General Environmental Science Corp. v. Horsfall

141 F.R.D. 443, 1992 U.S. Dist. LEXIS 3186, 1992 WL 48958
CourtDistrict Court, N.D. Ohio
DecidedMarch 10, 1992
DocketNo. 1:90 CV 1340
StatusPublished
Cited by1 cases

This text of 141 F.R.D. 443 (General Environmental Science Corp. v. Horsfall) is published on Counsel Stack Legal Research, covering District Court, N.D. Ohio primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
General Environmental Science Corp. v. Horsfall, 141 F.R.D. 443, 1992 U.S. Dist. LEXIS 3186, 1992 WL 48958 (N.D. Ohio 1992).

Opinion

ORDER

BATTISTI, District Judge.

This matter comes before the Court on Plaintiff General Environmental Science Corporation’s Renewed Motion for Sanctions and the various memoranda, documents, deposition transcripts, affidavits and other materials submitted by the parties concerning this motion.

On November 26, 1991, the Court heard the arguments of counsel and testimony from Defendant Frank Horsfall. Plaintiff contends that Defendants have destroyed discoverable and inculpatory documents which were the subject of pending discovery requests and have otherwise obstructed discovery in such a manner that Plaintiff should be granted default judg[445]*445ment, pursuant to Rule 37(b)(2)(C) of the Federal Rules of Civil Procedure, on its complaint and that Defendant Biosys Corporation’s counterclaim should be dismissed. Plaintiff also requests an award against Defendants and their counsel of all attorney fees and costs incurred by Plaintiff in this case. Defendants’ position is that they have tried in good faith to comply with discovery requests and Orders of this Court and that Plaintiff is merely attempting to avoid a decision on the merits. For the reasons stated below, Plaintiff’s Renewed Motion for Sanctions is granted.

In accordance with Federal Rule 52(a), the Court makes the following findings of fact and conclusions of law.

FINDINGS OF FACT

1. General Environmental Science Corporation (“GES” or “Plaintiff”) is a company headquartered in Cleveland, Ohio engaged in the world-wide sale of microbiological products used for bacterial augmentation in waste water treatment and aquaculture. GES is also engaged in other technical aspects relating to the treatment of water.

2. On July 27, 1990, GES filed a complaint alleging theft of trade secrets, fraud, RICO violations and other claims against Frank Horsfall (“Horsfall”), John Strauss (“Strauss”), Gustavo Gysler (“Gysler”) and Biosys Corporation (“Biosys”) (referred to collectively as “Defendants”). GES alleges that in 1989, Horsfall and Strauss, in the course of developing customers for GES product and technology in Europe, conspired with Gysler to steal the trade secrets of GES by forming a Swiss corporation to act as a distributor of GES product in Europe and then terminated the distributorship agreement with GES on the pretext of product variability and commenced to produce and sell a product derived from GES trade secrets. GES further alleges that Defendants terminated the contract between Biosys and GES by letter dated May 4, 1990. This scheme is outlined in the Affidavit of Karl Ehrlich (“Ehrlich”) which is attached to the complaint. Ehrlich allegedly refused to join this conspiracy after Horsfall and Strauss reviewed it with him.

3. On July 30, 1990, this Court entered an Order setting a discovery deadline of September 30, 1990 and a hearing on Plaintiff’s Motion for Preliminary Injunction for October 29, 1990.

4. On August 13, 1990 and August 14, 1990, respectively, GES noticed the depositions of Horsfall and Strauss. Horsfall filed a motion for protective order seeking to avoid a deposition on the ground that Swiss law protected him from being deposed. On September 14, 1990, the Court denied Horsfall’s motion, characterizing his argument that he was protected by Swiss law as “nothing more than slight of hand.”

5. Despite the September Order, Horsfall and Strauss refused to answer deposition questions,1 refused to answer interrogatories,2 and failed to produce documents on the ground that to do so would violate Swiss law.

6. On September 19, 1990, GES noticed the depositions of Gysler and Biosys. On September 25, 1990, Gysler and Biosys filed a motion for protective order seeking to be deposed in Switzerland under Swiss procedures.

7. On September 20, 1990, GES filed Plaintiff’s Motion to Compel Discovery3 requesting that the Court order Defendants to produce documents and provide answers to interrogatories and deposition questions. [446]*446Plaintiff also requested an award of attorney fees and costs pursuant to Federal Rule 37. Defendants opposed the motion on the ground that Plaintiff had failed to comply with Swiss discovery procedures.

8. The evidence submitted in connection with Plaintiff’s motion to compel revealed that on May 4, 1990, the same day that Defendants terminated their contract with GES via a letter reviewed and approved by defense counsel Jason Blackford, Defendants formed a new Swiss corporation called Biosphere Corporation (“Biosphere”). Defendants subsequently sought to avoid discovery about their current, allegedly competitive, activities with Plaintiff on the ground that all such information and documents were the property of Biosphere and that the individual Defendants, the principal officers and shareholders of Biosphere, were precluded by Swiss law from disclosing such information and documents.

9. In support of its motion to compel, Plaintiff presented the affidavit of Ehrlich who swore that Defendants attempted to induce him to enter into their scheme to defraud GES and told him that they would execute such scheme through the formation of shell corporations in which Gysler, trained as a lawyer, was an expert. Gysler subsequently confirmed, at deposition, his proficiency in forming shell corporations. (Gysler Depo. at 38-41, 757-60).

10. On October 8, 1990, the Court continued the hearing on Plaintiff’s motion for preliminary injunction because of Defendants’ obstruction of discovery through their refusal to answer interrogatories, answer deposition questions or produce documents. On November 28, 1990, the Court continued the hearing on GES’s motion for preliminary injunction indefinitely in light of pending motions to compel discovery.

11. On February 6, 1991, the Court held a hearing on Plaintiff’s motion to compel discovery and other discovery motions.

12. On April 4, 1991, the Court granted Plaintiff’s motion to compel discovery and awarded Plaintiff attorney fees and costs. The Court found that GES was “not attempting to conduct a fishing expedition” and that Plaintiff’s discovery requests “go to the very heart of its allegations that the Defendants have engaged in a fraudulent scheme to appropriate GES trade secrets and proprietary information.” The Court also found that “Gysler, Strauss and Horsfall, in particular, as owners and employees of Biosphere, have no right to refuse to provide the information requested by the Plaintiff” and that “they can hardly expect to hide behind Article 273.” 136 F.R.D. 130. The Court further ordered Defendants to provide all discovery within 20 days, including appearing for deposition in Cleveland, Ohio, within that time.

13. Despite the April Order, Defendants’ counsel refused to provide dates for the depositions and informed Plaintiff’s counsel that Defendants would not appear for deposition as noticed. Defendants also failed to produce any documents or interrogatory answers as ordered. Although defense counsel represented to the Court at the time that the delay was caused by the difficulty of communicating with their clients due to the distance between Switzerland and Cleveland,4 Gysler testified that the real reason for the delay was that “we did not feel that we were obliged to obey the order, according to Swiss law.” (Gysler Depo. at 560).

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Related

General Environmental Science Corp. v. Horsfall
25 F.3d 1048 (Sixth Circuit, 1994)

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Bluebook (online)
141 F.R.D. 443, 1992 U.S. Dist. LEXIS 3186, 1992 WL 48958, Counsel Stack Legal Research, https://law.counselstack.com/opinion/general-environmental-science-corp-v-horsfall-ohnd-1992.