United States District Court, Southern District of New York
April 2, 1991
GIORGIO MORANDI, INC., PLAINTIFF,
TEXTPORT CORPORATION, CHINA CROWN INVESTMENTS LTD., AND EXIM LINES, INC., DEFENDANTS.
The opinion of the court was delivered by: Robert P. Patterson, Jr., District Judge.
OPINION AND ORDER
This is an action by a clothing importer against its foreign
suppliers and a non-vessel operating common carrier ("NVOCC")
for breach of contract, fraud, negligence and conspiracy.*fn1
On October 10, 1990 plaintiff filed (1) a motion pursuant to
Rules 19, 20 and 21 of the Federal Rules of Civil Procedure to
join a defendant and pursuant to Rule 37 to compel defendant
China Crown Investments, Ltd. ("China Crown") to produce
documents identified during the deposition of Chang Kim, and
(2) a motion pursuant to Rule 37 to compel China Crown to
produce documents identified during the deposition of Joseph
Lau. Counsel for plaintiff failed to appear to argue the
motions at 4:00 p.m. on November 14, 1990, the time set by the
Court for oral argument. By memo endorsed dated November 14,
1990 the Court denied both motions for default of plaintiff's
counsel to appear for argument. Plaintiff now moves to vacate
the defaults pursuant to Rules 59 and 60 of the Federal Rules
of Civil Procedure. For the reasons set forth below,
plaintiff's motion to vacate is granted in part. The discovery
motions are granted to the extent indicated here. Plaintiff's
motion to add Kim as a new party defendant is denied.
In the prior motion, plaintiff sought to join Chang Kim
("Kim"), president and chief operating and executive officer of
defendant Exim Lines, Inc. ("Exim" or "Exim Lines"). According
to plaintiff, the gist of the complaint against Exim Lines is
that Exim Lines "had been negligent in permitting the other
defendants to fraudulently and unjustifiably backdate Exim's
bills of lading thereby concealing that fact that shipments of
merchandise made by defendants to plaintiff were shipped not in
accordance with the letters of credit which had been opened by
the plaintiff" and which had been honored by the bank. Fox Aff.
in Supp. of Mot. filed Oct. 10, 1990 ¶ 2.
On the basis of a deposition of Kim conducted on July 19,
1990 plaintiff's counsel alleges that Exim Lines is no longer
in business, that Kim "made all day-to-day decisions, including
hiring and firing of employees and was indeed the `boss,'"
id. ¶ 4, that an agent of Exim Lines, Freightways, had blank
Exim Lines bills of lading and issued at least twenty Exim
Lines bills of lading without prior approval and that Kim had
detected two or three instances of backdating by Freightways
and had threatened to terminate the agency which he did after
the Morandi situation arose. Id. Plaintiff concludes that Kim
was a control person of Exim Lines and was negligent in
permitting Exim Lines' agent to issue Exim Lines bills of
lading in a fraudulent fashion. Id. ¶ 5. Kim is not claimed to
be an owner or director of Exim Lines. Cf. Frances T. v.
Village Green Owners Assoc., 42 Cal.3d 490, 723 P.2d 573, 584,
229 Cal.Rptr. 456, 467 (1986) (individual liability proper
where defendants were directors of corporate defendant) and
People v. Dollar Rent-A-Car Sys., Inc., 211 Cal.App.3d 119,
259 Cal.Rptr. 191, 199 (Ct.App. 1989) (majority stockholder
and chief executive officer). But see National Survival Game,
Inc. v. Skirmish, U.S.A., Inc., 603 F. Supp. 339 (S.D.N.Y. 1985)
(individual defendants were officers but were solely
responsible for acts of wrongdoing).
Plaintiff's motion for joinder is governed by Rule 21 of the
Federal Rules of Civil Procedures which provides in relevant
Parties may be dropped or added by order of the
court on motion of any party
or of its own initiative at any stage of the
action and on such terms as are just.
Fed.R.Civ.P. 21. Rule 21 relates back to Rules 19 and 20
governing joinder of persons needed for just adjudication and
permissive joinder. See Barr Rubber Prods. Co. v. Sun Rubber
Co., 425 F.2d 1114
, 1126 n. 23 (2d Cir.), cert. denied,
400 U.S. 878
, 91 S.Ct. 118
, 27 L.Ed.2d 115 (1970). Joinder upon
motion under Rule 21 is a matter within the Court's discretion.
7 C. Wright, A. Miller & M. Kane, Federal Practice & Procedure
§ 1688 at 471 (1986).
This action was commenced on July 11, 1988. Plaintiff's
motion to join was filed more than two years later, on October
10, 1990. Late joinder of parties is disfavored for it tends to
"open up a `Pandora's box' of discovery." Barr Rubber Prods.
Co., 425 F.2d at 1127. Although a corporate officer may be held
liable for a tort in which he personally participated, see
Bambu Sales, Inc. v. Sultana Crackers, Inc., 683 F. Supp. 899,
913 (E.D.N.Y. 1988), MacMillan Co. v. I.V.O. W. Corp.,
495 F. Supp. 1134, 1137 (D.Vt. 1980), the acts ascribed to Kim are
not acts of direct and affirmative participation in the scheme.
The only evidence presented is that Kim remonstrated with the
third-party shipping agent for Exim Lines when it incorrectly
issued bills of lading on behalf of Exim Lines and that Exim
Lines terminated its agreement with the agent when it
discovered errors in the bills of lading for the Morandi
shipments. Fox Aff. in Supp. of Mot., Exh. A at 44, 55-56, 78;
Mem. in Opp. filed Oct. 15, 1990, Exh. B. This is insufficient
evidence of Kim's personal participation in the wrongful acts
and plaintiff's motion to join Chang Kim as a defendant is
denied. See Bambu Sales, 683 F. Supp. at 914 (dismissing
complaint against party where "evidence suggests that he had no
involvement at all in any wrongful acts by [corporate
China Crown has agreed, see Marrow Aff. filed Oct. 19, 1990 ¶
(3), and is ordered to produce the documents identified at page
156 of the Kim deposition (Fox Aff. in Supp. of Mot., Exh. A at
156). If they cannot be located, China Crown's answer to
plaintiff's oral request for production shall so indicate. Exim
Lines is ordered to produce the documents identified in the
June 26, 1990 letter addressed to Robert Marrow. (Fox Aff. in
Supp. of Doc. Prod. filed Oct. 10, 1990, Exh. D at 2-3). Exim
Lines' request for costs and for Rule 11 sanctions is denied.
IT IS SO ORDERED.