Rasby et al v. Pillen

Filing 106

MEMORANDUM AND ORDER - THEREFORE, IT IS ORDERED THAT: James Pillen's motion to compel production of documents, Filing No. 60 , is denied. James Pillen's objections, Filing No. 98 , are overruled. The order of the magistrate judge , Filing No. 81 , is adopted in its entirety. Rasby's motion to compel, Filing No. 77 , is granted in part. The order of the magistrate judge, Filing No. 89 , is adopted in its entirety. Pillen's objections, Filing No. 99 , are overruled. Ordered by Senior Judge Joseph F. Bataillon. (TCL)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA

DEBORAH RASBY,
Plaintiff,

8:15CV226

v.
MEMORANDUM AND ORDER
JAMES D. PILLEN,
Defendant.

This matter is before the court on defendant’s objection, Filing No. 98, to the
order of the magistrate judge, Filing No. 81, denying his motion to compel, Filing No. 60.
Further, defendant files a second objection, Filing No. 99, to the magistrate judge’s
order, Filing No. 89, granting a motion to compel, Filing No. 77. Plaintiff Deborah Rasby
sues defendant James Pillen to set aside a release and to obtain the fair market value
of her interest in certain properties.
A magistrate judge’s authority over nondispositive pretrial matters is governed by
28 U.S.C. § 636(b)(1)(A). Gomez v. United States, 490 U.S. 858, 873-74 (1989); see
also Fed. R. Civ. P. 72(a).

On review of a decision of the magistrate judge on a

nondispositive matter, the district court may set aside any part of the magistrate judge’s
order that it finds is clearly erroneous or contrary to law. 28 U.S.C. § 636(b)(1)(A); Fed.
R. Civ. P. 72(a); see Ferguson v. United States, 484 F.3d 1068, 1076 (8th Cir. 2007).
(“A district court may reconsider a magistrate judge’s ruling on nondispositive pretrial
matters where it has been shown that the ruling is clearly erroneous or contrary to
law.”).

A magistrate judge is afforded broad discretion in the resolution of

nondispositive discovery disputes. Bialas v. Greyhound Lines, Inc., 59 F.3d 759, 764
(8th Cir. 1995).
On review of a magistrate judge’s order on a nondispositive matter, the “district
judge in the case must consider timely objections and modify or set aside any part of
the order that is clearly erroneous or is contrary to law.” Fed. R. Civ. P. 72(a). A
decision is “‘clearly erroneous’ “when although there is evidence to support it, the
reviewing court on the entire evidence is left with the definite and firm conviction that a
mistake has been committed.’” Chakales v. C.I.R., 79 F.3d 726, 728 (8th Cir. 1996)
(quoting Chase v. Commissioner, 926 F.2d 737, 740 (8th Cir. 1991).
Motion to Compel, Filing No. 60
Defendant seeks production of documents requested from third-party attorneys
who previously represented plaintiff Deborah Rasby during a transaction that served as
the preface to this lawsuit.
The magistrate found the following facts, and the court adopts them for purposes
of this Memorandum and Order:
This cases arises from the parties’ business relationship, which
culminated in an agreement between them for Pillen to purchase Rasby’s
business ownership interest in associated companies such as Progressive
Swine Technologies, Inc. (PST), a management company for various
entities dealing with pork production including farms, feed mills, and swine
genetics. See Filing No. 5 - Amended Complaint ¶¶ 7-8, 11. PST began
operations on January 1, 1994, when Pillen held a 90% interest and
Rasby held the remaining 10%. Id. ¶ 8. The parties each received a
salary from 2001 to 2011. Id. ¶ 9. Since 1994 PST paid distributions to
the parties based on their ownership interests, with Rasby receiving
approximately $2,250,471 between the years 2000 through 2011. Id. ¶
10. Rasby alleges she learned Pillen was using their company assets to
benefit himself and his personal companies to her disadvantage. Id. ¶¶
12-16. Rasby states she confronted Pillen with her information, but he
became hostile and refused to discuss it. Id. ¶ 16. In May of 2011, Rasby
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decided to retire from PST with the understanding she would still receive
monthly distributions. Id. ¶ 17. After Rasby’s retirement, Pillen increased
his salary from $110,000 to $1,000,000 and stopped making distribution
payments. Id. ¶¶ 19-21. On April 13, 2012, Pillen offered to purchase
Rasby’s interest in the companies at less than market value and warned
her he planned to liquidate PST and stop cash distributions from her other
companies. Id. ¶¶ 23-24, 26. Rasby understood if she retained her
business interests she would have substantial tax liability exposure
without the income or distributions to pay it. Id. ¶¶ 22, 24, 27. Rasby
alleges Pillen’s agent told her Pillen “was going to ‘F’ with her” and he
threatened to “blow up PST” so she “would be looking for work again.” Id.
¶ 28. Rasby searched for investors to buy her interest but, due to Pillen’s
actions, investors refused. Id. ¶ 29. Pillen gave Rasby two weeks to
agree to sell to him or he would close PST. Id. ¶ 30. On June 29, 2012,
Rasby executed the Unit Purchase Agreement, selling her interests in the
companies to Pillen. Id. ¶ 31.

