Court Opinion

ID: 9467972
Source: CourtListenerOpinion
Date Created: 2023-08-05 02:00:55.325493+00
Date Added: 2024-06-11T17:40:36.958471
License: Public Domain

J. BLAINE ANDERSON, Circuit Judge
(dissenting):
I am now thoroughly convinced that my concurrence in the opinion filed in this appeal on the 17th day of January, 1980, was ill-advised and mistaken. I withdraw my concurrence and dissent from that opinion and from the vote of my colleagues to deny the petition for rehearing. My reasons, which I should have expressed earlier, are now set forth.
The general rule is that discovery orders, such as the one denying further discovery in the present case, are reviewed under an “abuse of discretion” standard. However,. this limited standard of review cannot afford any protection to a discovery order which is erroneous as a matter of law. People of State of California ex rel. Younger v. Tahoe Regional Planning Agency, 516 F.2d 215, 217 (9th Cir. 1975), cert. denied, 423 U.S. 868, 96 S.Ct. 131, 46 L.Ed.2d 97. Since the district court’s order in the present case was based solely on its legal conclusions on the meaning of the agreement, its action is freely reviewable on appeal. Id. Not only does a fair reading of the agreement1 reveal that it could not have been intended as Westwood’s release of its discovery rights against Dart, but also important policy considerations militate against such a result.
Accepting for the moment the characterization of the agreement as not containing any ambiguous language, the agreement is still not susceptible of the interpretation given to it by the majority. The agreement is entitled “General Release” and it contains much of the standard boiler plate to live up to this advance billing. There can be no doubt but that it releases Westwood’s rights against Dart which arose from the alleged conspiracy between Dart and Westwood’s former employees. The agreement also clearly states that: “It is understood that this release applies solely to DART INDUSTRIES, INC. and Synthetic Products and to no other party whatsoever.” Nowhere in the agreement is there any reference made to Westwood giving up or releasing its right of discovery from Dart. Yet, this is how the majority reads the agreement.
Since the agreement contains absolutely no discussion of discovery, and the parties obviously attach totally different meanings to it, the only possible way to read the release of discovery rights into it is by considering it ambiguous so that other evidence may be considered in determining the intent of the parties. See United States v. Haas & Haynie Corp., 577 F.2d 568, 572 (9th Cir. 1978).
At the time the agreement was entered into, it was made absolutely clear to Dart that Westwood intended to sue its former employees. The majority opinion points out: “an exception was expressly set forth in the agreement with respect to the two former employees.... ” As the alleged co-conspirator with these former employees, Dart was on notice that Westwood would seek discovery. Yet, Dart did not include a *652provision preventing discovery in the agreement. Since Dart either knew or had reason to know of Westwood’s interpretation of the agreement, it should be given the meaning attributed to it by Westwood (that is, no release of discovery rights). Haas & Haynie, supra, 577 F.2d at 573.
Moreover, Dart was the principal author of the agreement, and as such it should be construed in favor of Westwood. See 4 Williston on Contracts, § 621 (3d ed. 1961). This is particularly true where Dart admits knowledge of the pending lawsuit against the former employees, yet does not include any language about discovery in the agreement.
Upon further study and reflection, I am satisfied that we cannot apply the abuse of discretion standard on review of this issue. The district court, by denying all discovery from Dart, has done violence to all previous interpretation and experience under the discovery rules. As the Supreme Court has noted, the discovery rules “are to be accorded a broad and liberal treatment.” Hickman v. Taylor, 329 U.S. 495, 507, 67 S.Ct. 385, 392, 91 L.Ed. 451 (1947). The basic philosophy underlying discovery is that “prior to trial every party to a civil action is entitled to the disclosure of all relevant information in the possession of any person, unless' the information is privileged.” Wright, Law of Federal Courts 354 (2d ed.' 1970). Moreover, district courts “should guard against unnecessarily restricting the parties’ access to discovery.” Kyle Engineering Co. v. Kleppe, 600 F.2d 226, 232 (9th Cir. 1979). These considerations alone are a sufficient basis for reversing the district court’s order. See e. g., In re Westinghouse Elec. Corp., etc., 570 F.2d 899, 902 (10th Cir. 1978).
Furthermore, the majority opinion represents an unwarranted extension of the rule favoring the settlement of litigation.2 It is undisputed that the agreement settled all claims which Westwood had against Dart. (It should be noted that the major portion of the $700,000 payment to Westwood merely represented money due under their sales agreement.) Had Westwood sought to pursue claims against Dart, then the rule favoring settlement should bar those claims. But here an entirely different situation arises. Westwood is attempting to sue its two former employees and seeks discovery from Dart in relation to that litigation. In reaching its settlement agreement with Westwood, Dart was not acting as a representative of any other party. At no time did Westwood or Dart contemplate the settlement of any claims which Westwood might have against any other party. Moreover, as to Westwood’s two former employees, it was specifically recognized by the parties that Westwood would pursue its claim against them. Given these facts, the policy favoring settlement and the cases cited by the majority are irrelevant to this case, and should not be applied to terminate Westwood’s discovery rights.
What the district court and the majority opinion have done is to stretch the settlement agreement so as to destroy or at least seriously affect Westwood’s cause of action against nonparties (the two former employees) to the settlement agreement. It must be remembered that Westwood expressly reserved its right to sue these two former employees in the settlement agreement. Despite this express reservation and the fact that any policy in favor of settlement is irrelevant, the majority chooses to affirm the district court’s order which was clearly erroneous as a matter of law.
Because I am convinced that the district court’s order denying all further discovery by Westwood from Dart was contrary to the terms of the agreement, contrary to all general rules of contract interpretation, and *653contrary to the general policy in favor of discovery, I believe that the petition for rehearing should be granted and the order of the district court reversed.

. Contrary to the majority assertion, this writer is not convinced that the agreement involved in the present case cannot be equated to a covenant not to sue. Where a purported release of one joint debtor (i. e., Dart) states that all rights against another joint debtor are reserved (i. e., the two former employees), then the writing may be interpreted as a contract not to sue, rather than as a release. Restatement (Second) of Contracts § 354, Comment c (Tent. Draft No. 13, March 1, 1978). And, as the case cited by the majority says, “where the court can possibly interpret the document as a covenant not to sue, it will do so.” Dale Hilton, Inc. v. Triangle Publications, Inc., 198 F.Supp. 638, 639 (S.D.N.Y.1961).

. This policy in favor of settlement is far from absolute. In a recent decision this court stated that: “as a general rule a stipulation should not be construed as a stipulation that disposes of the entire case unless there is an unequivocal statement by the parties that it was so intended.” Vuitton Et Fils, S. A. v. J. Young Enterprises, Inc., 609 F.2d 1335, 1337 (9th Cir. 1979). By analogy this same reasoning should apply here. This writer does not believe that the agreement not to sue should be construed as a release of discovery rights in the absence of an unequivocal statement by the parties that it was so intended.