounds, applies to the medical malpractice statute of repose. Only one Illinois appellate court has addressed the issue, concluding that the savings statute did apply. The district court in this case, reasoning that statutes of repose are fundamentally different from statutes of limitations, disagreed. We now reverse.

I.

Tomra Hinkle was bom prematurely on January 23, 1984. As a result, she suffers from retinopathy of prematurity and is blind. Plaintiffs allege that the medical malpractice of William Henderson, M.D., who provided Tomra’s mother with obstetrical and prenatal care in 1983 and early 1984, caused Tomra’s injury. On January 23, 1992, plaintiffs filed a complaint in the Circuit Court of Cook County, Illinois, within eight years of the premature birth. No service was effected or attempted on Henderson or any of the other named defendants; rather, after eight months in the circuit court, plaintiffs moved for a voluntary dismissal under 735 ILCS 5/2-1009. The court granted the motion and dismissed the case without prejudice on September 24,1992.

On August 17,1993, within one year of the voluntary dismissal but outside of the applicable limitations period, plaintiffs filed this ease in the district court and effected service on Henderson within eight days. Plaintiffs’ ability to refile the suit outside of the limitations period is based on the Illinois savings statute, 735 ILCS 5/13-217, which gives plaintiffs one year in which to bring a new suit following a voluntary dismissal. Henderson moved to dismiss the case as untimely filed on two alternative theories. First, he argued that the Illinois savings statute was inapplicable to the medical malpractice limitations statute. Second, he argued that the savings statute did not give plaintiffs an extra year to file because they failed to comply with Illinois Supreme Court Rule 103(b), which requires a plaintiff to exercise reasonable diligence in obtaining service. The district court dismissed plaintiffs’ complaint based on defendant’s first theory and therefore did not address the second. See Hinkle ex rel. Hinkle v. Henderson, 896 F.Supp. 190 (C.D.Ill.1995). Plaintiffs appeal the dismissal.

II.

A.

Illinois has a statute of repose governing medical malpractice cases such as this. The statute provides that an action must be brought within eight years of the alleged acts of negligence:

Except as provided in Section 18-215 of this Act [fraudulent concealment], no action for damages for injury or death against any physician, dentist, registered nurse or hospital duly licensed under the laws of this State, whether based upon tort, or breach of contract, or otherwise, arising out of patient care shall be brought more than 8 years after the date on which occurred the act or omission or occurrence alleged in such action to have been the cause of such injury or death where the person entitled to bring the action was, at the time the cause of action accrued, under the age of 18 years; provided, however, that in no event may the cause of action be brought after the person’s 22nd birthday.

735 ILCS 5/13 — 212(b). Based on this statute alone, it is clear that plaintiffs’ district court action, brought more than nine years after Tomra’s premature birth, was time-barred.

However, Illinois has also adopted a savings statute, which plaintiffs argue saved their cause of action by virtue of the voluntary dismissal in the Cook County Circuit Court:

In the actions specified in Article XIII of this Act or any other act or contract where the time for commencing an action is limited, if judgment is entered for the plaintiff but reversed on appeal, or if there is a verdict in favor of the plaintiff and, upon a motion in arrest of judgment, the judgment is entered against the plaintiff, or the action is voluntarily dismissed by the plaintiff, or the action is dismissed for want of prosecution, or the action is dismissed by a United States District Court for lack of jurisdiction, or the action is dismissed by a United States District Court for improper venue, then, whether or not the time limitation for bringing such action expires during the pendency of such action, the plaintiff ... may commence a new action within one year or within the remaining period of limitation, whichever is greater, after such judgment is reversed or entered against the plaintiff, or after the action is voluntarily dismissed by the plaintiff, or the action is dismissed for want of prosecution, or the action is dismissed by a United States District Court for lack of jurisdiction, or the action is dismissed by a United States District Court for improper venue.

735 ILCS 5/13-217 (emphasis added). On its face, the savings statute appears to encompass plaintiffs’ case: the action brought by plaintiffs is one “where the time for commencing an action is limited” — in this case, by Section 212(b); plaintiffs voluntarily dismissed a prior action; and plaintiffs commenced á new action within one year of the voluntary dismissal. Nonetheless, the district court held that Section 217 did not apply to Section 212(b). It based this holding primarily on the distinction between statutes of repose like Section 212(b), to which it said Section 217 does not apply, and statutes of limitations, to which it said Section 217 does apply.

The Illinois Supreme Court has not addressed the question whether the savings provision in Section 217 applies to medical malpractice actions under Section 212(b), and it is therefore our task to determine how the Illinois Supreme Court would decide the issue. We begin by noting that the weight of authority is against the district court. Three state supreme courts and two state courts of appeals, including one in Illinois, have held that a savings statute does apply to save a cause of action otherwise barred by a medical malpractice statute of repose. See v. Hartley, 257 Kan. 813, 896 P.2d 1049 (1995); Cronin v. Howe, 906 S.W.2d 910 (Tenn.1995); Vesolowski v. Repay, 520 N.E.2d 433 (Ind.1988); Limer v. Lyman, 241 Ill.App.3d 125, 181 Ill.Dec. 667, 608 N.E.2d 918 (1993); Wade v. Reynolds, 34 Ohio App.3d 61, 517 N.E.2d 227 (1986). Only one state supreme court has held that a savings statute does not apply to a medical malpractice statute of repose. Wright v. Robinson, 262 Ga. 844, 426 S.E.2d 870 (1993). The only other state court case relied upon by the district court, Bruce v. Hamilton, 894 S.W.2d 274 (Tenn.Ct.App.1993), was later contradicted by the Tennessee Supreme Court in Cronin, supra, on precisely the same issue.

Nonetheless, the district court found that the Illinois Supreme Court would reject the reasoning of Limer, an Illinois appellate court case, and adopt the reasoning of Wright, the only state supreme court (Georgia) to reject the applicability of a savings statute to a statute of repose. The disagreement among the courts stems from the oftiterated distinction between statutes of limitations and statutes of repose. Here is one formulation:

A statute of limitations normally governs the time within which legal proceedings must be commenced after the cause of action accrues. A statute of repose, however, limits the time within which an action may be brought and is not related to the accrual of any cause of action. The injury need not have occurred, much less have been discovered.

Klein v. Catalano, 386 Mass. 701, 437 N.E.2d 514, 516 (1982) (citations omitted). Here is another:

“Statutes of limitations” extinguish, after period of time, right to prosecute accrued cause of action; “statute of repose,” by contrast, limits potential liability by limiting time during which cause of action can arise. It is distinguishable from statute of limitations, in that statute of repose cuts off right of action after specified time measured from delivery of product or completion of work, regardless of time of accrual of cause of action or of notice of invasion of legal rights.

Black’s Law Dictionary 1411 (6th ed.1990) (citations omitted). This Court has stated that statutes of limitations are procedural, barring only the remedy, while statutes of repose -are substantive, extinguishing the right to bring a cause of action. Boggs v. Adams, 45 F.3d 1056, 1060 (7th Cir.1995).

Illinois’ medical malpractice limitations statute, 735 ILCS 5/13-212, provides an excellent example of how statutes of limitations and statutes of repose operate. The adoption and rationale of Section 212 was outlined by the Illinois Supreme Court in Anderson v. Wagner, 79 Ill.2d 295, 37 Ill.Dec. 558, 402 N.E.2d 560 (1979); see also Hayes v. Mercy Hosp. & Medical Ctr., 136 Ill.2d 450, 457-458, 145 Ill.Dec. 894, 897-898, 557 N.E.2d 873, 876-877 (1990). In the early 1970s, states perceived a medical malpractice insurance crisis stemming from insurance companies’ reluctance to write medical malpractice policies and the high premiums of policies issued. Anderson, 79 Ill.2d at 301, 37 Ill.Dec. at 560, 402 N.E.2d at 562. The crisis derived in part from increased use of the “discovery rule” in the late 1960s. The discovery rule provides that a cause of action does not accrue, and thus a statute of limitations does not begin running, until a plaintiff knows or should know of his injury. Under the discovery rule, a plaintiff might not discover an injury for many years. The potential for such “long tail” liability reduces an insurance company’s ability to predict future liabilities. Therefore, as part of the solution to the crisis, Illinois and many other states placed an outside limit on the discovery rule in medical malpractice cases. 79 Ill.2d at 307-308, 37 Ill.Dec. at 563-564, 402 N.E.2d at 565-566. The outer limit is created by a statute of repose.

Section 212(a), though not at issue here, is illustrative. It states that a malpractice action must be brought within two years “after the date on which the claimant knew, or through the use of reasonable diligence should have known” of his injury. That is a statute of limitations, because its running is contingent on accrual — plaintiff must have “discovered” his injury. The statute codifies what was once the judicially-imposed discovery rule. Section 212(h) continues: “[B]ut in no event shall such action be brought more than 4 years after the date on which” the alleged negligence occurred. That is a statute of repose, because it begins to run regardless of “discovery” and sets an outer limit within which a cause of action must be brought. Section 212(b), at issue here, provides a special eight-year statute of repose for persons under the age of 18 at the time of accrual.

The statutes of repose found in Section 212 — and probably all statutes of repose, see Cada v. Baxter Healthcare Corp., 920 F.2d 446, 451 (7th Cir.1990), certiorari denied, 501 U.S. 1261, 111 S.Ct. 2916, 115 L.Ed.2d 1079 — are surgical strikes by the legislature against the discovery rule. Cunningham v. Huffman, 154 Ill.2d 398, 406, 182 Ill.Dec. 18, 22, 609 N.E.2d 321, 325 (1993); Mega v. Holy Cross Hosp., 111 Ill.2d 416, 422, 95 Ill.Dec. 812, 815, 490 N.E.2d 665, 668 (1986); Limer, 241 Ill.App.3d at 128, 181 Ill.Dec. at 669, 608 N.E.2d at 920. As Anderson amply demonstrates, the medical malpractice statute of repose was specifically adopted to ameliorate the effects of the discovery rule. As such, the statute of repose in Section 212(b) embodies two essential and related purposes: to prevent indefinite potential liability for a particular act or omission (to abolish “long tail” liability), and second, to afford defendants (and insurance companies) greater certainty in predicting potential liability.

