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Rasby v. Pillen

United States District Court, D. Nebraska

March 30, 2017

JAMES D. PILLEN, Defendant.


          Joseph F. Bataillon, Senior United States District Judge.

         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 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. Rasby claims Pillen forced her to agree and enter into the Purchase 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), unjust enrichment (Fourth Counterclaim), fraud (Fifth Counterclaim), conversion (Sixth Counterclaim), and civil extortion (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 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 ...

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