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Stabilis Fund II, LLC v. Compass Bank

United States District Court, N.D. Texas, Dallas Division

November 15, 2019

COMPASS BANK, Defendant.



         Before the Court are both Plaintiff's and Defendant's Objections to the Magistrate Judge's Order (Docs. 181 & 182, respectively) on Defendant's Motion to Compel (Doc. 92) and Second Motion to Compel (Doc. 114). The Magistrate's Order (the Order) granted in part and denied in part the motions to compel. See Doc. 180, Order, 8. For the following reasons, the Court OVERRULES Plaintiff's Objection (Doc. 181) as to item numbers 14 and 16 on Plaintiff's privilege log. The Court OVERRULES Defendant's Objection (Doc. 182) as to item number 1. The Court, however, ORDERS the Magistrate Judge to reconsider the parties' arguments on item numbers 2 and 40.

         I. BACKGROUND

         This case arises from Plaintiff Stabilis's purchase of a defaulted commercial loan from Defendant Compass. Doc. 180, Order, 1. In March 2013, Stabilis and Compass entered into a loan sale agreement (LSA) concerning a loan Compass made to a third party, the Kauras. Id. Before the LSA was executed, Stabilis alleges, the Kauras and Compass executed a loan modification agreement (LMA). Id. at 1-2. Stabilis alleges that it did not know about this LMA, despite due diligence. Id. Apparently, the LMA decreased the value of the loan. Id. at 2.

         Previously, Kauras filed suit in California against Compass alleging, inter alia, breach of the LMA. Id. Pursuant to the LSA, Stabilis defended Compass in that action through its outside counsel, Reed Smith. Id. (Internal citation omitted).

         Stabilis brought this suit against Compass alleging, inter alia, fraud based on Compass's alleged misrepresentations and concealment of the LMA. Id. One of the central issues has become Compass's statute-of-limitations argument. Compass believes that the four-year statute of limitations bars the suit at hand, arguing that Stabilis should have known about the LMA by August 30, 2013. Id. at 3. Stabilis, in turn, argued that it did not know about the LMA until September 2014, and therefore the suit was timely. Id.

         Compass has requested email communications between Reed Smith and Stabilis. Id. Although Reed Smith represented both Stabilis and Compass in the California case, Reed Smith provided other counsel to Stabilis with regards to “its indemnity obligations and rights against Compass vis-à-vis the LSA.” Id. Compass brought two motions to compel production of these communications (Docs. 92 & 114), which were referred to Magistrate Judge Toliver. See Docs. 95 & 116, Orders of Referral. Stabilis claimed attorney-client privilege and work-product protection for the requested communications. See Doc. 144, Pl.'s Mem. of Law and Br. in Support of its Privilege Log 1, 6.

         Relevant to this Court's review of Judge Toliver's Order, Judge Toliver ordered (1) item numbers 14 and 16 to be produced based on the joint-representation doctrine; (2) item number 40 to be produced based on the offensive-use doctrine; and (3) item numbers 1 and 2 to be protected by the attorney- client privilege and work-product doctrine. Doc. 180, Order, 5-8.


         Federal Rule of Civil Procedure 72 (a) provides that a “district judge . . . must consider timely objections” to a magistrate judge's order on a nondispositive matter “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). Rule 72(a)'s “‘clearly erroneous' standard applies to the factual components of the magistrate judge's decision.” Lahr v. Fulbright & Jaworski, LLP, 164 F.R.D. 204, 208 (N.D. Tex. 1996) (quoting Smith v. Smith, 154 F.R.D. 661, 665 (N.D. Tex. 1994)). The Rule's “contrary to law” language, on the other hand, applies to the magistrate's legal conclusions, meaning these conclusions “are reviewable de novo, and the district judge reverses if the magistrate judge erred in some respect in his legal conclusions.” Arters v. Univision Radio Broad. TX, LP, 2009 WL 1212285, at *2 (N.D. Tex. May 12, 2009) (internal alteration and quotation marks omitted) (quoting Lahr, 164 F.R.D. at 208) (internal citation omitted). Under either standard, “ [a] party who seeks to overturn a magistrate judge's order disposing of a discovery matter shoulders a heavy burden.” Hamilton v. First Am. Title Ins. Co., 2010 WL 791421, at *4 (N.D. Tex. Mar. 8, 2010) (collecting cases).

         III. ANALYSIS

         A. Stabilis's Objections

         Plaintiff Stabilis objects to the Order's denial of its assertion of privilege to item numbers 14, 16, and 40 on its privilege log. Doc. 181, Pl.'s Obj. to Mag. Order (“Pl.'s Obj.”), 1.

         1.Item Numbers 14 ...

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