Petersen v. Bitters et al

Filing 203

MEMORANDUM AND ORDER that the Estate of Joyce Rosamond Petersen's Statement of Objections to Magistrate Judge's Order Dated March 14, 2018 (Filing No. 189 ) is overruled. The Estate of Joyce Rosamond Petersen's Statement of Objections to Magistrate Judges Order Dated March 23, 2018 (Filing No. 190 ) is overruled. Ordered by Judge Robert F. Rossiter, Jr. (Copy mailed to pro se party) (JSF)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
ESTATE OF JOYCE ROSAMOND
PETERSEN,
8:16CV183
Plaintiff,
MEMORANDUM
AND ORDER

v.
WILLIAM E. BITTERS; ROBERT W.
BOLAND, JR.; JOHN L. HENRY; and
UNITED FINANCIAL SERVICES,
Defendants.

This matter is before the Court on plaintiff Estate of Joyce Rosamond Petersen’s
(the “estate”) “Statement of Objections to Magistrate Judge’s Order Dated March 14,
2018” (Filing No. 189) and “Statement of Objections to Magistrate Judge’s Order Dated
March 23, 2018” (Filing No. 190). For the reasons stated below, the objections are
overruled.
I.

BACKGROUND
While Joyce Rosamond Petersen (“Petersen”) was still living, William E. Bitters

(“Bitters”) was her financial advisor. On Bitters’s advice, Petersen loaned $150,000 in
2008 to defendant John L. Henry (“Henry”) and received a promissory note. Henry never
repaid the loan. Petersen died on October 20, 2013. On December 1, 2014, the estate
filed suit in the United States District Court for the Eastern District of Texas against
Henry, Bitters, United Financial Services (“UFS”), and Robert W. Boland, Jr. (“Boland”
and collectively, the “defendants”) for damages arising from the unpaid loan. 1
After some disputes in the Eastern District of Texas involving service and personal
jurisdiction, the case was transferred (Filing No. 57) to the District of Nebraska on
1

UFS.

Bitters allegedly conducts business as UFS, and Boland is allegedly an officer of

March 17, 2016, and the case was received (Filing No. 58) on April 25, 2016. The
defendants moved to dismiss (Filing Nos. 68 and 70), but their motions were deemed
mooted when the Court allowed (Filing No. 98) the estate to file an amended complaint
(Filing No. 99). The defendants again moved to dismiss (Filing Nos. 104, 106, and 112),
and the Court dismissed (Filing No. 121) three of the ten claims in the amended
complaint.
After a planning conference, the magistrate judge 2 entered a Final Progression
Order (“progression order”) (Filing No. 127) setting trial for March 19, 2018, scheduling
a status conference for October 24, 2017, and setting a November 1, 2017, writtendiscovery deadline and a November 30, 2017, deposition deadline. It appears no activity
took place in the case for the next seven months until the estate served discovery on the
defendants for the first time on September 19, 2017. At the October status conference,
the estate informed the magistrate judge for the first time that Henry was not responding
to discovery requests. The magistrate judge extended the trial date to June 25, 2018, the
written-discovery deadline to December 1, 2017, and the deposition deadline to
February 9, 2018.
On November 6, 2017, the magistrate judge held a hearing on the estate’s
discovery disputes with Henry, which included requests for admission, requests for
production, and interrogatories.

During the hearing, the parties went through the

discovery requests individually and mostly resolved the requests for admission and the
interrogatories. The magistrate judge informed the estate it could obtain many of the
requested documents by directly subpoenaing the entities that possessed them, and, if the
estate recovered any documents Henry claimed did not exist, the estate could then ask the
magistrate judge to impose sanctions.

2

The Honorable Cheryl R. Zwart, United States Magistrate Judge for the District
of Nebraska.
2

After a telephone conference on November 15, 2017, the magistrate judge
scheduled a discovery conference for December 21, 2017, required a jointly prepared
summary of remaining discovery disputes to be submitted by December 18, 2017, and
extended the deadline for written discovery to January 16, 2018 (Filing No. 137). On
November 16, 2017, the magistrate judge ordered (Filing No. 138) Henry to produce
several responses and documents by December 4, 2017, and keep the Court updated on
his address. 3 On December 6, 2017, the magistrate judge extended (Filing No. 144) the
expert-witness deadlines in response to the estate’s unopposed motion (Filing No. 143).
The estate moved to continue the discovery hearing on December 12, 2017, and
the submission date for the summary of remaining discovery disputes on December 18,
2017. The magistrate judge extended the deadline for the summary to January 22, 2018,
and set the conference for January 25, 2018.
On January 10, 2018, the estate notified Henry it intended to subpoena his
accountant and subpoenaed the accountant on January 19, 2018. The estate took the
accountant’s deposition on January 29, 2018, where Henry appeared and was allegedly
very disruptive and hostile.
On January 22, 2018, the estate provided a discovery-dispute summary to the
magistrate judge that was over 250 pages. At the discovery conference on January 25,
2018, the magistrate judge first advised the parties to attempt to come to an agreement.
After an hour in court and two and a half hours conferring, the parties were unable to

