INSURANCE CORP. v. COMPAGNIE DES BAUXITES
Legal provision: Due Process
ORAL ARGUMENT OF EDMUND K. TRENT, ESQ. ON BEHALF OF PETITIONERS
Chief Justice Burger: We will hear arguments next in Insurance Corporation of Ireland against Compagnie des Bauxites.
Mr. Trent, I think you may proceed whenever you're ready.
Mr. Trent: Mr. Chief Justice, may it please the Court:
This case comes before this Court on a cross-petition for certiorari to the Court of Appeals for the Third Circuit, brought by the Appellants there, Defendants in the District Court for the Western District of Pennsylvania.
The pleading in suit was the second count of the complaint by the Plaintiff, the Compagnie des Bauxite de Guinee, a non-Pennsylvania corporation, against a number of Defendants, including the 14 Cross-Petitioners, non-Pennsylvania insurance companies... Indeed, they were non-American insurance companies... on contracts of insurance made in London insuring a risk in Africa.
The Defendants pleaded lack of personal jurisdiction and filed a motion to dismiss for want of personal jurisdiction.
The Plaintiff requested the Defendants to produce their insurance policies covering Pennsylvania insureds, Pennsylvania risks, and emanating from brokers in Pennsylvania.
At the hearing before the district judge on the motion to dismiss and on the Defendants' objections to the request for documents, the counsel for the Defendant insurers, two young people from New York at the time, pointed out to the court that the Defendants did not have copies of their policies in their possession.
The contracts of insurance consisted of for the most part each contract a single piece of paper called a placing slip, where the terms of the risk were summarized in shorthand form, abbreviated form, in accordance with the practice in London.
And so then the district court said, well... oh... the Defendants' counsel said: These are in the hands of about 150 brokers in London.
According to British practice, the broker is not the agent of the insurance company, but the agent of the insured or the prospective insured seeking insurance.
And so the district judge said, request them from the brokers.
New York counsel for the insurers went to England to see what he could find out about these things.
In effect, he undertook to do what the court had ordered him to do.
And he found there that there were about four million files involved in these policies, because the insurers did not have indexes relating to Pennsylvania.
Their indexes were based on large geographical areas.
The continent of North America was the smallest group that they had.
And so he came back and, within the time allowed by the court as extended for 30 days, he filed an affidavit offering to produce all the Defendants' own records, these placing slips, at their places where they were kept in England, mostly in London, and for one of the Defendants in Tel Aviv, where its records were kept.
At the hearing... oh, the Plaintiff then filed a motion to compel, and at the hearing on that motion the district judge said, I'll give you another 60 days to get these policies from the brokers.
Unidentified Justice: Did the district court at that time, Mr. Trent, say where the production should take place?
Mr. Trent: Not expressly, no.
But the request for documents asked for them to be brought to the office of Plaintiff's counsel in Pittsburgh, and it was assumed that that's where they were to be produced.
Unidentified Justice: Is that disputed at all or does everybody agree?
Mr. Trent: I think everyone agrees on that.
There was no specific statement by the court that they should be produced in Pittsburgh, but everyone assumed it because the request for documents said to produce them at the office of Plaintiff's counsel in Pittsburgh.
Unidentified Justice: Counsel, insofar as I was able to determine reading the briefs, the Defendants at trial indicated that that would basically be possible; it was a question of when, not if.
Is that right?
Mr. Trent: To produce in Pittsburgh, you mean?
Well, it would be possible, yes, to bring 4,000, four million files to Pittsburgh.
But as a practical matter I would say no.
I question even whether Hercules could do such a thing, and we have no one of his caliber on our staff.
As a practical matter, it was impossible.
Unidentified Justice: And that position was articulated at all times before the district court?
Mr. Trent: --Yes.
It was not--
Unidentified Justice: That it was impossible physically?
Mr. Trent: --Well, I can't say that it was expressly said, but it would seem to me that it's just obvious that you can't bring four million files across the ocean as a practical matter.
And that was the position that we took.
Now, then the district court gave the Defendants another 60 days to get the policies from the brokers in London.
The Defendants then sent letters to roughly 150 brokers, and the brokers answered that it was impossible for them to get these policies out of their files or that it was impossible to do it within the time limit, which was a little less than 60 days by the time they got the request.
So that there they were taking the definite position that it was impossible because their files too were not indexed according to the states in the United States.
After that the Plaintiffs filed a motion for sanctions to have the court find that the Defendants were subject to jurisdiction in Pennsylvania.
While that motion was pending, the Defendants, based on some newly discovered evidence which they had received a few months before, filed an action in London for a declaratory judgment that they had the right to avoid, as the British term is, to rescind the contract, because of the failure of the Plaintiff to disclose material information at the time they asked the Defendants to assume the risk.
The Plaintiff then filed a motion to enjoin that London action, and at the hearing on the preliminary injunction the district court entered a sanction, finding the Defendants subject to jurisdiction and entered a preliminary injunction enjoining the action in London.
About two months later, on the Plaintiff's motion he entered orders saying that the jurisdictional finding is conclusive, there shall be no discovery on jurisdiction and no testimony on it at the permanent injunction hearing.
Then on appeal to the Court of Appeals, the Third Circuit, in an opinion by Judge Aldisert, reversed the injunction, but affirmed on the jurisdiction.
Plaintiffs filed a petition for certiorari on the injunction, which is still pending, and the Defendants filed a cross-petition on the jurisdiction, which Your Honors granted.
