In re Tong Seae (USA), Inc.
| Citation | 81 BR 593 |
| Decision Date | 21 January 1988 |
| Docket Number | Bankruptcy No. 4-85-03458C to 4-85-03460C,BAP No. NC 87-1301 MoVAs,Adv. No. 485-0352AC.,NC 87-1302 MoVAs |
| Parties | In re TONG SEAE (U.S.A.), INC., a California corporation, Pacific Bubble Cell Company, Ltd., d/b/a American Bubble Corporation, f/d/b/a Fit-Trend Trading Co. Ltd., a Hong Kong corporation, Bridgeport Trading Company, Ltd., a California corporation, Debtors. TONG SEAE (U.S.A.), INC., and Bridgeport Trading Co., Ltd., Appellants, v. EDMAR CORPORATION, Appellee. |
| Court | Bankruptcy Appellate Panels. U.S. Bankruptcy Appellate Panel, Ninth Circuit |
Joseph A. Scanlan, Jr., Miller, Morton, Caillat & Nevis, San Jose, Cal., for appellants.
Laura Grad, Feldman, Waldman & Kline, San Francisco, Cal., for appellee.
Before MOOREMAN, VOLINN and ASHLAND, Bankruptcy Judges.
This appeal arises from a judgment entered by the Bankruptcy Court below dismissing with prejudice the appellants/debtors' adversary action against the appellee. The appellants' complaint alleged violation of the automatic stay, conversion and damage to personal property. The Bankruptcy Court dismissed the complaint with prejudice pursuant to Federal Rule of Civil Procedure 37(b)(2)(C), which allows for the dismissal of an action for failure to comply with discovery.1 We affirm.
The defendant Edmar Corporation ("Edmar") is the lessor of certain real property located in New Jersey. After obtaining a New Jersey state court judgment for possession of the premises, the lessee/debtors ("appellants") filed a Chapter 11 petition in California which stayed the execution of the judgment. On November 14, 1985, the bankruptcy court entered an order approving the rejection of the subject lease. On November 21, 1985, the appellants filed their adversary action against Edmar requesting injunctive relief and damages.
On August 1, 1986, Edmar served the appellants' counsel of record (Mr. Thompson), with the First Set of Interrogatories and a Request for Production of Documents with a response deadline of September 3, 1986. On August 15, 1986, a second set of interrogatories was served with a response deadline of September 17, 1986.
On August 28, 1986, Edmar's attorney ("Ms. Grad") wrote Mr. Thompson, enclosing a copy of a stipulation extending the discovery cut-off date to October 20, 1986 and granting the appellants five (5) additional days to file their responses originally due September 3, 1986. Ms. Grad explained that she was not willing to extend the response time past September 8, 1986, because depositions had been scheduled for the next day (September 9, 1986), in Massachusetts. On September 9, 1986, the appellants had failed to comply with the agreed extension and Ms. Grad wrote a letter to Mr. Thompson stating that she would not consent to the failure to meet the deadline and that Edmar would seek recovery of costs.
On September 15, 1986, Ms. Grad wrote to Mr. Thompson to confirm their agreement to depose Mr. Yeh (a principal of the debtors), on September 26, 1986. The letter also "confirmed" Mr. Thompson's assurance that the responses to the interrogatories and document requests would "be in Ms. Grad's hands prior to the date of Mr. Yeh's deposition." However, on September 24, 1986, a Mr. Scanlan contacted Ms. Grad and stated that he would be representing the appellants in the adversary proceeding.
Ms. Grad agreed to postpone the deposition of Mr. Yeh to October 15, and 16, because of Mr. Scanlan's "inability to complete responses to the interrogatories and document requests prior to the September 26 deposition date." The agreement to continue the deposition was conditioned on the receipt of a substitution of attorney prior to September 26, 1986. No "substitution" was received, and in a letter dated September 29, 1986 to Mr. Scanlan, Ms. Grad again requested written confirmation as to who was the actual attorney of record. The letter also "confirmed" the parties agreement that the responses to the discovery requests would be delivered "no later than October 8, 1986."
Although, Mr. Scanlan reassured Ms. Grad that the October 8th deadline would be complied with, the requested documents and answers to interrogatories were not delivered. Ms. Grad again wrote to Mr. Scanlan insisting that the discovery be complied with so that she could prepare for Mr. Yeh's deposition. On October 14, Ms. Grad learned that Mr. Yeh had left the country a few days earlier. Ms. Grad immediately wrote Mr. Scanlan "postponing" Mr. Yeh's deposition to October 22 and 23 and stated that Edmar would seek sanctions if the interrogatories and requested documents were not delivered by October 16. Again, the deadline passed without compliance with the discovery requests.
