481 F.2d 1204 (8th Cir. 1973), 72-1318, General Dynamics Corp. v. Selb Mfg. Co.

Docket Nº:72-1318.
Citation:481 F.2d 1204
Party Name:GENERAL DYNAMICS CORPORATION, Appellee, v. SELB MANUFACTURING COMPANY, a Division of Western, Inc., a corporation, and Marie M. Bass, Administratrix of the Estate of Harry C. Bass, Jr., Deceased, [*]) Appellants.
Case Date:July 30, 1973
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit
 
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Page 1204

481 F.2d 1204 (8th Cir. 1973)

GENERAL DYNAMICS CORPORATION, Appellee,

v.

SELB MANUFACTURING COMPANY, a Division of Western, Inc., a corporation, and Marie M. Bass, Administratrix of the Estate of Harry C. Bass, Jr., Deceased, [*] ) Appellants.

No. 72-1318.

United States Court of Appeals, Eighth Circuit.

July 30, 1973

Submitted March 13, 1973.

Rehearing and Rehearing En Banc Denied Aug. 27, 1973.

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[Copyrighted Material Omitted]

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[Copyrighted Material Omitted]

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Bernard A. Barken, St. Louis, Mo., and Robert V. Light, Little Rock, Ark., for appellants.

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Thomas L. Croft, St. Louis, Mo., for appellee.

Before MATTHES, Chief Judge, and ROSS and STEPHENSON, Circuit Judges.

STEPHENSON, Circuit Judge.

This is an appeal by Selb Manufacturing Corp. and its sole owner, Harry C. Bass from an adverse verdict in favor of General Dynamics against both defendants, for $600,000.00 actual damages and $250,000 punitive damages. The lawsuit arose initially out of a contract between Selb and General Dynamics in connection with the production of the highly controversial F-111 military aircraft. The corresponding criminal appeal decided by this Court is reported at 472 F.2d 207.

General Dynamics held the prime government contract to design and manufacture the F-111 for the United States Air Force at its Fort Worth, Texas plant. During the fall of 1966, Selb Manufacturing obtained a sub-contract with General Dynamics under which Selb was to manufacture vital component parts for the aircraft pursuant to purchase orders. Six of the orders were issued between October, 1966 and March, 1967, calling for the manufacture by Selb of "longerons" and "capwing pivot supports." Under terms of the contract, Selb was to manufacture and inspect these parts in exact accordance with specifications and drawings.

Under normal operating conditions of the aircraft, the longerons would carry enormous quantities of stress. Certain restrictions were therefore placed upon longerons requiring welding since the welded area would be relatively weaker than its unwelded counterpart. Thus, where welding was required, the proposed weld would be submitted to the Material Review Board (M.R.B.) on a Supplier's Inspection Report (S.I.R.) form. The M.R.B. consisted of three members: a General Dynamics engineer, a member of the General Dynamics quality assurance department, and a member of Air Force Quality Assurance. Authorization to perform a weld required concurrence of all three M.R.B. members.

During June of 1968, Selb began welding without M.R.B. authorization. Warnings were subsequently issued by General Dynamics and ignored. On October 29, 1969, General Dynamics wired Selb terminating all six contracts for fault.

A discrepancy report was later issued on the allegedly defective Selb parts which indicated the following:

(1) Sixty one (61) 1891 longerons with defective welds;

(2) Eleven (11) 1750 longerons with defective welds;

(3) One carry through plate with a defective weld;

(4) Two carry through plates with dimensional discrepancies.

General Dynamics filed its complaint on November 14, 1969, and amended the same in April, 1970. It alleged fraud and breach of contract in its first two counts. In count three it sought to recover a penalty from Selb based upon the alleged giving of gratuities on its behalf to employees of General Dynamics. Pursuant to defendant's motion, the third count was dismissed on July 13, 1970. In its memorandum opinion, the trial court also held that Count I did not state a cause of action under Missouri Law. It stated that under Missouri law a tort action based upon a contractual relationship arises only where the duty allegedly breached is created by reason of the relationship between the parties regardless of the contract, i.e., landlord-tenant. The trial court reasoned, however, that since the State where the act occurred (Texas) permits such an action and has a strong interest in a suit arising from such an act, Count I would not be dismissed. General Dynamics' second amended complaint, again alleging fraud and breach of contract, was filed September 3, 1970.

In its answer Selb indicated, by way of affirmative defense, that General Dynamics

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waived the requirement that Selb report and obtain authorization for any corrective action to be taken on parts. Selb also counterclaimed seeking approximately $5,000,000.00 in damages for alleged breach of contract, and $6,000,000.00 for alleged defamation. Bass similarly raised the affirmative defense of waiver and counterclaimed for $6,000,000.00 for defamation.

