Title: Global Shipping & Trading, Ltd. v. Verkhnesaldincky Metallurgic Co.

State: wyoming

Issuer: Wyoming Supreme Court

Document:

Global Shipping & Trading, Ltd. v. Verkhnesaldincky Metallurgic Co.1995 WY 43892 P.2d 143Case Number: 94-101Decided: 03/24/1995Supreme Court of Wyoming

GLOBAL SHIPPING AND TRADING, LTD., a Wyoming Corporation; 
Dr. Petr Novak; Dr. Nikita Sorokine; Mr. Daniel Yates; Landmark Commercial Inc., 
a Panamanian Corporation; and YSA Management Services Ltd., a Wyoming 
Corporation, Appellants (Plaintiffs),

v.

VERKHNESALDINCKY METALLURGIC COMPANY; Matthew Roazen; 
J. Samuel Choate, Jr.; Peter Altman; Grigori Babenko; and Nikolai Kolmykov, 
Appellees (Defendants).

 

Appeal 
from District Court, Laramie County, Edward L. Grant, 
J.

Harold F. Buck of Buck Law 
Offices, Cheyenne, Argument presented by Mr. Buck, representing 
appellants.

Gregory C. Dyekman and 
Brandin Hay of Dray, Madison & Thomson, Cheyenne, Argument presented by Mr. 
Hay, representing 
appellees.

Before GOLDEN, C.J., and THOMAS, MACY, TAYLOR and 
LEHMAN, JJ.

LEHMAN, 
Justice.

[¶1]      In the district 
court plaintiffs failed to obey W.R.C.P. 37 discovery orders. In response, the 
district court dismissed plaintiffs' complaint and entered default judgment for 
defendants based upon their counterclaim. Plaintiffs 
appeal.

ISSUES

[¶2]      Plaintiffs assert 
the following issues:

Judgment was erroneously entered against a Wyoming 
Corporation and its Belgium resident shareholders for over Fourteen Million 
Dollars ($14,000,000.00) and their Complaint improperly dismissed as a sanction 
under Wyoming Rules of Civil Procedure 37 where:

1.         The 
materials ordered to be produced were substantially produced in a timely 
manner;

2.         The 
Court lacked jurisdiction to entertain the Counterclaim against the individual 
Defendants;

3.         The 
discovery material was accepted by the party seeking sanctions prior to the 
Court entering its Order; and

4.         The 
Court held neither a hearing to determine the sufficiency of the material 
produced nor a hearing on damages regarding default 
judgment.

Defendants present the 
following issues:

1.         Did 
the district court abuse its discretion in dismissing the plaintiffs' complaint 
and in entering default judgment against four of them for their repeated 
failures to obey the court's discovery orders?

2.         Did 
the district court have personal jurisdiction over the individual 
plaintiffs?

FACTS

[¶3]      Plaintiff 
corporation Global Shipping and Trading, Ltd. (Global Shipping), is a Wyoming 
corporation with its principal place of business in Belgium. The other named 
plaintiffs hold interests in the corporation. Defendant Verkhnesaldincky 
Metallurgic Company is a Russian manufacturer of titanium. Defendants Matthew 
Roazen and J. Samuel Choate, Jr. are American attorneys who were employed by the 
Russian entity. The remaining individual defendants reside in 
Russia.

[¶4]      Before this case 
was filed in the district court, Defendant Verkhnesaldincky Metallurgic Company 
sued Plaintiff Global Shipping in the United States District Court for the 
District of Wyoming for breach of contract. In that federal case, Global 
Shipping failed to answer after valid service and ignored discovery orders. The 
federal district court entered default and rendered default judgment against 
Global Shipping in the amount of $14,528,456.00 plus prejudgment and 
post-judgment interest and costs. 

[¶5]      Based upon that 
judgment, Defendant Verkhnesaldincky began execution procedures in Belgium 
against Global Shipping. During those Belgian proceedings, Defendant 
Verkhnesaldincky was informed that it was in fact a shareholder of Global 
Shipping. With that information, Defendant Verkhnesaldincky filed a second 
action, this time in the District Court for the First Judicial District, Laramie 
County, Wyoming, to compel Global Shipping to hold an annual shareholders 
meeting. The district court ordered the shareholders meeting. No one attended on 
behalf of Global Shipping, and, as a result, Defendant Verkhnesaldincky's 
American attorneys were named directors and officers of Global 
Shipping.

[¶6]      With that 
history, we now come to the case at hand. Global Shipping takes the role of 
plaintiffs by filing the instant action for declaratory and injunctive relief. 
Plaintiffs ask the court to declare that they are the sole shareholders, 
officers and directors of Global Shipping and that defendants were not entitled 
to call a shareholders meeting. Plaintiffs also ask the court to enjoin the 
action taken by the defendants who assumed control of Global Shipping at the 
shareholders meeting.

[¶7]      Defendants 
answered and counterclaimed for the unsatisfied judgment awarded in the federal 
court and sued the individual plaintiffs, seeking to pierce the corporate veil 
of Global Shipping. Defendants noticed the depositions of individual plaintiffs 
and corporate deposition of Global Shipping.