Unidentified Justice: Mr. Trent, before you get into your argument could I ask just perhaps kind of a stupid question?
What is the position of these British insurance companies as to where they should properly be sued?
Mr. Trent: Where they should be sued?
The custom over there is that if--
Unidentified Justice: That if an American company enters into an insurance... gets insurance from an English company, they're expected to sue in London?
Mr. Trent: --Yes, because the way that the insurance is placed, it's the broker in London who makes the contract with the insurer there.
Unidentified Justice: And they wouldn't even have been subject to suit in West Africa, either?
Mr. Trent: No, unless it's stated on the placing slip, it's assumed that it will be in London.
Now, in the present case the insurers, the underwriters who accepted the contract for the insurers thought that this was a Guinean company in Africa.
They had no knowledge at all that the Plaintiff was a Delaware corporation.
Its name being in French and French being the language in the Republic of Guinea, they thought it was a Guinean risk.
As a matter of fact, the testimony was they thought they were reinsuring a Guinean company, because many of the countries there have preference for their own insurance companies and the London companies then reinsure them.
The Court of Appeals in... well, I should say that the question is then whether the sanction was proper.
The Court of Appeals held that it... no.
And we say that depends on two things, whether a court can make a sanction, make an order requiring discovery and impose a sanction for not obeying before the court has found the Defendants subject to personal jurisdiction; and second, that the order in this case, the sanction order, is valid only if the discovery order is valid, and a discovery order requiring us to bring four million files from London to Pittsburgh is a complete abuse of discretion, it's impossible.
The Defendants could not comply with it and therefore they didn't willfully disobey it.
It was just impossible to obey.
And there's not a shred of evidence in the record that the young New York lawyers who were handling the matter were contumacious in any way.
They were trying to do what the court wanted them to do, and when they--
Unidentified Justice: Mr. Trent, that's I think the third time you've used the phrase "young New York lawyers".
I take it you wish in some way to disassociate yourself from--
Mr. Trent: --Well, I beg Your Honor's pardon.
I was in effect excusing them because of their lack of experience.
They are very nice people.
Unidentified Justice: --Excusing them for what?
Mr. Trent: For not immediately saying, we will produce these things in London.
They first... they tried to get--
Unidentified Justice: But they did have authority to represent your clients at the time?
Mr. Trent: --Oh, absolutely.
They were in charge of the case.
Unidentified Justice: And we must presume they are duly admitted and competent lawyers, even though they're young.
Mr. Trent: That's right, Your Honor.
Unidentified Justice: Counsel, was the court's order to produce only the files on policies issued by these companies to people in Pennsylvania, or was the order to produce all four million files?
Mr. Trent: --The order was to produce the Pennsylvania policies, but in order to do that the brokers in London and the Defendants in London would have had to go through four million files to see which ones related to Pennsylvania.
Now, in the course of one of the hearings, arguments in court, the lawyer from New York said: Well, suppose we admit that we're doing one percent, we get one percent of our income from Pennsylvania.
Will that satisfy?
And Mr. Mellott for the Plaintiffs said: No, I will not take your word for that.
I want to see all the records to make sure that you're showing them all to us.
So we would have had to bring four million files over, even if we had been able to sort out just the Pennsylvania ones, because Mr. Mellott was not willing to accept the representation--
Unidentified Justice: But that was not the court's order, in any event?
Mr. Trent: --No, the court's order was just the Pennsylvania files, that's right.
Unidentified Justice: How much easier would it have been to get into these records in London once they're identified?
Mr. Trent: Oh, they're there.
They're all available.
It would be just a matter for the Plaintiffs' counsel to go and look at them and see.
He would have to dig it out, and the cases say that the party seeking discovery has to bear the burden of whatever work it is to find what he wants.
Unidentified Justice: Mr. Trent, if I find myself unable to excuse what these lawyers did because they're young lawyers from New York, do you lose?
Mr. Trent: If you do not excuse them?
Unidentified Justice: If I find that I just can't excuse them--
Mr. Trent: Cannot excuse them--
Unidentified Justice: --because they're young and inexperienced--
Mr. Trent: --Well, I don't think that would.
Unidentified Justice: --did you lose?
Mr. Trent: No, I wouldn't think I would lose on that.
Unidentified Justice: All right, Well, you act like it.
Mr. Trent: Well, I beg your pardon.
I was trying to in effect explain what took place.
Unidentified Justice: I took it that your reference to these young men was to indicate that there was no deliberate, there was no xx conduct on their part.
Mr. Trent: Right, right, exactly, Your Honor.
That's true and that's correct, and I don't think the other side contends that there was.
Their principal basis is that we just did not produce the records in Pittsburgh.
Now, on the Court of Appeals Judge Aldisert... there's a split of authority in the circuits.
The latest case before this one was the case in the Fifth Circuit, Familia de Boom v. Arosa Mercantil in the Southern District of Texas, where the district court had dismissed an action because the plaintiff did not comply with... answer interrogatories.
And the Fifth Circuit, reversed that and said you cannot make an order requiring them to answer interrogatories until your first have jurisdiction over them.
The second ground for the Court of Appeals ruling here was that... Judge Aldisert admitted that the general rule is that where the documents are voluminous the party seeking... wanting to look at them must go where they are.
But he said that's a matter of discretion for the district court and we cannot find that... we can't say we disagree with it.
Now, we say that that is completely wrong, that it was an abuse of discretion to require us to bring four million files over to America, and we've cited cases in the brief that support that.
