Page 1 – PLAINTIFF’S RESPONSE TO DEFENDANTS’ OBJECTIONS TO MAGISTRATE 

JUDGE’S JANUARY 14, 2016, ORDER

Zupancic Rathbone Law Group, P.C.

4949 Meadows, Ste. 600

Lake Oswego, OR 97035

Tel: 503-968-8200 Fax: 503-968-8017

C. Robert Steringer, OSB #983514 

bob.steringer@harrang.com 

HARRANG LONG GARY RUDNICK P.C. 

1001 SW Fifth Avenue, 16th Floor 

Portland, OR 97204 

Telephone: 503.242.0000 

Facsimile: 503.241.1458 

Marjorie A. Elken, OSB #073368 

melken@zrlawgroup.com 

ZUPANCIC RATHBONE LAW GROUP, P.C. 

4949 Meadows Road, Suite 600 

Lake Oswego, OR 97035 

Telephone: 503-968-8200 

Facsimile: 503-968-8017 

Of Attorneys for Plaintiff Malbco Holdings, LLC, 

a Washington limited liability company

UNITED STATES DISTRICT COURT

DISTRICT OF OREGON

PORTLAND DIVISION

MALBCO HOLDINGS, LLC, a 

Washington limited liability company,

Plaintiff,

vs. 

BHUPENDRA R. PATEL and NILA B. PATEL, 

husband and wife; HEETAN B. PATEL; 

HEETAL B. PATEL-MANANI; and 

MUKESH PATEL,

Defendants.

Case No. 3:14-cv-947-PK

PLAINTIFF'S RESPONSE TO 

DEFENDANTS’ OBJECTIONS TO

MAGISTRATE JUDGE’S JANUARY 

14, 2016, ORDER 

FILED UNDER SEAL

Malbco Holdings, LLC (“Malbco”) responds to Defendants Bhupendra R. Patel’s and 

Nila B. Patel’s Objections to Magistrate’s Order on Plaintiff’s Motion to Compel (Doc. No. 113) 

(“B. Patel Objections”), Defendants Heetan Patel and Heetal Patel’s Objection to Magistrate’s 

Order on Plaintiff’s Motion to Compel (“H. Patel Objections”) and Defendant Mukesh Patel’s 

Objections to Magistrate Judge Papak’s Order dated January 14, 2016 (Docket No. 113) (“M. 

Patel Objections”) as follows: 

Case 3:14-cv-00947-PK Document 120 Filed 02/16/16 Page 1 of 11
Page 2 – PLAINTIFF’S RESPONSE TO DEFENDANTS’ OBJECTIONS TO MAGISTRATE 

JUDGE’S JANUARY 14, 2016, ORDER

Zupancic Rathbone Law Group, P.C.

4949 Meadows, Ste. 600

Lake Oswego, OR 97035

Tel: 503-968-8200 Fax: 503-968-8017

I. INTRODUCTION

 On September 22, 2014, Defendant Mukesh Patel responded to Malbco’s first request 

for production of documents and produced documents Bates stamped MUKESH000001-212. 

Included in those documents were copies of several agreements that documented a series of 

transactions between Mcloughlin Lodging Company (“MLC”), a company wholly owned by 

Defendant Mukesh Patel, and Budget Inn OMRS, LLC, a company wholly owned by Defendants 

Bhupendra and Nila Patel (the “Patel Parents”). Included in the documents were copies of a 

Note Purchase Agreement between MLC and Mountain West Bank (“MWB”); some of the 

pleadings from a foreclosure lawsuit that MWB was bringing against Budget Inn OMRS and the 

Patel Parents; an October 2013, Settlement Agreement of the lawsuit; various email 

communications related to the October 2013, Settlement Agreement; and a November 2013, 

Amended and Restated Line of Credit Agreement. 

Prior to October 2015, neither Mukesh Patel nor any other defendant in this case 

produced a single document or communication that showed that Heetan Patel was involved in 

any way with MLC or its decision to purchase the MWB note. Then, mere days before the 

discovery cut-off, defendants produce “updated” privilege logs identifying thousands of pages of 

communications between Heetan Patel and MLC’s counsel regarding the various MLC/Budget 

Inn/MWB transactions. Judge Papak properly determined that defendants waived the privilege 

over the documents on their late privilege logs, and that Malbco should be able to redepose 

Heetan Patel regarding the MLC/Budget Inn/MWB transactions. 