3

Henry objected (Filing Nos. 139 and 150) to the order. The Court denied (Filing
Nos. 149 and 151) those objections. The ruling on the objections was delayed because
the plaintiffs did not file any responses or inform the Court they were not going to file
responses.
3

resolve any issues. The subsequent in-court portion of the discovery hearing took over
five hours. 4
Boland and Bitters moved to extend the deadline for expert disclosure on
February 6, 2018. On February 8, 2018, Henry moved for a protective order pertaining to
documents obtained from the subpoena of his accountant 5 and moved to quash a
subpoena duces tecum served on him in relation to Henry’s alleged involvement in a
business known as JSJ Manufacturing Inc. On February 11, 2018, the estate filed a
Motion to Extend Deadlines; Make Alternative Service; Add New Defendants; and
Sanction John L. Henry and Require Him to Sign an Authorization to Release IRS
Records (Filing No. 166). 6
The magistrate judge dealt with these issues in a March 14, 2018, Memorandum
and Order (Filing No. 181). The magistrate judge denied Henry’s motion for a protective
order because of his own refusal to cooperate with the discovery process. Henry’s
motion to quash the subpoena duces tecum was denied as moot because the estate
withdrew the subpoena. The magistrate judge determined the estate had shown good
cause only for an extension of the deadline to depose party witnesses and denied the other
requests for extension. 7 The magistrate judge denied sanctions as to Henry but stated “if
Henry fails to produce documents as ordered in Filing No. 138 before March 26, 2018,

4

On February 5, 2018, the magistrate judge issued a written order (Filing No. 160)
on the discovery issues.
5

In the estate’s response to Henry’s motion, it attempted to move for its own
protective order.
6

The estate wished to extend the deadlines for depositions, written discovery,
expert-witness disclosure, and the amendment of the complaint.
7

Because the magistrate judge denied the extensions, she did not address the
estate’s request for alternate service of subpoenas on Henry.
4

Henry will be ordered to appear before the court and sign an authorization permitting [the
estate] to obtain records from the IRS.” 8
After Boland and Bitters moved (Filing Nos. 182 and 184) for summary judgment,
the estate moved (Filing No. 186) to extend the deadline to file its own summaryjudgment motion and requested an extension of the deposition deadline. This motion for
extension was filed at 11:41 p.m. on the day of the deadline. The estate claimed one of
its attorneys was ill and the other attorney was too busy to work on the case. Finding the
estate’s excuses unpersuasive, especially against the backdrop of the three-and-a-half
year pendency of this lawsuit, and the continual inability of counsel for the estate to
follow the rules of this Court, the magistrate judge denied (Filing No. 188) the estate’s
motion for lack of good cause.
II.

DISCUSSION
A.

Standard of Review

The estate’s objections to the magistrate judge’s orders are governed by 28 U.S.C.
§ 636(b)(1)(A). Under that section, the Court may reconsider the magistrate judge’s
rulings if “it has been shown that the magistrate judge’s order is clearly erroneous or
contrary to law.” Id. “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.’” Lisdahl v. Mayo Found., 633 F.3d 712,
717 (8th Cir. 2011) (quoting Anderson v. City of Bessemer City, 470 U.S. 564, 573
(1985)).
B.

First Order

The estate objected (Filing No. 189) to the magistrate judge’s partial denial (Filing
No. 181) of its Motion to Extend Deadlines; Make Alternative Service; Add New
Defendants; and Sanction John L. Henry and Require Him to Sign an Authorization to
8

Filing No. 138 required Henry to produce almost all of the documentation sought
by the estate from the IRS. Henry apparently did not meet the deadline, but the estate did
not pursue enforcement of the magistrate judge’s ruling.
5

Release IRS Records (Filing No. 166) on March 28, 2018. The estate’s statement of
objections contained multiple objections to the magistrate judge’s decision.
1.