Unidentified Justice: Would it not have been compliance with the order for your people in London to search through the files and found those that showed American business and just brought those?
Mr. Trent: Yes, but that would have been a Herculean task, because they had no indexes.
They would have had to examine--
Unidentified Justice: Well, you said a moment ago that if Plaintiff's counsel went over the files would be available to them.
But it would also be a Herculean task for the Plaintiff's counsel.
Mr. Trent: --Yes, that's right.
And because the Plaintiff is seeking the information, the Plaintiff must bear the burden of that.
Unidentified Justice: And there is no way in which these companies can find any shortcuts to know how much business they've done in Pennsylvania, I guess?
Mr. Trent: Well, two of them by... or some of them, by taking files for a limited period, part of the period... the period they asked for was about six years.
They took part of a year or a year or something, and then they made estimates, and they all said, well, we don't do more than one percent.
Unidentified Justice: How would they even know about the one percent?
That's what puzzles me.
Mr. Trent: --Well, I think that was just the general feeling of the underwriters.
Unidentified Justice: I mean, I'd assume there'd be some executives who would remember some policies that came from--
Mr. Trent: Oh, I think they could have remembered some particular ones, but that wouldn't satisfy the Plaintiff.
And by taking--
Unidentified Justice: --There was no attempt to sort of say, well, maybe we... if we give you everything we can find in the first few days of search or something.
Sometimes these things can be worked out.
Mr. Trent: --Yes.
Well, that was where they got their one percent, by looking at a short period.
Unidentified Justice: Yes.
Mr. Trent: But there was never any proposal by the Plaintiffs to accept something like that.
They wanted the whole thing and they wanted to look at every paper in the file to make sure we weren't withholding some.
So as I see it, the way these things ought to be handled is if there's no jurisdiction... until jurisdiction is found, there's no power in the court to enter any sort of order against a defendant.
But the plaintiff is not without a remedy there.
That was one of the things Judge Aldisert said, that it was necessary to do this, otherwise how can the Plaintiff prove his case of jurisdiction.
All they had to do was to initiate discovery against us as non-parties.
The British statute permits that.
We would have had to produce our documents pursuant to subpoena in London, and then they could have looked at them.
Now, as a practical matter we weren't going to insist on that.
We said, sure, come over, we'll let you see them.
And if they then wanted to look at the brokers' records also, they could have subpoenaed them.
But I think the brokers would have let them come and look at them.
They... except for, one of the brokers said these things are confidential.
The others did not object to producing them as such.
They objected because it was just such a terrible job to do.
Unidentified Justice: Well, it's your position, then, that the extreme nature of the discovery required by the district court, as you regard it, really doesn't have any bearing on this case, because I take it you would have objected on your jurisdictional argument to even requiring one witness who resided in Pittsburgh to be deposed on the jurisdictional issue.
Mr. Trent: Yes, yes.
Well, we had the right to do that.
I can't say that I would have objected if they wanted to take one.
Now, I have said in one part of my argument that these files in the... policies on the brokers' possession were not subject to our control.
As a practical matter they were not, because the brokers would not produce them, although I think we had a legal right to get them from the broker.
After all, when the insurance company writes insurance and signs a policy and the broker keeps it, the insurance company has a right to get that.
But the general rule in the law is that if a party which has control of another's documents, a non-party to the action has control of the documents of a party and the party says, please give them to me, and the person with custody says, no, I won't, then it's up to the other party to the case who wants them to go after that party who has the custody.
And I cited some cases on that.
Because they wouldn't produce them for us.
So... I started to say that the best way to resolve this would be if there is a... jurisdiction is contested and then the party asserting jurisdiction would file affidavits and the other one would file affidavits.
And if they're conflicting, then you cannot... you could dismiss the motion to dismiss.
You could deny the motion to dismiss, but you couldn't grant it on conflicting affidavits.
You would have to hold a hearing, and that I think should have been done.
Judge Simmons in the district court should have held a hearing and tried to resolve, to see whether there would be evidence to support a finding of jurisdiction, and then he could order discovery to get more evidence.
But he didn't do that.
At the same time as he made his injunction order, he entered a sanction and we had no opportunity, then, to try to comply with the sanction.
I would like to reserve the remainder of my time for rebuttal.
Chief Justice Burger: Very well.
ORAL ARGUMENT OF CLOYD R. MELLOTT, ESQ. ON BEHALF OF RESPONDENTS
Mr. Mellott: Mr. Chief Justice and if it please the Court:
It is the position of the Cross-Respondent that when a party to a litigation in a federal court comes into the court and asks for a binding determination of no jurisdiction... and incidentally, it was not a motion to dismiss under 12(b) that was filed here.
It was a motion for summary judgment that was filed 18 months after the action was commenced.
Motion for summary judgment was filed asking the court to determine... make a binding determination that there was no personal jurisdiction over 17 of the excess insurers.
Now, not only did the excess insurers come into court and ask for that action by the court; the excess insurers took advantage of the discovery rules themselves.
They served us with a request for production of documents.
They served us--
Unidentified Justice: How many documents?
Mr. Mellott: --Well, they asked us to produce policies which they had issued to CBG or to Halco or to another affiliated company, and to produce policies which had been referred to in an affidavit of Marsh & McLennan, policies which Marsh & McLennan, a broker in Pittsburgh, had written for either Halco, CBG... and when I say CBG I mean the Cross-Respondent here... or Alcoa, in which Marsh & McLennan state in the affidavit during a period, I believe, from 1971 until 1975, when the lawsuit was filed, they had written numerous policies for each of the excess insurers here involved, and they list them by number... it appears in the appendix, Your Honors... setting forth the number of contacts that they'd had in Pennsylvania.
