GK PROP. v. Redevelop. Agcy. of City of San Jose, C-74-0721-CBR.

• Decision Date: 26 March 1976
• Docket Number: No. C-74-0721-CBR.,C-74-0721-CBR.
• Citation: 409 F. Supp. 955
• Court: U.S. District Court — Northern District of California
• Parties: G-K PROPERTIES et al., Plaintiffs, v. REDEVELOPMENT AGENCY OF the CITY OF SAN JOSE, a public body, corporate and politic, et al., Defendants.

409 F. Supp. 955

G-K PROPERTIES et al., Plaintiffs, v. REDEVELOPMENT AGENCY OF the CITY OF SAN JOSE, a public body, corporate and politic, et al., Defendants.

No. C-74-0721-CBR.

United States District Court, N. D. California.

March 26, 1976.

James M. Berg, Fitzgerald, Johnson, Berg & Edgar, San Francisco, Cal., for plaintiffs.

John H. Tallett, Rogers, Vizzard & Tallett, San Francisco, Cal., for defendants.

MEMORANDUM OF OPINION

RENFREW, District Judge.

On March 4 and 11, 1976, the Court heard defendants' motion for dismissal of the above-entitled action because of plaintiffs' failure to comply with the discovery order of the Court dated October 28, 1975. At the latter hearing the Court announced its decision from the Bench granting this motion. In order to understand the import of plaintiffs' failure to comply with the Court's order and the reasons for the Court's action, it is necessary to set forth the background which led to the within motion.

This case, filed on April 1, 1974, is a proceeding in inverse condemnation arising out of 28 U.S.C. § 1331 for an alleged taking without just compensation in violation of the Fifth and Fourteenth Amendments of the Constitution of the United States. The property involved is the former S & H Kress Store between First and Second Streets in the City of San Jose, allegedly within a redevelopment project of the Redevelopment Agency of the City of San Jose and the City of San Jose. Plaintiffs asserted that defendants unreasonably delayed the program and have unreasonably interfered with the ownership of plaintiffs' property by acquisition, demolition, changes of access, and a failure to reuse the property which has been acquired. The subject property had been closed and plaintiffs claimed they were forced to sell it at a substantially reduced price to mitigate their damages.

Plaintiffs sought just compensation for the losses of use and rental or return on the subject property in an amount to be determined as well as $1,000,000 for the loss in fair market value of the subject property and other costs and attorneys' fees.

At the outset the reasons for the closing of the store in question were put in issue, whether it was because it was an unprofitable store or because of the alleged inverse condemnation or otherwise. The profitability and method of operations of the entire Kress Stores which were operated as a division of plaintiff Genesco were in issue as well.

The first inquiries concerning the financial status and profit and loss condition of Kress were made in interrogatories addressed to plaintiffs dated August 19, 1975. In the answers to those interrogatories dated September 26, 1975, the following answer was received for Interrogatory VI:

"Please attach the written reports, including the annual reports, since 1964, of the Kress Store division made to the Genesco Board of Directors.

"(a) If no report can be attached, please describe where such reports are located.

"A. At the present time, no reports are known to exist.

"(b) If no written report describe how the report is made to the Board of Directors of Genesco over the period of years referred to and by whom.

"A. At the present time, no reports are known to exist."

Thereafter, defendants by motion requested further answers to interrogatories, including Interrogatory VI. At the same time defendants noticed a motion to produce documents. Among other things, item No. 2 of the notice of motion to produce requested the production of "all reports of any kind in writing, including annual reports concerning the nature and extent of the Kress operation, profit and loss performance, goals, purposes, and the like, in the files of Kress Stores since 1960" (emphasis added). According to the affidavit of counsel for defendants, this language was specifically used in the event plaintiffs were claiming that the term "annual reports" only applied to reports to directors or stockholders.

These motions were heard by the Court on an order shortening time on October 28, 1975. On the same date the Court entered its order requiring the production of the documents, including item No. 2, and the order was also served on plaintiffs' attorneys the same day. The order also provided that further answers should be furnished with respect to Interrogatory VI(a) and (b) in the second set of interrogatories. In response to the motion to compel further answers to interrogatories, plaintiffs' attorney stated on page 5 of his declaration¹ dated October 27, 1975, as follows:

"Defendants' objection to the answers to Interrogatories 1(a) & (c), 6(a) & (b), 7, 17, 18, 26, 27, 28(a), 32, 35, 23 and 47 fails to reveal in what material manner such interrogatories have not been answered. Plaintiffs submit that a review of these answers will reveal that said interrogatories were either fully answered, substantially answered, or simply contain an answer that defendants do not like."

In response to the Court's order, counsel for defendants received on November 12, 1975, a letter from plaintiffs' counsel of the same date, in which the following statement was made:

"1. Annual reports for Kress from 1960 through 1968. Kress was merged into GENESCO in March of 1970; however, there may be an annual report for 1969 in Nashville. At the present time we do not have a copy of this document; however, it is being pursued in Nashville.

"2. Copies of annual reports to the Securities and Exchange Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for fiscal years ending 1964, 1965 and 1966. Additional years are probably in Nashville or in New York in the custody of Vince Cunningham at 730 Fifth Avenue. Further information will be provied sic if it is obtained."

In a letter to counsel for defendants dated November 13, 1975, from plaintiffs' counsel, the following statement was made:

"Further accounting records are being located and their custodian, volume and organization are being ascertained and will be delineated for you as soon as they are obtained. It should also be noted that according to my best information, no SEC reports for Kress Corporation were required after 1968 as they fell below 300 shareholders thereby obviating the necessity of filing such reports.

"Further information will be provided to you as it is obtained."

In another letter to counsel for defendants dated November 14, 1975, from plaintiffs' counsel, the following statement was made:

"As I have advised you since April, 1975, individual profit and loss statements for the Kress Stores were never prepared in 1971. Records from which profit and loss statements for each of the California stores could be prepared exist in storage in the New York offices of Kress Division. Mr. T. Lindemann is one of the officers in New York familiar with these records. The records are available for inspection by your accountant in New York at your convenience."

Defendants received the SEC reports through 1968 of the financial condition of Kress.

After receipt of the letter of November 14, 1975, defendants' accountants, Wolf and Company, who have a New York office, contacted a Mr. Lindemann and were furnished some information pertaining to the profit and loss of the individual California stores for the year 1971. The accountants were never offered any reports showing the financial condition of Kress on an annual or monthly basis from 1969 to date.

On November 18, 1975, plaintiffs filed their third supplement of answers to defendants' second set of interrogatories. Interrogatory VI was answered as follows:

"Please attach the written reports, including the annual reports, since 1964 of the Kress Store division made to the Genesco Board of Directors.

"A. No such reports made to the Board of Directors.

"(a) If no report can be attached, please describe where such reports are located.

"(b) If no written report describe how the report is made to the Board of Directors of Genesco over the period of years referred to and by whom."

Interrogatory XLIX was answered as follows:

"Will you furnish the auditor's reports for the individual California Kress stores as well as the auditor's report on all of the overall Kress operations for the last ten years?

"A. No such reports exist for individual stores. No such reports exist for Kress Division subsequent to merger of Kress and GENESCO."

A status conference was held with the Court on November 20, 1975, in which the deficiencies of discovery in the case were discussed. Because of discovery...