On September 8, 1971, General Dynamics filed interrogatories directed at both defendants. On December 28, 1971, General Dynamics moved to compel defendants to answer. The motion was sustained on January 4, 1972, and defendants were ordered to answer within twenty (20) days.

On January 7, 1972, defendant Bass served and filed his response thereto in which he asserted his Fifth Amendment Constitutional privilege not to incriminate himself. On the same date, Selb filed its answers to the interrogatories. Subsequently, General Dynamics moved to compel defendant Bass to answer each interrogatory. It also moved to compel Selb to answer the interrogatories more completely and sufficiently, or to dismiss Selb's counterclaims and to strike its affirmative defenses. In conjunction with General Dynamics' motions, defendants moved for a protective order, continuance and/or stay pending the outcome of their criminal appeal since judgment had been entered against them on November 9, 1971.

On February 18, 1972, the trial court heard oral argument on the motions and reviewed supporting affidavits and briefs. By oral order issued the same day, defendants' motion was denied. The trial court further ordered defendants to answer each interrogatory within twenty (20) days from February 18, 1972, and that if this order had not been followed upon expiration of the twentyday period an order would be issued dismissing the counterclaims of each defendant with prejudice, and striking their respective affirmative defenses also with prejudice.

Defendant Selb filed its supplemental answers on March 8, 1972. The twenty-day period expired as to Bass, without answers having been filed. After having read Selb's answers, the trial court determined that the answers as supplemented failed to comply with its earlier order that full and complete answers be made to each interrogatory. The trial court therefore entered its order of March 13, 1972 dismissing defendants' counterclaims with prejudice, and striking with prejudice, defendants' affirmative defenses.

Defendants now appeal and raise the following questions for our consideration:

I. Whether the trial court erred as to defendant Selb in dismissing its counterclaim, striking its affirmative defenses and denying its motion for a protective order.

II. Whether the trial court denied Bass his right against compulsory self-incrimination when it ordered him to answer interrogatories or face dismissal of his counterclaim and have his affirmative defenses stricken, and further whether it erred by denying Bass' motion for a protective order.

III. Whether the trial court applied the proper substantive law to this cause.

IV. Whether Count I of General Dynamics complaint stated a claim upon which relief could be granted.

V. Whether the trial court properly ruled: That former employees of the corporate parties were equally available to the parties; that a motion picture proffered by General Dynamics which depicted certain characteristics of the F-111 was admissible; and that evidence of weld repairs made without prior written authority by other vendors was inadmissible.

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I.

DISMISSAL OF SELB'S COUNTERCLAIM AND STRIKING OF ITS AFFIRMATIVE DEFENSES

Fed.R.Civ.P. 33(a) provides that where interrogatories are directed at a corporation, the corporation must designate someone to answer on its behalf "such information as is available to the party." (emphasis supplied) United States v. Kordel, 397 U.S. 1, 8, 90 S.Ct. 763, 767, 25 L.Ed.2d 1 (1970); see, Wright & Miller, Federal Practice and Procedure: Civil § 2018 at 143-44, and § 2172 at 536. Only in extreme cases, where no corporate agent can answer the propounded interrogatories without being subject to a "real and appreciable risk" of self-incrimination, should a protective order, pursuant to Fed.R.Civ.P. 26(c), be issued. Accord, United States v. Kordel supra, 397 U.S. 1, 8-9, 90 S.Ct. 763, 767-768 (1970). 1

Where no valid privilege is asserted and a party fails to obey an order to permit discovery. Fed.R.Civ.P. 37(b) (2) provides that "the court in which the action is pending may make such orders in regard to the failure as are just, and among others the following:"

******

* * *

"(C) An order striking out pleadings or parts thereof, or staying further proceedings until the order is obeyed, or dismissing the action or proceeding or any part thereof, or rendering a judgment by default against the disobedient party."

According to Selb, at the time of the closing of its plant during March, 1971, it had only five officers and employees. Of those, two, who were maintenance employees, were terminated in October, 1971. The three remaining persons, all officers, were: Harry C. Bass, Jr., President, Steven C. Fischer, a corporate officer, and Raymond N. Frey, Secretary. Since Bass and Fischer were involved in criminal litigation 2 arising from the events surrounding this civil cause, Frey was designated to respond to discovery procedures. We must decide, therefore, whether Frey provided "such information as [was] available to [Selb]." By...

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