II. LEGAL STANDARD

An Article III judge may reconsider a magistrate judge’s non-dispositive order “where it 

has been shown that the magistrate judge’s order is clearly erroneous or contrary to law.” 28 

 U.S.C. § 636(b)(1)(A). 

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Page 3 – PLAINTIFF’S RESPONSE TO DEFENDANTS’ OBJECTIONS TO MAGISTRATE 

JUDGE’S JANUARY 14, 2016, ORDER

Zupancic Rathbone Law Group, P.C.

4949 Meadows, Ste. 600

Lake Oswego, OR 97035

Tel: 503-968-8200 Fax: 503-968-8017

III. ARGUMENT

A. The “law of the case” doctrine is not applicable to Malbco’s Motion to Compel.

“Under the ‘law of the case’ doctrine, a court is ordinarily precluded from reexamining 

an issue previously decided by the same court, or a higher court, in the same proceeding.” U.S. 

v. Smith, 389 F.3d 944 (9th Cir. 2004). Defendants Heetan and Heetal Patel claim that Judge

Papak determined in his Opinion and Order on Malbco’s Motion to Strike [ECF. No. 41] that 

state court proceedings cannot be collaterally attacked in this proceeding. H. Patel Objections, p. 

6. In fact, Judge Papak’s ruling was far narrower. He determined that “Idaho law governing res

judicata bars defendants from relitigating issues from the [underlying] Idaho Lawsuit in this 

case.” Opinion and Order [ECF No. 41], p. 7. He also determined that under Idaho law 

“judgments against debtor-transferors are conclusive as to transferees unless they are tainted by 

fraud or collusion” and that the fraud must “appear on the face of the judgment.” Id. at 9. He 

found that Defendants Heetan and Heetal Patel were bound by the judgment in the underlying 

litigation because they were in privity with their parents in that case. Id. at 12. Finally, because 

defendants were barred from relitigating the Idaho lawsuit in this proceeding, Judge Papak 

denied defendants discovery on “matters decided by the Idaho lawsuit or contained within the 

Idaho judgment.” Id at 15. 

Nothing about those rulings is relevant to – or determinative of – Malbco’s Motion to 

Compel. First, res judicata is not applicable here: Malbco seeks discovery of issues related to 

the MWB litigation, which was resolved by settlement agreements, not by a judgment. Second, 

even if res judicata was applicable, the relevant law would be Oregon law, not Idaho law, since 

the MWB litigation was pending in Oregon. Finally, Malbco was not in privity with any party to 

the Oregon action. In short, Defendants Heetan and Heetal’s “law of the case” argument is 

without merit. 

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Page 4 – PLAINTIFF’S RESPONSE TO DEFENDANTS’ OBJECTIONS TO MAGISTRATE 

JUDGE’S JANUARY 14, 2016, ORDER

Zupancic Rathbone Law Group, P.C.

4949 Meadows, Ste. 600

Lake Oswego, OR 97035

Tel: 503-968-8200 Fax: 503-968-8017

B. Judge Papak did not err in allowing Malbco to re-depose Heetan Patel.

For nearly two years during discovery in this case – including through multiple 

depositions – defendants tried to hide Heetan Patel’s involvement in the various transactions 

between MLC and Budget Inn OMRS. Then, on the eve of the discovery cut-off date, 

defendants provided Malbco with “updated” privilege logs which make clear that Heetan Patel 

was intimately involved in MLC’s business, and regularly communicating with MLC’s counsel. 

Defendant Mukesh Patel submitted a declaration in the underlying briefing explaining Heetan’s 

role in the company: 

“I instructed my nephew, Heetan Patel (“Heetan”) to organize MLC, 

and he did so on August 16, 2012. At all times since its organization, 

MLC was wholly owned by me. At my instruction, Heetan also 

worked with MLC’s legal counsel in conducting its legal affairs, 

including consummating the purchase of the MWB loan documents.” 