[¶8]      Plaintiffs moved 
for a protective order to quash or modify the deposition notices. Individual 
plaintiffs argued they were residents of Belgium and should not be compelled to 
come to Wyoming for depositions. The individual plaintiffs offered to conduct 
the depositions and produce documents in Belgium. The court permitted the 
noticed depositions to be taken in Belgium, provided that the plaintiffs 
advanced Defendant Choate's costs for attending those depositions. Plaintiffs 
did not produce the requested documents or advance the appropriate sums for 
depositions in Belgium.

[¶9]      Defendant 
Verkhnesaldincky moved for W.R.C.P. 37 sanctions against plaintiffs. The court 
again ordered that plaintiffs produce documents and gave an additional fifteen 
days for the production. The court also ordered that plaintiffs' depositions be 
taken in Wyoming. Finally, the court noted on its order that the failure to 
comply strictly and completely with the time requirements of the order would 
result in immediate dismissal of the complaint and simultaneous entry of default 
against the noncomplying plaintiff.

[¶10]   Several days after the entry of the 
court's order, the order was amended. A warning with boldface type was amended 
to read as follows:

This Court finds that a final warning to Plaintiffs 
for their noncompliance with this Court's Orders is appropriate. The failure to 
comply completely and in full with this Order within the time periods specified 
herein shall result in the immediate 
dismissal of Plaintiffs' Complaint, and the entry of default judgment against 
Plaintiffs on Defendant's Counterclaim. No further hearing on W.R.C.P. 37 
sanctions will be necessary.

The court order required 
production of the documents by March 10, 1994. On March 4, 1994, plaintiffs 
produced 37 pages of documents; and on March 11, 1994, plaintiffs produced 58 
pages of documents. On March 15, 1994, the court determined its order had not 
been complied with, dismissed plaintiffs' complaint and granted default judgment 
against plaintiffs on Verkhnesaldincky's counterclaim. Plaintiffs submitted 
additional documents on March 22, 1994, and moved to set aside the default on 
March 25, 1994.

DISCUSSION

A. Rule 37 Sanctions

[¶11]   Did the district court abuse its 
discretion by dismissing plaintiffs' complaint and entering default judgment 
against plaintiffs on defendants' counterclaims? In Farrell v. Hursh Agency, 
Inc., 713 P.2d 1174, 1177-80 (Wyo. 1986), this court set forth the appropriate 
standard of review with respect to a district court's discovery 
decisions:

The rule is that the trial court has broad discretion 
in controlling discovery. Mauch v. Stanley Structures, Inc., Wyo., 641 P.2d 1247 
(1982). * * *

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In contemplating the issue having to do with abuse of 
discretion in the imposition of sanctions, it has been noted that the question 
is not whether the reviewing court would have dismissed the action, but whether 
the trial court abused its discretion in so doing. Margoles v. Johns, 587 F.2d 885 (7th Cir. 1978). * * * We have said that the trial court is given discretion 
with regard to sanctions, even to the point of entering a default judgment. 
Zweifel v. State ex rel. Brimmer, [Wyo., 517 P.2d 493, 498-99 (1974)]. Although 
the sanction of default is clearly not favored, we cannot say that the court 
abused its discretion in entering a default judgment against a party which has 
refused to comply with a court order compelling production of the same 
documents, which had been ordered produced nearly one year earlier. See Jones v. 
Uris Sales Corporation, 373 F.2d 644 (2nd Cir. 1967).

[¶12]   Rule 37 clearly authorizes the 
court to dismiss pleadings as well as grant default judgment against the 
disobedient party. Rule 37(b)(2)(C), W.R.C.P. The plaintiffs were given ample 
opportunity to comply with the district court's discovery order, and they were 
given adequate notice and warning by the district court that failure to comply 
would result in these sanctions. See generally Insurance Corp. of Ireland, Ltd. 
v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 707-08, 102 S. Ct. 2099, 2107, 
72 L. Ed. 2d 492 (1982) ("In holding that the sanction in this case was `just,' we 
rely specifically on the following. * * * The court then warned petitioners of a 
possible sanction. * * * Fourth, petitioners had ample warning that a continued 
failure to comply with the discovery orders would lead to the imposition of this 
sanction."). Yet the plaintiffs failed to comply. The plaintiffs cannot now 
complain of what they were notified would happen upon their failure to comply 
with the district court's discovery order. "Little sympathy will be shown those 
who undermine the principles of discovery." Caterpillar Tractor Co. v. Donahue, 
674 P.2d 1276, 1285 (Wyo. 1983). The district court's order was clear that the 
plaintiffs failed to comply with the court's discovery order and, based upon 
that failure, the plaintiffs' complaint was dismissed and default was entered 
against them.

[¶13]   The district court's order further 
found that the individual plaintiffs acted in such a manner as to justify 
piercing the corporate veil. We need not comment on evidence or lack of evidence 
which would support that finding because the court incorporated the Affidavit of 
Noncompliance in its order which set forth numerous acts of noncompliance by the 
individual plaintiffs. The individual plaintiffs, therefore, were subject to 
sanctions found in W.R.C.P. 37 which included dismissal of their complaint and 
entry of judgment against them.

