Valley Engineers Inc. v. Electric Engineering Co.

158 F.3d 1051, 1998 WL 740954
CourtCourt of Appeals for the Ninth Circuit
DecidedOctober 26, 1998
DocketNo. 97-16383
StatusPublished
Cited by177 cases

This text of 158 F.3d 1051 (Valley Engineers Inc. v. Electric Engineering Co.) 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
Valley Engineers Inc. v. Electric Engineering Co., 158 F.3d 1051, 1998 WL 740954 (9th Cir. 1998).

Opinion

KLEINFELD, Circuit Judge:

This case concerns sanctions for discovery violations.

Jurisdiction and Standards of Review.

We have jurisdiction over this timely filed appeal pursuant to 28 U.S.C. § 1291. A dismissal under Fed.R.Civ.P. 37 is reviewed for abuse of discretion. Anheuser-Busch, Inc. v. Natural Beverage Distributors, 69 F.3d 337, 348 (9th Cir.1995). The district court’s factual findings are reviewed for clear error. Id.

Facts.

Nugget Hydroelectric hired Electric Engineering to build four small hydroelectric projects for $11 million. Because construction was going badly, the scope of the contract was reduced from four projects to one. The contract price on the remaining project, Deadwood Creek, was raised from $2 million to $2.5 million. The contract was a turn-key deal, requiring that Electric Engineering get all required permits and easements, and take full responsibility for design, not relying on Nugget Hydroelectric. Electric Engineering did not build the project as promised, and was fired when it missed its deadlines. Electric Engineering’s president knew when Electric Engineering agreed to the revised Deadwood Creek contract that Electric Engineering was not going to perform as promised.

Just before the revised agreement was signed, Electric Engineering’s project manager for the Deadwood Creek project, John Carroll, wrote to the company president, cross-copying the company’s lawyers, the memorandum critical to this case. The importance of the memorandum is apparent from its face:

I have agonized over the available evidence .for the entire weekend and have made several false starts of this letter.
Deadwood appears to be priced with the same unit prices [as Big Mosquito, one of the three deleted projects]. I do not know the justification for using the same unit prices for Deadwood as Big Mosquito. It is impossible to build the job for the bid prices. The installation of the penstock could cost two or three times the bid amount.
[1053]*1053The two inlets for Deadwood are located in incredibly difficult terrain, several thousand feet from the nearest dirt road access.
Nine thousand feet of Deadwood penstock must be delivered several thousand feet down a 1:1 slope and then delivered horizontally to its installation point.
I am scared to death of the cost of constructing Deadivood. We have little time to experiment to find the best methods. We have limited resources with which to do the job.
While this is going on, Bill McCarty can be cooperating to resolve all of the pay request matters to bring us up to date with our billing. The bank should be so happy to see this happening, we should have another pay day before the plug is pidled on Deadwood.

(emphasis added).

Ultimately Electric Engineering failed to complete the project and was fired, Nugget Hydroelectric went bankrupt, and a subcontractor completed the project. Multiple lawsuits were filed in every direction. Electric Engineering sued other entities and people involved on the theory that their interference and failures to disclose had caused the overruns.

The claims against American Home, Electric Engineering’s surety, went to trial, but were settled mid-trial. The claims by and against Electric Engineering never got to trial. After endless discovery disputes, the judge eventually dismissed Electric Engineering’s claims as a discovery sanction. Electric Engineering had committed many discovery violations. The most critical had to do with hiding the memorandum quoted at length above. Electric Engineering appeals from dismissal of its claims against the construction lender (Credit Suisse), its project monitor (Calpine), the owner (Enervest, which owned Nugget), and various individual defendants.

Analysis.

The main issues on appeal boil down to these three: (1) did Electric Engineering waive its right to appeal the issues it does; (2) did the district court err in finding that Electric Engineering deliberately hid the memorandum; and (3) was hiding the memorandum a sufficient basis for so harsh a discovery sanction as dismissal?

A. Waiver.

Electric Engineering appealed the discovery sanction before judgment was entered as to all claims and all parties. We dismissed the appeal for lack of jurisdiction, because it was interlocutory. Valley Engineers v. American Home Assurance Co., 111 F.3d 139 (table), 1997 WL 191468, at 2 (9th Cir., April 17, 1997). Credit Suisse argues that because Electric Engineering did not appeal the dismissal as to Credit Suisse in that earlier appeal, only as to other defendants, it waived its right subsequently to appeal the sanctions order as to Credit Suisse. But none of its citations are on point, because in those eases, the appellate court had jurisdiction over the first appeal.

The point of the cases Credit Suisse relies on is that if a party has a chance to appeal a mistake to a court that can correct the error, and does not, then it should not be able to appeal the error when a subsequent occasion for appeal arises. Alioto v. Cowles Communications, Inc., 623 F.2d 616, 618 (9th Cir.1980) (“a new contention that could have been but was not raised”). The reason for this rule does not apply where the claimed error could not have been corrected because the appellate court lacked jurisdiction. An appeal that is dismissed because the appellate court lacks jurisdiction does not bar or waive a subsequent appeal when jurisdiction exists.

B. Willfulness.

For more than three years, Credit Suisse, taking the lead for defendants in discovery, [1054]*1054had unfulfilled requests for production outstanding that covered the Carroll memorandum. For more than two years, Electric Engineering’s lawyers violated court orders by failing to produce it. Several trial date settings had to be vacated because the discovery was incomplete. Warnings were given and monetary sanctions were imposed as Electric Engineering violated one court order after another. Even after, as a sanction, Electric Engineering had lost its attorney-client privilege regarding discovery requests, it continued to assert the nonexistent privilege regarding the Carroll memorandum. Finally, on the eve of a sanctions hearing, new lawyers for Electric Engineering produced the memorandum. Credit Suisse moved for case-dispositive sanctions, and got them.

The magistrate judge held two days of hearings, with testimony in person and by videotape, in order to resolve the sanctions motion.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Cite This Page — Counsel Stack

Bluebook (online)
158 F.3d 1051, 1998 WL 740954, Counsel Stack Legal Research, https://law.counselstack.com/opinion/valley-engineers-inc-v-electric-engineering-co-ca9-1998.