Opinion ID: 1272032
Heading Depth: 1
Heading Rank: 6

Heading: discovery of partner documents

Text: GAC contends that a partner, who is not itself a party in a case brought against the partnership, may not be ordered to answer interrogatories under N.M.R. Civ.P. 33, N.M.S.A. 1978, or to produce documents under N.M.R. Civ.P. 34, N.M.S.A. 1978. This issue arose when United served its First Set of Interrogatories on GAC. The interrogatories clearly called for information from the partnership or partners. See Section III A, infra, and n. 80, infra. None of these interrogatories was objected to within the time provided by Rule 33. [8] GAC provided only limited information from the partners in its original answers to those interrogatories. During several months of document production that followed the filing of those answers, it did not produce any records from the partners' files. In September 1976, United brought GAC's failure to provide information from the partners to the attention of the trial court. In November 1976, the court ruled that the right to discovery extends to a party partnership and the individual partners comprising the partnership, and the agents, servants, employees, directors and officers of a party or partner, and the court warned that sanctions would be imposed for the failure of the defendant partnership or either partner thereof to comply with specific orders of the Court directing discovery. (Emphasis added.) The court reiterated this ruling on at least five separate occasions in early 1977. It held that the partners have the same obligation in relationship to discovery as the partnership, because [t]he partnership is not an entity in and of the cognizable law. The court stated: GAC has no substantive separate existence in law. It is not a separate legal entity. GAC then argued that even if the court could order production of partnership-related documents in the possession of the partners, it could not require the partners to produce non-partnership documents. The court rejected this contention on at least two occasions. [9] Finally, in early March 1977, GAC began to produce documents which were in the possession of the partners. A year later the default judgment was entered after GAC failed to produce all of Gulf's cartel records. GAC's argument is based on the principle that discovery under Rules 33 and 34 is limited to parties to the case. GAC argues that a partnership is a separate legal entity, and as such, only it, the named defendant in this suit, rather than the non-party constituent partners, is subject to discovery under Rules 33 and 34. We find it unnecessary to consider the extent to which a partnership is a separate legal entity as a matter of substantive partnership law, because we conclude that under Rules 33 and 34 the trial court properly ordered GAC to produce partner documents and to furnish information from the partners. In construing Rules 33 and 34, we must begin with the notion that discovery is designed to make a trial less a game of blindman's buff and more a fair contest with the basic issues and facts disclosed to the fullest practicable extent. United States v. Procter & Gamble, 356 U.S. 677, 682, 78 S.Ct. 983, 986-87, 2 L.Ed.2d 1077 (1958) (citation omitted). In light of that policy, Rules 33 and 34 must be liberally construed in order to insure that a litigant's right to discovery is broad and flexible. Davis v. Westland Development Company, 81 N.M. 296, 299-300, 466 P.2d 862, 865-66 (1970). See also Goldman v. Checker Taxi Company, 325 F.2d 853, 855 (7th Cir.1963); In Re Folding Carton Antitrust Litigation, 76 F.R.D. 420, 423 (N.D. Ill. 1977); Hart v. Wolff, 489 P.2d 114, 117 (Alaska 1971). Rule 33 provides that interrogatories may be served only on a party, but it states that the interrogatories must be answered by the party served, or  if the party served is ... a partnership, ... by any officer or agent, who shall furnish such information as is available to the party.  (Emphasis added.) In an earlier opinion concerning this litigation, we noted that Gulf is a general agent of the GAC partnership. We stated: The agency of a partner is the hallmark of that particular form of business or professional association. United Nuclear Corp. v. General Atomic Co., supra, 90 N.M. at 100, 560 P.2d at 164. See § 54-1-9A, N.M.S.A. 1978. If, under Rule 33, Gulf is obliged as an agent of GAC, to furnish answers to interrogatories directed at the partnership, it would be incongruous to hold that information in the possession of Gulf is not available to GAC for the purpose of giving complete and accurate answers to those interrogatories. Indeed, the rule that all information available to the interrogated party must be supplied . . includes information possessed by, or within the knowledge of, ... agents or representatives of the party. Wycoff v. Nichols, 32 F.R.D. 370, 372 (W.D. Mo. 1963) (citations omitted). Although Rule 34 requires production of documents in the possession, custody or control of a party, and, unlike Rule 33, it does not specifically refer to the discovery obligations of the agents of a partnership, the principle is well-established that Rules 33 and 34 are equally inclusive in their scope. Wilson v. Volkswagen of America, Inc., 561 F.2d 494, 513 (4th Cir.1977), cert. denied, 434 U.S. 1020, 98 S.Ct. 744, 54 L.Ed.2d 768 (1978). See also Davis v. Westland Development Company, supra, 81 N.M. at 299, 466 P.2d at 865. [10] GAC concedes that the two rules should be similarly construed, but it argues that the focus should be on the concept of control under Rule 34, rather than on the phrase available in Rule 33. However, the proper focus is not so much on one phrase or on the other, as it is on the purposes underlying each limitation on the scope of discovery under those rules. In each instance, the purposes are relatively apparent and very pragmatic. Each phrase embodies only two limitations. First, a party obviously cannot be required to produce materials which he is incapable of procuring. Second, in general a party should not be required to obtain, collect or turn over materials which the opposing party is equally capable of obtaining on its own. Konczakowski v. Paramount Pictures, 20 F.R.D. 588, 593 (S.D.N.Y. 1957); Cinema Amusements v. Loew's, Inc., 7 F.R.D. 318, 321 (D. Del. 1947). It is undisputed that neither United nor I&M was capable of procuring on its own the information and documents sought from the partners. Thus, the critical inquiry concerns only the first of the above