UNITED STATES COURT OF APPEALS
For the Fifth Circuit
No. 93-1339
GEORGE E. McGILL and
JOHN R. WEIBEL,
Plaintiffs-Counter-Defendants-
Appellants,
VERSUS
MYRON W. GOFF,
Defendant-Counter-Plaintiff-
Appellee.
Appeal from the United States District Court
for the Northern District of Texas
(March 16, 1994)
Before JONES and DeMOSS, Circuit Judges, and SCHWARTZ1, District
Judge.
DeMOSS, Circuit Judge:
BACKGROUND
This case arises from the formation of a Texas joint venture
in June 1985, the purpose of which was to purchase for investment
a 51-acre tract of land in Dallas County, Texas. The co-managers
of the joint venture are Defendant-Appellee Myron Goff and Harold
Tollerup, a non-party to this action. Plaintiffs-Appellants George
1
District Judge of the Eastern District of Louisiana,
sitting by designation.
McGill and John Weibel (collectively referred to as "Appellants")
are two of the several investors in the joint venture.
On September 27, 1991, Appellants sued Goff for fraud and
breach of fiduciary duty in relation to Goff's solicitation of
their participation in the joint venture. Goff asserted a
counterclaim for tortious interference with business relations.
On January 13, 1993, Goff moved for summary judgment, alleging
that Appellants' claims lacked evidentiary support and that they
were otherwise time-barred. Appellants moved to amend their
complaint on February 8. The district court referred both parties'
motions to a magistrate judge for proposed resolution.
On March 10, the magistrate judge entered his report,
concluding that limitations barred Appellants' fraud claim and that
there was no evidence of a fiduciary relationship between Goff and
Appellants. He also concluded that granting Appellants' motion to
amend would be futile in light of the bar posed by the statute of
limitations.
On March 11, the district court adopted the magistrate judge's
report and entered a "final judgment" dismissing Appellants' case.
On March 19, the court entered an order granting Goff's voluntary
dismissal of his counterclaim. Thereafter, on April 9, Appellants
filed a timely notice of appeal.
DISCUSSION
1. District Court's Adoption of the Magistrate Judge's Report
Appellants first argue that the district court's hasty
adoption of the magistrate judge's report precluded them from
2
filing objections to the magistrate judge's recommendations. This
they claim violated Federal Rule of Civil Procedure 72 and 28
U.S.C. § 636(b)(1) and constituted reversible error. While we
agree that the aforementioned rule and statute contemplate parties
being given 10 days to object to any recommendation contained in a
magistrate judge's report, and that the better practice for a
district court is to refrain from acting on a magistrate judge's
report until after the 10-day objection period, we do not agree
that the court's abridgment of this rule requires automatic
reversal. We conclude from the circumstances of this case that the
error is harmless and has otherwise been waived.
First of all, Appellants cannot establish from the record that
the district court did not in fact review the magistrate judge's
report in accordance with the standards set forth in Rule 72.
Thus, the cases relied upon by Appellants are inapposite and do not
require reversal of the court's judgment.2
2
In Hernandez v. Estelle, it was demonstrable from the
record that the district court did not perform the required de
novo review of the magistrate's proceedings because the
transcript of the magistrate's three-day evidentiary hearing was
not filed with the district court until over six months after the
district court had entered its order based on the magistrate's
report. 711 F.2d 619, 620 n.2 (5th Cir. 1983). The Sixth Circuit
case of Hill v. Duriron Co. Inc. is materially similar to the
Hernandez case in that the district court entered an order based
on a magistrate's report before the transcript of the evidentiary
hearing had been filed in the district court. 656 F.2d 1208, 1215
(6th Cir. 1981). Similarly, in Hill v. Jenkins, the court
concluded that it was error for the district court to adopt
"verbatim" the findings of fact and conclusions of law submitted
by a party when it did not have before it either the other
party's proposed findings and conclusions or the magistrate's
findings and recommendations; thus, the court concluded that "the
record in this case compels the conclusion that the district
court did not conduct a de novo review of the proceedings held
3
Second, the mere fact that the court adopted the magistrate
judge's report one day after its entry does not warrant the
presumption that the court did so without review. The district
court was charged with review of a rather short and simple motion
for summary judgment and motion to amend; the evidence presented
was brief and the legal issues uncomplicated. We are confident
that the court could have reviewed and disposed of these matters
within a day.