Declaration of Mukesh Patel in Support of Response to Plaintiff’s Motion to Compel 

[ECF No. 110], ¶ 4. 

Yet, during depositions, defendants told a very different story. When Malbco asked 

Mukesh Patel who had formed MLC, he did not identify Heetan. Instead, he stated: 

“Q Who is McLoughlin Lodging Company? A better question is what 

is McLoughlin Lodging Company? 

A It is McLoughlin Lodging Company. We formed that lodging 

company.

Q Who formed that lodging company?

A I think lawyers.

Q Okay. When you say we, are you referring --

A Like lawyer.

Q -- to you and your lawyer?

A Yes.”

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Page 5 – PLAINTIFF’S RESPONSE TO DEFENDANTS’ OBJECTIONS TO MAGISTRATE 

JUDGE’S JANUARY 14, 2016, ORDER

Zupancic Rathbone Law Group, P.C.

4949 Meadows, Ste. 600

Lake Oswego, OR 97035

Tel: 503-968-8200 Fax: 503-968-8017

Declaration of Marjorie A. Elken in Support of Plaintiff Malbco Holdings, LLC’s Motion 

to Compel [ECF No. 100] (“MAE Decl.”), Ex. 14 [M. Patel Dep. Tr. 32:16-25]. Malbco also 

asked Mukesh Patel whether anyone was familiar with MLC’s business and affairs aside from 

him and his lawyers, and Mukesh answered with an unqualified “no.” Id. at Ex. 14 [M. Patel 

Dep. Tr. 33:7-19]. Heetan testified that he had no part in the decision to purchase the MWB 

notes (in direct contradiction to Mukesh Patel’s declaration). Id. at Ex. 15 [H. Patel Dep. Tr. 

89:25-90:4]. Finally, Defendant Bhupendra Patel testified that his brother was the only 

representative of MLC with whom he worked: 

“Q Have you dealt with somebody else -- well, when you deal with 

McLoughlin Lodging Company, have you dealt with somebody 

other than your brother? 

A I have dealt with my counsel. 

MR. WRIGHT: And that is as far as you should answer. 

Q BY MS. ELKEN: When you were working with McLoughlin 

Lodging Company, have you spoken with somebody else who is a 

representative of McLoughlin Lodging Company other than your 

brother? 

A No.”

Declaration of Marjorie A. Elken in Support of Response to Defendants’ Objections to 

Magistrate Judge’s January 14, 2016, Order (“M. Elken Decl.”), ¶ 2, Ex. 1 [B. Patel Dep. Tr. 

39:6-16].1 Yet, the privilege logs show that Bhupendra Patel was copied on some of Heetan 

Patel’s communications with MLC’s counsel. See, e.g., MAE Decl., Ex. 13 [M. Patel Priv. Log 

p. 5 MUKESH000255-266; p. 6 MUKESH 000295, 000297; p. 8 MUKESH000325].

Defendants’ testimony was misleading at best, and flat out false at worst. Given this 

testimony, and the late disclosure of Heetan Patel’s involvement in the MLC transactions, Judge 

1

 This section of deposition testimony was not included in the underlying briefing, but Malbco 

discussed it with the Court in the December 7, 2015, hearing on Malbco’s Motion to Compel. 

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Page 6 – PLAINTIFF’S RESPONSE TO DEFENDANTS’ OBJECTIONS TO MAGISTRATE 

JUDGE’S JANUARY 14, 2016, ORDER

Zupancic Rathbone Law Group, P.C.

4949 Meadows, Ste. 600

Lake Oswego, OR 97035

Tel: 503-968-8200 Fax: 503-968-8017

Papak did not err in ordering Heetan Patel to sit for another deposition related to those 

transactions. 

C. The requested documents are relevant.

Defendants’ relevancy argument misses the boat. Defendants say the documents Judge 

Papak ordered them to produce are not relevant because Malbco has mischaracterized the various 

transactions reflected in the documents. M. Patel Objections, p. 4. However, that argument 

simply raises a question of fact about defendants’ intent with the various transactions. 

