Dart Industries Company, Inc., Movant-Appellee v. Westwood Chemical Company, Inc.

649 F.2d 646, 1980 U.S. App. LEXIS 19012
CourtCourt of Appeals for the Ninth Circuit
DecidedApril 2, 1980
Docket77-3880, 78-1525
StatusPublished
Cited by91 cases

This text of 649 F.2d 646 (Dart Industries Company, Inc., Movant-Appellee v. Westwood Chemical Company, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Ninth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Dart Industries Company, Inc., Movant-Appellee v. Westwood Chemical Company, Inc., 649 F.2d 646, 1980 U.S. App. LEXIS 19012 (9th Cir. 1980).

Opinions

[648]*648PALMIERI, District Judge:

This is an appeal from the entry of an order quashing a subpoena duces tecum and denying any further discovery against appellee. The basic question presented on appeal is whether the district court abused its discretion by denying discovery.

The present proceeding is an outgrowth of a lawsuit filed by Westwood Chemical Company, Inc. (Westwood) against two of its former employees in the Southern District of New York. These employees allegedly conspired with Synthetic Products Company (Synthetic), a division of Dart Industries Company, Inc. (Dart), as well as Dart, to terminate a sales agency agreement that had been in force for some years between Westwood and Synthetic. In an effort to pursue discovery ancillary to the New York lawsuit, Westwood had a subpoena duces tecum issued from the Central District of California to one of Dart’s officers directing him to appear for deposition upon written questions and to produce documents. Upon Dart’s motion, the district court signed an order quashing the subpoena and denying any further discovery against Dart.

The district court’s order barring discovery is to be reviewed under an “abuse of discretion” standard. In Premium Service Corp. v. Sperry & Hutchinson Co., 511 F.2d 225, 229 (9th Cir. 1975), this court affirmed an order quashing a subpoena duces tecum and explained:

We will reverse such an order to quash only for abuse of discretion .... Such abuses must be unusual and exceptional; we will not merely substitute our judgment for that of the trial judge .... A judge abuses his discretion only when his decision is based on an erroneous conclusion of law or where the record contains no evidence on which he rationally could have based that decision.

We conclude that the district court did not abuse its discretion in barring discovery.

Dart was not a party to the New York lawsuit that arose from the termination of the sales agreement with Westwood because Dart and Westwood had entered into an agreement of general release on September 1, 1976. Under the release, Westwood received $700,000 from Dart in settlement of all claims under the parties’ sales agency agreement, and as satisfaction for all claims Westwood may have had resulting from the termination of the sales agreement and the alleged conspiracy causing the termination.

The crucial issue in the controversy before us turns on the interpretation of the release agreement. The release agreement provided “that WESTWOOD releases and discharges DART INDUSTRIES INC. and its Synthetic Products Division of any rights it has or may hereafter have by reason of a conspiracy alleged by WEST-WOOD ...” (emphasis added). Dart argues, and the district court agreed, that Westwood released any right to engage in discovery against Dart. Westwood contends that the agreement was designed only to release Dart from any possible claims against Dart as a defendant, not to bar discovery in an action against third parties. Although each side has sought to support its interpretation of the agreement’s meaning by affidavits of attorneys who participated in its formulation, we have concluded that the meaning of the agreement is clear, requiring no amplification.

Our dissenting brother disagrees with our construction of the general release by saying “it contains much of the standard boiler plate to live up to this advance billing” [as a general release], adding that there is nothing in the agreement referring to Westwood’s releasing its right of discovery from Dart. The answer to this is that Westwood gave up far more than its right of discovery against Dart. It gave up everything. It released Dart from “any rights [Westwood] has or may hereafter have by reason of a conspiracy alleged by Westwood.” (emphasis added). Additionally, we can see no reason to denigrate the use of boiler plate or stereotype language where, as here, it was used appropriately. Such language has the value of frequent usage and general understanding. Far from derogating from its meaning, we be[649]*649lieve it enhances its clarity beyond peradventure of doubt.

What our brother seems to be saying is that because the word “discovery” should have been used, and was not used, the agreement is ambiguous and operates only as a partial release. This conclusion is nothing short of rewriting the agreement and emasculating it. Equally unfounded is his statement that the major portion of the $700,000 payment to Westwood “merely represents money due under their sales agreement.” This flies in the face of the agreement which states at the very outset:

WESTWOOD CHEMICAL COMPANY, INC., having an address at 801 Second Avenue, New York, New York 10017, for and in consideration of the sum of SEVEN HUNDRED THOUSAND U. S. DOLLARS ($700,000.00) in hand paid by DART INDUSTRIES, INC., 8480 Beverly Boulevard, Los Angeles, California 90048, the receipt and sufficiency whereof is hereby acknowledged, ....

The dissent in this particular apparently relies on a choice between conflicting partisan affidavits submitted after the agreement was executed and the consideration paid, and when this controversy reached the district court. We believe that court reached a correct conclusion on “evidence which he rationally could have based that decision.” Premium Service Corp. v. Sperry & Hutchinson Co., supra at 229.

The dissent states that important policy considerations militate against interpreting the agreement as a general release. While discovery is a valuable right and should not be unnecessarily restricted, Kyle Engineering Co. v. Kleppe, 600 F.2d 226, 232 (9th Cir. 1979), the “necessary” restriction may be broader when a nonparty is the target of discovery. As one district court has noted, “[tjhere appear to be quite strong considerations indicating that ... discovery would be more limited to protect third parties from harassment, inconvenience, or disclosure of confidential documents.” Collins and Aikman Corp. v. J. P. Stevens & Co., Inc., 51 F.R.D. 219, 221 (D.S.C.1971). One author has stated that the more appropriate nomenclature is “nonparty” discovery, not “third-party” discovery, as “the word nonparty serves as a constant reminder of the reasons for the limitations . .. that characterize ‘third-party’ discovery.” Getman, R., “Federal ‘Third-Party’ Discovery in the Small Antitrust Case,” 45 Brooklyn L.Rev. 311 (1979).

Although the strong policy in favor of liberal discovery is clear, Hickman v. Taylor, 329 U.S. 495, 507, 67 S.Ct. 385, 391, 91 L.Ed. 451 (1957), commentators have recognized that there is a potential for abuse in such a policy. One commentator has written:

[T]he draftsmen of the federal rules held utopian notions of what might be gained from discovery.
Designed with the hope of eliminating the so-called sporting theory of justice, discovery practice in many cases simply transfers the battlefield from the courtroom to the pretrial stage.

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649 F.2d 646, 1980 U.S. App. LEXIS 19012, Counsel Stack Legal Research, https://law.counselstack.com/opinion/dart-industries-company-inc-movant-appellee-v-westwood-chemical-ca9-1980.