BMO Harris Bank N.A. v. Principis Capital LLC

Background

BMO Harris Bank sued Principis Capital LLC and others after alleging that Principis defaulted under a credit agreement. Magistrate Judge Fox previously granted in part and denied in part BMO’s application to compel responses to Requests Nos. 1–3, 8, and 9 in BMO’s first set of document requests. The defendants objected to that order under Federal Rule of Civil Procedure 72(a), which permits objections to a magistrate judge’s order on a non-dispositive pretrial matter.

Discovery dispute

The defendants challenged Judge Fox’s decision requiring Principis to produce financial statements from August 2020 to the present in response to BMO’s Request No. 2. BMO argued that the statements were relevant to whether a receiver should be appointed in the lawsuit and that the loan documents required Principis to provide them. The defendants argued that the statements were irrelevant and confidential and that Principis would have to prepare them because it was no longer a “going concern” and was being forced to wind down.

The defendants also argued that discovery generally does not require a party to create documents it does not possess or control. Alternatively, they requested forty-five days to compile the statements instead of the fourteen days allowed by Judge Fox’s order.

Standard of review and ruling

A district court may set aside a magistrate judge’s order on a non-dispositive pretrial matter only if it is clearly erroneous or contrary to law. “Clearly erroneous” means that the court is left with a definite and firm conviction that a mistake was made. An order is contrary to law when it fails to apply or misapplies relevant law or procedural rules. The standard is highly deferential, and magistrate judges have broad discretion over non-dispositive disputes.

Judge Schofield overruled the defendants’ objections. She concluded that Judge Fox reasonably determined that the financial statements were relevant and proportional to the needs of the case under Federal Rule of Civil Procedure 26 because Principis’s financial circumstances were central to BMO’s claims. She also found no clear error in the conclusion that producing the statements would not be unduly burdensome, that the information existed, and that Principis was otherwise obligated to produce the documents. The court noted that the confidentiality objection was expected to become moot after entry of an agreed confidentiality order.

Judge Schofield also held that Judge Fox did not abuse his discretion by setting a fourteen-day deadline because BMO’s request had been pending for several months. The defendants were not precluded from seeking an extension if circumstances warranted one. The Clerk of Court was directed to close Docket No. 117.