Counter-motion for a Protective Order

The estate complains the magistrate judge did not rule on its “counter-motion” for
a protective order to prevent Henry from attending depositions. The magistrate judge did
not err in declining to rule because the estate’s “counter-motion” was contained in a
response brief (Filing No. 168) and was not a proper motion.

See NECivR 7.1

(describing motions and response briefs separately). In addition, if the magistrate judge
did not rule on the motion then the estate cannot object to that non-existent ruling.
2.

Lack of Due Diligence

A progression order “may be modified only for good cause and with the judge’s
consent.” Fed. R. Civ. P. 16(b)(4). “The primary measure of good cause is the movant’s
diligence in attempting to meet the order’s requirements.” Sherman v. Winco Fireworks,
Inc., 532 F.3d 709, 716-17 (8th Cir. 2008) (quoting Rahn v. Hawkins, 464 F.3d 813, 822
(8th Cir. 2006)). Prejudice to the nonmovant is also a relevant factor to consider before
extending progression deadlines, but courts do not need to reach that factor if the movant
was not diligent. Id. at 717.
The magistrate judge determined the estate was not diligent because it “did not
attempt to serve subpoenas on third parties until nearly a year after the case progression
order was entered, three years after the case was filed, and less than a month before the
deposition deadline.” The magistrate judge also noted the case had been pending for two
years, with approximately six months of the delay attributable to the estate’s “failure to
promptly effectuate service on the defendants, with an additional year caused by filing
the lawsuit in a forum that lacked personal jurisdiction over them.” The magistrate judge
concluded that “despite the court’s November 2017 assistance regarding Defendant
Henry’s discovery, [the estate] waited until the eleventh hour to subpoena third parties

6

identified during that hearing.” The magistrate judge declined to extend most of the
deadlines in the progression order. 9
The estate argues that it has been diligent and attempts to blame the delay in the
case on the non-cooperation of the defendants. After reviewing the record, the Court
disagrees. The magistrate judge’s determination that the estate was not diligent was not
in error, much less clear error, and any further delay to the case in prejudice the
defendants who have already waited three years to resolve a case arising out of a
transaction in 2008.
3.

Equitable and Judicial Estoppel

The estate’s third and fourth arguments are that the defendants were equitably and
judicially estopped from arguing that the estate “did not act with diligence because they
did not submit discovery requests for the first six months” and they also “joined [the
estate] in seeking prior extensions of time on the basis that [the estate] (and they) had
acted, up until the dates of those filings, with diligence to support good cause.”
The doctrines of equitable and judicial estoppel do not compel a reversal of the
magistrate judge’s decision. First, diligent conduct for a plaintiff is not necessarily the
same as diligent conduct for a defendant because the plaintiff bears the burden of proof
and must often gather more evidence than a defendant. Thus, it is not necessarily
inconsistent for a defendant to argue that similar actions were diligent for itself and not
for a plaintiff. Second, even if the defendants were estopped from arguing that the estate
had not been diligent, the magistrate judge could have raised the issue herself because
continual delays affect the interests of judicial economy. See, e.g., Salkeld v. Gonzales,
420 F.3d 804, 810 (8th Cir. 2005) (deciding the denial of a continuance based on a
concern for judicial economy is not arbitrary).

9

The magistrate judge recognized, “Henry did not fully and timely respond to [the
estate’s] written discovery, necessitating a court order, and he has allegedly failed to
comply with that order to date.” Given Henry’s lack of cooperation, the magistrate judge
extended the deadlines for completing depositions.
7

4.

Alleged Misrepresentation of Facts

The estate asserts the magistrate judge misrepresented facts “in an apparent
attempt to paint [the estate] in a poor light.” Even if this accusation were true, which it is
not, for it to have any relevance to its objection, the estate must point to inaccurate factual
representations that actually affected the magistrate judge’s analysis. It has not done so.
While arguing that the magistrate judge misleadingly stated the factual record, the
estate again begins to list grievances against Henry and attempts to blame its delay on the
actions of the defendants. The Court has already addressed this argument and will not do
so again.
5.

Compliance with Local Rules

The estate contends the magistrate judge erred when she stated the estate did not
comply with Nebraska Civil Rule 7.1. This claim is irrelevant because, although the
magistrate judge noted in passing that the estate did not follow the local rules, the
magistrate judge did not base her determination on that conclusion.
6.