We turn now to the Illinois savings statute, 735 ILCS 5/13-217, which embodies a different and sometimes conflicting purpose. Section 217 affords plaintiffs a second chance to have their case heard on the merits when their first suit is dismissed for some procedural defect. The purpose of the statute is “to facilitate the disposition of litigation upon the merits and to avoid its frustration upon grounds that are unrelated to the merits.” DeClerck v. Simpson, 143 Ill.2d 489, 492, 160 Ill.Dec. 442, 444, 577 N.E.2d 767, 769 (1991) (quoting Roth v. Northern Assurance Co., 32 Ill.2d 40, 48, 203 N.E.2d 415, 419 (1964)). The savings statute will not always frustrate the purposes of a statute of limitations or a statute of repose. The one-year refiling period under' the savings statute might end well before expiration of the limitation period, and when it does, only one refiling is allowed. Flesner v. Youngs Dev. Co., 145 Ill.2d 252, 254, 164 Ill.Dec. 157, 158, 582 N.E.2d 720, 721 (1991). But in some cases, the savings statute is employed after expiration of the limitation period and it therefore acts to extend the period by one year — and no more than one year because, just as in Flesner where the limitation period had not run, only one refiling is permitted when the limitation period has run. Gendek v. Jehangir, 119 Ill.2d 338, 343, 116 Ill.Dec. 230, 232, 518 N.E.2d 1051, 1053 (1988). It is this application of the savings provision — one in which the statutory limitation period is extended — that brings the two legislative policies into conflict: the desire to achieve adjudication on the merits and the desire to bar suits after too much time has passed.

No one disputes that the savings provision applies when statutes of limitations are involved. The savings statute expressly applies to cases “where the time for commencing an action is limited,” which on its face includes both statutes of limitations and statutes of repose. In excluding Section 212(b) from the reach of Section 217, the district court first emphasized the inherently different nature of statutes of repose. It and other courts have said that statutes of repose are substantive rather than procedural, that they cut off the remedy as well as the right, that they are an absolute bar to plaintiff whereas a statute of limitations is contingent, and that they divest the court of jurisdiction; thus statutes of repose, unlike statutes of limitations, may not be waived. Hinkle, 896 F.Supp. at 194-195; Wright, 426 S.E.2d at 871-872. The courts conclude that a savings statute, being merely a procedural device, cannot revive a cause of action that is extinguished by a statute of repose. The problem with this conclusion is that, while it may be true that a defendant cannot waive a statute of repose, the Illinois legislature can. The fact that the two types of limitations are conceptually and procedurally distinct in a number of respects says nothing about whether Section 217, which applies when “the time for commencing an action is limited,” includes statutes of repose. Thus emphasizing the inherent differences of statutes of repose begs the question presented in this case. Accord Cronin, 906 S.W.2d at 914 (the fact that statute of repose is substantive is not “decisive”); See, 896 P.2d at 1055 (procedural/substantive distinction is merely “semantics”).

The district court next turned to the purposes of the medical malpractice statute of repose — a more persuasive basis for distinguishing statutes of limitations since it sheds light on legislative intent. The court concluded that an “unwavering period of repose which cannot be extended by savings statutes furthers the goal of certainty in the business of providing health care.” 896 F.Supp. at 195. Given that the savings statute unquestionably applies to statutes of limitations, the question is whether the purposes of the statute of repose are sufficiently different to justify excluding it from Section 217. As we have said, Illinois adopted the statute of repose to ameliorate the effects of the discovery rule. Thus the statute of repose serves only two purposes above and beyond those served by any limitations statute: to eliminate indefinite potential liability and to give defendants greater certainty and predictability. See See, 896 P.2d at 1054. Taking these one at a time, it is clear that no reason exists for treating the statute of repose differently. As to the first, the one-year savings statute does not impair the goal of eliminating indefinite potential liability. In the worst case scenario, Section 217 will extend the period of repose by one year. The Illinois Supreme Court has been quite strict in concluding that Section 217 may not be used to permit successive refilings. Gendek, supra; Flesner, supra. The savings statute as construed by the Illinois Supreme Court simply does not create the type of indefinite potential liability that Section 212(b) was designed to abolish.

The second goal of the repose statute — to afford defendants greater certainty and predictability — is really the heart of this case. While “saving” a cause of action for one year does not effect the indefiniteness of potential liability, it does change the certainty and predictability afforded defendants; however, this is true only where the defendant is unaware that the first action was filed. Where the defendant knows that plaintiff has brought an action, usually from receiving service, he must be presumed to understand that a procedural defect in the action may cause a delay of up to one year pursuant to the savings statute. See Gonzalez v. Thorek Hosp. & Medical Ctr., 143 Ill.2d 28, 36-37, 155 Ill.Dec. 796, 800, 570 N.E.2d 309, 313 (1991). In such a case, his level of certainty and predictability is no less than in any other litigated matter, and the purpose of the statute of repose is still realized. Section 217 lists several procedural defects in addition to voluntary dismissal that trigger the statute; in most of the situations, the defendant is likely aware that the action exists: dismissals for jurisdiction and venue; reversal of judgment on appeal; and verdict in favor of plaintiff followed by a motion in arrest of judgment entered against plaintiff. In these cases, the defendant is likely aware that the action exists (and may be presumed familiar with the savings statute); thus, based on the purposes of the statute of repose, this Court can discern no reason why the Illinois Supreme Court would exclude the medical malpractice statute of repose from operation of Section 217 in any of these situations where the defendant knows the action exists. See Roth, 32 Ill.2d at 49-50, 203 N.E.2d at 420. As a matter of statutory interpretation then, the Illinois Supreme Court would also have to conclude that voluntary dismissals — also listed in Section 217 — must be treated alike.

The difficulty in this ease is that the district court was presented with the most egregious situation possible for application of Section 217: plaintiff waited until the very last day of the eight-year repose period to file suit, then took no action in the circuit court for eight months, failing even to attempt service on defendant, received a voluntary dismissal, and finally waited just short of one year to refile the case in district court, at long last serving defendant more than nine years after the alleged acts of negligence. Unaware that plaintiff filed suit in circuit court, defendant’s ability to predict liability was undoubtedly compromised. Thus the district court’s decision refusing to extend the repose period via Section 217 made sense as to this plaintiff. But as a matter of statutory interpretation, it does not make sense. As we concluded above, the Illinois Supreme Court would not categorically exclude the statute of repose from all of the procedural defects listed in Section 217. Further, the Illinois legislature expressly included voluntary dismissals (and for that matter, dismissals for want of prosecution!) in that list and made no mention of exceptions for defendants who are not served. To affirm the district court, we would have to read an exception into the statute. Given the Illinois Supreme Court’s recognition that Section 217 is “very specific and clear” and that it must be given its plain and ordinary meaning, DeClerck, 143 Ill.2d at 492-496, 160 Ill.Dec. at 443-445, 577 N.E.2d at 768-770, this Court will not do so.

There is an additional reason not to read exceptions into the savings statute. The only exception that would facilitate the purposes of the statute of repose is one that excludes plaintiffs who fail to effect service on defendants. Such plaintiffs are the least sympathetic and the least deserving of additional time to file suit. Illinois law already takes this into account. Illinois Supreme Court Rule 103(b) mandates that plaintiffs exercise reasonable diligence to obtain service on defendants. As discussed below, the district court on remand will have to consider the Rule 103(b) issue in this case. We only pause here to note the congruity in Illinois law: the differing goals of Section 212(b) and Section 217, though infrequently coming into conflict, are reconciled when they do conflict by Rule 103(b), which guarantees that the savings statute cannot be used to extend the period of repose when the purposes of the repose period are most threatened. We are mindful in this regard of the Illinois Supreme Court’s statement that “courts should not insert words into legislative enactments when the statute otherwise presents a cogent and justifiable legislative scheme.” Hayes, 136 Ill.2d at 456, 145 Ill.Dec. at 896, 557 N.E.2d at 875 (citing Hagen v. City of Rock Island, 18 Ill.2d 174, 179, 163 N.E.2d 495, 498 (1959)).

Two other findings of the district court similarly fail to overcome the plain language of Section 217. The court noted that the savings statute allows a plaintiff to “commence a new action within one year,” but that the statute of repose, being substantive, extinguishes a cause of action when it runs; it thus defies logic to allow the filing of a “new” suit on a nonexistent cause of action. This argument was also used by the Tennessee appeals court in Bruce, 894 S.W.2d at 278. The argument provides no rational basis for distinguishing statutes of limitations and statutes of repose. When either runs, the plaintiff is unable to file a new suit absent the savings statute, regardless of whether we say plaintiff is without a right or without a remedy. The district court’s reliance on the term “new” reads too much into the statute and ignores the fact that the Illinois legislature has the power to waive or extend both types of limitation statutes. Accord See, 896 P.2d at 1051 (the Kansas savings statute also says the plaintiff may bring a “new” cause of action, but the court nonetheless found it applicable to the statute of repose).

Finally, the district court found it significant that Section 212(b) was enacted after Section 217: “If the legislature had wished [Section 217] to be applicable to [Section 212(b) ], it need only have so stated in [Section 212(b) ]....” 896 F.Supp. at 195. This argument was also used by the Georgia Supreme Court in Wright, 426 S.E.2d at 872. The argument, however, reveals little about legislative intent because it could just as easily cut the other way. The Illinois legislature, aware of the savings statute when drafting the statute of repose, could have expressly excepted the savings statute in Section 212(b). In Wade, supra, the Ohio appeals court found it significant that the legislature failed to expressly except the savings statute in the text of the statute of repose where it had excepted another provision in the statute of repose. 517 N.E.2d at 228. Section 212(b) is similar: it expressly excepts Section 13-215 fraudulent concealment from operation of the statute of repose. The legislature apparently knew how to write exceptions into Section 212(b), but failed to except the savings statute. Because the district court’s argument could cut either way regarding legislative intent, it is not persuasive.

B.

The conclusion that the Illinois Supreme Court would hold that the savings statute applies to statutes of repose does not end our inquiry. Relying exclusively on the nature of statutes of repose, the district court did not address defendant’s second alternative argument in Ms motion to dismiss — that plaintiffs’ failure to comply with Illinois Supreme Court Rule 103(b) mandated a dismissal even if the savings statute were found applicable to the medical malpractice statute of repose. Rule 103(b) provides as follows:

(b) Dismissal for Lack of Diligence. If the plaintiff fails to exercise reasonable diligence to obtain service prior to the expiration of the applicable statute of limitations, the action as a whole or as to any unserved defendant may be dismissed without prejudice. If the failure to exercise reasonable diligence to obtain service occurs after the expiration of the applicable statute of limitations, the dismissal shall be with prejudice. In either case the dismissal may be made on the application of any defendant or on the court’s own motion.

