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Quantlab Group, LP v. Dempster

United States District Court, S.D. Texas, Houston Division

December 20, 2019

QUANTLAB GROUP, LP, et al., Plaintiffs,
ALLEN HERMAN DEMPSTER, et al., Defendants.



         Plaintiffs Quantlab Group, LP and Quantlab Financial, LLC (collectively, “Quantlab”) filed a Motion to Compel Production or, in the Alternative, in Camera Inspection of the Privilege Log Documents (“Motion to Compel”) [Doc. # 57]. By Order [Doc. # 61] entered June 21, 2019, the Court referred Quantlab's Motion to Compel to United States Magistrate Judge Dena Palermo pursuant to 28 U.S.C. § 636(b)(1)(A) for determination. Magistrate Judge Palermo issued her Order on Plaintiffs' Motion to Compel [Doc. # 86], granting in part and denying in part the motion.

         The case is now before the Court on Non-Parties' Objection [Doc. # 87], to which Quantlab filed a Response [Doc. # 90]. Defendants Allen Herman Dempster, and Dempster & Dietler, LLP also filed an Objection [Doc. # 89], to which Quantlab filed a Response [Doc. # 91]. Quantlab also provided supplemental information regarding the Objections.[1] Having reviewed the record and the applicable legal authorities, the Court overrules the Objections and requires compliance with the Magistrate Judge's Order.

         I. BACKGROUND

         Plaintiffs filed this lawsuit alleging that Defendant Dempster and his firm Dempster & Dietler, LLP, served for many years as Quantlab's attorney and accounting advisor. Plaintiffs allege that Dempster prepared partnership agreements and a Voting Trust Agreement that enabled two of Quantlab Group's minority partners, non-parties Bruce P. Eames and Andrey Omeltchenko, to attempt to take control of Quantlab Group and its related companies.

         Defendants prepared a privilege log, identifying 400 documents as protected by (1) the attorney-client privilege, (2) the attorney work product privilege, and (3) the California Accountancy Act. The documents contain communications between Dempster, Eames, Omeltchenko, and separate counsel for Eames and Omeltchenko. After full briefing on the Motion to Compel, the Magistrate Judge issued her Order. The Magistrate Judge denied the Motion to Compel to the extent the documents contained “accounting information relating solely to Eames or Omeltchenko individually or their related entities, but not Quantlab.” Order, p. 10. The Magistrate Judge granted the Motion to Compel in all other respects. See id.

         Non-parties Eames and Omeltchenko filed an Objection, as did Defendants. The Objections are now ripe for this Court's review.

         II. RULE 72(a) LEGAL STANDARD

         This Court reviews a Magistrate Judge's discovery order under Rule 72(a) of the Federal Rules of Civil Procedure. See Johnson v. United Airlines, Inc., 2016 WL 7742747, *1 (S.D. Tex. Apr. 14, 2016). Pursuant to Rule 72(a), a “party” may file objections to a non-dispositive order issued by a Magistrate Judge, and the district judge “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); Orthoflex, Inc. v. ThermoTek, Inc., 990 F.Supp.2d 675, 682-83 (N.D. Tex. 2013); DAC Surgical Partners P.A. v. United Healthcare Servs., Inc., 2014 WL 585753, *1 (S.D. Tex. Feb. 14, 2014). A party appealing a Magistrate Judge's order “must demonstrate how the order is reversible under the applicable standard of review - de novo for error of law, clear error for fact findings, or abuse of discretion for discretionary matters.” Orthoflex, 990 F.Supp.2d at 683.

         The factual aspects of the Magistrate Judge's order are reviewed under the “clearly erroneous” standard, and the district judge “may not disturb a factual finding of the magistrate judge unless, although there is evidence to support it, the reviewing court is left with the definite and firm conviction that a mistake has been committed.” Id.; see also Moore v. Ford Motor Co., 755 F.3d 802, 808 (5th Cir. 2014) (“the district court's review of the magistrate judge's factual findings was limited to clear error review”). “If a magistrate judge's account of the evidence is plausible in light of the record viewed in its entirety, a district judge may not reverse it.” Orthoflex, 990 F.Supp.2d at 683.

         The legal conclusions in the Magistrate Judge's order are reviewed de novo, and “the district judge reverses if the magistrate judge erred in some respect in her legal conclusions.” Id. Matters within the Magistrate Judge's discretion are reviewed for an abuse of discretion. Id.

         Fundamentally, review under Rule 72(a) is “highly deferential.” Nerium SkinCare, Inc. v. Nerium Int'l, LLC, 2017 WL 9934881, *1 (N.D. Tex. Feb. 6, 2017). Where, as here, discovery orders are at issue, “the objecting party's burden is especially ‘heavy.'” Id. (quoting Hamilton v. First Am. Title Ins. Co., 2010 WL 791421, *4 (N.D. Tex. Mar. 8, 2010)).

         III. ANALYSIS

         A. Non-Parties ...

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