Richmark Corp. v. Timber Falling Consultants
| Citation | 959 F.2d 1468 |
| Decision Date | 30 March 1992 |
| Docket Number | Nos. 91-35966,91-36059,s. 91-35966 |
| Parties | , 22 Fed.R.Serv.3d 703 RICHMARK CORP., a California Corporation, Plaintiff, v. TIMBER FALLING CONSULTANTS, an Oregon Corporation, Defendant. TIMBER FALLING CONSULTANTS, an Oregon Corporation, Counterclaim Plaintiff-Appellee, v. RICHMARK CORP., a California Corporation, Peacock Mfg. Co., a Texas Corporation, Zhu Yuanchang, Eugene Wang, James Yang, and Francis Tong, Counterclaim Defendants, and Beijing Ever Bright Industrial Co., a foreign Corporation, Counterclaim Defendant-Appellant. |
| Court | United States Courts of Appeals. United States Court of Appeals (9th Circuit) |
David A. Ranheim, Dorsey & Whitney, Minneapolis, Minn., for appellant.
John F. Neupert, Miller, Nash, Wiener, Hager & Carlsen, Portland, Or., for appellee.
Appeal from the United States District Court for the District of Oregon.
Before BROWNING, SKOPIL and D.W. NELSON, Circuit Judges.
This case presents a number of difficult questions regarding a sensitive area of law and foreign relations. Timber Falling Consultants, Inc. (TFC) won a default judgment for fraud and breach of contract against Beijing Ever Bright Industrial Co. (Beijing), a corporation organized under the laws of the People's Republic of China (PRC) and an arm of the PRC government. As part of an effort to execute that judgment, TFC sought discovery of Beijing's assets worldwide. Beijing resisted those discovery efforts, and refused to comply when ordered to do so by the district court. The district court imposed discovery sanctions, held Beijing in contempt, and ordered contempt fines of $10,000 a day. Beijing contends that PRC secrecy laws prevent it from complying with the discovery order and that it would be subject to prosecution in the PRC were it to comply. It appeals the discovery order, the discovery sanction, the contempt order, and the district court's refusal to vacate the contempt order. 1
While we acknowledge the importance of the interests the State Secrecy statute is designed to protect, we conclude in the circumstances of this case that the PRC's laws limiting disclosure cannot excuse Beijing's failure to comply with the district court's orders. For this reason, we affirm the discovery and contempt orders. We modify the contempt order, however, to make it payable to the court, rather than to TFC.
Beijing contracted to purchase lumber from Richmark Corp. Richmark in turn retained TFC to procure the timber. After the contract fell through, Richmark sued TFC. TFC counterclaimed against Richmark and cross-claimed against all other parties involved, including Beijing, alleging fraud and breach of contract. Beijing failed to appear, apparently because of the Beijing appealed this judgment to the Ninth Circuit. 2 Beijing did not post a supersedeas bond or letter of credit, however, so TFC was free to begin efforts to collect the judgment while the appeal was pending. In an attempt to do so, TFC served Beijing with a number of discovery requests and interrogatories which sought to identify Beijing's assets worldwide. Beijing did not respond to those requests, and instead moved for a stay of discovery pending resolution of its Rule 60(b) motion for relief from the judgment. TFC in turn filed a motion to compel discovery.
interruption in United States-PRC relations which followed the Tienanmen Square incident. All other claims on both sides were dismissed by the district court, but TFC was awarded a $2.2 million default judgment against Beijing. This judgment was entered on June 5, 1990
On October 15, 1990, the district court denied Beijing's Rule 60(b) motion, mooting Beijing's request for a stay, and granted TFC's motion to compel discovery. Richmark Corp. v. Timber Falling Consultants, 747 F.Supp. 1409 (D.Or.1990). Beijing then appealed the denial of its Rule 60(b) motion, 3 and on November 27, 1990, petitioned the district court for a stay of discovery pending appeal. The district court denied this motion on January 11, 1991. Beijing promptly petitioned the Ninth Circuit for a stay of discovery. Its petition was denied on February 19, 1991.