Rule 103(b) is similar to the principle adopted by courts in other states that a savings statute only helps a “diligent” plaintiff. See, e.g., Cronin, 906 S.W.2d at 912.

In the circuit court action, plaintiff did not attempt to serve any of the defendants for the eight months that the ease was pending. Because defendants were never served, no Rule 103(b) motion was filed and apparently the court did not raise plaintiffs’ diligence on its own motion, instead granting the voluntary dismissal. The question here is whether, under Illinois law, the district court should rule on Henderson’s Rule 103(b) motion where (1) the Illinois statutes apparently give a plaintiff both the absolute right to seek a voluntary dismissal, 735 ILCS 5/2— 1009, and an absolute right to refile within one year, 735 ILCS 5/13-217, (2) no Rule 103(b) motion was made in the first action, and (3) the lack of diligence occurred in the first action but not in the second.

The Illinois Supreme Court has previously addressed the interplay of Rule 103(b) with a plaintiffs right to voluntarily dismiss an action under Section 1009 and the savings provision of Section 217. In O’Connell v. St. Francis Hosp., 112 Ill.2d 273, 97 Ill.Dec. 449, 492 N.E.2d 1322 (1986), plaintiff filed a medical malpractice action on the last day of the applicable statute of limitations, but failed to serve defendants for eight months. When defendants moved for dismissal under Rule 103(b), plaintiff moved for and received a voluntary dismissal without prejudice. Plaintiff then refiled the case pursuant to the savings statute and immediately served defendants. The defendants once again filed a Rule 103(b) motion to dismiss, which was demed. On appeal, defendants argued that the Rule 103(b) motion should have been considered prior to the motion for voluntary dismissal and that plaintiffs lack of diligence in the first action should be considered on a Rule 103(b) motion in the second action.

The Illinois Supreme Court’s decision in O’Connell laid the groundwork for reconciling Rule 103(b) with a plaintiffs right to voluntarily dismiss a case and later refile. The Court noted the obvious conflict between Rule 103(b), a procedural rule of the Court, and Sections 1009 and 217, procedural statutory provisions of the legislature. It stated that when such a conflict occurs, the rule will prevail. 112 Ill.2d at 281, 97 Ill.Dec. at 453, 492 N.E.2d at 1326.

Rule 103(b) was adopted by tMs court to effectuate its historical and constitutional mandate to render justice fairly and promptly.
Due diligence in serving process is essential to tMs purpose, for it is the sole legally sufficient means of alerting defendants to the pendency of a civil suit____ Where a plaintiff (1) fails to exercise due diligence, particularly where Ms failure contmues long after the expiration of the statute of limitations; (2) takes a voluntary dismissal pursuant to section 2-1009 when Ms diligence is challenged by a Rule 103(b) motion; and (3) refiles Ms action under section 13-217, even though promptly effecting service on his refiled complaint, justice is truly and unnecessarily delayed.

112 Ill.2d at 282, 97 Ill.Dec. at 453, 492 N.E.2d at 1326. The Court thus held that (1) a Rule 103(b) motion must be heard prior to a Section 1009 motion for voluntary dismissal and (2) the second court may consider the plaintiffs diligence in the original as well as the refiled ease when considering a Rule 103(b) motion. 112 Ill.2d at 283, 97 Ill.Dec. at 453, 492 N.E.2d at 1326.

O’Connell’s holding was reaffirmed and extended by the Court in Muskat v. Sternberg, 122 Ill.2d 41, 118 Ill.Dec. 455, 521 N.E.2d 932 (1988). There plaintiff filed a medical malpractice suit on the last day of the limitations period, but failed to serve defendants for two years, at which time the case was dismissed for want of prosecution. When plaintiff refiled pursuant to the savings statute, defendants moved to dismiss under Rule 103(b). The Court reaffirmed the holding of O’Connell that lack of diligence in the first action should be considered under a Rule 103(b) motion in the second action, even where the plaintiff diligently served defendant in the second action. 122 Ill.2d at 45, 118 Ill.Dec. at 457, 521 N.E.2d at 934. The Court also extended O’Connell to cases where no Rule 103(b) motion was made in the first action. 122 Ill.2d at 47-48, 118 Ill.Dec. at 457-458, 521 N.E.2d at 934-935 (citing Catlett v. Novak, 116 Ill.2d 63, 106 Ill.Dec. 786, 506 N.E.2d 586 (1987)). The rationale for such a rule is simple enough: plaintiffs should not be able to insulate themselves from the diligence requirement of Rule 103(b) by manipulating the savings statute. 122 Ill.2d at 49, 118 Ill.Dec. at 458, 521 N.E.2d at 935.

Thus it is clear to this Court that, after finding the savings statute applicable to the medical malpractice statute of repose, the Illinois Supreme Court would address whether plaintiffs’ case should nonetheless be dismissed under Rule 103(b) pursuant to O’Connell and Catlett and the principles developed thereunder. It is irrelevant that Rule 103(b) was not considered in the circuit court action and that plaintiffs diligently served defendant in the refiled district court action. Because the district court disposed of the case on defendant’s first alternative argument and did not address Rule 103(b), a remand is in order. On remand, the district court must decide whether plaintiffs failed to exercise reasonable diligence to obtain service in the first action under Rule 103(b) and the Illinois cases that have established the appropriate standard for “reasonable diligence.”

III.

For the foregoing reasons, the decision of the district court is Reversed and the case Remanded for proceedings consistent with this opinion.


source: Caselaw Access Project

author: HARLINGTON WOOD, Jr., Circuit Judge.

license: Public Domain

text:
    Virgil BOHAC, Plaintiff-Appellant, v. Togo D. WEST, Jr., Secretary of the Army, Defendant-Appellee.
    No. 95-2194.
    United States Court of Appeals, Seventh Circuit.
    Argued Jan. 10, 1996.
    Decided May 31, 1996.

      Jeffrey C. Mochalski, Ellen M. Frantz (argued), Johns & Flaherty, La Crosse, WI, for Plaintiff-Appellant.
    Christa A. Reisterer, Steven O’Connor (argued), Office of the U.S. Atty., Madison, WI, for Defendant-Appellee.
    Before HARLINGTON WOOD, Jr., CUDAHY, and ROVNER, Circuit Judges.
   HARLINGTON WOOD, Jr., Circuit Judge.

Virgil Bohac appeals the district court’s decision to treat the Rule 12(b)(6) motion filed by Togo D. West, Jr., Secretary of the Army (“the Army”), as a motion for summary judgment. In particular, Bohac challenges the district court’s failure to provide him with prior notice of the decision to convert the Army’s motion and his lack of an opportunity to further supplement the record. For the reasons provided below, we vacate in part and affirm in part. The grant of summary judgment is affirmed.

I. BACKGROUND

On November 17, 1994, Bohac filed suit against the Army under the Age Discrimination in Employment Act (“ADEA”), 29 U.S.C. § 621, et seq., and the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201, et seq. Bohac, a civilian employee of the Army at Fort McCoy, Wisconsin, alleged that the Army’s failure to promote him to the position of heavy equipment foreman constituted an act of age discrimination and retaliation. Bohac was 62 years old at the time of his non-promotion.

The Army filed a motion to dismiss Bohac’s complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. The Army also filed a memorandum in support of its motion to dismiss, to which various exhibits were attached. Bohac filed a memorandum in opposition to the Army’s motion, to which Bohac also attached various exhibits.

On April 14, 1995, the district court entered its order on the Army’s motion. In regard to Bohac’s ADEA claim, the court first determined that the Army’s motion should be treated as a motion for summary judgment, since both parties had submitted admissible exhibits outside the pleadings which the court had not excluded. The court thereupon granted the Army’s converted motion for summary judgment after concluding that Bohae’s suit was barred by his earlier failure to comply with an administrative time limit and by his failure to provide the Equal Employment Opportunity Commission (“EEOC” or “Commission”) with 30 days’ notice of his intent to file suit. In addition, the court granted the Army’s motion to dismiss Bohae’s FLSA claim.

Bohac now appeals the district court’s order on his ADEA claim. Bohac primarily argues that the district court erred by failing to provide him with prior notice and an opportunity to further supplement the record after the court decided to treat the Army’s motion to dismiss as one for summary judgment. Bohac does not appeal the district court’s decision to dismiss his FLSA claim.

II. STANDARD OF REVIEW

We review the district court’s grant of summary judgment by viewing all factual inferences in the light most favorable to the nonmoving party (herein Bohac) and determining de novo whether there exists any genuine issue of material fact requiring submission of the case to the finder of fact or whether judgment as a matter of law was appropriate. Fed.R.Civ.P. 56(c); Sarsha v. Sears, Roebuck & Co., 3 F.3d 1035, 1038 (7th Cir.1993) (citations omitted). Where summary judgment has been granted in a discrimination case, however, this standard is applied with “added rigor” as intent and credibility are usually crucial issues. Sarsha, 3 F.3d at 1038 (citations omitted).

III. DISCUSSION

A. Bohac’s ADEA Claim,

In order to properly address the merits of Bohac’s appeal, we must first examine the nature of his underlying claim. Under the ADEA, an individual who feels that he or she has been discriminated against in federal government employment on account of age has two remedial options. The aggrieved individual may choose to first file an administrative complaint against the agency alleged to have acted diseriminatorily. 29 U.S.C. § 633a(b). Thereafter, the individual may file suit in federal district court if he is not satisfied with his administrative relief. 29 U.S.C. § 633a(c); 29 C.F.R. § 1614.408. To commence an administrative action, however, an Equal Employment Opportunity (“EEO”) counselor must first be contacted within 45 days of the date of the questioned incident. 29 C.F.R. §§ 1614.107(b); 1614.105(a)(1). Alternatively, an action may be filed in federal district court in the first instance, provided that the EEOC is given at least 30 days’ notice, within 180 days after the occurrence of the questioned matter, of the individual’s intent to file such an action. 29 U.S.C. § 633a(d).