Defendants admit that if Malbco’s version of events is true, the documents are relevant. This is 

not a motion for summary judgment – the Court is not in a position to determine whose version 

of the facts is correct. Judge Papak did not err in determining that the documents are relevant – 

they are directly relevant to Malbco’s theory of the case. 

D. Malbco’s discovery has not been out of proportion to the needs of this case. 

As an initial matter, this argument was not raised below, and it should not be considered 

here. More importantly, the argument is without merit. This case involves the fraudulent 

transfers of millions of dollars of assets. One of Malbco’s claims requires a solvency analysis of 

Bhupendra and Nila Patel (the “Patel Parents”) at the time of the various transfers. The 

insolvency analysis in this case will be complex because the Patel Parents have owned interests 

in up to nine different companies during the relevant time periods. To date, defendants have 

provided a combined total of 15,000 pages of documents. That is not a substantial amount of 

documentation given the complexities of the case, and defendants’ behavior, as explained more 

thoroughly below. 

Mukesh Patel is really complaining that Malbco has issued too many discovery requests 

in this case. However, that issue has already been argued to Judge Papak through a motion to 

quash, and Judge Papak denied the motion. See Opinion and Order [ECF No. 90]. Defendants 

did not object to that opinion, and cannot re-raise that issue here. 

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Page 7 – PLAINTIFF’S RESPONSE TO DEFENDANTS’ OBJECTIONS TO MAGISTRATE 

JUDGE’S JANUARY 14, 2016, ORDER

Zupancic Rathbone Law Group, P.C.

4949 Meadows, Ste. 600

Lake Oswego, OR 97035

Tel: 503-968-8200 Fax: 503-968-8017

Moreover, the amount of discovery in this case has stemmed from defendants’ own 

behavior. Malbco took depositions in this case in March 2015 (after defendants cancelled 

depositions set for the end of February, the day before the depositions). Defendants were 

extremely evasive in their depositions: The five defendants answered that they either did not 

know the answer to the question, or they could not remember the answer to the questions more 

than 650 times. Defendants Mukesh Patel alone answered either “I don’t know” or “I don’t 

remember” more than 200 times. At one point during the deposition he asked to take a break so 

his counsel could refresh his memory on something. When he came back, he testified “I don’t 

remember and he [his counsel] won’t refresh my memory. * * * [H]e says just remember what 

you remember and that is perfect. You know, he doesn’t want me to – ” at which point his 

counsel stopped him from saying anything further. 

Since defendants could not answer simple deposition questions such as whether a 

particular asset had liens on it, Malbco needed to issue discovery requests to obtain that 

information. It also had to issue several subpoenas because defendants refused to produce 

documents that they had control over in their role as representatives of their solely-owned 

companies. They insisted that Malbco issue subpoenas to each of those companies, so Malbco 

did. Defendants then moved to quash the subpoenas and the new discovery requests on the basis 

that they were too broad. Judge Papak properly denied that motion. 

The bottom line is that discovery has been expensive in this case – as a result of 

defendants’ behavior – but the amount of discovery has been proportional to the needs of the 

case. 

E. Judge Papak did not err in ordering production of the privileged documents.

1. The record contains sufficient evidence to question Heetan Patel’s role as an

agent of MLC.

Defendants say that Malbco has presented no evidence to challenge Heetan Patel’s status 

as an agent of MLC. This is simply untrue. Defendants’ own testimony in this case questions 

Case 3:14-cv-00947-PK Document 120 Filed 02/16/16 Page 7 of 11
Page 8 – PLAINTIFF’S RESPONSE TO DEFENDANTS’ OBJECTIONS TO MAGISTRATE 

JUDGE’S JANUARY 14, 2016, ORDER

Zupancic Rathbone Law Group, P.C.

