1District Judge of the Eastern District of Louisiana,

sitting by designation.

UNITED STATES COURT OF APPEALS

For the Fifth Circuit

No. 93-1339

GEORGE E. McGILL and

JOHN R. WEIBEL,

Plaintiffs-Counter-DefendantsAppellants, 

VERSUS

MYRON W. GOFF,

Defendant-Counter-PlaintiffAppellee. 

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
2

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
 

2In 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

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
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

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
5

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
 

3We 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). 

6

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
 

4Certain 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.

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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
 

5McGill'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.

 

6The 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

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
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 83⁄4 percent interest in the joint

venture.

9

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
 

7Their 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.

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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,
11

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.