UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK
December 29, 2010
THE EXPORT-IMPORT BANK OF THE REPUBLIC OF CHINA PLAINTIFF,
The opinion of the court was delivered by: Hon. Harold Baer, Jr., District Judge:*fn1
OPINION & ORDER
For over three years Plaintiff, the Export-Import Bank of the Republic
of China ("Plaintiff" or the "Bank") has sought satisfaction of a
judgment against defendant Grenada for $25 million. Plaintiff now
seeks contempt sanctions of $10,000 per day based on Grenada's alleged
failure to comply with a court order regarding post-judgment
discovery, and an additional $10,000 in attorneys' fees.*fn2
Plaintiff also seeks an order compelling complete responses
to interrogatories and a second Rule 30(b)(6) witness.
Following oral argument, the parties submitted supplemental briefing on the propriety of imposing sanctions on a sovereign nation. For the reasons below, I conclude that sanctions are appropriate and Plaintiff's motion is GRANTED in part and DENIED in part.
FACTUAL AND PROCEDURAL BACKGROUND
The Court entered summary judgment against the sovereign nation of Grenada on February 6, 2007. Plaintiff served interrogatories on October 3, 2007. Grenada did not respond. On Plaintiff's motion, the Court on April 9, 2009 ordered an answer be served within ten days.
When the time to answer passed without a re sanctions. A newly-installed Grenadian government retained new counsel, and on July 2, 2009 the Court denied the motion for sanctions, accepting that the new administration intended to respond to the interrogatories diligently. On September 4, 2009, Grenada responded to the interrogatories.
Unsatisfied with Grenada's responses, Plaintiff sought leave to move to compel compliance in January 2010. On March 1, 2010, during a telephone conference, the Court issued an order (the "Order") requiring Grenada to provide information on two developers, Cinnamon 88 and Levera, listed in Grenada's response to Interrogatory 6 as owing Grenada approximately $15 million and $3 million, respectively. On March 12, 2010, Grenada provided a letter with information related to the two developers. The alleged inadequacy of this response forms the basis for the present sanctions motion.
Plaintiff refrained from seeking further Court intervention in the hope that a scheduled 30(b)(6) deposition would supplement the deficient responses. The deposition occurred, but Plaintiff found it also deficient. Grenada admits that its 30(b)(6) witness was not prepared to answer all questions. It has professed some level of willingness to address these concerns, but has failed to do so. Grenada claims it has complied with its discovery obligations, and in any case further discovery is futile because it has no money to satisfy the judgment. Its general thesis is that it fully intends to comply with the judgment as soon as financial conditions allow.
1.The motion for sanctions based on noncompliance with the March 1, 2010 Order.
A district court has discretion to impose contempt sanctions for violations of post-judgment discovery orders. Daval Steel Prods. v. M/V Fakredine, 951 F.2d 1357, 1363 (2d Cir. 1991).*fn3 However "courts should proceed with care in pursuing the assets of foreign governments and their instrumentalities." First City, Texas-Houston, N.A. v. Rafidain Bank, 281 F.3d 48, 54 (2d Cir. 2002). I have carefully considered the propriety of jurisdiction, whether it includes the power to impose sanctions, and whether sanctions are appropriate.
a.Jurisdiction is based on waiver A foreign sovereign may waive its immunity from suit under the Foreign Sovereign Immunities Act (FSIA), 28 U.S.C. § 1605(a) (listing various grounds for waiver). Waiver may be effected "either explicitly or by implication." 28 U.S.C. § 1605(a)(1). Grenada waived its sovereign immunity explicitly in its loan agreements, in which it subjected itself to the jurisdiction of this Court, see Complaint ¶ 27; Answer, at ¶ 1, and implicitly by participating in these proceedings without objection.