Third, Appellants have not cited, and we have not found, any
case authority for the argument that the district court lacks the
power to review the recommendations of a magistrate judge during
the 10-day period allotted for objections, or without the benefit
of any objections. Moreover, we find persuasive the following
observations of the Supreme Court concerning the ultimate
supervisory authority a district court exercises over cases it
refers to a magistrate judge:
The district judge has jurisdiction over the case at all
times. He retains full authority to decide whether to
refer a case to the magistrate, to review the
magistrate's report, and to enter judgment. . . .
[W]hile the statute does not require the judge to review
an issue de novo if no objections are filed, it does not
preclude further review by the district judge, sua sponte
or at the request of a party, under a de novo or any
other standard. Indeed, in the present case, the
District Judge made a de novo determination of the
before the magistrate." 603 F.2d 1256, 1258 (7th Cir. 1979).
Finally, in Coolidge v. Schooner California, the Ninth Circuit
reversed judgment because the record "clear[ly]" demonstrated
that the district court performed no review of the magistrate's
"opinion." 637 F.2d 1321, 1327 (9th Cir. 1981). Apparently the
district court believed that the magistrate's "opinion" was final
and that any objections to its "opinion" were to be entertained
by the magistrate. Id.
4
petition despite petitioner's failure to suggest that the
Magistrate erred. Thomas v. Arn, 474 U.S. 140, 154
(1985).
Fourth, we do not agree that in this instance a meaningful
review of the magistrate judge's report could not be had in the
absence of Appellants' objections to the magistrate judge's
recommendations. With the benefit of both parties' written
arguments to the magistrate judge, the district court was well able
to conduct a satisfactory review of the pros and cons relating to
Goff's motion for summary judgment and Appellants' motion to amend.
This is especially true with regard to Goff's motion for summary
judgment, which the district court and this Court review as a
matter of law, according no deference to the magistrate judge's
prior disposition of the summary judgment issues. See Fed. R. Civ.
P. 72(b); Walker v. Sears, Roebuck & Co., 853 F.2d 355, 358 (5th
Cir. 1988). For this reason and those mentioned above, we conclude
that Appellants were not prejudiced by the district court's
procedural mistake to such a degree as to require reversal.
Moreover, the record demonstrates that Appellants had ample
opportunity before the court's judgment became final to bring this
error to the court's attention. The judgment did not become final
until the district court entered an order dismissing Goff's
counterclaim, Fed. R. Civ. P. 54(b) -- some nine days after it had
adopted the magistrate judge's recommendations and dismissed
Appellants' suit. During these nine days, Appellants could have
raised an objection to the district court's precipitate adoption of
the magistrate judge's recommendations by motion to reconsider or
5
otherwise.3 Having failed to do so, Appellants seek correction of
this purely ministerial error for the first time on appeal. We
hold that Appellants have waived the right to complain on appeal of
any error associated with the district court's adoption procedure.
Appellants' remaining points of error concern the merits of
the district court's granting of Goff's motion for summary judgment
and denial of Appellants' motion to amend. Preliminarily, Goff
argues that Appellants waived the right to review of the magistrate
judge's recommendations by failing to file objections. Appellants
respond by pointing out that the magistrate judge's report did not
inform them of the ten-day objection period or of the possible
adverse effect of their failure to file timely objections, as
required in Nettles v. Wainwright. 677 F.2d 404, 408 (5th Cir.
1982)(en banc).