Denial of Leave to Amend the Complaint and to Add Expert
Witnesses

The estate takes issue with the magistrate judge’s refusal to extend the deadlines to
file an amended complaint and to name new experts. This objection is merely a rehash of
the estate’s previous diligence argument and is overruled.
7.

IRS Authorization

The estate had sought an order requiring Henry to sign an authorization allowing
the estate to obtain records from the IRS. The magistrate judge allowed Henry until
March 26, 2018, to produce the records the estate sought from the IRS, and if he did not,
then Henry would be ordered to appear before the court and sign the IRS authorization.
Henry did not meet the deadline, but rather than bring this to the attention of the
magistrate judge, the estate objected to this ruling two days after the deadline. In its
8

statement of objections, the estate complained that being required to file a third motion to
compel would be an “undue and unnecessary burden” and the delay until March 26 was
“unfair.”
This argument is nonsensical. The magistrate judge did not require the filing of a
motion to compel. The estate could have merely shown any lack of compliance to the
magistrate judge and received an order requiring Henry to sign the authorization.
Moreover, filing a motion to compel in accordance with the magistrate judge’s earlier
order is not more of a burden than filing a statement of objections and declaration totaling
107 pages. Any delay the estate identifies would still occur if this Court reversed the
magistrate judge’s order. 10

Finally, the estate has not cited any authority showing the

requested IRS authorization was mandatory.

The estate’s alleged grievance here is

baseless.
8.

Request for Alternate Service of Subpoenas

The estate had requested the ability to perform alternate service on Henry and his
family. The magistrate judge did not directly address this request, and the estate now
asserts, “The Order held that ‘no further discovery shall be served in this case’ . . . and
thereby indirectly denied Plaintiff’s request to make alternative service of subpoenas on
Henry’s wife, son, and brother.” Because the Court agrees with the magistrate judge that
the deadlines should not be extended, including those for discovery, this argument is
immaterial.
9.

Consent to a Magistrate Judge

The estate argues it did not consent to have a magistrate judge decide any matters.
It apparently overlooks the fact that “a judge may designate a magistrate judge to hear
and determine any pretrial matter pending before the court[.]” 28 U.S.C. § 636(b)(1)(A).
The estate’s consent is not required.

10

The only delay the Court can identify is the time between the magistrate judge’s
decision on March 14, 2018, and the March 26, 2018, deadline.
9

10.

Sanctions Against Henry

The estate takes issue with the magistrate judge’s denial of sanctions against
Henry. It specifically argues, “Sanctions are mandatory,” and cites Federal Rule of Civil
Procedure 37(b)(2)(A); Arnold v. ADT Sec. Servs., 627 F.3d 716, 720 (8th Cir. 2010);
and Carlson v. Freightliner LLC, 226 F.R.D. 343, 372 (D. Neb. 2004).
Rule 37(b)(2)(A) actually provides, “If a party . . . fails to obey an order to provide
or permit discovery . . . the court where the action is pending may issue further just
orders.” “Rule 37(b)(2) permits a court to impose sanctions[.]” Carlson, 226 F.R.D. at
372 (emphasis added). 11 Sanctions were not mandatory in this case, and the magistrate
judge had the discretion to deny them.
None of the estate’s arguments for reversing the magistrate judge’s March 14,
2018, Memorandum and Order (Filing No. 181) are persuasive and its statement of
objections (Filing No. 189) is overruled.
C.

Second Order

On April 6, 2018, the estate objected (Filing No. 190) to the magistrate judge’s
refusal to extend the deadlines for summary judgment and depositions. The estate’s
statement of objections again contained multiple objections.
1.

Repeated Arguments

The following arguments made by the estate are identical to those made and
addressed previously: (1) the magistrate judge mistakenly said the estate did not comply
with Nebraska Civil Rule 7.1, (2) the magistrate judge incorrectly decided the estate
lacked due diligence, (3) the defendants should be equitably and judicially estopped from
arguing the estate failed to act diligently, and (4) the estate did not consent to a magistrate
judge. These objections are overruled for the same reasons as stated above.

11

Sanctions are required in the form of attorney fees after a successful motion to
compel. Fed. R. Civ. P. 37(a)(5)(A); Arnold, 627 F.3d at 720. There was no such
successful motion in this case.
10

2.