In this case, Bohae was notified on May 27, 1994, that he had not been promoted to the position of heavy equipment foreman. Bohae initially chose to pursue administrative relief, but he did not contact an EEO counselor until July 27, 1994 — 61 days after he was informed of his non-promotion. Consequently, Bohae was notified on August 26, 1994, that his administrative complaint was being dismissed in light of his failure to initiate contact with an EEO counselor within 45 days.

Bohae then filed suit in district court on November 17,1994. Bohae did not, however, provide the EEOC with any notice, let alone 30 days’ notice, of his intent to do so. The district court, relying upon Bohac’s failure to provide notice to the EEOC and on the second holding of McGinty v. United States Dep’t of the Army, 900 F.2d 1114, 1117-18 (7th Cir.1990) (holding that the failure to comply with an administrative time limit bars a subsequent suit in district court), granted summary judgment against Bohac.

1. Thirty Days’ Notice of Intent to Sue

We first review the district court’s decision regarding Bohac’s failure to give the EEOC 30 days’ notice of his intent to file suit. As stated by 29 U.S.C. § 633a(d), such notice need only be filed “[w]hen the individual has not filed a complaint concerning age discrimination with the Commission.” The district court evidently concluded that the complaint filed by Bohac with the Army’s EEO office did not constitute the filing of a complaint “with the Commission.” Although there is support for the district court’s view, we must disagree with this conclusion.

We acknowledge that the case law on this subject is divided. Compare McIntosh v. Weinberger, 810 F.2d 1411, 1425 n. 6 (8th Cir.1987) (holding that the filing of a formal complaint with the employee’s agency constitutes filing a complaint with the EEOC), vacated on other grounds sub nom. Turner v. McIntosh, 487 U.S. 1212, 108 S.Ct. 2861, 101 L.Ed.2d 898, and cert. denied, 487 U.S. 1217, 108 S.Ct. 2870, 101 L.Ed.2d 905 (1988); Ray v. Nimmo, 704 F.2d 1480, 1484 (11th Cir.1983) (same); Purtill v. Harris, 658 F.2d 134, 138 (3d Cir.1981) (same), cert. denied, 462 U.S. 1131, 103 S.Ct. 3110, 77 L.Ed.2d 1365 (1983); with Lackhouse v. Brady, 746 F.Supp. 751, 754-57 (N.D.Ill.1990) (holding that the filing of a formal complaint with the employee’s agency does not constitute the filing of a complaint with the EEOC); Hinton v. Solomon, 475 F.Supp. 105, 108 (D.D.C.1979) (same). This case law neatly exemplifies the Eleventh Circuit’s observation that “[t]he regulatory complaint process is far from clear.” Ray, 704 F.2d at 1484 n. 10. After conducting our own review of this process, we conclude that those cases which declined to equate a formal agency filing with an EEOC filing for purposes of § 633a(d) should not be followed.

In Lackhouse, for example, the court based its decision on the then-prevailing exhaustion of administrative remedies requirement. As Lackhouse quite perspicaeiously inquired: “In logical terms, what possible sense could there be to requiring administrative exhaustion if one of the preliminary steps that an individual must take in the administrative process automatically serves to open up another channel of almost immediate access to the courts?” 746 F.Supp. at 755. This concern was certainly valid at the time it was expressed; as discussed below, however, exhaustion is no longer required. See Adler v. Espy, 35 F.3d 263 (7th Cir.1994). Thus, the impetus behind Lackhouse no longer exists.

In Hinton, on the other hand, the court was primarily influenced by the purpose behind the 30 days’ notice requirement:

It is clear from the language of the statute that the purpose of providing notice to the Commission is to permit that body to contact the prospective defendants and take action to eliminate unlawful practices____ Although the filing of an administrative complaint would provide notice to prospeetive defendants, it would neither make the Commission aware of the alleged discrimination problem nor give the Commission the opportunity to exercise its directive to resolve the matter short of a judicial proceeding.

Hinton, 475 F.Supp. at 108 (internal statutory citations omitted). In light of the significant sharing of responsibilities between the EEOC and the agencies under the regulatory scheme, however, we believe that the goals of the 30 days’ notice provision are sufficiently advanced through the filing of a formal administrative complaint.

[T]he purpose of the notice of intent to sue requirement is to allow the EEOC to attempt conciliation. Under the complaint process, however, the regulations require that the aggrieved party, prior to filing an EEOC complaint, consult with the Agency’s EEO Counselor so that the Counselor may seek an informal adjustment of the complaint.

Ray, 704 F.2d at 1484 n. 9. Thus, by the time that a formal administrative complaint is filed, an EEO counselor at the agency will have already attempted to informally resolve the dispute. Moreover, an agency’s EEO counselor, who is apt to be more familiar with the workings of the particular agency, and who might even be familiar with the individuals involved, is likely to be as effective, if not more so, at reaching an informal settlement of the grievance as the EEOC.

Therefore, if we are to affirm the grant of summary judgment, we must do so solely on the basis of the district court’s reliance on the second holding of McGinty. For the reasons discussed below, we conclude that this ground is meritorious and ultimately sufficient.

2. McGinty

Like Bohac, McGinty was a civilian employee of the Army. After McGinty was denied promotion to a position of permanent employment, she filed a formal administrative complaint alleging age discrimination. McGinty’s complaint was rejected on the merits and she was informed of her right to file an administrative appeal with the EEOC within 20 days. Instead of filing a timely administrative appeal, MeGinty filed suit in district court more than eight months later.

The district court dismissed McGinty’s suit after concluding that administrative remedies must be exhausted, once they are initiated, before suit may be filed in district court. After she had filed her suit in district court, but before that court had ruled on the matter, MeGinty did file an appeal with the EEOC, but the EEOC dismissed this appeal because it was filed well outside the 20-day time limit. After the EEOC had dismissed MeGinty’s administrative appeal for untimeliness, MeGinty filed a second suit in district court. The district court dismissed the second suit after it concluded that it was barred by McGinty’s earlier failure to comply with the applicable administrative time limits.

Upon review, we upheld the district court’s dismissals of McGinty’s two suits. Stating that “administrative remedies, once initiated, must be exhausted before a suit may be filed,” we upheld the dismissal of McGinty’s first suit. 900 F.2d at 1117 (citations omitted). We then held that the second suit was barred by the EEOC’s dismissal of McGinty’s administrative complaint for untimeliness. Id. at 1118.

The viability of our first holding was cast into doubt by Stevens v. Department of the Treasury, 500 U.S. 1, 9-10, 111 S.Ct. 1562, 1567-68, 114 L.Ed.2d 1 (1991), when the Solicitor General advised the Court that the government no longer believed that exhaustion of administrative remedies was required. The government later made the same concession before this court. See Espinueva v. Dalton, No. 93-1582, 1994 WL 109019 (7th Cir. Mar.30, 1994), cert. denied, — U.S. -, 115 S.Ct. 131, 130 L.Ed.2d 74 (1994). Accordingly, we no longer require that administrative remedies, once begun, must be exhausted before suit is filed in district court. Adler v. Espy, 35 F.3d 263 (7th Cir.1994). See also 29 C.F.R. § 1614.410 (providing for the termination of the EEOC’s processing of an appeal upon the filing of a civil action).

As discussed above, the district court relied on the second holding of McGinty in support of its decision to grant the Army’s converted motion for summary judgment. This second holding, however, was expressly indeterminate as the McGinty court refused to decide whether the administrative time limits should be treated as jurisdictional or as statutes of limitation. We recently had the opportunity to revisit this issue and we held that these administrative time limits are not jurisdictional. See White v. Bentsen, 31 F.3d 474, 475 (7th Cir.1994) (citations omitted), cert. denied, — U.S. -, 115 S.Ct. 1426, 131 L.Ed.2d 309 (1995). While it is true that White addressed an intermediate administrative time limit, we now hold that the rationale expressed in White applies equally to the initial administrative time limit at issue here.

B. The District Court’s Decision to Treat the Army’s Rule 12(b)(6) Motion as a Motion for Summary Judgment

Since these administrative time limits are akin to statutes of limitation, Bohac should have been permitted to introduce evidence demonstrating his entitlement to the equitable remedies of tolling, estoppel, or waiver. Bohac was not provided with any such opportunity and this is the subject of his appeal. Bohac focuses here on the language of Rule 12(b) of the Federal Rules of Civil Procedure, which provides, in pertinent part:

If, on a motion asserting the defense numbered (6) to dismiss for failure of the pleading to state a claim upon which relief can be granted, matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56, and all parties shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 56.

(Emphasis added).

This language generally requires the district court to provide the parties with prior notice and a reasonable opportunity to supplement the record when the court decides to treat a motion to dismiss as a motion for summary judgment. See, e.g., Milwaukee Typo. Union No. 23 v. Newspapers, Inc., 639 F.2d 386, 391 (7th Cir.) (citations omitted), cert. denied, 454 U.S. 838, 102 S.Ct. 144, 70 L.Ed.2d 119 (1981). It is true that no notice was provided by the district court in this case, but we have previously declined to apply a bright-line rule in such situations. Burick v. Edward Rose & Sons, 18 F.3d 514, 516 (7th Cir.1994) (citations omitted). Rather, we will only find the grant of summary judgment to have been improper “[w]here the record discloses the existence of unresolved material fact issues, or where the parties represent that they would have submitted specific controverted material factual issues to the trial court if they had been given the opportunity.” Milwaukee Typo. Union, 639 F.2d at 391 (citations omitted). We conclude that there are no unresolved factual issues in this record; the evidentiary materials which Bohac claims that he would have introduced likewise fail to raise an issue of material fact.

The unsubmitted evidentiary materials in question are intended to demonstrate that the 45-day initial consultation deadline should have been tolled in this instance. Bohac argues that tolling is appropriate because he was allegedly lulled into inaction by Army personnel and thereby misled. Our review of this matter, however, has convinced us otherwise.

We initially note that any “misleading” that might have taken place here must have occurred before the 45-day deadline had passed in order to be effectual and thereby within the ambit of the equitable tolling doctrine. See Cada, 920 F.2d at 451 (Equitable tolling “denotes efforts by the defendant— above and beyond the wrongdoing upon which the plaintiffs claim is founded — to prevent the plaintiff from suing in time.”) (emphasis added). Bohac apparently had three such pre-deadline contacts', directly or indirectly, with Army personnel. Before initiating contact with an EEO counselor, Bohac had already contacted the civilian personnel office, his union, and his congressman.

