Lupe Development Partners, LLC v. Deutsch

Background

The district court reviewed plaintiffs Lupe Development Partners, LLC and Steven Minn’s objections to Magistrate Judge David T. Schultz’s order denying their motion to depose the Scher Law Firm, LLP. Third-party Penny Drue Baird responded to the objections.

In an earlier order, the magistrate judge instructed that plaintiffs could not pursue further discovery into Baird’s finances without new evidence of fraudulent or voidable transactions. The order noted that plaintiffs had subjected Baird to multiple lawsuits and third-party subpoenas over thirteen years but had uncovered little evidence of suspicious activity.

Plaintiffs later sought permission to subpoena and depose the Scher Firm, which had sued Baird and her children in 2009. The magistrate judge denied the request, finding that it conflicted with the earlier discovery order and that plaintiffs could have raised the issue years earlier. The magistrate judge also imposed limited sanctions in the form of Baird’s costs and fees for responding to the motion.

Plaintiffs’ objections

Plaintiffs argued that the proposed subpoena sought information from a third party and did not violate the court’s earlier order. They contended that a deposition might reveal new evidence of fraud. The district court rejected that reasoning, explaining that the possibility that discovery might produce such evidence did not satisfy the earlier requirement that plaintiffs already have new evidence of fraudulent or voidable transactions.

Plaintiffs also argued that seeking permission demonstrated a special effort to comply with the earlier order. The court disagreed, stating that asking the court to deviate from its previous decision did not show the claimed vigilance. Plaintiffs further argued that the magistrate judge’s order would effectively prevent additional post-judgment discovery whenever it might involve information about Baird and could prevent them from collecting their outstanding judgment. The district court found that argument based on an overly broad reading of the earlier discovery restrictions.

Standard of review

The district court reviewed the magistrate judge’s nondispositive decision under a highly deferential standard. It could reverse only if the decision was clearly erroneous or contrary to law. A decision is clearly erroneous when the reviewing court has a definite and firm conviction that a mistake occurred; a decision is contrary to law when the court failed to apply or misapplied relevant law or procedural rules.

Ruling

The court held that plaintiffs had not demonstrated any error in the magistrate judge’s decision. It stated that other state and federal courts had previously admonished plaintiffs’ efforts to obtain information about Baird’s finances and concluded that limited sanctions were appropriate.

The court ordered that plaintiffs’ objections were overruled and that the magistrate judge’s order was affirmed.