Opportunity to Reply to the Response

The estate contends the magistrate judge violated Nebraska Civil Rule 7.1(c) when
she ruled on the motion to continue before it could file a reply brief. The estate overlooks
Nebraska General Rule 1.1(c), which explains, “[I]n the interest of justice a judge may
deviate from this court’s rules and procedures.” Even if the magistrate judge did violate
Rule 7.1(c), it was harmless because the estate has included the arguments it would have
made in its reply brief in its statement of objections and, as elaborated on below, the
Court determines them to be unpersuasive.
3.

Impossibility of the Pretrial Schedule

According to the estate, “The [progression order] set an impossible schedule that
deprived [the estate] of any opportunity to seek critical discovery for use at summary
judgment and at trial.”
If the progression order had truly set an impossible schedule, the proper time to
ask for an extension would have been much earlier than 11:41 p.m. on the day of the
deadline. If the estate would have been diligent in prosecuting the case, then it would
have been able to complete discovery before the deadline, or at least discover that
extension was necessary before what was literally the eleventh hour.
4.

Unavailability of the Estate’s Counsel

The estate disputes the magistrate judge’s conclusion that the estate was not
diligent, claiming that one of the estate’s attorneys was violently ill and the other was
extremely busy. The Court finds that the magistrate judge’s findings were not clearly
erroneous. Even if the two attorneys were unable to work on the case, then they should
have filed their extension much earlier than they did. The Court does not believe that
being busy excuses a lack of diligence; the attorneys took the case and are responsible for
its timely disposition.

11

5.

Sufficient Time for Defense Counsel to Respond

The estate argues the magistrate judge mistakenly found the estate did not give the
defendants enough time to respond to the motion. In support of this allegation, the estate
argues that counsel for Bitters and Boland electronically filed a brief one hour after the
estate sent him an email requesting his position on the motion. The estate concludes the
attorney “was obviously online since he filed a motion one hour later, but he chose not to
respond.”
First, the magistrate judge merely stated that the estate did not contact opposing
counsel until the last minute. That statement was not clearly erroneous. According to the
estate, the email to opposing counsel was sent at 8:51 p.m. The estate’s conclusion that
opposing counsel obviously saw the email but chose not to respond because a brief was
filed an hour later is also extremely speculative. This is not grounds to reverse the
magistrate judge’s order.
6.

Prejudice

The estate claims “the magistrate judge’s order incorrectly states that [the estate]
made no showing of ‘prejudice’ in not being able to depose Henry’s family members.”
This misunderstands the magistrate judge’s ruling.
The magistrate judge actually ruled that there was no prejudice to the estate from
not being able to depose Henry’s family members before the expiration of the summary
judgment deadline on March 20, 2018, because the estate’s “arguments rely on proving
fraud, misrepresentation, or concealment of material facts. Such issues raise factual
disputes, require assessing the credibility of witnesses, and rarely, if ever, can be decided
as a matter of law.”
7.

The Supreme Court’s Pioneer Decision

The estate takes issue with the magistrate judge’s failure to address the United
States Supreme Court’s decision in Pioneer Investment Services v. Brunswick Associates
Ltd. Partnership, 507 U.S. 380, 394 (1993).
12

A court need not address every case cited by the parties. What is more, Pioneer
does not apply here. Pioneer dealt with the meaning of “excusable neglect” within
Federal Rule of Bankruptcy Procedure 3003(c). Id. at 382-83. The applicable standard
when determining to modify a progression order is “good cause,” which is a more
stringent standard. Fed. R. Civ. P. 16(b)(4); see Bartunek v. Bubak, 941 F.2d 726, 728
(8th Cir. 1991) (referring to “excusable neglect” as a more stringent standard than “good
cause”).
The magistrate judge has been open-minded, patient and timely in her rulings on
the numerous and varied discovery and progression issues that have arisen in this case.
Because the estate’s arguments for overruling the magistrate judge’s refusal (Filing
No. 188) to extend the deadlines for summary judgment and depositions are
unconvincing, the estate’s statement of objections (Filing No. 190) is overruled.
III.

CONCLUSION
The magistrate judge’s decisions (Filing Nos. 181 and 188) were not clearly

erroneous or contrary to law. Accordingly,
IT IS ORDERED:
1.

The Estate of Joyce Rosamond Petersen’s Statement of Objections to
Magistrate Judge’s Order Dated March 14, 2018 (Filing No. 189) is
overruled.

2.

The Estate of Joyce Rosamond Petersen’s Statement of Objections to
Magistrate Judge’s Order Dated March 23, 2018 (Filing No. 190) is
overruled.

Dated this 3rd day of May, 2018.
BY THE COURT:

Robert F. Rossiter, Jr.
United States District Judge
13