When we tried to obtain additional information concerning policies written for other companies, we of course were unable to get them from Marsh & McLennan.
Unidentified Justice: Mr. Mellott, it was never clear to me reading the briefs whether it was your position in the lawsuit that your clients had jurisdiction because of the Pennsylvania contacts related to these particular policies alone, or whether it was your position that there was jurisdiction because the original Defendants had done so much business in Pennsylvania that there was general jurisdiction.
Mr. Mellott: Justice... excuse me.
I didn't mean to interrupt.
It was our position that we had jurisdiction on several grounds, and Judge Simmons so found in his preliminary findings and in the findings on the permanent injunction.
We contended, first of all, that there was sufficient contacts in this particular transaction.
I find myself disagreeing completely with the statement of facts which Mr. Trent has stated to this Court and I think the record will support--
Unidentified Justice: Well, if you were willing to rest on that you wouldn't need all these four million files.
Mr. Mellott: --Your Honor, we also contended that they had conducted sufficient other business in Pennsylvania so as to meet the tests under International Shoe and other cases which this Court has decided.
And we contended that they had adopted the primary policy.
You see, we have a policy covering the first $10 million of loss with INA insurance company in Philadelphia, in Pennsylvania.
The excess insurers do not deny that they adopted the terms of the primary policy.
But they would have us sue INA in Pennsylvania and them, at least some of them, in London and one of them in Brussels.
We submit that when they adopted the terms of the primary policy they were subject to suit where the primary insurer was subject to suit.
We also contend that there was an implied term in the policy that they would consent to suit in Pennsylvania.
Other policies... and they're listed in the record... other policies had been issued to my client previously in which most of the excess insurers were involved, in which there was a consent to suit clause, anywhere.
Unidentified Justice: If there is an implied term in the policy, why is there any need for an express consent to suit clause?
Mr. Mellott: Well, Your Honor, obviously I was trying to prove jurisdiction on one of several grounds, and the Defendants were contending that they didn't do enough business here... or in Pennsylvania... to be subject to suit there.
And it seemed to me that when they're coming into court and asking the court to make a binding determination of no jurisdiction on the ground that they don't have sufficient contacts in Pennsylvania to satisfy the tests under International Shoe, that by doing so they've at least agreed to produce or consented to the jurisdiction of the court to produce those facts which are relevant to that determination.
Otherwise it seems to me, Your Honors, it's a complete abuse of our judicial process.
Furthermore, there is evidence in the record, contrary to what Mr. Trent says, that the excess insurers knew that INA was the company that had written the primary insurance, that they knew of the contact with Pennsylvania.
We have affidavits from the brokers, we have testimony on depositions.
The excess layer was $10 million.
40 percent of that was reinsured with INA Reinsurance in Brussels.
The same London broker who the excess insurers would have this Court believe for all purposes is the agent of my client, at the same time they were negotiating the excess layer of coverage, they were also negotiating the reinsurance, not for my clients but for the excess insurers, with INA Reinsurance in Brussels.
That company took 40 percent of this excess layer of $10 million.
That company is an affiliated company with the primary carrier.
That company had full information in its files, furnished by the broker, concerning CBG, its U.S. connection, the fact it was a Delaware corporation, who its owners were, completely consistent with the affidavit of the London brokers as to what they had in their files and what was available for the excess insurers to see.
Now, if they gave it to the reinsurance company, I submit there is reason to believe it was also given to all of the excess insurers.
There are a lot of other misstatements of fact which appear in the brief and which were repeated here again today.
Now, the only way that I can explain it is that Mr. Trent came into this case some time after the sanctions were entered.
I've been in the case from the beginning.
There was never a question at any time in any of the proceedings as to whether the documents had to be produced in Pittsburgh or in London.
There was never an objection made by the excess insurers on that basis.
I never refused to go to London to look at documents.
The court never really ordered them to produce them in Pittsburgh.
As a matter of fact, as Mr. Trent should know, I went to London and to Europe, to Brussels, both before and after this offer that was made four months after they were ordered to produce the documents, to look at documents when the documents were produced.
What did happen here?
A motion... after they filed the motion for summary judgment claiming no in personam jurisdiction because, they said, they didn't have sufficient contact... the fact is they had initially filed affidavits in connection with the motion for summary judgment in which all 17 denied any business in Pennsylvania.
But after we filed counter-affidavits establishing business to the extent that we were able to prove it, they filed new affidavits, in 13 of which these excess insurers acknowledge under oath that they are engaged in writing insurance and covering risks on a worldwide basis.
They don't exclude Pennsylvania.
Pennsylvania is a rather commercial state, with a lot of industries that are engaged in business worldwide.
In some of these affidavits we find representations that they conducted... that they had reviewed some of their files and that they had determined that certain percentages, either one percent more or less, had been determined to be derived from Pennsylvania.
Now, that's not just in a representation of counsel, as I understood Mr. Trent to indicate to the Court previously.
It is in signed, sworn affidavits of the excess insurers.
Justice Stevens, I believe asked the question about, how did they know.
Well, presumably, at least the representation made to the court was that the files had been reviewed to support the affidavit, not that they had some general understanding out of the air.
Now, it may be, and I submit should be, that one percent of their premium income, which in all probability runs into the millions of dollars, is enough contact with Pennsylvania to meet the test of International Shoe.