On October 24, 1986, Edmar filed a Motion to Dismiss for Failure to Comply with Discovery. The appellants, through Mr. Scanlan, filed an opposition to the motion arguing (1) that Mr. Scanlan had been hampered due to the large number of interrogatories and requests for documents, (2) that the principal of the corporation (Mr. Yeh) spent much of his time "outside the U.S.," and (3) that "extensive discovery" had already been completed by Edmar.
The hearing on the motion to dismiss was set for November 24, 1986 and immediately before the hearing, Mr. Scanlan delivered the responses to the First Set of Interrogatories to Ms. Grad. At the hearing, Mr. Scanlan argued for the first time that the requested documents were in the hands of the "real party in interest" Packaging Industries, which had received the machinery allegedly damaged by Edmar. Mr. Scanlan further argued that Edmar had been provided with all the necessary documents at the time of the deposition of Packaging Industries. Apparently, when Ms. Grad had taken the deposition of Packaging Industries, located in Massachusetts, she had been given "access to six thousand documents."2 Mr. Scanlan stated at the hearing that he could have the documents photocopied and sent to Ms. Grad.
On December 5, 1986, the bankruptcy court entered an Order re Sanctions for Failure to Make Discovery. The court awarded attorney's fees for the appellants' delays, however, it determined that dismissal of the action was not warranted. The court further ordered that the remaining discovery requests were to be complied with by January 5, 1987. The order also explicitly warned that failure to so comply would result in dismissal.
Pursuant to the award of attorney's fees, Ms. Grad served on Mr. Scanlan a declaration dated December 17, 1986. The declaration was received by Mr. Scanlan on December 22, and made specific reference to the December 5th order. Mr. Scanlan, however, had not received a copy of the court's order and on December 29, 1986 requested a copy from the bankruptcy clerk.3 The order was received by Mr. Scanlan on December 31, 1986, and on January 5, 1987, he sent a letter to Ms. Grad stating:
I trust, . . . (1) you have reviewed the Answers to Interrogatories First Set and are satisfied as to their scope and sufficiency; and (2) that you have accepted my representation that all documents available to the plaintiff debtors had been previously provided to you by Packaging Industries. If not, please be advised that no documents responsive to your request exist in the hands of the Plaintiff.
The letter also asked whether Edmar "wished to have the documents from Packaging Industries reproduced." In a letter dated January 13, 1987, Ms. Grad reemphasized Edmar's position that Mr. Scanlan had not yet complied with the request for document production.
On January 9, 1987, Edmar filed a Motion to Dismiss for Failure to Comply with Court Order re Discovery. The court set the hearing for January 30, 1987 and ordered that written opposition to the motion be served by hand on Edmar's counsel and filed no later that January 23, 1987.
On January 23, 1987, the appellants filed an opposition to the motion to dismiss and again argued that they had substantially complied with discovery. More specifically, appellants stated that the requested documents had been "previously provided" to Edmar at the time of the Massachusetts depositions. Further, Mr. Scanlan argued that he had not been given proper notice of the December 5, 1986 order. Although, the order setting the time for the hearing required that the opposition be served by hand by January 23, 1987, Edmar states in its Brief that it was received (through Federal Express) on January 27, 1987, three days before the hearing.
The hearing on Edmar's second motion to dismiss took place on January 30, 1987. The court pointed out that even up until that date, the appellants had not complied with the December 5, 1986 order. The court also stated that the appellants had sufficient time to answer the Second Set of Interrogatories because they were not only served on Mr. Thompson in August 1986, but a copy had also been attached to the first motion to dismiss which had been served on Scanlan in November. As to the lack of notice of the December 5, 1986 order, the court stated that the delay in receiving the order might have been avoided if Mr. Scanlan had formally substituted into the case.
On February 25, 1987, the bankruptcy court entered Findings of Fact and Conclusions of Law. The first Notice of Appeal was filed two days later. On March 3, 1987, a Judgment was entered dismissing the adversary action with prejudice and the second Notice of Appeal was filed March 13, 1987.
In reviewing an order of dismissal under Fed.R.Civ.P. 37(b)(2)(C), a reviewing court must determine whether the lower court abused its discretion. National Hockey League v. Metropolitan Hockey Club, Inc., 427 U.S. 639, 96 S.Ct. 2778, 49 L.Ed.2d 747 (1976). Under the abuse of discretion standard, this Panel must have "a definite and firm conviction that the court below committed a clear error of judgment in the conclusion it reached," before...
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