B. Personal Jurisdiction

[¶14]   Plaintiffs' second issue asserts 
that the court lacked jurisdiction over the individual plaintiffs and therefore 
entry of judgment on the counterclaim was improper. The basis for this argument 
is that the individual plaintiffs appeared by virtue of filing the declaratory 
relief complaint. They claim they had no choice in their appearance because W.S. 
1-37-113 requires that "all persons shall be made parties who have or claim any 
interest which would be affected by the declaration[.]" The individual 
plaintiffs further argue that the counterclaim was permissive rather than 
compulsory in that it did not arise out of the subject matter of the original 
complaint. Because of that, it is claimed, the court does not obtain 
jurisdiction over individuals named in the counterclaim.

[¶15]   This court reviews personal 
jurisdiction issues de novo. Anderson v. Perry, 667 P.2d 1155 (Wyo. 1983); Eddy 
v. Oukrop, 784 P.2d 610 (Wyo. 1989). In Leman v. Krentler-Arnold Hinge Last Co., 
284 U.S. 448, 451, 52 S. Ct. 238, 239-40, 76 L. Ed. 389 (1932), the United States 
Supreme Court concluded that a plaintiff who brings suit against defendants in a 
forum in which the court could not otherwise exercise personal jurisdiction 
submits "itself to the jurisdiction of the court with respect to all the issues 
embraced in the suit, including those pertaining to the counterclaim of the 
defendants[.]" The Supreme Court followed and expanded that rule to issues of 
venue in General Electric Co. v. Marvel Rare Metals Co., 287 U.S. 430, 432-35, 
53 S. Ct. 202, 203-04, 77 L. Ed. 408 (1932). Both Leman and Marvel have been 
consistently followed by other courts. See generally Rubsam v. Harley C. Loney 
Co., 86 F. Supp. 350 (E.D.Mich. 1949); H.R. Basford Co. v. Jones, 22 F.R.D. 319 
(D.Colo. 1958); Commerce Mfg. Co. v. Blue Jeans Corp., 146 F. Supp. 15 (E.D.N.C. 
1956); Howard Concrete Pipe Co. v. Cohen, 139 Ga. App. 491, 229 S.E.2d 8 (1976); 
Dewey & Almy Chemical Co. v. Johnson, Drake & Piper, Inc., 25 F. Supp. 1021 (E.D.N.Y. 1939) (stating general rule that "[t]he plaintiff by coming 
voluntarily into the District Court of this District subjects itself to the 
Jurisdiction of this Court in respect to all possible grounds of 
counterclaim.").

[¶16]   Furthermore, in Insurance Corp. of 
Ireland, the United States Supreme Court concluded that because the requirement 
of personal jurisdiction represents first of all an individual right, it can, 
like other such rights, be waived. Id., 456 U.S.  at 703, 102 S. Ct.  at 2105. The 
Court stated that regardless of the power of the state to serve process, an 
individual may submit to the jurisdiction of the court by appearance. Id. The 
Court went on to state that it has upheld state procedures which find 
constructive consent to the personal jurisdiction of the state court in the 
voluntary use of certain state procedures. Id., 456 U.S.  at 704, 102 S. Ct.  at 
2105 (citing Adam v. Saenger, 303 U.S. 59, 67-68, 58 S. Ct. 454, 458, 82 L. Ed. 649 (1938) ("There is nothing in the Fourteenth Amendment to prevent a state 
from adopting a procedure by which a judgment in personam may be rendered in a 
cross-action against a plaintiff in its courts * * *. It is the price which the 
state may exact as the condition of opening its courts to the 
plaintiff")).

[¶17]   The individual plaintiffs invoked 
the district court's authority as shareholders and alleged officers and 
directors of Plaintiff Global Shipping and Trading, Ltd., a Wyoming corporation. 
The individual plaintiffs incorporated Global Shipping in Wyoming. The 
individual plaintiffs invoked Wyoming law and the district court's authority to 
protect Global Shipping's interest against the defendants. Furthermore, the 
individual plaintiffs invoked Wyoming law and the district court's authority and 
submitted to the district court's jurisdiction by asking the district court to 
enjoin the defendants from acting as shareholders, directors and officers of 
Global Shipping, reinstating the individual plaintiffs as Global Shipping's sole 
shareholders, directors and officers. Defendants' counterclaim to pierce the 
corporate veil of a Wyoming corporation and to hold the directors and officers 
of that Wyoming corporation liable for the debts of the corporation asserted a 
claim for relief resting wholly and only in Wyoming law.

[¶18]   The individual plaintiffs submitted 
to the district court's jurisdiction by voluntarily appearing and bringing their 
original action in the district court. This is the price the state of Wyoming 
exacts from the individual plaintiffs for opening its courts to them. They, 
therefore, waived any objection to personal jurisdiction. The district court 
appropriately exercised specific personal jurisdiction over those officers and 
directors with respect to the counterclaim. The individual plaintiffs invoked 
the jurisdiction of the district court by seeking affirmative relief against the 
defendants.

CONCLUSION

[¶19]   The decision of the district court 
is affirmed in all respects.