And when they... when we were in court and they asked whether that wasn't adequate, whether I wasn't satisfied with that, I said that if you are still contending that that extent of business does not meet the regularity test then I want you to produce the documents, as you were originally ordered to do.
And they said, what difference... the lawyer said, what difference does it make whether it's one or two percent?
Well, I offered to withdraw the request for production of documents if they would acknowledge that the one or two percent of their business was sufficient to meet the tests of the Pennsylvania long arm statute and the requirement of International Shoe.
They were not willing to do that.
They still contended that the contacts were not adequate.
Now, they were originally ordered to produce, on July 27th, 1978.
Mr. Trent would have you believe, and in fact says so in his brief and in his reply brief and intimated it again today, that the lawyers from New York, who are experienced insurance lawyers in the international insurance field, immediately went to London to contact the brokers.
In fact, that's what he says in his brief.
There's no citation to the record for that.
Unidentified Justice: Counsel, do you agree with Mr. Trent that the order to produce did contemplate production in Pittsburgh?
Mr. Mellott: No, Your Honor, I do not.
Unidentified Justice: Where do you think it contemplated production?
Mr. Mellott: Your Honor, I think that matter was never settled.
They never objected.
At any time there was any discussion about this matter on the record, Your Honor, they never objected that it was the burden to bring it to Pittsburgh.
That's not in their objections.
The burdensomeness that they objected to was the collection of the documents.
The only objections in the record to this production, contrary to what Mr. Trent has indicated in his brief and again today, are objections as to relevancy... I think it's clearly relevant... and objections as to burdensomeness from the standpoint of having to contact the brokers to get the documents.
Unidentified Justice: Well, but if as you say there really was no place for production specified, then they would have had no occasion to get into the question of whether it was too burdensome to bring it, once it had been assembled, from London to Pittsburgh.
Mr. Mellott: Well, Your Honor, in the order which the judge entered there was no provision for place of production.
And we had gone to London previously to look at documents.
We were perfectly willing to go again, and I'm sure the lawyers so understood.
That to me is a red herring that's come into the case after the sanctions were entered.
It's not something that was involved at all.
We went to London and looked at their documents.
We went to Brussels and looked at documents.
We did it both before and afterwards.
Now, the problem is, at the July 27th, '78, hearing the counsel from New York told the court they'd have to contact brokers, there were 150 brokers involved.
In fact, they had filed an affidavit earlier that day in which they said there'd be 150 brokers involved and it would require contacts.
The judge suggested that a letter be written to the brokers, a form letter.
This is in July.
And there was no objection at that time that they were outside of the control of the excess insurers.
When was the letter finally written to the brokers?
Six months later, in January 1979.
Even though at the July hearing their counsel is saying, the documents you want are in the hands of the brokers, they're not saying, however, that they're outside their control... and if I understood Mr. Trent today, he's now not suggesting that either, because I think clearly they are not outside the control of the excess insurers... instead of immediately going to London, as Mr. Trent indicates in his brief, and in his reply brief, and again today, they admitted five months later at the December hearing that they hadn't contacted even one broker, five months after they had been ordered to do it.
As a matter of fact, they had only contacted 15 of their 21 clients.
They hadn't even contacted all of them.
And that's conclusively established by the affidavit that they filed in November, and by the--
Unidentified Justice: Mr. Mellott--
--Where is that affidavit?
Mr. Mellott: --It's in the record, Your Honor.
Unidentified Justice: Well, we don't need to take your time hunting it up.
Mr. Mellott: The affidavit is at 98a and 99a.
Unidentified Justice: Of?
Mr. Mellott: Of the appendix, volume one.
Unidentified Justice: What volume, what volume?
Mr. Mellott: Volume one, Your Honor.
Unidentified Justice: Okay.
Mr. Mellott: Now, the admission as to the fact that they hadn't contacted any brokers as late as five months after they were originally ordered to produce the documents and the judge had originally suggested that they do it appears in the transcript of the December 27, 19... or December 21, 1978, hearing, which also appears in the joint appendix, volume one.
It starts on page 105a.
At none of the... well, first of all, the judge gave them all the time they wanted in--
Unidentified Justice: Counsel, you went to London and looked at the documents?
Mr. Mellott: --Not these documents, Your Honor; other documents.
Not these documents.
They did produce some other documents, Your Honor, but not these.
Unidentified Justice: Did you make any attempt to review these documents for business in Pennsylvania?
Mr. Mellott: Your Honor, prior to the time that the sanction was he entered, except for the offer to produce four million files... and while it's been characterized in the brief and here today as being a list of the North American files, it was never so identified to us, nor was it so identified in any of the papers or in any of the discussions.
All it was was an indication to us that they would open the files of 15 of the excess insurers.
That's were the four million files were supposed to be located.
At the same time they're telling us that the files are in the hands... the documents that they were ordered to produce are in the hands of the brokers.
So these four million files may or may not contain what they were ordered to produce.
Unidentified Justice: Well, time is getting away and I have two questions--
Mr. Mellott: All right.
Unidentified Justice: --I'd really like to hear you address.
And one is the question of whether it was an abuse of discretion for the court to order the production of four million files.
And secondly, if not and if the court could properly impose sanctions in this discovery effort, was it an abuse of the court's discretion to prevent any further litigation of that problem at the trial on the merits, the jurisdictional question?
Mr. Mellott: Your Honor, in the first place, Judge Simmons did not order the production of these four million files.
He ordered... and he changed our request after the counsel for the excess insurers had presented arguments.