On January 28, 1991, Beijing for the first time requested advice from its government on how to respond to TFC's discovery requests. Specifically, Beijing sought guidance as to whether PRC "State Secrecy Laws" prohibited it from disclosing the requested information concerning its assets. This request was passed by the State Secrecy Bureau to another arm of the State Council, the Ever Bright Group, which was in charge of overseeing Beijing's operations. On April 16, 1991, the Ever Bright Group sent written notification to Beijing that almost all of its financial information was classified a state secret and could not be disclosed.
Meanwhile, following the denial of the stay petition by the Ninth Circuit, TFC moved for contempt and discovery sanctions against Beijing. In its answer, Beijing for the first time raised the issue of the State Secrecy Laws. The district court denied the request for sanctions on March 4, but it rejected Beijing's contention that PRC law prevented it from complying as "untimely and without merit," and again ordered Beijing to respond to TFC's discovery requests. On March 5, Beijing moved the district court for a protective order against discovery, on the same grounds. The district court denied this motion on March 14.
Beijing still refused to comply with the discovery orders. On April 4, 1991, the district court held Beijing in contempt of its October 15 and March 4 orders. It awarded TFC its attorney's fees and costs incurred in seeking discovery as a discovery sanction, and imposed contempt fines of $10,000 a day, payable to TFC, until Beijing complied with the discovery orders. However, the district court indicated that it would vacate the contempt order if Beijing complied with the discovery orders within 60 days.
On May 15, 1991, Beijing provided the limited amount of information the Ever Bright Group allowed it to disclose, 4 and Beijing appeals on a variety of grounds from the March 4 discovery order, the April 4 contempt order, and the July 24 denial of its motion to vacate.
moved the district court to vacate the contempt sanctions. On July 24, 1991, the district court denied the motion to vacate. Richmark Corp. v. Timber Falling Consultants, 138 F.R.D. 132 (D.Or.1991)
District court rulings compelling discovery are reviewed for an abuse of discretion. Self Directed Placement Corp. v. Control Data Corp., 908 F.2d 462, 463 (9th Cir.1990). So too are district court decisions imposing discovery sanctions, Halaco Engineering Co. v. Costle, 843 F.2d 376, 379 (9th Cir.1988), findings of civil contempt, General Signal Corp. v. Donallco, Inc., 787 F.2d 1376, 1379 (9th Cir.1986), the amount of costs and fees awarded as a discovery sanction, id. at 1380, and the amount of the civil contempt sanction, United States v. Asay, 614 F.2d 655, 661 (9th Cir.1980). These decisions should not be reversed "absent a definite and firm conviction that the district court made a clear error of judgment." Halaco Engineering, 843 F.2d at 379.
Questions of foreign law, like all questions of law, are reviewed de novo. Kaho v. Ilchert, 765 F.2d 877, 882 (9th Cir.1985); Fed.R.Civ.P. 44.1.
TFC served its discovery requests and interrogatories on Beijing in July 1990. Beijing did not object to those requests on the grounds that PRC law did or might interfere with its ability to comply. When TFC filed a motion to compel a response, Beijing's answer did not raise the potential problem of PRC secrecy law. Nor did Beijing raise the issue in its motion for stay of discovery before the district court, or before the Ninth Circuit. Beijing first raised this issue in February 1991 in its reply to TFC's motion for contempt sanctions.
Because of this delay, TFC contends that Beijing has waived any objection based on the secrecy laws. Fed.R.Civ.P. 33 and 34 provide that discovery requests must be responded to within 30 (or in some cases 45) days. It is well established that a failure to object to discovery requests within the time required constitutes a waiver of any objection. Davis v. Fendler, 650 F.2d 1154, 1160 (9th Cir.1981); D.Or.Local Rule 230-3. 5 Beijing clearly did not object within the time required by the Federal Rules.
Beijing contends that it raised the issue as soon as possible, and cites a declaration from its counsel in the PRC that the State Secrecy Bureau normally will not advise companies about the impact of the secrecy laws until every legal effort has been made to avoid discovery of the information. This argument might justify Beijing's delay in requesting guidance from the Ministry of Justice, although the validity of this argument is open to question, given that Beijing actually requested such guidance before the resolution of its stay petition in the Ninth Circuit. But in any event, the argument cannot justify Beijing's failure to raise the issue before the district court as an objection to TFC's discovery request, or at the very least in response to the motion to compel. 6 Its objections to the discovery orders and the contempt adjudication based on the PRC secrecy laws were therefore waived.
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