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United States v. High Plains Livestock, LLC

United States District Court, D. New Mexico

September 19, 2018

UNITED STATES OF AMERICA, Plaintiff,
v.
HIGH PLAINS LIVESTOCK, LLC, dba PRODUCERS LIVESTOCK AUCTION, MICHAEL FLEN, CALVIN PAREO, and DARCIE PAREO, Defendants.

          MEMORANDUM OPINION AND ORDER OVERRULING DEFENDANTS BJECTIONS TO MAGISTRATE'S PROPOSED FINDINGS AND RECOMMENDED DISPOSITION ON MOTION REQUESTING REIMBURSEMENT AND ADOPTING THE RECOMMENDED DISPOSITION OF MAGISTRATE JUDGE JERRY H. RITTER

          M. CHRISTINA ARMIJO SENIOR UNITED STATES DISTRICT JUDGE

         This matter comes before the Court on Magistrate Judge Jerry H. Ritter's Proposed Findings and Recommended Disposition on Motion Requesting Reimbursement (Doc. 423), filed August 9, 2018, which recommends that this Court deny Defendant High Plain Livestock's ("HPL's") Motion Requesting Reimbursement of Payments to Co-Special Master Johnson Miller & Co. Doc. 402. Pursuant to 28 U.S.C. § 636(b) and Federal Rule of Civil Procedure 72(b)(2), HPL filed objections to the Magistrate Judge's Proposed Findings and Recommended Disposition ("PFRD"). See Doc. 428. The Court, having conducted a de novo review of HPL's objections, hereby overrules them and adopts the PFRD for the reasons set forth below.

         I) Standard of Review

         "Review of the magistrate judge's ruling is required by the district court when a party timely files written objections to that ruling." Hutchinson v. Pfeil, 105 F.3d 562, 566 (10th Cir. 1997). Specifically, "[d]e novo review is required when a party files timely written objections to the magistrate judge's recommendation." In re Griego, 64 F.3d 580, 583-84 (10th Cir. 1995) (citation omitted). "De novo review requires the district court to consider relevant evidence of record and not merely review the magistrate judge's recommendation." Id. "However, neither 28 U.S.C. § 636(b)(1) nor Fed.R.Civ.P. 72(b) requires the district court to make any specific findings; the district court must merely conduct a de novo review of the record." Garcia v. City of Albuquerque, 232 F.3d 760, 766 (10th Cir. 2000).

         '"The filing of objections to a magistrate's report enables the district judge to focus attention on those issues ~ factual and legal ~ that are at the heart of the parties' dispute.'" United States v. One Parcel of Real Prop., with Bldgs., Appurtenances, Improvements, and Contents, 73 F.3d 1057, 1059 (10th Cir. 1996) (quoting Thomas v. Am, 474 U.S. 140, 147 (1985)). "[A] party's objections to the magistrate judge's report and recommendations must be both timely and specific to preserve an issue for de novo review by the district court or for appellate review." United States v. One Parcel, 73 F.3d at 1060.

         II) Background

         Pursuant to Federal Rule of Civil Procedure 65 and 7 U.S.C. § 228a, the United States sought a temporary restraining order prohibiting Defendants "from operating as a market agency or dealer while livestock sellers and consignors remain unpaid and livestock buyers remain unreimbursed for overcharges[.]" Doc. 1 at 21-22. Shortly after the case was filed, the United States moved for a preliminary injunction, submitting that "[t]he only way to protect all of the interests harmed by Defendants' practices is to issue an injunction-ordering that Defendants cease buying and selling livestock." Doc. 7 at 2. Ultimately, this Court appointed Special Master Gayland Cowen to oversee aspects of HPL's operations and to provide monthly compilation reports to the Court. See Doc. 296 at 6. The Court granted the Special Master broad authority to monitor the financial activities of HPL and granted him electronic access to its bank accounts. Doc. 296 at 7. However, the Court was unable to determine from Mr. Cowen's reports whether HPL was solvent. Doc. 353 at 2. Accordingly, this Court appointed Johnson, Miller & Co. as Co-Special Master, "for the purpose of investigating whether High Plains Livestock is solvent," on July 10, 2017. Id. In performing its duties, this Court directed that the Co-Special Master be permitted "direct visual and physical access to High Plain Livestock's bank accounts, investment accounts, financial statements, loan documents, loan applications, credit applications, day-to-day records, transaction records, accounts receivable records, and all other financial and business records." Id. at 11.