4949 Meadows, Ste. 600

Lake Oswego, OR 97035

Tel: 503-968-8200 Fax: 503-968-8017

whether Heetan was an agent of MLC or his uncle, Mukesh Patel. Heetan flat out denied that he 

had any part of the decision for MLC to purchase the MWB notes. His father said that he never 

dealt with any representative of MLC other than Mukesh Patel. Mukesh testified that nobody 

besides him and his lawyer were familiar with the business and affairs of MLC and that he could 

not remember anyone else other than himself and his lawyers who made decisions related to the 

MWB litigation. Yet, a review of Mukesh Patel’s privilege log shows that thirty percent of the 

documents consist of communications between Heetan Patel and Mukesh/MLC’s counsel on 

which Mukesh was not even copied. These communications include subject matters such as 

“Note Purchase Project,” “Budget Inn Note Purchase Due Diligence,” “Note Buyer Entity 

Structure,” “Potential Purchase of MWB Notes,” “Mountain West/Budget Inn,” “Letter to 

Receiver,” and “Kanti & Bharti’ answer to MWB complaint” attached. 

Either Heetan Patel is not an agent of MLC (as was the clear testimony in the 

depositions) and therefore the communications are not privileged, or defendants were being 

untruthful in their depositions. In either event, Judge Papak’s decision that defendants waived 

the privilege over the communications was not clear error. 

2. Judge Papak was correct in determining that defendants’ communications

were not covered by the common interest privilege.

The common interest privilege covers confidential communications between parties and 

their counsel where the parties share a common legal interest. Port of Portland v. Oregon Ctr. 

For Envtl. Health, 238 Or. App. 404, 414, 243 P.3d 102, 109 (2010). As described in more 

detail in Malbco’s Motion to Compel pages 18 through 22, defendants seek to use the common 

interest privilege to create a blanket privilege covering all communications between the family 

members, all of their companies and their lawyers on a series of transactions – on some of which 

the various parties were adverse. Further, some of defendants’ alleged “common interests” were 

not shared legal interests. For example, defendants say they had a shared interest in MLC 

purchasing the MWB notes because MLC would be a less aggressive creditor – that is a shared 

Case 3:14-cv-00947-PK Document 120 Filed 02/16/16 Page 8 of 11
Page 9 – PLAINTIFF’S RESPONSE TO DEFENDANTS’ OBJECTIONS TO MAGISTRATE 

JUDGE’S JANUARY 14, 2016, ORDER

Zupancic Rathbone Law Group, P.C.

4949 Meadows, Ste. 600

Lake Oswego, OR 97035

Tel: 503-968-8200 Fax: 503-968-8017

commercial interest, not a shared legal interest. In re F.T.C., 2001 WL 396522, at *5 (S.D.N.Y. 

Apr. 19, 2001) (common economic interest not sufficient to support common interest privilege).

Judge Papak did not err in finding that defendants’ communications were not covered by a 

blanket common interest privilege. 

3. Defendants waived the attorney-client privilege by failing to claim the 

privilege in a timely manner. 

Defendants say that they have not waived the privilege because the communications set 

out in their “updated” privilege logs were not responsive to Malbco’s August 2014, discovery 

requests. M. Patel Objections, p. 9. However, in response to those requests, defendants 

provided the note purchase agreement, the two line of credit agreements and the two settlement 

agreements. The requests sought all documents and communications. Defendants produced the 

documents, but now want to say that the communications about those documents were not 

responsive. Judge Papak did not err in finding that the communications listed on defendants’

“updated” privilege logs were responsive to Malbco’s first requests for production of documents, 

and that defendants’ failure to provide a privilege log identifying those communications for over 

a year constituted a waiver of the privilege.

4. Defendants have implicitly waived the privilege by using it as both a shield 

and a sword.

Malbco is claiming that the purchase of the MWB note, the two line of credit agreements 

and the two settlement agreements were a series of sham transactions that were meant to 

encumber all of the Patel Parents’ assets. In defense, defendants claim that the note purchase and 

the resulting settlements and lines of credit were undertaken to remove the receiver that was 

running the Budget Inn hotel and to pursue a claim against Kanti Patel. However, defendants say 

Malbco is not entitled to discovery on either of those alleged goals because all of defendants’ 

communications are subject to the common interest privilege. In other words, defendants claim 

that their intent in pursuing the various transactions was not related to defrauding creditors 

Case 3:14-cv-00947-PK Document 120 Filed 02/16/16 Page 9 of 11
Page 10 – PLAINTIFF’S RESPONSE TO DEFENDANTS’ OBJECTIONS TO MAGISTRATE 

JUDGE’S JANUARY 14, 2016, ORDER

Zupancic Rathbone Law Group, P.C.