mentioned principles  whether the party from whom the materials are sought has the practical ability to obtain those materials. Because the inquiry is a pragmatic one, the phrases available and possession, custody or control should not be subjected to formalistic strictures which ignore the policy of liberal discovery and the practical realities of the particular situation at issue. See Hart v. Wolff, supra, 489 P.2d at 117. Thus, it is immaterial under Rules 33 and 34 that the party subject to the discovery orders does not own the documents, [11] or that it did not prepare or direct the production of the documents, [12] or that it does not have actual physical possession of them. [13] It is also clear that the mere fact that the documents are in the possession of an individual or entity which is different or separate from that of the named party is not determinative of the question of availability or control. [14] In light of the fact that partner documents were ultimately produced in this case, there can be little doubt that, as a practical matter, those documents were available to GAC. [15] Therefore, they were subject to discovery orders entered under Rules 33 and 34. Our holding in this regard is not only supported by the language and underlying purposes of Rules 33 and 34, but also, it is mandated by two practical considerations. The first concerns the nature of a partnership; the second involves the business relationships of the entities involved in this case. A partnership is composed of and can only act through its constituent partners. As the trial judge pointed out in this case, if the discovery obligations of a partnership do not extend to the individual partners, then the partners could avoid all meaningful discovery by the simple expedient of maintaining the information and documents related to the partnership business in the separately located files of the partners, rather than in the partnership offices. Cf. C. Wright & A. Miller, Federal Practice and Procedure: Civil § 2208, p. 616 (1970) ([A] party cannot immunize a document from inspection by turning it over to a nonparty so long as it remains in the party's control. (Footnote omitted.)) The second practical consideration which compels the conclusion that documents in the separate possession of the partners should be subject to production concerns the nature of Gulf uranium activities and the history of the General Atomic business operation as they relate to the issues raised in this case. Although GAC is a partnership rather than a subsidiary of Gulf, it simply took over the business of Gulf Energy including that of Gulf General Atomic. Gulf Energy was planned to be and was operated by Gulf as one part of a coordinated, comprehensive uranium business. Thus, through Gulf Minerals, Gulf Canada and Gulf Energy, Gulf was involved in the production of uranium, the purchase and sale of uranium supplies, the fabrication of uranium fuel and the manufacture of nuclear reactors. Prior to the creation of GAC, these various Gulf divisions or subsidiaries were clearly not operationally divorced from one another. [16] The transformation of Gulf Energy from a Gulf division to a partnership with Scallop changed the form of the business organization, but not the nature of the business it conducted. There was a substantial continuity of identity in the top levels of management. [17] GAC succeeded to the business records of Gulf General Atomic, Gulf Energy and Gulf-United. The evidence does not indicate that when GAC took over Gulf Energy  operating an identical business, in identical offices, with the same records, and with largely the same personnel in essentially unchanged reporting relationships  it suddenly became totally divorced from the uranium activities of the partners comprising it. [18] The flow of information and the transfer of key personnel from one entity to another; the past history of close coordination of activities between GAC's predecessor and other Gulf companies; and the continuity of business purpose  all substantially refute any such implication. We fail to see how what was apparently interrelated for purposes of corporate profit became totally separate and distinct when it became the subject of discovery in litigation. Other decisions involving discovery from distinct, though related, corporations in cases in which only one corporation is named as a party, support our conclusion that the coordinated nature of the business enterprises of separate entities may justify the imposition of discovery obligations on those entities which are not parties to the action. In Societe Internationale, Etc. v. McGranery, 111 F. Supp. 435 (D.D.C. 1953), modified on other grounds sub nom., Societe Internationale, Etc. v. Brownell, 96 U.S.App.D.C. 232, 225 F.2d 532 (D.C. Cir.1955), rev'd on other grounds sub nom., Societe Internationale v. Rogers, 357 U.S. 197, 78 S.Ct. 1087, 2 L.Ed.2d 1255 (1958), the court ordered production of documents in the possession of a corporation, which, although related to the corporate-plaintiff, was not itself a party. The court said: Certain it is that the court can pierce the corporate veil to determine the true character of the interests making up its composition. Subtle relationships are necessarily to be contemplated. Through the interlocked web of corporate organization, management and finance there runs the thread of a fundamental identity of individuals in the pattern of control. 111 F. Supp. at 441-42 (citations omitted). See also In Re Uranium Antitrust Litigation, 480 F. Supp. 1138, 1153 (N.D. Ill. 1979) (The formalities separating the two corporations cannot be used as a screen to disguise the coordinated nature of their uranium enterprise). These two decisions are consistent with our own in recognizing not only the practical managerial connections between the various entities, but also, the identity of financial interest in the outcome of the litigation. As GAC pointed out on this appeal, Gulf has a very significant interest in this litigation, and stands to gain or lose immediately from any decision. It should not be very startling then that we demand as the price of possible legal victory full participation in the disclosure of relevant information by those who stand to profit from the ultimate outcome. Therefore, we hold that the trial court properly concluded that documents and information in the separate possession of the partners were subject to production in a suit in which only the partnership was named as a party. [19] B.