R.W. Intern. Corp. v. Welch Foods, Inc.

• Decision Date: 07 May 1991
• Docket Number: No. 91-1058,91-1058
• Citation: 937 F.2d 11
• Parties: R.W. INTERNATIONAL CORP. and T. H. Ward de la Cruz, Inc., Plaintiffs, Appellants, v. WELCH FOODS, INC. and Magna Trading Corp., Defendants, Appellees. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 11

937 F.2d 11

19 Fed.R.Serv.3d 1353

R.W. INTERNATIONAL CORP. and T. H. Ward de la Cruz, Inc., Plaintiffs, Appellants, v. WELCH FOODS, INC. and Magna Trading Corp., Defendants, Appellees.

No. 91-1058.

United States Court of Appeals,

First Circuit.

Heard May 7, 1991.

Decided June 21, 1991.

Rehearing and Rehearing en banc Denied July 29, 1991.

Jose A. Hernandez Mayoral, with whom Rafael Hernandez Mayoral was on brief, for plaintiffs, appellants.

Ana Matilde Nin, with whom Samuel T. Cespedes, Jaime E. Toro-Monserrate, and McConnell Valdes Kelley Sifre Griggs & Ruiz-Suria were on brief for defendant, appellee Welch Foods, Inc.

Jorge I. Peirats, with whom O'Neill & Borges was on brief, for defendant, appellee Magna Trading Corp.

Before SELYA and CYR, Circuit Judges, and BOWNES, Senior Circuit Judge.

SELYA, Circuit Judge.

Understandably frustrated by the plaintiffs' coyness in the course of pretrial discovery, the district court invoked Fed.R.Civ.P. 37(b)(2) and dismissed this civil action. R.W. Int'l Corp. v. Welch Foods, Inc., 129 F.R.D. 25 (D.P.R.1990) (RWI I ). Finding, as we do, that the plaintiffs, although conducting themselves in a less than exemplary manner, did not violate any specific order of the court, we reverse.

I. BACKGROUND

The plaintiffs, R.W. International Corp. and T.H. Ward de la Cruz, Inc., affiliated entities, sued Welch Foods, Inc. (Welch) in the Puerto Rico courts on or about April 5, 1989, alleging unjust termination of a distributorship agreement in violation of the Dealers' Contract Act, P.R. Laws Ann. tit. 10, Sec. 278 et seq. (1976) (Law 75). Noting diversity of citizenship, Welch removed the case to the United States District Court for the District of Puerto Rico under 28 U.S.C. Sec. 1441. Later, the plaintiffs filed an amended complaint adding a further array of claims under federal and state law and joining a second defendant, Magna Trading Corp. (Magna).

There is no need to choreograph the tarantella danced so feverishly by the parties and the district court during the approximate nine month period from removal to dismissal. It suffices to say that the docket was inundated with repeated motions, replies, surreplies, rejoinders, and surrejoinders, all filed without much discernible regard for the advancement of judicial proceedings. From what we can tell, the frenetic display of compulsive behavior is likely attributable to all parties, save perhaps Magna, in roughly equal measure. Because certain episodes are critical for the purposes at hand, we mention them specifically.

1. On April 26, 1989, Thomas Ward, sole shareholder of the plaintiff corporations, refused to attend his duly noticed deposition. Welch thereupon moved for sanctions. The motion was granted under Fed.R.Civ.P. 37(d), which provides,

inter alia, for monetary sanctions if "an officer, director, or managing agent of a party ... fails ... to appear" for a duly noticed deposition. The plaintiffs were fined $3,000.

2. On August 25, 1989, Judge Perez-Gimenez recused himself. The case was reassigned to Judge Pieras.

3. On October 27, 1989, Judge Pieras convened a scheduling conference pursuant to Fed.R.Civ.P. 16(b). At that session, the district court ordered the plaintiffs, inter alia, to produce on or before November 16 all documents regarding their claimed damages under Law 75. A deposition schedule was set in place.

4. On November 8, 1989, the district court, in order to facilitate the taking of depositions, accelerated the due date for document production, moving it from November 16 to November 13.

5. On November 14, 1989, Welch moved for dismissal. It grounded the motion on the plaintiffs' failure to produce certain documents regarding damages, most notably, financial statements and tax returns for Impex Trading Corp. (Impex), a non-party corporation wholly owned by Ward.

6. On November 15, 1989, Ward was deposed. He refused to answer certain questions that were asked regarding the tax-exempt status of plaintiff R.W. International Corp. Welch promptly supplemented its dismissal motion, citing Ward's recalcitrance at the deposition as a further ground for relief. The plaintiffs objected to these motions. Magna sided with Welch.

7. On January 10, 1990, the district court, finding that the plaintiffs had willfully violated its discovery orders, dismissed the case. In so doing, the court rested the dismissal squarely on Rule 37(b)(2). RWI I, 129 F.R.D. at 28-29.