Filing No. 81, at 1-2.
Purchase

Rasby claims Pillen forced her to agree and enter into the

Agreement.

She

claims

undue

influence

(Count

1),

fraudulent

misrepresentation (Count II), securities fraud (Count III), loss of opportunities (Count
IV), and breach of fiduciary duty (Count V). Pillen denies these claims and alleges that
Rasby engaged in wrongdoings. Pillen also asserts claims for breach of contract for
filing this lawsuit in violation of the express terms of the Purchase Agreement (First
Counterclaim), breach of fiduciary duty (Second Counterclaim), breach of duty of loyalty
(Third

Counterclaim),

Counterclaim),

unjust

conversion

enrichment

(Sixth

(Fourth

Counterclaim),

Counterclaim),
and

civil

fraud

extortion

(Fifth

(Seventh

Counterclaim).
The dispute in question now before the court occurred when Pillen requested
production of documents from Rasby that related to her previous attorneys, McGrath
North law firm. The request related to the drafting and negotiation of the purchase
agreement. The parties eventually agreed that McGrath would produce the responsive
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documents to Rasby with a privilege log. Certain documents were produced to Pillen in
February, March and May. There were redacted emails in the May production, and the
content was not listed on the privilege log.
Pillen contends that Rasby waived the attorney-client privilege with regard to the
redacted emails. He wants them to establish Rasby’s state of mind when entering into
the agreements. Rasby argues she did not waive the attorney-client privilege. She
contends she placed only Pillen’s conduct at issue, as she was aware of the tax
implications of his threats.
The magistrate carefully analyzed the facts and law and determined that Rasby
“placed only Pillen’s conduct at issue when she alleged fraud and duress. Rasby did
not engage in an affirmative act which placed her confidential attorney-client
communications at issue.” Filing No. 81, at 7. The magistrate further concluded that
“[t]he facts associated with Rasby’s claims, including Pillen’s alleged
conduct, whether Rasby sought and received the advice of counsel, and
other influences on Rasby’s state of mind, may be relevant. Pillen has
means to access such facts, for example by asking Rasby what
alternatives she considered.
Rasby’s confidential attorney-client
communications extend beyond the facts to encompass matters sheltered
in the interests of justice by an important privilege and the ultimate issues
for resolution by the jury.”
Id. at 7-8.

Pillen next contended that Rasby waived her rights to assert attorney-client
privilege when she disclosed some full and some redacted emails. The magistrate
judge stated:
Here, Rasby concealed the confidential communications--that is those
containing communications made for the purpose of facilitating the
rendition of professional legal services. Rather, Rasby provided emails
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and parts of emails containing unprivileged facts and communications
intended to be sent to outside parties. Rasby sustained her burden of
establishing the privilege applies and no voluntary or involuntary waiver
occurred.

