Taylor v. Riley

          MEMORANDUM AND ORDER

          HON. CANDY W. DALE, United States Magistrate Judge

         INTRODUCTION

         Pending before the Court is Plaintiffs Motion to Stay and to Permit a Limited Deposition of the Defendant During the Stay. (Dkt. 9) The motion is ripe for the Court's consideration. All parties have consented to the jurisdiction of a United Magistrate Judge pursuant to 28 U.S.C. § 636(c). The parties filed responsive briefing and the Court conducted a hearing on August 28, 2017, at which the parties appeared and presented their arguments. The Court has considered the parties' written memoranda, relevant case law, and their arguments. For the reasons outlined herein, the Court will deny Plaintiff's motion and the corresponding request for a limited deposition of the Defendant.

         BACKGROUND

         On May 10, 2017, Plaintiff Donna J. Taylor filed suit against Defendant Richard Riley. (Dkt. 1) In her complaint, Taylor alleges breach of assumed duty, breach of contract, breach of representations and/or warranties, fraud, constructive fraud, fraudulent concealment, and negligent misrepresentation. All of these claims are related to a Letter Agreement composed by Riley 22 years ago-in 1995. At the time, Riley was an attorney with Eberle, Berlin, Kading, Turnbow & McKlveen, Chartered (Eberle Berlin). He wrote the Letter Agreement on behalf of the firm's client, AIA Services, Corp. (AIA).

         In 1987 and 1988, AIA issued Series A Preferred shares to Donna Taylor and Reed Taylor (Reed)^[1] in connection with their divorce. The share issuances were related to Taylor's and Reed's prior investments in AIA and its wholly-owned subsidiary, AIA Insurance, Inc. In 1995, AIA agreed to increase the amortization period and applicable interest rate for the redemption of Taylor's shares. This agreement was memorialized in the Letter Agreement composed by Riley.

         A series of state and federal lawsuits have been filed related to share redemption contracts and other matters between Taylor, Reed, AIA and other parties. Directly pertinent here is the June 15, 2015 decision issued by District Judge Jeff M. Brudie in the consolidated state court cases CV08-1150 and CV13-1075.^[2]

         One of the questions Judge Brudie answered was what interest rate legally applied to the Series A Preferred shares held by Taylor. The court determined that, because shareholder approval was necessary for the increased interest rate, and because there was no record of shareholders ever voting to authorize a higher rate, "[t]he only equitable remedy for the situation as presented in 2015" was for the court to recalculate the redemptions made for Taylor's Series A Preferred shares based on the rates set forth in the provisions of the AIA Articles of Incorporation. The court found it was "the only lawful interest rate" in effect at the time. The increased rates promised in the Letter Agreement had never been approved by the shareholders and thus were not legally binding.

         Pursuant to the court's recalculation of the interest rate, it found that all but 7, 110 of Taylor's Series A Preferred shares had been redeemed by AIA. The court's decision is currently on appeal with the Idaho Supreme Court. Taylor seeks to have the judgment reversed and a finding made that she is entitled to the higher interest rate. If this were the outcome, the recalculation would be reversed and the new finding could be that she owns 41, 509 Series A Preferred shares as previously alleged.

         The lawsuit before this Court is premised on the state district court's conclusion that Taylor owns 7, 100 Series A Preferred shares. Taylor claims Riley is responsible for the damages Taylor incurred as a result that finding. Taylor's claim is based on the contention that Riley should have notified her, within the 1995 Letter Agreement, of the requirement that the shareholders vote and approve the higher interest rate.

         The motion to stay is made in part on the argument that this lawsuit would become moot should Taylor be successful in her appeal of the state court case. In other words, if the Idaho Supreme Court reverses Judge Brudie's finding regarding the lawful interest rate, the damages Taylor alleges Riley caused would cease to exist. Taylor has argued also that the Idaho Supreme Court should expand the scope of negligent misrepresentation claims to include a cause of action in cases of assumed duty by a lawyer. Currently, the law is limited in application to accountants.

         In addition, Taylor requests a limited deposition of Riley during the stay. Taylor claims that, if the stay is granted, Riley may modify answers to questions in this matter based on the outcome of the Idaho Supreme Court appeal. In support of her argument, Taylor alleges Riley has a history of concealing facts and refusing to be deposed in the state court actions related to this controversy.

         DISCUSSION

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