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Basham v. Jenks

United States District Court, W.D. Virginia, Roanoke Division

May 10, 2018

TIMOTHY L. JENKS, Defendant.


          Michael F. Urbanski, Chief United States District Judge

         Plaintiff Timothy Basham ("Basham") brings this breach of contract action against defendant Timothy L. Jenks ("Jenks") arising out of the insolvency of their residential development company, Waterstone Development Company, LLC ("Waterstone"). Pending before the court are Basham's motion for leave to amend the complaint, ECF No. 13, and Jenks' motion for judgment on the pleadings, ECF No. 16. Pursuant to 28 U.S.C. § 636(b)(1)(B), the court referred both motions to United States Magistrate Judge Robert S. Ballou for a report and recommendation. ECF No. 18.

         The magistrate judge heard oral arguments on the motions on December 6, 2017. ECF No. 23. In a report and recommendation issued on January 3, 2018, the magistrate judge recommended granting Jenks' motion for judgment on the pleadings because neither Waterstone's Articles of Organization nor its Operating Agreement created a legally enforceable obligation for the parties to pay the debts of Waterstone. ECF No. 25, at 7-8. The magistrate judge further recommended denying Basham's motion for leave to amend the complaint as futile, reasoning that the proposed contribution claim was not ripe because Basham had not alleged that he had fully satisfied the debt or partially satisfied the debt and secured a complete release for Jenks. Id. at 2-5. Jenks timely filed a limited objection to the magistrate judge's reasoning regarding Basham's motion for leave to amend. ECF No. 26. On March 13, 2018, the court heard oral argument on Jenks' limited objection. ECF No. 28.

         For the reasons stated below, the court will ADOPT in part and REJECT in part the magistrate judge's report and recommendation to the extent consistent with the reasoning in this Memorandum Opinion, DENY Basham's motion for leave to amend the complaint, GRANT Jenks' motion for judgment on the pleadings, and DISMISS this case with prejudice.


         Basham, a South Carolina resident, and Jenks, a Virginia resident, formed Waterstone to develop residential homes in Roanoke County, Virginia in 2007. As alleged by Basham, each owned 50% of Waterstone and both parties were required to make contributions to ensure the liquidity and viability of the company. Waterstone entered into multiple promissory note arrangements during its existence, at least one of which was with Franklin Community Bank ("Bank"). Waterstone became insolvent in December 2013, with outstanding obligations to the Bank and other creditors in excess of $280, 000. Basham alleges to have paid $274, 000 to creditors while Jenks paid only $6, 000.

         Basham filed a breach of contract claim against Jenks in the Circuit Court for the County of Franklin on November 10, 2016, and Jenks removed the case to this court on May 4, 2017. ECF No. 1. Basham asked the court for leave to amend the complaint to add a common law contribution claim on October 12, 2017. ECF No. 13. The proposed amended complaint added factual allegations about the debt that Waterstone owed to the Bank. ECF No. 13-1. In relevant part, Basham newly alleges that Waterstone obtained multiple loans from the Bank from 2007 to at least 2010, most of which were subject to a personal guarantee for repayment by the parties. In June 2012, the Bank notified Waterstone that it was in default on one of die loans with a deficiency of $517, 008.05. The Bank thereafter seized personal collateral of both parties in partial satisfaction of the outstanding loan balance. Basham alleges in the proposed complaint that Jenks' share of the amount owed by Waterstone to its creditors totals $140, 000, and that Basham paid that amount plus approximately $134, 000 owed by Jenks when Jenks "failed to honor his obligation as required under Waterstone's operating agreement." ECF No. 13-1, at 6. Basham seeks damages in the amount of $134, 000.


         Rule 72(b) of the Federal Rules of Civil Procedure permits a party to "serve and file specific, written objections" to a magistrate judge's proposed findings and recommendations within fourteen days of being served widi a copy of die report. See also 28 U.S.C. § 636(b)(1). The Fourtih Circuit has held that an objecting party must do so "with sufficient specificity so as reasonably to alert the district court of the true ground for the objection." United States v. Midgette, 478 F.3d 616, 622 (4th Cir. 2007), cert denied. 127 S.Ct. 3032 (2007).

To conclude otherwise would defeat the purpose of requiring objections. We would be permitting a party to appeal any issue that was before the magistrate judge, regardless of the nature and scope of objections made to the magistrate judge's report. Either the district court would tiien have to review every issue in the magistrate judge's proposed findings and recommendations or courts of appeals would be required to review issues that the district court never considered. In either case, judicial resources would be wasted and the district court's effectiveness based on help from magistrate judges would be undermined.

Id. The district court must determine de novo any portion of the magistrate judge's report and recommendation to which a proper objection has been made. "The district court may accept, reject, or modify the recommended disposition; receive further evidence; or return the matter to the magistrate judge with instructions." Fed.R.Civ.P. 72(b)(3); accord 28 U.S.C. § 636(b)(1). "General objections that merely reiterate arguments presented to the magistrate judge lack the specificity required under Rule 72, and have the same effect as a failure to object, or as a waiver of such objection." Moon v. BWX Techs., Inc., 742 F.Supp.2d 827, 829 (W.D. Va. 2010) (citing Veney v. Astrue, 539 F.Supp.2d 841, 845 (W.D. Va. 2008)), affd. 498 Fed.Appx. 268 (4th Cir. 2012); see also Thomas v. Am. 474 U.S. 140, 154 (1985) ("[T]he statute does not require the judge to review an issue de novo if no objections are filed.").

         Further, objections that only repeat arguments raised before the magistrate judge are considered general objections to the entirety of the report and recommendation. See Veney, 539 F.Supp.2d at 845. As the court noted in Veney:

Allowing a litigant to obtain de novo review of her entire case by merely reformatting an earlier brief as an objection "mak[es] the initial reference to the magistrate useless. The functions of the district court are effectively duplicated as both the magistrate and the district court perform identical tasks. This duplication of time and effort wastes judicial resources rather than saving them, and runs contrary to the purposes of the Magistrates Act." Howard [v. Sec'y of Health & Human Servs.]. 932 F.2d [505], 509 [(6th Cir. 1991)].

539 F.Supp.2d at 846. A plaintiff who reiterates his previously raised arguments will not be given "the second bite at the apple []he seeks." Id. Instead, his re-filed brief will be treated as a general objection, which has ...

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