All they were ordered to do was to give us names of the policies, the policy numbers and the general outline of those policies which had a Pennsylvania contact, either by being written for a Pennsylvania insured, being written through a Pennsylvania broker, or covering a risk in Pennsylvania.
Now, that's what they were ordered to do.
I submit, Your Honor, that when they made this offer, four months after they had been originally ordered to produce, it was not an offer that complied with what they'd been ordered to do.
I mean, on the one hand they're telling us they don't have the files, they're with the brokers... although they never said that they were outside their control... I mean, that they didn't have the documents.
On the other hand, after coming to the court at the end of the 90 days, asking for an extension of time and representing to the court that in all probability we can comply with the court's order within 30 days, and the court granted an extension of an additional 30 days, all we get is a two-page affidavit, the end of November, four months later, which simply says 15 of the companies will open their files.
Now, those are not the documents the court ordered produced.
There was not even any representation that those included the documents which were produced.
In fact, if you believe them when they say that the documents that we were requesting were in the possession of the brokers, those files didn't even include any of them.
Unidentified Justice: If we assume for a moment that the court had the power to enter some sanction and to compel discovery for the purpose of reviewing its own in personam jurisdiction, do you think the court also properly precluded any further consideration of that issue at trial?
Mr. Mellott: Well, I think the court did, Your Honor, and I think by virtue of the holding of this Court in the National Hockey League case that's required.
If sanctions are going to mean anything and have any deterring effect, you can't say that once the sanction has been entered it can be removed by compliance later.
All that'll do is bring about a complete abuse of the discovery process.
Unidentified Justice: That doesn't necessarily follow, it seems to me.
Maybe this particular sanction was not the correct one.
Maybe there should have been a monetary sanction based on all of your time and energy and interest and all the rest, and delay.
Wouldn't that serve a deterrent purpose?
Mr. Mellott: Your Honor, I submit that it was not... and I'm not even sure that it's the case today.
The Defendants haven't even today, so far as I know, offered to produce the documents which they were ordered to produce.
Now, Mr. Trent after he got into the case made a new offer, and it's not clear from the offer whether he's talking about producing the documents including those from the brokers or whether he's talking about the same four million files.
But in any event, Your Honor, I don't agree with what Mr. Trent said about my view as to whether the lawyers acted in good faith or not.
I do not believe they acted in good faith.
I think they did not act in good faith, as the Third Circuit found.
And I think a review of the record will make it very clear here they did not act in good faith.
And the judge gave them nine months to comply--
Unidentified Justice: It seems to me that all of that goes to the question of what would be an appropriate sanction.
Maybe you're dead right that you were really given a terrible run-around here and entitled to a very severe sanction.
The legal question, though: Is it correct for the sanction to be a finding of jurisdiction when in fact there may be no jurisdiction?
Mr. Mellott: --Well, if Your Honor please, I think if you look at the evidence that's in the record... and I submit that there is adequate evidence in the record for the court to find jurisdiction even now on the face--
Unidentified Justice: Well then, really, you've spent an awful lot of time on an unnecessary project.
Mr. Mellott: --Well, that may be, except that there's a lot of money involved in this case, Your Honor, and... the suit was filed in December '75.
Here we are in March of 1982.
And most of the reason why this case isn't to trial--
Chief Justice Burger: We'll resume there at 1:00 o'clock.
Mr. Mellott: --Thank you, Your Honor.
Chief Justice Burger: You may resume, counsel.
ORAL ARGUMENT OF CLOYD R. MELLOTT, ESQ. ON BEHALF OF RESPONDENTS -- RESUMED
Mr. Mellott: Mr. Chief Justice and may it please the Court:
I would like to continue with my response to Justice Stevens' question.
There are three points that I would like to make in response to your question as to whether a money sanction wouldn't have been better.
Maybe I haven't phrased it exactly as you did, Your Honor.
In the money sanction, as I understand it, you were suggesting that they pick up the expenses that were involved from the delay.
I submit, Your Honor, that that type of a sanction would have no deterrent effect on the type of misconduct that was engaged in here, particularly in a time of high inflation, which we had during the period of dilatory tactics.
Unidentified Justice: You mean deterring other people or being effective in this case?
Mr. Mellott: Deterring other people, Your Honor.
Unidentified Justice: Well, what do you care about that?
You just want--
Mr. Mellott: Well, what I'm suggesting--
Unidentified Justice: --to deter somebody in this case, don't you?
Mr. Mellott: --Well, yes, Your Honor, I'm really primarily concerned in this case.
But I'm suggesting that the sanction that was imposed here is fully in accordance with the provision of Rule 37(b)(2)(A), which presumes under that rule that the facts which would be established if the discovery were complied with are deemed to be established.
And that's exactly what Judge Simmons did, and he did it only after he had warned them, five months after he had originally ordered the production, he warned them that if the production wasn't made in another 60 days the sanction of the type he's mentioned would be entered.
He gave them actually 120 days, so that they had a total of nine months to comply.
And they didn't comply.
Furthermore, I submit that sanction is in accordance with the rules and... the rule, Rule 37, and with the decisions of this Court in the National Hockey League case, in which the sanction of dismissal was used, which is even more severe than the sanction here involved.
At least they still have an opportunity to defend on the merits.
Furthermore, I think it's in accordance with the holding of this Court in the Hammond Packing case, in which a sanction of a dismissal--
Unidentified Justice: I'm not so much concerned about the severity of the sanction as the question of the theory by which, if there in fact is no jurisdiction how does the court have power to impose it?