We need not address Nettles or the degree to which Appellants
were or should have been aware of the 10-day objection period since
we have already concluded that the district court's faulty adoption
procedure precluded Appellants from filing objections to the
3
We do not premise Appellants' waiver on their failure to
file a post-judgment motion under Rule 59 or Rule 60. The period
critical to Appellants' waiver is the nine days after the court's
adoption of the magistrate's recommendations and before its
dismissal of Goff's counterclaim. During this period, no final
judgment had been entered, and the court's adoption and dismissal
order was subject to the court's plenary revision. Fed. R. Civ.
P. 54(b).
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magistrate judge's recommendations. We hold that under these
circumstances Appellants are entitled to appellate review of the
district court's judgment.4
2. Goff's Motion for Summary Judgment
Having reviewed the parties' evidence, we are of the opinion
that the district court's judgment granting Goff's motion for
summary judgment must be affirmed. The statute of limitations on
Appellants' fraud claims is four years from the date Appellants
discovered or in the exercise of reasonable diligence could have
discovered Goff's alleged fraud. Jackson v. Speer, 974 F.2d 676,
679 (5th Cir. 1992). Appellants filed suit on September 27, 1991.
Goff's summary judgment evidence indisputably establishes that
Appellants were aware of the falsity of Goff's alleged
representations in the summer of 1985.
Weibel alleges that in May or June of 1985, he and his wife
were approached by Goff and offered the opportunity to invest in a
piece of real property in the Dallas, Texas area. According to
4
Certain language in Appellants' brief could be read as an
argument that Nettles in some way precludes our holding that
Appellants waived the right to complain about the district
court's adoption procedure by failing to complain at the trial
court level. If Appellants are making this argument, we reject
it. The sole issue before the court in Nettles was whether an
appellant had waived the right to object on appeal to findings in
a magistrate's report by failing to object at the trial court.
677 F.2d at 406-7. The court held that he had, provided the
magistrate informed him of his right to file objections to the
report. Id. at 410. Nettles has absolutely nothing to do with a
party's waiver of the right to complain on appeal about the
procedures utilized by the district court in adopting a
magistrate's report. Nettles speaks only to the waiver of
objections to a magistrate's findings while our holding concerns
the waiver of "objections" to a district court's adoption
procedure.
7
Weibel, they agreed to invest in the joint venture "based upon
representations by Goff that the property would be resold quickly,
that the investment would yield a substantial profit to the
investors, and that Goff would buy out their investment upon
request." (Emphasis added) McGill alleges that in late June or
early July 1985, Tollerup solicited his participation in the joint
venture.5 According to McGill, Tollerup represented that "the
property would be resold quickly [,] that the investment would
yield a substantial profit to its investors[, and] that Tollerup
and/or Goff would buy out McGill's interest upon request."
(Emphasis added) Appellants testified that they understood
"quickly" to mean within a year of their investment.
After investing in the deal, Appellants in August 1985
received and executed a copy of the joint venture agreement. The
terms of the agreement are so contrary to Appellants' alleged
understanding of the deal that upon review of the document,
Appellants would have been put on notice of Goff's alleged fraud.6
5
McGill's investment in the joint venture appears to have
been solicited exclusively through his contacts with Tollerup.
As an alternate ground for summary judgment, Goff argues that
there is no evidence to support the existence of an agency
relationship between Tollerup and himself. For the purposes of
our limitations discussion we will assume without deciding that
Tollerup's alleged representations were made with Goff's
authorization.