Id. at 8.
The magistrate judge concluded that the motion to compel productions of
documents should be denied.
Pillen objects to the findings of the magistrate judge.

In particular, Pillen

contends the magistrate judge erred in concluding that Rasby did not place her
confidential attorney-client communications at issue; and that she did not waive her
attorney-client privilege by partial disclosure.
The court has carefully reviewed the facts, the law, the magistrate’s decision, as
well as each of Pillen’s objections. The court concludes that the magistrate judge is
correct in all respects. A decision made by the magistrate will only be set aside if it is
clearly erroneous or is contrary to law. See Fed. R. Civ. P. 72(a). “A finding is clearly
erroneous when although there is evidence to support it, the reviewing court on the
entire evidence is left with the definite and firm conviction that a mistake has been
committed.” Gateway, Inc. v. Companion Prod., Inc., 384 F.3d 503, 507–08 (8th Cir.
2004) (emphasis supplied). The court can reverse the magistrate judge’s order upon a
showing that he “fails to apply the relevant law.” Jenkins v. Pech, No. 8:14CV41, 2015
WL 3872388, at *2 (D. Neb. June 23, 2015) (quoting Brooks v. Lincoln Nat’l Lif Ins. Co.,
No. 8:05CV118, 2006 WL 2487937, at *3) (D. Neb. Aug. 25, 2006). The court agrees
with the magistrate judge that Pillen has failed to make any such showing. There is no
evidence that confidential communications were disclosed. Thus, this motion is denied.
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Motion to Compel, Filing No. 77
Plaintiff Rasby moved to compel further answers to interrogatories, production of
documents, and to serve subpoenas on non-party accountants. Rasby wanted to obtain
information regarding the financial condition of Progressive Swine Technologies, Inc.
(PST) and other companies owned or controlled by Pillen. Rasby contends that this
discovery is relevant because it is “an action to set aside a release and obtain the fair
value for the interest [she] formerly owned in business entities in which [Pillen] retains
his interest.”

See Filing No. 79, Brief, p. 1.

Rasby contends there were multiple

businesses related to PST wherein Pillen failed to offer Rasby an opportunity to
participate in ownership of those businesses.
Rasby wanted to subpoena these records to establish that Pillen “made
intentional misrepresentations regarding his plans to furnish money to related entities
and to demonstrate the value of those entities for which Ms. Rasby should have been
given the opportunity for ownership.” Filing No. 79 at 4. Pillen argues the request is
irrelevant and overly broad.
The magistrate judge determined that Rasby sustained her burden of
demonstrating relevance, as the requests bear on her claims about the value of PST as
well as the conduct with regard to PST. However, the magistrate judge further found
that Rasby did not meet her burden with respect to the time period requested, “through
the present.” The magistrate judge concluded that the request should be limited to two
years after the buyout. Filing No. 89 at 5.
Pillen objects, contending the information requested is not relevant, as (1) it is
plaintiff’s personal financial information, and (2) plaintiff did not hold an interest in some
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of the companies wherein she requests information. The court has carefully reviewed
the facts, the law, the magistrate’s decision, as well as each of Rasby’s objections. The
court concludes that the magistrate judge is correct in all respects. The information is in
fact relevant to Rasby’s claims, and the magistrate reduced the request to a reasonable
timeframe.

THEREFORE, IT IS ORDERED THAT:
1. James Pillen’s motion to compel production of documents, Filing No. 60, is
denied;
2. James Pillen’s objections, Filing No. 98, are overruled;
3. The order of the magistrate judge, Filing No. 81, is adopted in its entirety;
4. Rasby’s motion to compel, Filing No. 77, is granted in part;
5. The order of the magistrate judge, Filing No. 89, is adopted in its entirety; and
6. Pillen’s objections, Filing No. 99, are overruled.
Dated this 30th day of March, 2017.

BY THE COURT:
s/ Joseph F. Bataillon
Senior United States District Judge

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