Although it appears that the Army did not expressly raise the issue of administrative time limits on these occasions, any obfuscation by silence which might have resulted is immaterial. The record shows that reasonable measures were taken by the Army to inform individuals such as Bohac of the nature of their administrative remedies. Bohac does not challenge the Army’s assertion that posters were displayed in Bohac’s work place which prominently mentioned the 45-day initial consultation deadline. We conclude that the presence of these posters was sufficient to notify Bohac of the applicable time limits. See Kontos v. United States Dep’t of Labor, 826 F.2d 573, 576 (7th Cir.1987) (implying that the posting of such information would be sufficient to notify an employee of the time limits). We conclude, therefore, that mere silence on the part of the Army was insufficient to dissolve that knowledge of the time limits which Bohac is deemed to have possessed under these circumstances.

Moreover, we note that Bohac was no stranger to the administrative complaint process. The record reveals that he had previously filed an EEO complaint alleging age discrimination in 1991. In addition, the district court’s conversion of the Army’s motion cannot have come as a surprise to Bohac as both parties presented material outside the pleadings. In fact, Bohac’s memorandum in opposition to the Army’s motion to dismiss expressly envisions the possibility that the court might take this course.

It is not clear why Bohac tarried in contacting the EEO office; if it was his strategy to delay filing a formal complaint until after he had pursued his other options, it was a strategy that failed him. “One who decides to follow a schedule of his own devising, for reasons of his own invention, has no legitimate complaint when the tribunal adheres to the rules.” White, 31 F.3d at 476 (citations omitted).

Therefore, we conclude that any error committed by the district court in failing to apprise the parties of its intention to convert the Army’s motion to dismiss into a motion for summary judgment was harmless.

“[W]here no potential disputed material issue of fact exists, a summary judgment will not be disturbed even though the district court disregarded the procedure which should have been followed.” Milwaukee Typo. Union, 639 F.2d at 391 (citation omitted).

IV. CONCLUSION

Bohac did not file suit in district court as an initial matter and he did not provide the EEOC with 30 days’ written notice of his intent to file suit. Therefore, Bohac’s suit was properly before the district court only by virtue of the filing of his earlier administrative complaint. Since Bohac’s earlier administrative complaint served to admit him to the district court, we must require that this earlier filing be timely and otherwise properly executed. Bohac has failed to state a viable equitable defense to excuse his failure to comply with the 45-day initial consultation deadline; we therefore affirm the district court’s grant of summary judgment.

For the reasons set forth above, we vacate in part, and affirm in part, the decision of the district court. The parties shall bear then-own costs.

Vacated in Part and Affirmed in Part.

      . Section 1614.105(a)(1) states:
      (a) Aggrieved persons who believe they have been discriminated against on the basis of race, color, religion, sex, national origin, age or handicap must consult a Counselor prior to filing a complaint in order to try to informally resolve the matter.
      (1) An aggrieved person must initiate contact with a Counselor within 45 days of the date of the matter alleged to be discriminatory or, in the case of personnel action, within 45 days of the effective date of the action.

      . Section 633a(d) states, in pertinent part:
      When the individual has not filed a complaint concerning age discrimination with the Commission, no civil action may be commenced by any individual under this section until the individual has given the Commission not less than thirty days’ notice of an intent to file such action. Such notice shall be filed within one hundred and eighty days after the alleged unlawful practice occurred.

      . In addition, we note that the regulation which addresses Bohac’s precise situation — the filing of a civil action following the receipt of a final decision at the agency level — does not mention the 30 days' notice requirement: "A complainant who has filed an individual complaint ... is authorized under ... the ADEA ... to file a civil action in an appropriate United States District Court: (a) Within 90 days of receipt of the final decision on an individual ... complaint if no appeal has been filed____” 29 C.F.R. § 1614.408(a).

      . The time limit for appeals to the EEOC has since been expanded to 30 days. See 29 C.F.R. § 1614.402(a).

      . As the McGinty court stated: “We need not decide whether the holding of [Rennie v. Garrett, 896 F.2d 1057 (7th Cir.1990)] would require the ADEA administrative deadlines to be treated like statutes of limitations rather than jurisdictional prerequisites because McGinty’s complaint must be dismissed under either analysis.” 900 F.2d at 1118.

      .The regulations themselves support this conclusion: "The time limits in this part are subject to waiver, estoppel and equitable tolling.” 29 C.F.R. § 1614.604(c).

      .The advisory committee’s notes further clarify this language:
      The addition at the end of subdivision (b) makes it clear that on a motion under Rule 12(b)(6) extraneous material may not be considered if the court excludes it, but that if the court does not exclude such material the motion shall be treated as a motion for summary judgment and disposed of as provided in Rule 56. It will also be observed that if a motion under Rule 12(b)(6) is thus converted into a summary judgment motion, the amendment insures that both parties shall be given a reasonable opportunity to submit affidavits and extraneous proofs to avoid taking a party by suiprise through the conversion of the motion into a motion for summary judgment.

      . The tolling doctrine implicated by this argument is termed equitable estoppel. Equitable estoppel “comes into play if the defendant takes active steps to prevent the plaintiff from suing in time.” Cada v. Baxter Healthcare Corp., 920 F.2d 446, 450 (7th Cir.1990) (citations omitted), cert. denied, 501 U.S. 1261, 111 S.Ct. 2916, 115 L.Ed.2d 1079 (1991).

      . The regulations require the posting of this information: “In order to implement its program, each agency shall: ... Publicize to all employees and post at all times ... a notice of the time limits and necessity of contacting a Counselor before filing a complaint----” 29 C.F.R. § 1614.102(b)(6).

      . Bohac's memorandum states, in pertinent part:
      It is the position of the plaintiff that he has the abilily to proceed in federal court as a federal employee under the Age Discrimination in Employment Act (ADEA), and that he need not exhaust administrative remedies. Moreover, if the court determines otherwise, Mr. Bohac requests that the court treat the defendant's motion as one for summary judgment so that evidentiary facts may be appropriately before the court.
      [I]f the court determines Mr. Bohac needed to file with the agency within the 45 days in order to pursue his federal court action, then it is respectfully requested that evidentiary facts are properly before the court since this motion to dismiss and the response has [sic] referred to facts outside of the pleadings. At that time it would be appropriate for the court, based on the facts presented, to determine whether equitable tolling applies or not.
      For the reasons above, Mr. Bohac respectfully requests that the court deny the motion to dismiss or in the alternative to treat this motion as one for summary judgment so the appropriate evidentiary facts may be before the court by way of affidavits.


author: KANNE, Circuit Judge.

text:
    In the Matter of Douglas R. PRINCE and Jane Prince, Debtors-Appellants.
    Nos. 94-3474, 94-3714.
    United States Court of Appeals, Seventh Circuit.
    Argued Sept. 18, 1995.
    Decided May 31, 1996.
    Rehearing and Suggestion for Rehearing En Banc Denied July 9, 1996.

      Daniel A. Zazove (argued), Barbara L. Yong (argued), Barbakoff, Zazove & Glick, Chicago, IL, Steven B. Towbin, D’Aneona & Pilaran, Chicago, IL, for Unsecured Creditors Committee.
    David G. Lynch, Rudnick & Wolfe, Chicago, IL, Richard M. Kates (argued), Chicago, IL, for appellants Douglas Prince, Jane Prince.
    Before FLAUM, KANNE, and ROVNER, Circuit Judges.
   KANNE, Circuit Judge.

When Dr. Douglas R. Prince and his wife, Jane Prince, filed for bankruptcy reorganization in 1981, Dr. Prince operated his orthodontics practice as a wholly owned professional corporation. As part of the plan of reorganization, Dr. Prince was to retain his practice, but the Princes agreed to pay the equity value of his stock in the professional corporation into a fund to satisfy their unsecured creditors. When the Princes and the unsecured creditors committee could not agree upon the stock’s worth, they turned to the bankruptcy court for a valuation hearing. The bankruptcy court determined that the stock was worth only the value' of the practice’s physical assets, but on appeal the district court reversed and remanded for a calculation of the stock’s value that included Dr. Prince’s goodwill. On remand, the bankruptcy court’s recomputation arrived at a markedly higher value for the stock. After the entry of judgment, the unsecured creditors committee filed a motion to alter or amend the judgment on the basis of newly discovered evidence. The bankruptcy court granted the motion and amended its judgment to further increase the value of the stock, and the district court affirmed this decision on appeal. The Princes now challenge both the ruling that Dr. Prince’s goodwill was properly included in the value of his stock and the decision to grant the unsecured creditors committee’s motion to alter or amend the judgment, and we affirm.

I. History

On August 17, 1981, Dr. Prince and his wife filed a voluntary petition for bankruptcy reorganization under Chapter 11. See 11 U.S.C. § 1101 et seq. At the time of filing, Dr. Prince was the sole shareholder of a professional corporation, through which he operated his practice as an orthodontist. In February of 1983, the Princes filed a combined disclosure statement and plan of reorganization proposing the liquidation of their estate. The plan was supported by the unsecured creditors committee (the “Committee”) and was confirmed on November 4, 1983.

The plan required the Princes to marshal the equity value of all their assets into a fund for distribution to their creditors. The Princes could either sell each asset and remit the sale proceeds to the fund, or they could retain an asset by depositing into the fund, over a three-year period, an amount equal to its equity value. The plan indicated that Dr. Prince wished to retain his orthodontics practice and would therefore pay the equity value of his stock in the professional corporation into the fund. The plan was confirmed, however, without the parties ever agreeing upon the stock’s value. In the plan, the Princes disclosed that the corporation’s physical assets were worth $25,000, less equipment liens totaling $17,500, and thus proposed to pay an equity value of $7,500 into the fund, subject to audit and negotiations with the Committee. In the event that posteonfirmation negotiations failed to reach an accord as to the value of the stock, the plan provided that the dispute would be resolved at a valuation hearing before the bankruptcy court. The parties have yet to agree upon the stock’s worth.

Less than four months after confirmation, Dr. Prince negotiated the sale of his practice to an orthodontist from New York, Dr. Timothy J. Clare. On February 25, 1984, the two doctors signed a written sales contract, wherein Dr. Clare promised to pay a purchase price of $450,000, with payments to commence in September of 1984. Dr. Prince’s obligation under the agreement was threefold: First, he promised to transfer all of the professional corporation’s stock to Dr. Clare. Second, Dr. Prince agreed to enter into a covenant not to compete, under which he was prohibited for five years from practicing within ten miles of any community he had previously served. Third, Dr. Prince undertook a “practice obligation” to provide transitional services during the interim period— i.e., from February to September, Dr. Prince would pay some of Dr. Clare’s expenses (salary, housing, gas, insurance, travel), continue to practice on a part-time basis, and use his best efforts to build a rapport between his patients and Dr. Clare. After working together until only June, however, the two doctors had a falling out, and the actual sale in September was never consummated.