Mr. Mellott: --Well, Your Honor, on that point, I submit that when a party comes into court and asks the court to make a binding determination that there is no personal jurisdiction over him, and when that party engages in discovery against another party already in the case--
Unidentified Justice: All these arguments are arguments that you didn't really need the discovery that gave rise to the particular order before us, because those are independent grounds for jurisdiction.
Mr. Mellott: --What I'm saying, Your Honor, is that when they come into court and ask for a binding determination of the court, as the Fourth Circuit held in the Lekkas case which we've cited in our brief, they are deemed to submit to the jurisdiction of the court, at least to the point of providing relevant evidence on the issue that they've asked the court to decide.
It seems to me it would be a complete misuse of our judicial process--
Unidentified Justice: Would you mean the court has jurisdiction has to determine its jurisdiction, and that there were efforts, you say, that frustrated the determination of jurisdiction and therefore this drastic step is taken?
Mr. Mellott: --That's correct, Your Honor.
I mean, it would be a real misuse of process to say on the one hand, as this Court has said, that there is jurisdiction to determine jurisdiction, and that a party can come in and invoke that jurisdiction and yet say: but I'm not going to produce the evidence that's relevant to that determination; you have to decide it on what evidence is in the record; I'm not going to produce the evidence that's in my possession.
Now, that's what the excess insurers ask this Court to hold.
I submit that that would be clearly improper.
I also would argue that this is a question... the test here is, did Judge Simmons abuse his discretion in applying this sanction?
He warned them that it would be applied.
They elected not to comply.
And as I said this morning, I do not believe that their offer, their belated offer to open files of 15 excess insurers, was a compliance with the order to produce certain specific documents which they say are in the hands of the brokers, so they couldn't have been in the files that they were offering to produce in any event.
Unidentified Justice: Does the record show what interest will be payable on the claims when, as and if they're allowed?
Mr. Mellott: No, they do not, Your Honor.
But we have made a claim and we've amended the complaint to ask for an inflation factor, and the court has permitted that amendment.
Now, whether we'll be able to sustain it ultimately or not I don't know.
Unidentified Justice: Permitted the amendment?
Mr. Mellott: The court permitted the amendment only, Your Honor.
Your Honor, I believe some of you asked me questions this morning about, why did you go ahead with the discovery if you felt so confident there was jurisdiction.
Well, if this Court holds from the contacts, as I believe it could on the basis of International Shoe, that there's no need for this discovery, that there is sufficient evidence of contacts in the record, as I believe there is, then of course... I don't need the sanction, because there's no appeal from this decision.
But I felt that I had to assert jurisdiction on every ground available to me, and that's what I tried to do, as long as they were trying to contend that there wasn't sufficient jurisdiction.
Unidentified Justice: Does the order that was entered here foreclose any further investigation of jurisdiction?
Mr. Mellott: Yes, it does, Your Honor, primarily based on the reasoning of this Court in the National Hockey League case.
Unidentified Justice: Was that specifically done under the rule?
Mr. Mellott: That was done subsequently by an order of court, Your Honor, that in view of the fact that one of the grounds for jurisdiction was that he had imposed a sanction under Rule 37(b)(2)(A) and based on the National Hockey League case, that that issue should not be further litigated.
Unidentified Justice: And so the question of jurisdiction supposedly is no longer open in this case, is that it?
Mr. Mellott: That's right, Your Honor, on the basis of the reasoning of this Court in the National Hockey League case that if you permit them to avoid the sanction after it's been imposed by then complying with the court order, all you'd get would be dilatory tactics.
Unidentified Justice: You are not now complying with a court order, proving that there isn't jurisdiction.
That isn't the same as complying with the order.
Mr. Mellott: The court actually, in the preliminary injunction order and in the permanent injunction order, found jurisdiction on several grounds.
Unidentified Justice: Yes?
Mr. Mellott: Including the sanction.
And the court has held that, in view of the entry of the sanction, that the issue of in personam jurisdiction is no longer open for litigation, that it's finally binding on the parties in this case.
Now, the Court of Appeals, I believe incorrectly, dismissed as to three of the Defendants, and that's part of what is included in our petition for cert to this Court, which the Court presently has under consideration, because we believe there is adequate evidence of contacts in the record.
There is also evidence that they did not comply with the order, either.
And our petition for cert also includes the injunction, a point which they--
Thank you very much, Your Honors.
Chief Justice Burger: Mr. Trent?
REBUTTAL ARGUMENT OF EDMUND K. TRENT, ESQ. ON BEHALF OF PETITIONERS
Mr. Trent: Mr. Chief Justice, may it please the Court:
One thing Mr. Mellott has just mentioned now and he mentioned as well before lunch, he said that we had asked for a binding determination of jurisdiction, not merely a motion to dismiss.
Now, he is incorrect in that.
On page 38a of the prayer of the affidavit which was filed by the New York lawyers under their New York practice, where they make an affidavit and contain the motion in it--
Unidentified Justice: That's 38a of what?
Mr. Trent: --Of the joint appendix.
Unidentified Justice: Volume one?
Mr. Trent: Yes.
"Wherefore, it is respectfully urged that the motion for summary judgment dismissing the complaint against the moving Defendants on the grounds of lack of in personam jurisdiction and forum non conveniens, be, in all respects, granted."
So all he was doing was moving to dismiss for lack of jurisdiction.
He did not invoke the jurisdiction of the court by saying it had no jurisdiction.
I think that's just a complete contradiction to say that.
