Police and Fire Retirement System of the City of Detroit et al v. Watkins et al
Filing
207
ORDER Affirming The Magistrate Judge's Opinion and Order. Signed by District Judge Victoria A. Roberts. (LVer)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
POLICE AND FIRE RETIREMENT
SYSTEM OF THE CITY OF DETROIT,
ET AL.,
Plaintiffs,
CASE NUMBER: 08-12582
HONORABLE VICTORIA A. ROBERTS
Magistrate Judge R. Steven Whalen
v.
DONALD V. WATKINS, ET AL.,
Defendants.
/
ORDER AFFIRMING THE MAGISTRATE JUDGE’S
OPINION AND ORDER
This matter is before the Court on Defendants’ objections (Doc. # 192) to
Magistrate Judge R. Steven Whalen’s Order (Doc. # 189) regarding a discovery dispute
between the parties.
On January 12, 2012, Plaintiffs The Police and Fire Retirement System of Detroit
(“PFRS”) and the General Retirement System of the City of Detroit (“GRS”) (collectively,
“the Funds”) moved for a protective order prohibiting Defendants Donald V. Watkins and
his company, Watkins Aviation, LLC from deposing Ronald Zajac, General Counsel for
both Plaintiffs, and Joseph Turner of Clark Hill PLC, attorney for Plaintiffs in this
litigation. (Doc. # 176).
Defendants seek to depose both attorneys on their knowledge of past
misconduct on the part of the Funds, referred to as “pay to play” requests. According to
Defendants, the Funds have operated in a “sea of corruption” for years; this corruption
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involves “improper requests for financial favors, demands for improper cash payments,
and efforts to shake-down innocent recipients of pension fund loans – all in exchange
for favorable treatment by their Trustees,” they allege. (Doc. # 192 at 11). They say
evidence of these prior bad acts is admissible under Fed. R. Evid. 404(b) as evidence of
a pattern of misconduct – the same misconduct which ultimately led to this lawsuit and
which forms the basis of Defendants’ defense. Defendants also seek to depose Turner
regarding legal fees his firm charged Watkins in connection with the transaction that led
to this suit (the “TradeWinds transaction”). Defendants say: the fees were excessive,
Watkins convinced Turner to reduce them, and the Funds declared default on the
TradeWinds loan in part as retaliation for the fee reduction.
Magistrate Judge Whalen held a hearing on February 16, 2012. (Doc. # 195).
He ruled from the bench, granting in part and denying in part Plaintiffs’ motion for a
protective order. His remarks on the record are incorporated into his Order. He held
Defendants could depose both attorneys regarding the TradeWinds negotiations and
communications. (Id. at 29-31). However, he held the depositions must be limited in
scope to Turner’s and Zajac’s negotiations and/or communications with Watkins and/or
representatives of TradeWinds regarding the TradeWinds loan, rejecting Defendants’
contention that they are entitled to ask questions related to other transactions involving
the Funds. Citing Fed. R. Civ. P. 26(b), the magistrate said inquiries into matters
unrelated to the TradeWinds transaction would not likely lead to admissible evidence of
crimes, wrongs or other acts under Fed. R. Evid 404(b). (Id. at 30). He concluded
evidence of “pay to play” pressure outside of the TradeWinds transaction is irrelevant
under Fed. R. Evid. 401, and even if relevant and admissible under Rule 404(b), it is
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unduly prejudicial under Rule 403 in light of its slight probative value. (Id. at 29-30).
Finally, Magistrate Whalen held Defendants’ claim about the “billing situation” is “highly
speculative” and irrelevant to the claims or defenses in the case. (Id. at 31).
Defendants object to the restrictions the Magistrate placed on the questions they
may ask Turner and Zajac. (Doc. # 192). They believe they are entitled to ask about
other “pay to play” requests by the Funds and about Watkins’ billing dispute with Turner
under Rule of Evidence 404(b). They argue these lines of inquiry are relevant to their
defense that the Funds’ impropriety prevented them from fulfilling their obligations under
the deal, absolving them of their guarantor liability.
The Court will reverse a Magistrate’s ruling on a pretrial, non-dispositive motion
only if the decision is clearly erroneous or contrary to law. 28 U.S.C. § 636(b)(1)(A);
Fed. R. Civ. P. 72(a). The clearly erroneous standard applies to factual findings made
by the Magistrate; his legal conclusions are reviewed under the “contrary to law”
standard. Gandee v. Glaser, 785 F. Supp. 684, 686 (S.D. Ohio 1992), aff’d, 19 F.3d
1432 (6th Cir. Mar. 14, 1994) (table). A finding is clearly erroneous when, “‘although
there is evidence to support it, the reviewing court is left with the definite and firm
conviction that a mistake has been committed.’” Robinson v. Allstate Ins., Co., No. 0910341, 2011 WL 3111947, at *2 (E.D. Mich. July 26, 2011) (quoting United States v.
United States Gypsum Co., 330 U.S. 364, 395 (1948)). “If more than one permissible
view of the evidence exists, the Magistrate’s decision cannot be clearly erroneous.” Id.
(citing Anderson v. City of Bessemer City, N.C., 470 U.S. 564, 573-74 (1985)). A legal
conclusion that fails to apply or misapplies case law, statutes, or procedural rules is
“contrary to law.” Id. This standard requires the Court to use independent judgment.
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Id.
Magistrate Whalen’s decision is neither clearly erroneous nor contrary to law.
The magistrate correctly interprets and applies the relevant authority, including
Nationwide Mut. Ins. Co. v. Home Ins. Co., 278 F.3d 621 (6th Cir. 2002); Fed. R. Evid.
401, 403, and 404(b); and Fed. R. Civ. P. 26(b) to conclude that Plaintiffs are entitled to
a protective order prohibiting Defendants from questioning Turner and Zajac about
matters outside of the TradeWinds transactions (including the billing dispute). In
particular, any relevance these matters might have to Defendants’ defense is
substantially outweighed by the danger of unfair prejudice and confusing the issues
under Fed. R. Evid. 403, as the magistrate observed.
Accordingly, the Court OVERRULES Defendants’ objections and AFFIRMS the
Magistrate’s Order. Plaintiffs’ Motion is GRANTED IN PART AND DENIED IN PART.
IT IS ORDERED.
S/Victoria A. Roberts
Victoria A. Roberts
United States District Judge
Dated: May 1, 2012
The undersigned certifies that a copy of this
document was served on the attorneys of
record by electronic means or U.S. Mail on
May 1, 2012.
S/Linda Vertriest
Deputy Clerk
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