In November of 1988, the bankruptcy court held a hearing to determine the value of Dr. Prince’s stock in his professional corporation. The Committee and the Princes each put forth an expert witness, and the bankruptcy court believed that “[b]oth experts testified in a credible fashion, consistent with their respective assumptions.” The Committee’s expert concluded that the stock of the professional corporation was worth $650,000, based on a capitalization of the stream of cash flows that the practice was likely to produce in the future (Dr. Prince had previously disclosed that he enjoyed an annual income from the practice of between $250,000 and $300,000). The Committee’s expert conceded, however, that this value would not exist if Dr. Prince were to leave and compete with the corporation. The expert testified that without the personal goodwill of Dr. Prince — defined by the bankruptcy court as “the confidence that his patients had in him as an orthodontist” — the stock would have only nominal value.

The methodology of the Princes’ expert assumed that Dr. Prince’s goodwill should not be included in the stock’s value because the professional corporation did not possess a covenant not to compete from Dr. Prince. As a result, and consistent with the Committee expert’s concession, he determined that the corporation’s stock was equal to the liquidation value of its physical assets, or $7,500. The Princes’ expert admitted, however, that almost every sale of a medical or dental practice entails the execution of a covenant not to compete, the exceptions usually being where a physician has expired and thus presents no risk of competition.

On the basis of the experts’ testimonies, the bankruptcy court found virtually every fact in this case to be undisputed and distilled the valuation down to one issue of law: “whether Dr. Prince’s personal goodwill should be included in the calculation of [the stock’s] value.” The bankruptcy court determined as an initial matter that Dr. Prince’s goodwill fell within the personal earnings exception of 11 U.S.C. § 541(a)(6), which excludes the debtor’s postcommencement earnings from the bankruptcy estate in a liquidation. Because the liquidation of the Princes’ estate was proposed as part of a plan of bankruptcy reorganization under Chapter 11, rather than as a Chapter 7 liquidation, the bankruptcy court recognized that the parties could have bargained around § 541(a)(6)’s presumptive exclusion and particularly specified whether the value of Dr. Prince’s goodwill was to be paid into the fund. However, the court found that the plan itself did not evidence the parties’ intention either to include or exclude the value of Dr. Prince’s goodwill, and thus it concluded that the stock’s worth was limited to the $7,500 value of the professional corporation’s physical assets.

On appeal, the United States District Court for the Northern District of Illinois disagreed with the bankruptcy court and held that Dr. Prince’s goodwill did not fall within the personal earnings exception of 11 U.S.C. § 541(a)(6). As a result, the district court remanded the case, instructing, the bankruptcy court to include the worth of Dr. Prince’s goodwill in the stock’s value. Because the bankruptcy court had determined that the stock’s worth was limited to $7,500, and thus had not endeavored to assign a value to Dr. Prince’s goodwill, the district court advised the bankruptcy court how it should go about calculating the value of the goodwill. Finding the arm’s length sale agreement between Dr. Prince and Dr. Clare to be an accurate proxy for the worth of the stock, the district court directed the bankruptcy court to calculate the value of Dr. Prince’s stock (physical assets plus goodwill) by subtracting the amount of Dr. Clare’s salary and expenses paid under the contract, as well as the value of the tangible services performed by Dr. Prince during the interim period, from the purchase price to be paid by Dr. Clare.

On remand, the bankruptcy court accepted evidence and argument as to the value of the amounts that should be offset against the purchase price in determining the worth of the stock. During final argument, it occurred to the court and the parties that a crucial issue was whether Dr. Prince or Dr. Clare received the income from the practice during the interim period. If Dr. Clare received the income, then some portion of the purchase price could be considered compensation for Dr. Prince’s part-time labors during the interim period rather than for the stock, and thus the value of these labors would be properly deducted from the purchase price in determining the value of the stock. On the other hand, if Dr. Prince received the income himself, then that income would be his compensation, and the value of his interim labors would not be offset against the purchase price.

Without adjournment, the bankruptcy court recalled Dr. Prince to testify as to which doctor received the practice’s income during the interim, and Dr. Prince testified that Dr. Clare had received such income. The Committee argued that this testimony was inconsistent with the fact that Dr. Clare was paid an interim salary under the sales contract, but it could offer no real evidence at that time to contradict Dr. Prince’s testimony. Thus, on the basis of the evidence from this hearing, the bankruptcy court recalculated the value of Dr. Prince’s stock to be $292,290, which represented the purchase price of $450,000, less (1) the amount of Dr. Clare’s salary and expenses that were paid under the contract and (2) an assigned wage for Dr. Prince’s part-time labor during the interim period.

The Committee promptly filed a motion to alter or amend the judgment under Fed. R.Civ.P. 59(e), pointing to evidence in the record suggesting that Dr. Prince had received the income from the practice during the interim period and therefore that an assigned wage for Dr. Prince’s part-time interim labor should not have been deducted. Before ruling on the motion, the bankruptcy court granted the Committee leave to obtain the practice’s bank records to determine conclusively the recipient of the income. After reviewing the bank records, the bankruptcy court found it indisputable that Dr. Prince had in fact received the practice’s interim income. As a result, the bankruptcy court granted the Committee’s motion and amended the judgment to value the stock at $405,-440. On appeal, the United States District Court for the Northern District of Illinois affirmed the bankruptcy court’s decision to grant the motion.

II. Analysis

The Princes now ask this court to resolve two issues: (1) whether the district court erred in directing the bankruptcy court to include Dr. Prince’s goodwill as part of the value of his stock in the professional corporation; and (2) whether the district court erred by affirming the bankruptcy court’s grant of the Committee’s motion to alter or amend the judgment.

A. Valuation of Dr. Prince’s Stock

The Princes proposed the liquidation of their estate as a plan of reorganization under Chapter 11, rather than as a bankruptcy liquidation under Chapter 7. As such, the bankruptcy court correctly noted that the parties could have particularly specified in the plan the dollar value for the stock that Dr. Prince would be required to pay into the creditors’ fund. The parties and the lower courts agree, however, that the plan contains no indication of the parties’ intent concerning whether goodwill should be included in, or excluded from, the proper valuation of the stock. Therefore, we must determine whether Dr. Prince’s goodwill should, in the absence of guidance from the parties, be included as part of the value of his stock — a determination that presents a question of law, over which we exercise de novo review. Pilditch v. Board of Educ. of the City of Chicago, 3 F.3d 1113, 1115 (7th Cir.1993), cert. denied, Pilditch v. Gool, — U.S. -, 114 S.Ct. 1065, 127 L.Ed.2d 385 (1994).

We are not asked on appeal to review the district court’s application of law to the facts because the factual consequences hinging upon whether Dr. Prince’s goodwill is treated as part of the stock value are undisputed. Both parties agree that if Dr. Prince’s goodwill is excluded from the valuation calculus, the worth of the stock is limited to the $7,500 of physical assets. On the other hand, as-' suming that Dr. Prince’s goodwill is properly included in the stock’s value, the Princes do not assert error in the bankruptcy court’s numerical computation of the goodwill’s value; they appeal only the district court’s grant of the Committee’s motion to alter or amend the judgment on the basis • of new evidence.

The Princes contend that they are required to pay no more than the $7,500 value of the practice’s physical assets into the creditors’ fund, and their argument in support of this contention has two components. First, they argue that from a conceptual standpoint, Dr. Prince’s goodwill should not be included in the value of the professional corporation’s stock. Secondly, the Princes argue (as the bankruptcy court initially decided) that even if Dr. Prince’s goodwill does theoretically constitute part of the worth of the stock, the value of the goodwill must be excluded from the bankruptcy estate by virtue of the Bankruptcy Code’s postcommencement earnings exception in 11 U.S.C. § 541(a)(6).

Addressing the first component of the Princes’ argument requires a brief explanation of the principles of stock valuation. See generally Richard A. Brealey & Stewart C. Myers, Principles Of Corporate Finance 29-68 (4th ed. 1991). In general, stock as an asset has value because of its capacity to generate cash flows in the future. Shareholders may expect to receive future cash flows from the stock in three ways: (1) as dividends when corporate profits are periodically distributed to the company’s shareholders; (2) as capital appreciation (or decline) when the stock is sold at some point in the future for a profit (or loss); and/or (3) as liquidation distributions when, upon dissolution of the company, the shareholders receive the residual value of the company’s assets after all creditor claims have been satisfied. In financial terms, the value of the stock on any given day (its “present value”) is how much money an investor would be willing to pay on that given day in order to obtain the right to receive the stock’s cash flows in the future. See also Beerly v. Dept. of Treasury, 768 F.2d 942, 946 (7th Cir.1985), cert. denied, 475 U.S. 1010, 106 S.Ct. 1184, 89 L.Ed.2d 301 (1986).

Theoretically, the stock’s present value would be derived first by plotting out the stock’s expected future cash flows, based essentially on an aggregation of the probabilities of all possible future events. This projected stream of income would then be “discounted” back to the present day (i.e., reduced to the value that someone would be willing to pay today for the expected cash flows in the future), using a discount factor that accounts for (1) the uncertainty (or riskiness) of the future cash flow projections and (2) the purchaser’s opportunity cost of investing money in the stock rather than in some other available wealth-producing asset.

Unfortunately, it is often quite difficult to accurately estimate stock’s future cash flows or to choose the appropriate discount factor. As a result, calculations of stock’s present value will invariably be uncertain approximations. See Metlyn Realty Corp. v. Esmark, Inc., 763 F.2d 826, 835-36 (7th Cir.1985); Daniel R. Fischel, The Appraisal Remedy in Corporate Law, 1983 Am. B. Found. Res. J. 875, 890-91. The Committee expert attempted to estimate the present value of the stock by projecting the practice’s past earnings into the future and then discounting these future cash flows back to the time of confirmation using what he believed to be the appropriate discount factor. Conceptually, the Committee expert had the right idea: on the date of confirmation, while Dr. Prince owned the stock, the value of the stock would indeed be the discounted value of the future cash flows that on that date Dr. Prince’s practice could have been expected to receive in the future. The Committee expert’s calculation of earnings value, however, was subject to a significant range of error based on the expert’s subjective choice of a discount factor, as well as on the fact that the expert’s projections of future cash flows were based on some function of Prince’s past earnings from his practice, which could have been, but were not necessarily, an accurate reflection of what his practice’s earnings would be in the future. See Metlyn Realty, 763 F.2d at 835; Fischel, 1983 Am. B. Found. Res. J. at 891.

