Investment Properties International, Ltd. v. IOS, Ltd.
Investment Properties International, Ltd. v. IOS, Ltd.
Opinion of the Court
The posture of this case is procedural, and, contrary to the underlying facts involved,
Plaintiffs-petitioners brought this action for damages for violations of section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and SEC Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5, and for violations of the Sherman Anti-Trust Act, 15 U.S.C. § 1. A request for a preliminary injunction was denied by Judge Marvin E. Frankel on the basis that the “drastic remedy ... of interim restraint” was improper, since it appeared likely that the individual prosecuting the suit lacked capacity to bring it in the name of the corporate plaintiff, and since “very substantial doubts” existed as to whether plaintiffs could succeed in establishing federal subject matter jurisdiction.
Thereupon plaintiffs-petitioners served a notice of taking depositions of certain named officers of defendant and its subsidiaries, the examination to be limited to the threshold issues of standing and jurisdiction. Defendants-respondents subsequently moved under Fed.R.Civ.P. 26(c) (1), before Judge Dudley B. Bonsai, for. an order vacating plaintiffs-pe
The writ of mandamus
The narrow restraints on the general use of mandamus are all the more difficult to apply vis-a-vis the Federal Rules of Civil Procedure discovery provisions, which to a large extent rely for their effectiveness on the discretion of the trial judge. It is settled in this circuit, however, that “[w]hen a discovery question is of extraordinary significance or there is extreme need for reversal of the district court's mandate before the case goes to judgment, there are escape hatches from the finality rule: . . . [one being] ... an extraordinary writ.” American Express Warehousing, Ltd. v. Transamerica Insurance Co., 380 F.2d 277, 282 (2d Cir. 1967). “Extraordinary significance” and “extreme need for reversal” are standards that are not self-executing. They are to be defined and measured — in deciding whether to entertain a mandamus proceeding — by the touchstones of “usurpation of power, clear abuse of discretion and presence of an issue of first impression.” Id. at 283 [interpreting and applying Schlagenhauf v. Holder, 379 U.S. 104, 85 S.Ct. 234, 13 L.Ed.2d 152 (1964)].
Judge Bonsai clearly had the power to vacate plaintiffs-petitioners’ notices of deposition. Fed.R.Civ.P. 26 (c) (1). Nevertheless, the issue here is one of first impression, and the vacation reveals, through its consequences, an abuse of discretion. Discovery here, furthermore, is not a matter of mere “housekeeping,” see American Express Warehousing, Ltd. v. Transamerica Insurance Co., supra, 380 F.2d at 284, but is the heart of the controversy, for on it turns plaintiffs-petitioners’ right to be in court. The order below makes it virtually impossible to discover the facts on which jurisdiction and standing turn, and thus puts the plaintiffs-petitioners in a cul-de-sac which the Federal Rules never contemplated.
While Judge Bonsai did not give the rationale for this portion of his order, Judge Frankel in denying the earlier request for preliminary relief had stated that there were “sharp disputes” concerning the dates and places of the trans
With respect to some of [the involved stock transactions], plaintiffs say they need an evidentiary hearing or state that they need time to inspect certain records. The court has no desire to foreclose their inquiries. The case may be an appropriate one for trial, and perhaps plaintiffs could profit from discovery. But that is another story for another day. The existence of substantial factual disputes may itself weigh against granting preliminary relief.
Plaintiffs-petitioners essentially argue that Arthur Adelson, who is prosecuting this action, became its president after the transactions purportedly supporting jurisdiction had taken place, and that the truth of those matters lies only within the knowledge and control of defendants-respondents’ officers. Defendants-respondents answer that Adelson did have “access to information which should have enabled him to make at least a minimal showing of a basis of jurisdiction.”
Which allegation is true is unknown to us, yet it seems to us that Judge Bonsai’s order — which limits all further discovery, not just depositions, until jurisdiction is established — places plaintiffs-petitioners’ case in limbo, from which there is no appeal.
Furthermore, an order to vacate a notice of taking is generally regarded as both unusual and unfavorable, see 8 C. Wright & A. Miller, Federal Practice & Procedure § 2037, at 272 (1970), especially
[i]n view of the general philosophy of full discovery of relevant facts and the broad statement of scope in Rule 26, and in view of the power of the court under Rules 26(c) and 30(d) to control the details of time, place, scope, and financing for the protection of the deponents and parties. . . .
4 J. Moore, Federal Practice 26.69, at 26-493, 494 (2d ed. 1971). Cf. Littlejohn v. Shell Oil Co., 456 F.2d 225 (5th Cir., 1972) (2-1 decision) (error to grant motion for summary judgment “before the plaintiff had been afforded the opportunity to utilize discovery to develop basic jurisdictional facts from data solely within the defendants’ possession”).
We consider the order in this case as creating the exceptional circumstances necessary to support the extraordinary writ of mandamus, and we find the criteria of the Schlagenhauf and American Express cases, supra, to be satisfied. See also International Products Corp. v. Koons, 325 F.2d 403 (2d Cir. 1963) (case remanded with suggested modification, application for writ allowed if modification not made); Madison-Lewis, Inc. v. MacMahon, 299 F.2d 256 (2d Cir. 1962) (writ granted; 2-1 decision); 4 J. Moore, Federal Practice ¶ 26.83 [9.-4], at 26-612-622 (2d ed. 1971). Thus we grant the petition for writ of mandamus and direct the district judge to vacate his order entered January 6, 1972, which order vacated plaintiffs-petitioners’ notices of discovery, including depositions, and to allow such limited discovery as will permit the trial court to determine whether it has jurisdiction and whether plaintiffs have standing to prosecute this action. In respect both to standing and to subject matter jurisdiction discovery must be aimed at the production of factual matter other than what appears in the opinion of Judge
Judgment in accordance with opinion.
. The facts of the case, and especially those relative to the standing and jurisdiction issues, are discussed extensively in Judge Marvin E. Frankel’s opinion denying preliminary relief, published in CCH Fed. Sec.L.Rep. ¶ 93,011, at 90,726 (S.D.N.Y. April 21, 1971). On an expedited appeal, this court affirmed that decision without an opinion.
. Or, .alternatively, for an order specifying the way in which any depositions could be taken.
. The All Writs Act, 28 U.S.C. § 1651(a), grants to the federal courts the power to issue “all writs necessary or appropriate in aid of their respective jurisdictions and agreeable to the usages and principles of law.”
. It is, of course, possible for the court below to hear the jurisdictional and standing questions on affidavits only, as well ns on oral testimony or depositions. Fed. R.Civ.P. 43(e). But affidavits based on mere supposition or only of a conclusory nature might well be held insufficient. See, e. g., Unicon Management Corp. v. Hoppers Co., 250 F.Supp. 850 (S.D.N.Y. 1966). See also 5 J. Moore, Federal Practice ¶ 43.13 at 1385 (2d ed. 1971).
Reference
- Full Case Name
- INVESTMENT PROPERTIES INTERNATIONAL, LTD., Plaintiffs-Petitioners v. IOS, LTD., Defendants-Respondents, and Hon. Dudley B. Bonsal, United States District Judge for the Southern District of New York
- Cited By
- 11 cases
- Status
- Published