Now, one thing I think has not been clearly brought out here is to just what was being asked for in these records.
First, the request for documents asked for the policies, and then the court said at the hearing on that, we'll get up this list in a general way.
And Mr. Mellott then said, I want to see the policies.
And then counsel for the Defendants said that the brokers had the policies, and so mister... Judge Simmons said, well, write to the brokers.
So we understood that we were to get the policies.
Then after New York counsel had gone to England to investigate the situation... and Mr. Mellott's correct, he didn't talk to the brokers, he talked to 15 of his clients, but they knew about the brokers and so forth... he came back and he made this affidavit... and there's not anything dilatory; he did it within the time... that it would involve four million files.
Now, he was talking then about the insurers' own files, but they would show the same thing as the brokers' files.
That is, the contract is the placing slip and the insurance company keeps that.
The broker, as agent for the insured, then prepares a policy, gives it to the insured to sign and then takes it back and keeps a copy of it.
So the same information would be in the brokers' files as would be in the insurers' files.
So New York counsel, Mr. Bruckmann, thought, well, let us offer our own files and we will make those available.
They would show the same thing as the brokers' files.
Now, Mr. Mellott says that we never did offer to produce the documents anywhere.
But after I got into the case, which was after the sanctions had been entered, I thought, well, let's see if we can get the... offer to produce them now and satisfy the court and be done with it.
And so I expressly offered to produce all these files in London.
And Mr. Mellott said, no, we're not interested in the files relating to jurisdiction now, and he prepared this order and he submitted it and the judge said he was going to sign it, barring us from ever contesting jurisdiction again.
And I said, on the strength of that I offer to produce all these records in London on July 2nd, 1979.
That's right in the record.
So Mr. Mellott is incorrect to say we never did offer to produce the files.
Unidentified Justice: You didn't offer to produce them until the sanction had been entered.
Mr. Trent: No... well, that was my offer.
But Mr. Bruckmann before the sanction had been entered, he offered to produce them in London, and I just repeated that offer in the hope that it would be accepted and we would get the thing done.
Because we were perfectly willing to produce our files, and they could look through them and rummage through them all they want.
Unidentified Justice: Mr. Trent, did your offer pertain to your files or the brokers' files?
Mr. Trent: Our files.
Unidentified Justice: Where did I get the notion that the information was only obtainable from the brokers' files?
What was all this fussing around about the brokers' files?
Mr. Trent: Well, that was because Mr. Mellott's request for documents asked for policies, and we did not have any policies in our files.
We had only the placing slips, which were the contracts.
Unidentified Justice: I thought I also got the impression that your files wouldn't disclose whether it was Pennsylvania business or--
Mr. Trent: Well, the indexes... the placing slips themselves would, if you looked at each one.
But the indexes did not say which ones were from Pennsylvania, and the same was true of the brokers.
They did not have the indexes, either.
Unidentified Justice: --Because I'm puzzled about why you sort of shuttled them off to the brokers.
It probably would have been much more efficient in the first place to stay with your files, wouldn't it?
Mr. Trent: Well, I think it would have been.
But that was Judge Simmons' idea, because they wanted... they had asked expressly for the policies and only the brokers had the policies.
Unidentified Justice: And you didn't... your predecessor representing your client didn't happen to say, well, really a quicker way to get it would be to look at our own files instead of going through the policies?
Mr. Trent: No.
No, that was not said.
That could have been said.
I don't know whether the realized that or what at the time.
Unidentified Justice: Would you think on your theory of the case or of the rule the district court would have been justified in saying, I'm going to impose... I'm going to find that there is jurisdiction unless you sustain the burden of proof that there isn't?
Mr. Trent: No.
Unidentified Justice: And that you will have to get your own documents and come in here with proof?
Mr. Trent: No, that was wrong.
I think Judge Simmons in effect did say that.
But that is not correct.
The burden is on the Plaintiff to show jurisdiction.
Unidentified Justice: When did the judge say that?
Mr. Trent: I beg your pardon?
Unidentified Justice: When did the judge say that?
Mr. Trent: He said that--
Unidentified Justice: Before he imposed the sanction?
Mr. Trent: --Yes.
Unidentified Justice: So he said to you: Look, I'm going to find that there's jurisdiction unless you come in and prove--
Mr. Trent: Yes, yes, precisely.
Unidentified Justice: --Now, that is... and you think that was unjustified?
Mr. Trent: Yes, that was erroneous, because all we have--
Unidentified Justice: Let's assume for the moment that you agree that there had been a refusal to discover.
I know you say there wasn't.
Mr. Trent: --Yes.
Unidentified Justice: But assume there was.
Mr. Trent: All right.
Unidentified Justice: And you agree that a sanction, some kind of an effective sanction, was justified.
You say that sanction would be bad, to put the burden of proof on--
Mr. Trent: Yes, yes.
Unidentified Justice: --Even though you had refused discovery?
Mr. Trent: Yes.
Unidentified Justice: And even though the rule says that you may, as a sanction you may deem the facts sought to have been established?
Mr. Trent: Yes, because we say that doesn't apply where it's a question of jurisdiction.
And the Familia de Boom case held exactly that, that even though the burden was on the plaintiff to produce the... to prove jurisdiction, if the plaintiff couldn't get it it was too bad, but he should make other efforts.
Now, we say, as I said before, that the Plaintiff was not hamstrung here.
All he had to do was go to London and look at our records.
Chief Justice Burger: Thank you, gentlemen.
The case is submitted.