6
The agreement states that "[a]lthough there is no
contractual obligation to do so, the Joint Venturers desire to
sell the Venture Property within five (5) years from the date of
this agreement." The agreement also expresses several
"purpose[s]" of the joint venture, among them, "to own, manage,
improve, subdivide, develop, mortgage, lease . . . and otherwise
deal with the Venture property." Article III of the agreement
establishes the "term" of the venture; conspicuously absent from
8
Moreover, at the expiration of the year following their investment,
Appellants' interest had not been bought out. Weibel testified
that Goff's failure to buy out his investment was the reason he was
pursuing the instant litigation. Weibel's wife testified that she
was "disappointed" by July of 1986 because Goff had not "ke[pt] his
word" and had "lied to [her]" by not buying out their interest
within a year. Finally, McGill testified that he had asked
Tollerup to buy out his interest as early as 1986 and that when
Tollerup failed to do so, he considered Tollerup to have breached
his promise. On the strength of this evidence, we hold that
Appellants' fraud claims are barred by limitations.
We also hold that Appellants' claims for breach of fiduciary
duty similarly barred. An action for the breach of fiduciary duty
is subject to the four-year statute of limitations, Spangler v.
Jones, 797 S.W.2d 125, 132 (Tex. App.--Dallas 1990, writ denied),
as well as the discovery rule. El Paso Assoc. v. J.R. Thurman &
Co., 786 S.W.2d 17, 20 (Tex. App.--El Paso 1990, no writ);
Wakefield v. Bevly, 704 S.W.2d 339 (Tex. App.--Corpus Christi 1985,
no writ).
Appellants' allege that Goff breached his duties as a
fiduciary by failing to disclose that he profited from the sale to
the joint venture of the real estate that became the joint venture
this provision is any definite limitation on the venture's
duration. Rather, the venture is to continue until either the
venture property is sold (and there is no obligation concerning
when that will be) or a "majority [of investors] (in interest,
not numbers)" agree to terminate the venture. Between them,
Appellants owned only an 8¾ percent interest in the joint
venture.
9
property. However, the "REPRESENTATIONS AND WARRANTIES OF JOINT
VENTURERS" section in the joint venture agreement clearly provides
that "[e]ach joint venturer hereby warrants and represents: . . .
(j) [t]hat he realizes that a profit is being made by Myron Goff on
the sale of the Venture Property to the Joint Venture." It is
undisputed that Appellants were provided a copy of the agreement to
execute and return in August of 1985. Appellants's breach of
fiduciary duty claims are therefore barred and the district court's
grant of summary judgment is affirmed.
3. Appellants' Motion to Amend
By their third motion to amend, Appellants seek to add new
parties and new claims to this litigation.7 While concluding that
Goff would not be unduly prejudiced by Appellants' amended
complaint, the magistrate judge nevertheless concluded that
allowing the amendments would be futile in light of the limitations
bar. Finding no clear error with the magistrate judge's proposed
disposition, the district court entered an order adopting the
magistrate judge's recommendation and denying Appellants' motion to
amend. We affirm the district court's order.
Appellants' amended complaint adds Tollerup and the joint
venture as defendants. It also includes new claims for statutory
fraud, violations of the Texas Deceptive Trade Practices Act,
7
Their first motion to amend was "unfiled" by the district
court because it had not been filed in compliance with the local
rules for the Northern District of Texas. Their second motion to
amend was untimely filed and later withdrawn by Appellants' third
motion to amend which was itself untimely and filed over three
weeks after Goff filed his motion for summary judgment.
10
breach of warranty, and breach of contract. The complaint also
requests that any judgment which the joint venture may have or may
recover against Appellants for their breach of the joint venture
agreement be set off against Appellants' anticipated recoveries in
this suit.
The allegations against Tollerup and the joint venture stem
from the same misrepresentations and non-disclosures alleged in
Appellants' original complaint. Moreover, the claims Appellants
seek to add are predicated on the same alleged misrepresentations
and non-disclosures of which this court has already determined
Appellants were or in the exercise of reasonable diligence could
have been aware in August 1985 and the fall of 1986. We hold,
therefore, that allowing Appellants' proposed amendments would be
futile in light of the relevant limitation periods, and that the
district court did not abuse its discretion in denying Appellant's
motion to amend.
CONCLUSION
The judgment of the district court is AFFIRMED in all
respects.
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