Following the district court's declination to reconsider the dismissal, R.W. Int'l Corp. v. Welch Foods, Inc., 133 F.R.D. 8, 11-12 (D.P.R.1990) (RWI II ), ¹ the plaintiffs appealed.

II. ANALYSIS

In the ordinary course of civil litigation, "[t]he choice of sanctions for failing to comply with a court order lies with the district court, and we may not lightly disturb a decision to dismiss." Velazquez-Rivera v. Sea-Land Service, Inc., 920 F.2d 1072, 1075 (1st Cir.1990). Yet, this is not the ordinary case; the question here is not whether the court abused its discretion in imposing a particular sanction, but whether the court, under the applicable rules and the circumstances obtaining, had the authority to impose the sanction.

We start our discourse by parsing the rule that the district court specifically identified as the source of its authority:

If a party ... fails to obey an order to provide or permit discovery, including an order made under subdivision (a) of this rule ... 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....

Fed.R.Civ.P. 37(b)(2)(C). The rule's language clearly requires two things as conditions precedent to engaging the gears of the rule's sanction machinery: a court order must be in effect, and then must be violated, before the enumerated sanctions can be imposed. The decided cases, and the commentators, are consentient in the view that Rule 37(b)(2)'s plain language means exactly what it says. See, e.g., Badalamenti v. Dunham's, Inc. 896 F.2d 1359, 1362 (Fed.Cir.), cert. denied, --- U.S. ----, 111 S.Ct. 142, 112 L.Ed.2d 109 (1990); Salahuddin v. Harris, 782 F.2d 1127, 1131 (2d Cir.1986); Laclede Gas Co. v. G. W. Warnecke Corp., 604 F.2d 561, 565 (8th Cir.1979); 4A J. Moore & J. Lucas, Moore's Federal Practice p 37.03, at 37-62 to 37-64 (2d ed. 1991); 8 C. Wright & A. Miller, Federal Practice and Procedure Sec. 2289, at 790 (1970). In this case, therefore, the propriety of dismissing plaintiffs' complaint under Rule 37(b)(2) hinges on the answer to the following question: Did either Ward's refusal to answer the tax exemption questions during his deposition or the plaintiffs' failure to produce the Impex documents transgress "an order to provide or permit discovery," Fed.R.Civ.P. 37(b)(2), then in effect? We analyze each episode separately.

A. Deposition Testimony.

Should a deponent, though answering many questions at a duly noticed deposition, refuse to answer certain specific questions, the examiner is not remediless. ² See Fed.R.Civ.P. 37(a)(2) ("If a deponent fails to answer a question propounded ..., the discovering party may move for an order compelling an answer.... [and] the proponent of the question may complete or adjourn the examination before applying for an order."). If the court thereafter finds that the refusal was not "substantially justified," the examiner will receive the amount of "the reasonable expenses incurred in obtaining the order, including reasonable attorney's fees." Fed.R.Civ.P. 37(a)(4). The taxonomy of Rule 37 is progressive. If an order to answer is issued under Rule 37(a), and then disobeyed, Rule 37(b)(2) comes into play, authorizing the trial court to impose further sanctions, including the ultimate sanction of dismissal.

In this instance, the initial hurdle was never cleared. Although Ward's deposition was included within the discovery timetable set forth in the scheduling order, that order was not violated. Ward appeared for his deposition on November 15 as scheduled. When he refused to answer the questions concerning tax-exempt status, no Rule 37(a) order to compel answers to those questions was extant. Instead of following the protocol limned in Rule 37, that is, adjourning the deposition and seeking an order to compel Ward to respond to the questions and to pay the expenses ancillary thereto, Welch's counsel elected to bypass Rule 37(a) and seek immediate dismissal of the suit. In the circumstances at bar, that was tantamount to a ball player sprinting from second base to home plate, without bothering to round, let alone touch, third base. Under such circumstances, the district court's premature resort to Rule 37(b)(2) cannot be upheld. Accord Salahuddin, 782 F.2d at 1131-32.

The appellees make two arguments in an effort to repair the damage done by their rush to judgment. They point out, first, that Ward had been forewarned of possible dismissal because he had previously been sanctioned for failing to attend a deposition. We find wholly disingenuous the claim that this circumstance somehow relieved the court from following the step-by-step progression delineated in Rule 37 and, in the bargain, nullified the express command of Rule 37(b)(2). Having once committed a discovery violation, a party does not thereby forfeit the ordinary procedural prophylaxis of the Civil Rules. In the absence of a Rule 37(a) order or its functional equivalent, Ward's track record, though blemished, could not by itself animate Rule 37(b)(2).

Alternatively, the appellees say that the order issued in consequence of the scheduling conference (the Scheduling Order) was a suitable surrogate for a Rule 37(a) order. The appellees would have us infer from the sweeping...