Bartholomew v. Avalon Capital Group, Inc.

278 F.R.D. 441, 2011 U.S. Dist. LEXIS 148019, 2011 WL 6217313
CourtDistrict Court, D. Minnesota
DecidedApril 28, 2011
DocketCivil No. 09-1279 (MJD/AJB)
StatusPublished
Cited by30 cases

This text of 278 F.R.D. 441 (Bartholomew v. Avalon Capital Group, Inc.) is published on Counsel Stack Legal Research, covering District Court, D. Minnesota primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Bartholomew v. Avalon Capital Group, Inc., 278 F.R.D. 441, 2011 U.S. Dist. LEXIS 148019, 2011 WL 6217313 (mnd 2011).

Opinion

ORDER & MEMORANDUM

ARTHUR J. BOYLAN, United States Chief Magistrate Judge.

This matter is before the Court, Chief Magistrate Judge Arthur J. Boylan, on Plaintiffs’ Motion to Compel Discovery [Docket No. 44]. A hearing was held on the motion on March 23, 2011. Michael M. Krauss and Edward T. Wahl appeared on behalf of Plaintiffs. David M. Sehiffman, Richard Anderson, and Meredith Jenkins Laval appeared on behalf of Defendant.

Based upon the record, memoranda, and oral arguments of counsel, IT IS HEREBY ORDERED that Plaintiffs’ Motion to Compel Discovery [Docket No. 44] is GRANTED IN PART and DENIED IN PART as follows:

1. To the extent that Defendant has not previously done so, on or before May 13, 2011, Defendant shall produce the following information to Plaintiffs:
a. All communications and documents from Defendant’s privilege log that were created or altered between January 1, 2007, and October 31, 2008, with Nicole Blakely as author, recipient, or carbon-copy recipient, that address potential legal claims by Lakeland’s creditors, including Bank of Scotland and Bank of Montreal;
b. All communications and documents from Defendant’s privilege log that were created between January 1, 2007, and October 31, 2008, with Nicole Blakely as author, recipient, or carbon copy recipient, that address the termination of Bob Machacek and the related litigation;
c. All communications and documents from Defendant’s privilege log that were created or altered between January 1, 2007, and October 31, 2008, with Nicole Blakely as author, recipient, or carbon copy recipient, that address the forensic audit and retention of De-loitte and Touche;
d. Unredacted versions of documents that Defendant previously redacted on relevance grounds and for which Defendant does not have a claim of privilege.

2. On or before May 13, 2011:

a. Defendant shall submit directly to the Court’s chambers for in-camera review all documents and communications from Defendant’s privilege log that were created or altered between January 1, 2007, and October 31, 2008, with Nicole Blakely as author, recipient, or carbon copy recipient, that generally address or involve Lakeland, that are not otherwise ordered to be disclosed to Plaintiff.
b. Defendant shall submit directly to the Court’s chambers for in-camera review all documents and communications from Defendant’s privilege log that were created or altered between January 1, 2007, and October 31, 2008, that address potential legal claims by Lakeland’s creditors, including Bank of Scotland and Bank of Montreal, that address the forensic audit and retention of Deloitte and Touche, and that address the termination of Bob Machacek and the related litigation, [444]*444and that are not otherwise ordered to be disclosed to Plaintiff.
c. Defendant shall also provide directly to this Court’s chambers a memorandum detailing the basis for Defendant’s assertions of privilege on the documents and communications ordered for in-camera review. Defendant shall provide to Plaintiffs a list of those documents that Defendant is submitting for in-camera review.
d. In lieu of producing documents and communications for in-camera review, Defendant may produce documents and communications directly to Plaintiff.

3. Within five days of Defendant’s submission of documents and communications for in-camera review, Plaintiffs shall provide directly to this Court’s chambers a memorandum detailing then-position on Defendant’s assertion of privilege for the documents ordered for in-camera review.

4. Plaintiffs’ motion is denied in all other respects.

5. The attached memorandum is incorporated herein.

MEMORANDUM

I. BACKGROUND

a. Allegations in the Complaint

Plaintiffs James A. Bartholomew (Bartholomew) and Lighthouse Management Group, Inc. (Lighthouse Management), as Receiver for Lakeland Construction Finance, LLC (Lakeland),1 bring their Amended Complaint against Defendant Avalon Capital Group, Inc.2 (Avalon), asserting the following claims: avoidance of fraudulent transfer made with actual intent to defraud creditors, in violation of Minn.Stat. § 513.44(a)(1); avoidance of fraudulent transfer, in violation of Minn.Stat. § 513.45(b); recovery of illegal purported equity transfer pursuant to Minn.Stat. § 322B.54; breach of fiduciary duty arising out of the purported equity transfer; breach of fiduciary duty arising out of purported debt transfer; and unjust enrichment. [Docket No. 27.]

Plaintiffs’ claims are based on the following allegations: Lakeland was in the business of making loans to developers and home builders. (Am. Compl. ¶ 5, Jan. 25, 2010.) Lakeland’s operations were financed through bank debt, asset securitization, capital contributions, loans by Avalon (its principal shareholder), and net earnings. (Id. at ¶ 5.) Avalon owned all of Lakeland’s voting units. (Id. at ¶¶ 2, 7.) “Lakeland is described in offering materials as being a ‘portfolio company of Avalon Capital Group, Inc., a San Diego-based private investment office for Ted Waitt, founder and former Chairman of computer maker Gateway, Inc.’ ” (Id. at ¶ 10.) “Avalon appointed itself the sole “Manager” of Lakeland.” (Id. at ¶ 12.)

Plaintiffs further allege as follows: In May 2007, Lakeland had the following facilities:3

Bank Amount and Facility Type
LaSalle Bank National Assoc. $387,000,000 senior credit facility
BMO Capital Markets $150,000,000 non-recourse securitization facility 4
Anchor Bancorp, Inc. $5,000,000 financing facility

(Id. at ¶ 14.) On or about June 2007, Lake-land entered into a $30 million supplemental credit facility with Bank of Scotland pic. (Id. at ¶ 15.) In September 2007, Lakeland entered into a credit and security agreement (senior credit agreement) with the Bank of Scotland and a term loan and security agreement (term loan) with Bank of Scotland (USA), Inc. (Id. at ¶ 1.) Under the senior credit agreement, Lakeland could borrow up to $425 million. (Id. at ¶ 17.) Under the term loan, Lakeland could borrow up to $70 million. (Id. at ¶ 19.) Lakeland’s indebtedness under the term loan was secured by a security interest in substantially all of Lake-[445]*445land’s assets, subordinate to the security interest provided for in the senior credit agreement. (Id. at ¶ 20.)

Plaintiffs further alleges as follows:

Avalon caused Lakeland to borrow $360 million under the Senior Credit Agreement on September 4, 2007. Lakeland used the $360 million, among other purposes, to repay all amounts outstanding under the La-Salle Facility, the $5 million financing facility, and the $30 million supplemental credit facility. In October, November, and December 2007, Lakeland made certain repayments and borrowings to adjust its outstanding indebtedness.

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278 F.R.D. 441, 2011 U.S. Dist. LEXIS 148019, 2011 WL 6217313, Counsel Stack Legal Research, https://law.counselstack.com/opinion/bartholomew-v-avalon-capital-group-inc-mnd-2011.