The opinion of the court was delivered by: JOHN E. SPRIZZO
Refinemet International Company ("Refinemet" or "plaintiff") brings this action for damages against Eastbourne N.V. ("Eastbourne" or "defendant") for breach of an indemnification agreement, and for a declaration of Eastbourne's future liability for continuing reimbursement of expenses paid or incurred by Refinemet. The Court having held a bench trial, having seen and heard the witnesses, having reviewed in detail the exhibits proffered by the parties, finds in favor of the defendant. Accordingly, for the reasons that follow, judgment shall be entered for the defendant. The following shall constitute the Court's findings of fact and conclusions of law as required by Fed. R. Civ. P. 52(a).
On December 31, 1979, Refinemet International Company, Ag-MET, Inc., and R.I.C. Corp., executed a merger agreement whereby Refinemet would merge into R.I.C., Ag-MET's wholly-owned subsidiary. See Joint Pre-Trial Order ("PTO"), Exhibit A, Attachment A, PP M. On that same date, expressly to induce Refinemet to enter into that merger, see Plaintiff's Exhibit ("Pl. Ex.") 174, Ag-MET entered into an Equity Contribution Agreement ("the Agreement") with Eastbourne, a company affiliated with Refinemet.
See PTO, Ex. A, Att. A, P S. At that time, those companies shared a common stockholder, the Empain Schneider group, a group which had interests in a large collection of different companies. See PTO, Ex. A, Att. A-1, P B; Trial Transcript ("Tr.") at 35-38.
Under the Agreement,
Eastbourne was obligated to make capital contributions to Ag-MET in amounts equal to its paid or incurred obligations. For Ag-MET, which sometime thereafter changed its name to Refinemet, those expenses principally included expenses associated with environmental clean-up and proliferating litigation with respect to environmental violations. The Agreement limited coverage to expenses arising out of events which occurred prior to December 31, 1979, and required that Refinemet give notice of all claims to Eastbourne by March 31, 1982. See Pl. Ex. 174.
On or about March 18, 1982, plaintiff requested and received an indefinite extension of time for plaintiff to give notice of claims which they were then processing. Realizing that it could not meet the March 31 deadline, in large part due to Refinemet's chaotic bookkeeping conditions, Tr. at 97-98, 311, 374, 393-94; see also Pl. Ex. 8, the parties executed a letter agreement so amending the Agreement. See PTO, Ex. A, Att. A, P V; Pl. Ex. 8.
On January 7, 1983, the parties further amended the Agreement in conjunction with an anticipated sale of Refinemet. The purchaser, Mr. Mandel Sherman, testified that the financing for that transaction, provided primarily by the Chase Manhattan Bank, depended on an assurance of coverage under the Agreement. Tr. at 423, 441. As consideration for that assurance, Refinemet agreed to pay Eastbourne the net proceeds from a sale of property located in Kearny, New Jersey, which was owned by Newtown Refining Corp. ("Newtown"), Refinemet's wholly-owned subsidiary. See Pl. Ex. 445.
On May 11, 1984, under mounting pressure from Chase Manhattan for further security for the aforesaid financing, Refinemet caused Newtown to grant Chase a $ 40,000,000 first mortgage lien on the Kearny property without consulting Eastbourne. See PTO, Ex. A, Att. A, P FF; Pl. Ex. 423. When they learned about that mortgage in late 1984, Eastbourne was assured by Newtown's counsel that Chase would release its lien once the property was sold. Tr. at 143, 162-66, 180; Pl. Ex. 51, 424, 425, 427.
However, when Newtown sold that property on March 5, 1985, the net proceeds were transferred to Chase to satisfy the mortgage without Eastbourne's consent. See PTO, Ex. A, Att. A, P II. Eastbourne learned about the Kearny sale and that it would not receive the bargained for proceeds on or about March 7, 1985. As a consequence, first on March 8, 1985, then later on March 14 and 19, Eastbourne declared by telexes sent to Refinemet that the Agreement was terminated due to Refinemet's breach.
See Pl. Ex. 47; Def. Ex. C, J. On December 2, 1988, Refinemet filed the instant suit.
The Court held a four day bench trial. At the outset, it should be noted that Refinemet's counsel, Mr. Norman Roy Grutman, rejected the Court's offer to postpone the trial based on the Court's perception that plaintiff did not appear ready to proceed. However, as the trial progressed, it appeared that many matters normally resolved pre-trial had not been accomplished. For example plaintiff had not yet produced many of Refinemet's books and records, including a number of its cancelled checks and its corporate tax returns for the years 1985-1989. Nevertheless, repeatedly noting that the law favors admission of evidence in non-jury trials and that its own practice for bench trials is to take evidence subject to a subsequent motion to strike, the Court received into evidence check duplicates in place of the missing cancelled checks and permitted testimony regarding schedules based on the unproduced tax returns.
As a further accomodation, the Court, on plaintiff's request, granted a continuance in the middle of the trial in order to enable plaintiff's counsel to conduct a trial deposition of Sherman who, it was explained, was beyond the subpoena power of the Court and would not appear voluntarily. Counsel also represented to the Court that he would return to court with the unproduced books and records. Tr. at 324-25, 360-61. However, when the trial reconvened after what amounted to a seventeen day continuance, no such books and records were produced, and, although his deposition had been taken on the basis of a representation that he would not appear, Sherman did in fact appear to testify. Finally, after the close of testimony, the Court, over defendant's objection, received into evidence the previously unproduced corporate tax returns belatedly offered by plaintiff although testimony about them had already been completed.
After the trial concluded, but before the scheduled final arguments, plaintiff submitted a motion to reopen the record for the purpose of offering previously unproduced cancelled checks. Plaintiff submitted its motion without having first had a pre-motion conference as required by the Court's individual rules. The motion was supported by an affidavit of Norman Greenstein, an accountant at Refinemet, which stated that, at the request of counsel, he had made a thorough search of the relevant files since the inception of this lawsuit, see Affidavit of Norman Greenstein sworn to May 21, 1991 ("Greenstein Aff."), PP 8, 10, a statement which flatly contradicted his previous trial testimony that he had not bothered to look for the cancelled checks. Tr. at 397-402.
In its discretion, see Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 331-33, 28 L. Ed. 2d 77, 91 S. Ct. 795 (1971); Air et Chaleur, S.A. v. Janeway, 757 F.2d 489, 495 (2d Cir. 1985), the Court denied plaintiff's motion finding, in light of the facts and circumstances surrounding plaintiff's behavior with respect to discovery and the maximum indulgence previously shown to plaintiff by the Court, that plaintiff had not demonstrated that its failure to produce such evidence at least before the end of the trial was not the result of its own lack of diligence. See Bradford Trust Co. of Boston v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 622 ...