951 F.3d 41
1st Cir.2020Background
- BPP Retail Properties borrowed >$90M to buy six Puerto Rico shopping centers; loan later held by ML‑CFC.
- ML‑CFC filed a diversity foreclosure action in federal district court and moved to appoint a receiver over the six properties, citing a contractual right and equitable grounds.
- District Court initially referred the receiver motion to a magistrate under 28 U.S.C. § 636(b)(1)(B) (report & recommendation), but then redesignated it under § 636(b)(1)(A) to allow the magistrate to "hear and determine."
- The Magistrate Judge granted the receiver appointment based on the contract; the District Court denied BPP's objections and refused a stay.
- BPP appealed under 28 U.S.C. § 1292(a)(2), arguing (1) the motion could not be delegated to a magistrate under § 636(b)(1)(A) because it is effectively injunctive/dispositive and (2) the magistrate’s final determination raised Article III concerns.
- The First Circuit vacated and remanded, holding the motion is "dispositive" for purposes of Rule 72 and § 636(b)(1), so the magistrate should have issued a report and recommendation subject to de novo district‑court review.
Issues
| Issue | Plaintiff's Argument (ML‑CFC) | Defendant's Argument (BPP) | Held |
|---|---|---|---|
| Whether a motion to appoint a receiver may be delegated to a magistrate to "hear and determine" under 28 U.S.C. § 636(b)(1)(A) | Motion is a pretrial, nondispositive matter and thus delegable under § 636(b)(1)(A) | Receiver appointment is equivalent to injunctive relief / otherwise dispositive and therefore nondelegable under § 636(b)(1)(A) | Held: Motion is "dispositive" under Rule 72 and should not have been finally decided by a magistrate under § 636(b)(1)(A); it requires a report & recommendation and de novo review under § 636(b)(1)(B). |
| Whether appointment of a receiver is substantively an "injunctive relief" motion excluded from § 636(b)(1)(A) | Receivership is not an injunction and may be treated separately | Appointment is functionally equivalent to injunctive relief | Held: Court declined to adopt the "injunction" label as the sole basis; instead rested decision on the dispositive/functionality analysis. |
| Whether the magistrate’s final determination would raise Article III problems if authorized under § 636(b)(1)(A) | (implicitly) statutory route would avoid constitutional issues | (argued) limited review by district court could raise Article III separation concerns | Held: Court avoided deciding the Article III question by resolving the statutory/separation‑of‑dispositive‑vs‑nondispositive issue first. |
Key Cases Cited
- Phinney v. Wentworth Douglas Hosp., 199 F.3d 1 (1st Cir. 1999) (Rule 72 mirrors § 636(b)(1); nondispositive matters may be finally decided by magistrates in appropriate cases)
- PowerShare, Inc. v. Syntel, Inc., 597 F.3d 10 (1st Cir. 2010) (stay‑pending‑arbitration motions can be delegated when functionally nondispositive)
- Highland Ave. & B.R. Co. v. Columbian Equipment Co., 168 U.S. 627 (1898) (historically separates receiverships from injunctions)
- United States v. Raddatz, 447 U.S. 667 (1980) (recognized dispositive/nondispositive distinction under § 636(b)(1))
- Consol. Rail Corp. v. Fore River Ry. Co., 861 F.2d 322 (1st Cir. 1988) (lists equitable factors for appointing a receiver, including likelihood of success)
- United States v. Rivera‑Guerrero, 377 F.3d 1064 (9th Cir. 2004) (remand for de novo district‑court review where magistrate exceeded authority)