4949 Meadows, Ste. 600

Lake Oswego, OR 97035

Tel: 503-968-8200 Fax: 503-968-8017

(sword), but because that intent was a common one, it and all communications about it, are 

privileged (shield). That is the epitome of the sword-shield doctrine. 

Defendants try to argue that the sword-shield doctrine only applies if a client uses an

advice of counsel as defense. Defendants are wrong. The focus of the doctrine is not on the type 

of communication involved, but on whether the party has put the privileged communications at 

issue in the case, either through an affirmative claim or a defense. Gomez v. Vernon, 255 F.3d 

1118, 1131 (9th Cir. 2001). For example, in Roberts v. Legacy Meridian Park Hosp., Inc., the 

Court determined the doctrine applied to a defendants’ communications with his counsel about a 

settlement agreement where the plaintiff was suing to enforce the settlement agreement, and 

defendant responded that no settlement occurred because his attorney lacked authority to agree to 

the settlement. Roberts, 97 F. Supp. 3d 1245, 1255-56 (D. Or. 2015). 

Judge Papak did not err in determining that defendants have put their alleged privileged 

communications at issue in this case, and therefore implicitly waived the privilege over those 

communications. 

CONCLUSION

Defendants have not shown any clear error in Judge Papak’s decision. Accordingly, for 

the reasons set forth herein and in Malbco’s Motion to Compel, the Court should affirm Judge 

Papak’s January 14, 2016, Order. 

DATED this 16th day of February, 2016. 

ZUPANCIC RATHBONE LAW GROUP, P.C. 

By: /s/ Marjorie A. Elken

Marjorie A. Elken, OSB #073368 

melken@zrlawgroup.com

Telephone: 503-968-8200 

Facsimile: 503-968-8017 

Of Attorneys for Plaintiff MALBCO HOLDINGS, 

LLC, a Washington limited liability company

Case 3:14-cv-00947-PK Document 120 Filed 02/16/16 Page 10 of 11
Page 1- CERTIFICATE OF SERVICE Zupancic Rathbone Law Group, P.C.

4949 Meadows, Ste. 600

Lake Oswego, OR 97035

Tel: 503-968-8200 Fax: 503-968-8017

ATTORNEY CERTIFICATE OF SERVICE

I certify that on February 16, 2016, I served or caused to be served a true and complete 

copy of the foregoing PLAINTIFF’S RESPONSE TO DEFENDANTS’ OBJECTIONS TO 

MAGISTRATE JUDGE’S JANUARY 14, 2016, ORDER on the party or parties listed below 

as follows: 

 Via CM / ECF Filing (UNDER SEAL)

 Via First Class Mail, Postage Prepaid

 Via Email

 Via Personal Delivery

Zachary W L Wright, OSB #941615

Tonkon Torp LLP 

888 SW Fifth Avenue, Suite 1600 

Portland, OR 97204 

Of Attorneys for Defendants Bhupendra R. 

Patel and Nila B. Patel

Laura Caldera Taylor, OSB #993786

Thomas L. Hutchinson, OSB #994896 

Bullivant Houser Bailey PC

888 SW Fifth Avenue, Suite 300 

Portland, OR 97204 

Of Attorneys for Defendants Heetan Patel 

and Heetal Patel-Manani

Nicholas J. Henderson, OSB #074027

Motschenbacher & Blattner LLP

117 SW Taylor Street, Suite 200 

Portland, OR 97204 

Of Attorneys for Defendant Mukesh Patel

ZUPANCIC RATHBONE LAW GROUP, P.C. 

By: /s/ Marjorie A. Elken

Marjorie A. Elken, OSB #073368 

melken@zrlawgroup.com

Telephone: 503-968-8200 

Facsimile: 503-968-8017 

Of Attorneys for Plaintiff MALBCO 

HOLDINGS, LLC, a Washington limited 

liability company

Case 3:14-cv-00947-PK Document 120 Filed 02/16/16 Page 11 of 11