         This Court's Order Appointing Co-Special Master Johnson, Miller & Co. directed HPL to make additional payments into the Court Registry for the purpose of compensating the Co-Special Master. Doc. 353 at 10. However, the Court's Order permitted HPL to seek reimbursement of the cost of the Co-Special Master's review and report from the United States if the following conditions were met:

If the results of the solvency analysis are that 1) High Plains Livestock is solvent, and 2) there is no evidence that High Plains Livestock is utilizing the company funds for purposes other than company business, and 3) the Special Master's conclusions as to the monthly financial status of High Plains Livestock do not differ from Special Master Cowen's conclusions by greater than 10%[.]

Doc. 353 at 11. It is this provision that lies at the heart of the parties' current dispute.

         Meanwhile, this Court dismissed the remaining Counts in the Complaint for lack of jurisdiction and on the United States' Motion. See Docs. 336, 345. In retaining jurisdiction under Section 228a, this Court directed the United States to file an administrative claim by a date certain or face dismissal of the request for temporary injunctive relief. Doc. 388 at 2. The United States filed an administrative claim, which was set for a hearing on the merits on September 11, 2017. Id. However, prior to the start of the hearing, the Secretary and Defendants entered into a Consent Order that "directs the Defendants to cease and desist activities that were the subject of the administrative claim and that imposes sanctions under the PSA." Id. (citing Exhibit 1 thereto). Specifically, the Consent Order suspends HPL's registration as a market agency selling on commission for four years, requires Defendants to cease and desist from six separate violations of the PSA, and assesses a one hundred thousand-dollar civil penalty against the Defendants, jointly and severally (with $90, 000.00 held in abeyance). Doc. 388 at 9-10.

         Upon entry of the Consent Order, Defendants filed an Unopposed Emergency Motion to Dismiss Remaining Claims and for an Order Directing Special Masters to Cease All Work on and Related to this Matter. See generally Doc. 388. This Court granted the Unopposed Motion on September 12, 2017. Doc. 390. Notably, "due to the negotiated resolution of the dispute through the administrative process, Johnson, Miller & Co. did not complete its assignment and did not deliver a report to the Court but was paid $23, 428.43 for work that was done." Doc. 423 at 4.

         In granting the Unopposed Motion, this Court retained jurisdiction to rule on HPL's Motion Requesting Reimbursement of Payments to Co-Special Master Johnson, Miller & Co. Doc. 402. On November 13, 2017, this Court referred the Motion to Magistrate Judge Jerry Ritter to "initiate and complete necessary proceedings deemed necessary in order to address the pending motion[] and submit to this Court a recommended disposition of the motion[]." Doc. 415. Magistrate Judge Ritter issued his Proposed Findings and Recommended Disposition ("PFRD") on August 9, 2018. Doc. 423. After summarizing the material facts of this case, Magistrate Judge Ritter concluded that HPL failed to show why the Court should direct the United States to reimburse it for the payments made to the Co-Special Master prior to the dismissal of this case. Id. at 11. In reaching this conclusion, Magistrate Judge Ritter found that HPL failed to meet the letter of this Court's Order Appointing the Co-Special Master; that is, that the conditions precedent for reimbursement have not been met. See Doc. 423 at 7. Moreover, Magistrate Judge Ritter determined that "considerations of fairness and equity" implicit in Federal Rule of Civil Procedure 53 did not warrant reimbursement in this case. See Id. at 8-10. HPL objects to Magistrate Judge Ritter's conclusions. See Doc. 428.

         III) Objections Raised

         HPL presents a number of unenumerated objections to the magistrate judge's report and recommendations:

• The report fails to distinguish between past market operations and current dealer ...

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