b.Jurisdiction includes the power to impose sanctions Once a court may exercise jurisdiction, it may issue contempt orders. "The waiver by a foreign state under [the FSIA's waiver provisions], rendering it party to an action, is broad enough to sustain the court's jurisdiction through proceedings to aid collection of a money judgment rendered in the case, including discovery pertaining to the judgment debtor's assets." First City, Texas-Houston, N.A. v. Rafidain Bank, 281 F.3d 48, 53 (2d Cir. 2002). In Rafidain the Second Circuit affirmed the district court's order of civil contempt imposing a $1,000 per day fine to compel Rafidain, Iraq's state-owned commercial bank, to comply with discovery demands intended to assist a judgment creditor collect an unsatisfied default judgment.*fn4
Grenada argues in a footnote that any waiver should be construed narrowly and not extend to the imposition of contempt sanctions. It notes that "in general, explicit waivers of sovereign immunity are narrowly construed 'in favor of the sovereign' and are not enlarged 'beyond what the language requires.'" World Wide Minerals, Ltd. v. Republic of Kazakhstan, 296 F.3d 1154, 1162 (D.C. Cir. 2002) (citing Library of Cong. v. Shaw, 478 U.S. 310 (1986)). However, Grenada points to no language limiting its waiver, and its mere consent to jurisdiction here provides the Court with discretion to impose contempt sanctions. See Rafidain, 281 F.3d at 53. See also Autotech Techs., 499 F.3d at 744 (upholding contempt sanction where party was found to have waived immunity based on Grenada reasons that its waiver of immunity extended only to suit in connection with the loan agreements with the Bank and does not compromise its immunity from contempt sanctions. It cites a Fifth Circuit case holding that a waiver of sovereign immunity for commercial activities does not include a waiver of the immunity that a sovereign otherwise enjoys from the imposition of fines or collection of penalties from its assets. See Af-Cap, Inc. v. Republic of Congo, 462 F.3d 417, 429-29 (5th Cir. 2006), cert. dismissed, 549 U.S. 1275 (2007). Grenada's arguments are unpersuasive. In Af-Cap the court found no waiver at all because no language in the parties' agreements waived immunity and the relevant pleadings "consistently raised an immunity defense." Af-Cap, Inc. v. Republic of Congo, 462 F.3d 417, 427 (5th Cir. 2006), cert. dismissed, 549 U.S. 1275 (2007). In contrast, as noted above Grenada has not raised an immunity defense and has submitted to jurisdiction in its loan agreements. See Complaint ¶ 27; Answer, at ¶ 1. Moreover, Af-Cap found sanctions inappropriate in part based on a request from the United States government as amicus curiae, see id. at note 8, and no such request has been lodged in this case. Finally, the Af-Cap court concluded that monetary sanctions are inappropriate under the FSIA, and was apparently untroubled by the notion that the FSIA "allows rights without remedies." Id. at 428. Controlling precedent in this circuit disagrees. See Rafidain, 281 F.3d at 51, 54 (affirming the imposition of a $1,000 per day fine until state bank purged its contempt, and noting that without such power "the FSIA would in some cases confer jurisdiction to do no more than render an unenforceable, permanently unsatisfied judgment.").
Next, Grenada points to the Restatement (Third) of the Foreign Relations Law of the United States for the proposition that courts "should not ordinarily impose sanctions of contempt. for order[s] of production" where the information is located outside the United States and its production 'is prohibited by a law, regulation, or. other authority of the state in which the information is located." Restatement 3d § 442(2)(b). However, Grenada concedes that the Second Circuit has not adopted this particular provision. Def.'s Suppl. Memo. Opp. Mot. for Contempt at 3. Moreover, Grenada does not cite the laws or other authority that allegedly prohibit the disclosure.*fn5
While the agreement between Grenada and the Cinnamon 88 developer contains a confidentiality clause, it allows for an exception where a party "has to reveal such information by law." Decl. Rohan A. Phillip ¶ 7. In any case confidentiality concerns can be respected through a confidentiality order governing production. Thus even were Restatement 3d § 442(2)(b) applicable in this Circuit, it would not be implicated in this case because disclosure violates no law or other authority.
Failing application of the Restatement standard, Grenada argues under the principle of comity that the Court must engage in a balancing test, under which the most important considerations are the competing interests of the nations whose laws are in conflict. See Madanes v. Madanes, 186 F.R.D. 279, 286 (S.D.N.Y. 1999). Comity requires respect for the laws of another nation, unless doing so would prejudice the interests of the U.S. See Cunard S.S. Co. v. Salen Reefer Servs. AB, 773 F.2d 452, 457 (2d Cir. 1985).
The interest of the United States here is limited to "fully and fairly
adjudicating matters before its courts." First American Corp. v. Price
Waterhouse LLP, 98 F. Supp. 353, 364 (S.D.N.Y. 1998). *fn6
Grenada argues that this interest is weakened by the facts
that the litigation involves no U.S. entities as litigants, no federal
statutory schemes, and no assets in the U.S. While this may be true,
it is significant that the U.S. provides a neutral forum for
resolution of the dispute between the Export-Import Bank of China and
the nation of Grenada. Moreover, U.S. policy supports foreign and
domestic credit when the "
urisdiction of United States"
See Allied Bank Int'l v. Banco ted States dollars under contracts subject to the j creditors [are] entitled to payment in the United States in Uni ors seeking to enforce foreign sovereign debt Credito Agricola de Cartago, 757 F.2d 516, 521-22 (2d Cir. 1985). Here the loan agreements provided that payments to the Bank were to be made in U.S. Dollars at a New York bank. See Complaint ¶ 19. Moreover, the loan agreements contained forum selection clauses subjecting the parties to the jurisdiction of New York state and federal courts. See Complaint ¶ 27. Because Grenada has cited no Grenadian law that would be abrogated, has chosen to avail itself of the laws, currency, and banks here, questions of Grenadian law do not in this case lend weight to Grenada's arguments in the balancing test required by comity.