Due to these difficulties in approximation, where market information is available, looking to the stock’s “fair market value” — what an arm’s length buyer would be willing to pay for the stock on the open market — is generally the best means of gauging the stock’s present value. This court has noted that in a properly functioning market, especially where the stock is frequently traded among a number of different buyers and sellers, the price that buyers are presently willing to pay — and that sellers are willing to accept — for shares of the stock is usually the most accurate representation of the present value of the stock’s future cash flows. Beerly, 768 F.2d at 946; Metlyn, 763 F.2d at 835. The collective appraisal of market participants is considered to be a more reliable measure of the stock’s value than the subjective estimates of one or two expert witnesses. Metlyn, 763 F.2d at 835; Fischel, 1983 Am. B. Found. Res. J. at 891 & n. 68.

As a result, the district court instructed the bankruptcy court to look to the purchase price agreed upon by Dr. Prince and Dr. Clare as an estimate of the stock’s present value on the date of confirmation. Now it is true that, as in this case, where stock is traded infrequently (or only once), recent sales may not be as reliable an indicator of current value as the equilibrium market price for a stock that is heavily traded “because they impound valuations by only a few buyers and sellers, and because circumstances may have changed since those sales took place.” Beerly, 768 F.2d at 946. However, here Dr. Clare and Dr. Prince negotiated the stock’s sale price at arm’s length; as orthodontists they both had considerable information concerning the probable worth of the practice; and the signing of the sale agreement occurred almost concurrently with the confirmation of the plan. As a result, the agreed-upon purchase price is likely to represent a reasonably accurate estimation of the present value of Dr. Prince’s stock on the date of confirmation.

The Princes argue that when measuring the present value of the practice, the worth of the stock should be limited to the $7,500 liquidation value of the practice’s physical assets. In most cases, liquidation value is only an appropriate estimation of stock worth where a company is dissolving. Shanno v. Magee Indus. Enter., Inc., 856 F.2d 562, 566 (3d Cir.1988). In dissolution, liquidation distributions are the only foreseeable future cash flows to the shareholder, and thus liquidation value is an accurate tool for measuring the stock’s present value. On the other hand, where a business is expected to continue as a going concern, the company’s expected future earnings from operations often far exceed the liquidation value of the company’s physical assets. Thus, when valuing a business that is continuing to operate as a going concern, liquidation value is generally an inaccurate approximation of what shares are worth to the shareholders. See Beerly, 768 F.2d at 946; see also In re Winthrop Old Farm Nurseries, 50 F.3d 72, 74 & n. 2 (1st Cir.1995) (collecting cases).

Nonetheless, the Princes maintain that the stock’s worth on the date of confirmation was no more than the $7,500 value of the practice’s physical assets because the corporation did not possess a covenant not to compete from Dr. Prince. They reason that because (as the Committee expert conceded) the stock would be worth only $7,500 if Dr. Prince were to leave the corporation and compete with it, and because the corporation did not have a contractual guarantee that Dr. Prince would not leave and compete, the stock value should be limited to $7,500.

This argument, however, misunderstands the concept of present valuation. The bankruptcy court’s task was not to determine the present value of the stock as of some hypothetical future day when Dr. Prince left to compete with his own corporation, but to determine the value of the stock on the day the bankruptcy reorganization plan was confirmed. Present value is derived by discounting back a projected stream of future cash flows, and this stream of cash flow projections is based on the probability of possible future events. On the day the plan was confirmed, Dr. Prince’s leaving and competing with the corporation was hardly a 100 percent certainty. It was a possible event that affected the value of the stock: the higher the probability of him competing, the lower the expected future cash flows to the stock, and the lower the probability of him competing, the higher the expected future cash flows to the stock. But the mere possibility that he might leave to compete with the corporation does not render the stock worthless any more than the possibility of fire destroying an uninsured house strips that house of every cent of its present value. What is important for calculating present value is the probability of a particular future event occurring.

Granted, if Dr. Prince’s professional corporation had for some reason possessed a covenant not to compete from Dr. Prince, it would have ensured that the probability of his leaving to compete with the practice would be zero. However, it is not clear that the probability of him leaving and competing was any higher than zero despite the absence of a covenant not to compete. At the time the plan was confirmed, Dr. Prince was operating the practice, and it seems quite unlikely that while still owning the stock he would have abandoned his practice, moved across the street, and competed with himself. When Dr. Prince agreed to sell the practice to Dr. Clare, a covenant not to compete became necessary because there would exist a significant probability that Dr. Prince might compete with Dr. Clare and thereby reclaim any goodwill transferred as part of the sale. But at the time of confirmation, when Dr. Prince owned the stock himself, there was no need for a covenant not to compete in order to protect Dr. Prince’s substantial goodwill, which constituted the lion’s share of the stock’s value.

The considerable value of the practice to Dr. Prince on the date of confirmation is illustrated by the amount of money that four months later Dr. Clare agreed to pay under the sale agreement. The Princes attempt to reconcile this with their contention that the stock was worth only $7,500 when Dr. Prince owned it by pointing to Dr. Prince’s promises under the purchase agreement that he would use his best efforts to build a rapport between his patients and Dr. Clare, and that he would enter into a covenant not to compete. They argue that the covenant not to compete and Dr. Prince’s best efforts were newly created value, paid for by Dr. Clare, which did not exist at the time of confirmation when Dr. Prince owned the practice.

This argument, however, misunderstands how the covenant and Dr. Prince’s efforts were valuable primarily as a means to effectively transfer the value of Dr. Prince’s goodwill to Dr. Clare. At the time of confirmation, Dr. Prince’s goodwill (his relationship of trust and loyalty with his patients) resulted in a significant amount of business, and thus earnings, for his practice. Under the sale agreement, Dr. Prince’s best efforts at encouraging his patient base to continue seeing Dr. Clare were intended to substitute Dr. Clare for himself in the relationships of goodwill he enjoyed with his patients. In other words, they were to transfer Dr. Prince’s goodwill to Dr. Clare. Given that after this transfer Dr. Prince could theoretically open up shop across the street, reclaim his patients, and (as the Committee expert noted) thereby leave Dr. Clare with only nominal value in the stock, the covenant not to compete was intended to ensure that Dr. Prince’s transfer of his goodwill to Dr. Clare would not be illusory. Thus, the covenant not to compete and Dr. Prince’s best efforts did not represent the transfer of additional value to Dr. Clare over and above the value of the stock to Dr. Prince. Rather, they were used (as they are in virtually every sale of a .medical or dental practice) merely to ensure that after the sale the practice would be as valuable in Dr. Clare’s hands as it had been in Dr. Prince’s.

Now this is not to mean that the covenant not to compete had no value to Dr. Clare. Rather, it means that without it, Dr. Prince’s goodwill would not have been as valuable to Dr. Clare as it had been to Dr. Prince because the probability that Dr. Prince would turn around and compete with Dr. Clare was much greater than the probability that Dr. Prince would compete with himself. The purpose of the covenant not to compete was to ensure that the transfer ,of the goodwill together with the covenant would be worth roughly the same amount to Dr. Clare as the goodwill itself had been worth to Dr. Prince. The purchase price was therefore an appropriate measure for the bankruptcy court to rely upon when determining the value of the stock in Dr. Prince’s hands on the date of confirmation.

Thus, from a conceptual standpoint, the present value of Dr. Prince’s stock cannot be limited to the $7,500 value of the practice’s physical assets. Instead, the bankruptcy court was entirely justified in looking to the Committee expert’s calculations or the agreed-upon purchase price between Dr. Prince and Dr. Clare as evidence of the stock’s present value. However, given that the need for this valuation arises in bankruptcy, a calculation of the stock’s present value is not the end of our inquiry. Although the Bankruptcy Code casts a broad net over the assets of the debtor, pulling virtually all the debtor’s property interests into the bankruptcy estate, the Code expressly excludes “earnings from services performed by an individual debtor after the commencement of the case.” 11 U.S.C. § 541(a)(6). This exclusion applies to Chapter 11 bankruptcies, see In re FitzSimmons, 725 F.2d 1208, 1211 (9th Cir.1984); therefore, to the extent that any portion of the stock’s present value represents postcommencement earnings from Dr. Prince’s services, it is not part of the bankruptcy estate and must be excluded from the amount that Dr. Prince is required to pay into the fund.

The present value of stock in a company can be separated into what portion of the stock’s value is attributable to which of the company’s assets. Some of the value of stock may flow from the company’s physical assets, such as equipment. Some of the company’s future cash flows may be attributable to the company’s human capital — its employees’ skills and labor. And some of a stock’s value may derive from the company’s intangible assets, such as a trademark or general “goodwill.” Goodwill is an intangible asset that represents the ability of a company to generate earnings over and above the operating value of the company’s other tangible and intangible assets. It often includes the company’s name recognition, consumer brand loyalty, or special relationships with suppliers or customers.

A good portion of the present value of the professional corporation’s stock on the date of confirmation stems from the human capital of its sole employee on that date, Dr. Prince. Dr. Prince’s services are valuable because of his various personal attributes, including his natural skills, his personality and demeanor, his extensive training and professional knowledge, and his license to practice dental medicine. By expending his labor in providing these services, Dr. Prince generated earnings for the practice, which resulted in profits flowing to the professional corporation’s shares of stock. That portion of the stock’s worth on the date of confirmation representing the value of Dr. Prince’s future skilled labor is undisputedly excluded from the estate by virtue of the § 541(a)(6) post-commencement earnings exception.