On the basis of the foregoing I conclude that Grenada's status as a sovereign does not by itself preclude contempt sanctions.
c.Sanctions are appropriate in this case Grenada acknowledges that the Order required information by March 12, 2010 concerning "the alleged $15 million Cinnamon 88 asset and the $4,416,798.56 Levera asset listed in Grenada's Interrogatory Responses." Def.'s Memo. Opp. Mot. for Contempt Sanctions at 12. However, it argues that it satisfied that obligation. According to Grenada, its March 12, 2010 submission detailed "the troubled and unsuccessful history of both projects and made clear that both the Cinnamon 88 and Levera 'assets', which were listed in the interrogatories . . . are actually worthless." Def.'s Memo. Opp. Mot. for Contempt Sanctions at 13. However, the March 12, 2010 submission lacks any particulars, fails to produce documents, and fails to identify by name or address either the Cinnamon 88 developer or the Levera developer. See Summit Decl. Ex. P. While Grenada may have provided certain information, it provided no information that would aid Plaintiff in ascertaining the existence of any funds, in direct contravention of my March 1, 2010 Order. Grenada has had an inordinate amount of time to comply with post-judgment discovery, has provoked three motions to compel, and required regular attention from this Court. Its efforts have hardly been a model of reasonable diligence or energetic compliance with court orders. See Red Ball Interior Demolition Corp. v. Palmadessa, 947 F.Supp. 116, 121 (S.D.N.Y. 1996). Sanctions are appropriate.
d.Amount of Sanctions The parties agree on the applicability of the standard for determining the appropriate amount of a civil contempt sanction: (1) the harm from noncompliance; (2) the probable effectiveness of the sanction; (3) the financial resources of the contemnor and the burden the sanctions may impose; and (4) the willfulness of the contemnor in disregarding the court's order. Lamar Fin. Corp. v. Adams, 918 F.2d 564, 567 (5th Cir. 1990) (citing United States v. United Mine Workers, 330 U.S. 258 (1947)).
Plaintiff asserts that the noncompliance has prevented it from pursuing satisfaction of its judgment; that a strong sanction is likely to coerce compliance; that Grenada is a nation and while it may have trouble satisfying the entire judgment, "it certainly has the ability to pay" the sanction of $10,000 per day until it complies with its obligations. Fourth, Grenada's non-compliance is willful, as shown by the fact that it has acknowledged that its answers are incomplete. Plaintiff asserts that $10,000 per day would be substantial enough to encourage Grenada to purge its contempt, yet not so onerous so as to constitute a penalty. Grenada pleads substantial hardship based on a series of hurricanes and its general economic difficulty, and asserts that $10,000 a day would constitute a substantial prejudice. It also disputes that noncompliance was willful.
Given Grenada's financial difficulties it will have a 14-day opportunity to purge its contempt. If at the end of the 14th day from entry of this Order Grenada has not complied with my March 1, 2010 Order and provided information on Cinnamon 88 and Levera that is fully responsive to Interrogatory 6, sanctions will automatically accrue at a rate of $1,000 per day. The documents exchanged will remain strictly confidential, marked "For Attorneys Eyes Only" and be accessible to the parties' counsel but not the parties. Any reference to the confidential information shall be redacted from all future documents filed publicly, and the parties are directed to provide Chambers with both redacted and unredacted copies. Any release will be on notice and pursuant to further order of this Court.
2.Motion to compel compliance with outstanding discovery.
Plaintiff's motion to compel centers on Grenada's allegedly inadequate Rule 30(b)(6) witness and answers to interrogatories. As noted above, Grenada acknowledges some of the shortcomings of its 30(b)(6) witness, but points out that it provided a large number of requested documents in connection with the deposition, and that the witness did testify to a wide range of topics. Defendants are ordered to provide a supplemental 30(b)(6) witness to cure any deficiencies in its previous witness's deposition, and do so within 30 days following the date of this Order.
Plaintiff points to inadequate interrogatory answers with respect to the following subjects: bank accounts, liquid assets, debtors, disposition of the money originally loaned by Plaintiff, potential deponents, foreign aid, other foreign or international business contracts, and financial record keeping. Grenada meets many of Plaintiff's allegations point by point, arguing that in fact it has provided adequate answers. From the papers it appears that some but not all answers were deficient. Grenada is therefore ordered to provide within 30 days following the date of this Order complete responses to Interrogatories 6, 13, 15, 16 and 18.