However, not all of the stock’s present value is attributable to Dr. Prince’s future skilled labor, a fact evidenced by the sale agreement between Dr. Prince and Dr. Clare. The sale agreement price represents the value of the practice over and above the value of Dr. Prince’s labors. To explain, after the consummation date of the sale, Dr. Prince was not expected to continue working for the practice; rather, Dr. Clare intended to substitute his <yum future skilled labor for that of Dr. Prince. Thus, after subtracting the amount of Dr. Clare’s expenses and salary paid during the interim period by Dr. Prince, the purchase price represents the present value of the practice, excluding the worth of Dr. Prince’s future labors — i.e., the present value of the corporation’s physical assets and Dr. Prince’s goodwill.

The Princes contend, as the second component of their argument, that they should only have to pay into the creditors’ fund the $7,500 of the purchase price that represents the value of the corporation’s physical assets. They argue that Dr. Prince’s goodwill is, like his skills, training, and dental license, a personal attribute — that his goodwill is merely part of his human capital and therefore must be excluded from the bankruptcy estate under the § 541(a)(6) earnings exception. In an important sense, however, Dr. Prince’s goodwill is unlike his skills, his schooling, or his dental license. These components of Dr. Prince’s human capital can only manifest their value by increasing the worth of his future labors. Dr. Prince’s innate physical ability, his personality, or his professional degree increase the market value of his services, but they cannot be sold to another orthodontist; they have value only as attributes of Dr. Prince. On the other hand, Dr. Prince’s goodwill, like the practice’s physical equipment, can be sold and transferred, and once sold and transferred can generate value for another orthodontist. Although the mechanism of using his best efforts to transfer his patients’ loyalties to Dr. Clare and then securing the transfer with a covenant not to compete is not as simple as signing over title to a physical asset, the functional effect is the same. Dr. Prince could sell and deliver his goodwill to Dr. Clare, and Dr. Clare would then reap the value of the asset. Thus, Dr. Prince’s goodwill is not intrinsically part of his human capital, but rather is a separate intangible capital asset of the practice, like a trademark would be.

The courts have interpreted the postcommencement earnings exception extremely narrowly, holding that § 541(a)(6) excepts only earnings from services actually performed by an individual debtor after the date of commencement and that cash flows representing return on capital assets (even intangible ones) are not earnings from services of the debtor. See In re FitzSimmons, 725 F.2d at 1211. In re FitzSimmons involved an individual attorney operating his practice as a sole proprietorship, a situation quite analogous to Dr. Prince and his wholly owned professional corporation. The attorney, FitzSimmons, objected to being directed to pay any of his practice’s future profits to his creditors as part of a Chapter 11 reorganization, arguing that the profits were excluded from the bankruptcy estate by § 541(a)(6). The Ninth Circuit held:

FitzSimmons is thus entitled to monies generated by his law practice only to the extent that they are attributable to personal services that he himself performs. To the extent that the law practice’s earnings are attributable not to FitzSimmons’ personal services but to the business’ invested capital, accounts receivable, good will, employment contracts with the firm’s staff, client relationships, fee agreements, or the like, the earnings of the law practice accrue to the estate.

Id. (emphasis added). The same is true of Dr. Prince’s stock in his professional corporation. The value of earnings from future services performed by Dr. Prince are excluded from the bankruptcy estate. As discussed above, this exclusion was accomplished by the bankruptcy court’s looking to the agreed-upon purchase price as evidence of the stock’s value. The purchase price (less Dr. Clare’s interim salary and expenses) includes the value of the practice’s physical assets (undisputedly part of the bankruptcy estate) and Dr. Prince’s goodwill. The value of Dr. Prince’s goodwill represents future cash flows not from earnings for future services actually performed by Dr. Prince, but from return on an intangible capital asset that could be sold and transferred with the sale of the practice. The value of Dr. Prince’s goodwill is therefore not excluded from the estate by virtue of § 541(a)(6), and according to the plan of reorganization it must be paid by the Princes into the creditors fund.

B. Motion to Alter or Amend the Judgment

A court may grant a Rule 59(e) motion to alter or amend the judgment if the movant presents newly discovered evidence that was not available at the time of trial or if the movant points to evidence in the record that clearly establishes a manifest error of law or fact. Russell v. Delco Remy Div. of General Motors Corp., 51 F.3d 746, 749 (7th Cir.1995); LB Credit Corp. v. Resolution Trust Corp., 49 F.3d 1263, 1267 (7th Cir.1995) (quoting FDIC v. Meyer, 781 F.2d 1260, 1268 (7th Cir.1986)). The decision whether to grant or deny a Rule 59(e) motion is entrusted to the sound judgment of the district court, and we will reverse only for an abuse of discretion. LB Credit Corp., 49 F.3d at 1267.

In its motion to alter or amend the judgment, the Committee pointed to evidence in the record contradicting Dr. Prince’s testimony that Dr. Clare had received the income from the practice during the interim period. This evidence in the record, however, did not clearly demonstrate a manifest error of fact; it merely suggested that Dr. Prince’s testimony might have been incorrect. Instead, the bankruptcy court’s decision to amend the judgment was based on the conclusive proof of the practice’s bank records, which were not offered into evidence prior to the entry of judgment. Because the bank records were “newly discovered” evidence, rather than evidence existing in the record, the bankruptcy court was authorized to amend the judgment on the basis of the records only if the evidence was unavailable to the Committee at the time of the hearing. See Figgie Int’l Inc. v. Miller, 966 F.2d 1178, 1180 (7th Cir.1992).

The Princes argue that the district court abused its discretion by granting the Committee’s Rule 59(e) motion because the bank records were in existence and accessible by the public — and therefore technically available-prior to the entry of judgment. But this argument reflects a far too simplistic interpretation of availability. This court has held that “[a] Rule 59(e) motion cannot be used to present evidence that could and should have been presented prior to the entry of final judgment.” Retired Chicago Police Ass’n v. City of Chicago, 76 F.3d 856, 867 (7th Cir.1996) (emphasis added). Where a party is made aware that a particular issue will be relevant to its case but fails to produce readily available evidence pertaining to that issue, the party may not introduce the evidence to support a Rule 59(e) motion. Green v. Whiteco Indus., Inc., 17 F.3d 199, 202 n. 5 (7th Cir.1994). However, it appears that in this case the parties did not have sufficient indication prior to the hearing that the recipient of the interim income would be a relevant issue, and even once the relevance of the issue was discovered the parties were not given an opportunity to collect evidence bearing on the question. On remand to redetermine the value of Dr. Prince’s stock including goodwill, the district court had instructed the bankruptcy court to consider “the purchase price paid by Dr. Clare, less the value of the tangible assets and the value of the transitional services rendered by Dr. Prince in connection with the sale.” (emphasis added). In light of this directive, both parties (as well as the bankruptcy court) assumed at the hearing that an amount would be deducted for Dr. Prince’s part-time labors during the interim period, and they focused on quibbling over how much. Only during final argument, after all the evidence had been introduced, did it occur to the bankruptcy court and the parties that whether Dr. Prince received the practice’s interim income was a crucial question.

Like the Committee and the bankruptcy-judge, the Princes did not anticipate that the recipient of the interim income would be in issue and thus did not access the practice’s bank records. In fact, when called to the stand, Dr. Prince testified that Dr. Clare had received the practice’s income — testimony that directly contradicted the bank records’ conclusive evidence. As a result, the Princes cannot maintain that the Committee was at fault for similarly failing to foresee the relevance of the bank records and therefore neglecting to produce them.

Given that the Committee had no reason to have obtained the bank records prior to the hearing, and that the bankruptcy court did not grant a continuance in order for the parties to gather evidence on the question once its relevance became apparent, we find that the bank records were effectively unavailable to the Committee prior to the entry of judgment. The bankruptcy court, therefore, did not abuse its discretion in granting the Committee’s timely motion to amend the judgment on the basis of the bank records. As the district court summarized, the bankruptcy court here was faced with a choice: “It could reopen the proofs and reach a correct result or it could knowingly enter an erroneous judgment giving Dr. Prince a $105,000 windfall as a result of his own false testimony.” We cannot find error in the bankruptcy court’s choosing the former.

Both decisions of the district court are hereby

Affirmed.

      . More precisely, the agreement stated that Dr. Clare would pay “$450,000.00 amortized at 12 percent simple interest for 5 years, and $500,-000.00 amortized at 10 percent simple interest for 5 years. The payment amount shall be $120,-000 per year including principal and interest. The balance, if any, from each of these calculations at the end of the five year period shall be averaged to obtain the final payment amount for the sixth year.”

      . This, of course, excepts those situations where a shareholder derives some nonpecuniary personal benefit from part ownership in a company — such as where a life employee proudly holds stock in his employer, or where a loyal fan holds stock in his favorite sports franchise.

      . Of course, the existence of an enforceable covenant not to compete would not absolutely ensure that Dr. Prince would not compete with the corporation. It would, however, make Dr. Prince liable for any loss in revenue to the corporation from his competition, and thus would ensure that there would be no reduction in cash flows to the stock as a result of any competition from Dr. Prince.

      . This, together with the significant margin of error inherent in earnings value calculations, likely accounts for the discrepancy between the Committee expert's estimates and the agreed-upon purchase price.

      . Note that the mere fact that Dr. Prince’s goodwill was created through years of his practicing in the community does not alter the conclusion that it is an asset separate from his human capital. If Dr. Prince were to have fashioned one of the practice's physical assets with his own hands, this would not change the fact that the asset could be sold and, therefore, that the asset had value independent of Dr. Prince. The earnings exception does not exclude earnings from an asset created by a debtor’s past labors, only the earnings from actual services performed by the debtor in the future.


text:
    UNITED STATES of America, Appellee, v. Enrique CRUZ-OCHOA, Appellant.
    No. 95-3393.
    United States Court of Appeals, Eighth Circuit.
    Submitted Feb. 27, 1996.
    Decided May 9, 1996.
   JUDGMENT

The above-entitled ease is set for oral argument as the third case on Tuesday, March 12,1996. It is hereby ORDERED:

1) The case be stricken from the calendar and dismissed.

2) Our review of the sentencing transcript and record before us leads us to conclude that the district court erred as a matter of law by incorrectly believing that it could not depart downward from the guidelines on the basis of defendant’s waiver and consent to administrative deportation upon the filing of a joint motion by the parties for a two-level downward departure at sentencing on defendant’s plea of guilty to illegal reentry.

3) The sentence is vacated and the case remanded for resentencing, so that the district court may consider whether departure is warranted. Whether a downward departure should be granted lies within the sound discretion of the district court. See U.S. v. Whitetail, 956 F.2d 857 (8th Cir.1992).