II. PRIOR PROCEEDINGS
This action was initiated by the filing of a civil suit on February 1, 2002. The complaint alleges that defendants breached contracts to supply heavy crude oil to plaintiff, and that their declaration of force majeure
was invalid. Plaintiff seeks damages, specific performance of the contracts, and declaratory judgment.
An order dated October 30, 2003, established a pre-trial schedule. According to the schedule, all discovery is to be completed no later than October 1, 2004.
In a letter dated April 7, 2004, plaintiff brought a discovery dispute to the Court's attention, alleging a refusal by defendants to produce “critical documents that go to the very heart of this case.” Plaintiff's letter included the following claims:
... the key documents in the case include: (1) those documents showing Defendants' internal discussions of, and reasons for, claiming the force majeure;
(2) how the force majeure
was implemented; and (3) documents sufficient to determine (a) the amount and type of crude Defendants were selling to various other customers during the time. Defendants were claiming they could not deliver to LCR because of a force majeure;
(b) the type of contractual relationship (e.g. spot or term contract) involved; and (c) the date the contract was entered into and the date the crude was delivered. We need these documents for the period 1998 through 2003. After months of promising the electronic data and a summary sales spreadsheet that includes these documents, Defendants announced last week that they would not produce any of these documents.
The letter claimed that defendants had made an announcement relating to discovery on April 1, 2004:
Defendants claimed the attorney general of Venezuela had issued a “directive” that Defendants not produce any electronic data, contending the electronic files were somehow related to an investigation into the alleged sabotage that occurred over a year ago in late 2002. Defendants have stated that, as a result, Defendants will not produce any electronic discovery—including the sales spreadsheets and crude production data previously promised—in either electronic or hard copy form.
Plaintiff attached a letter from the Office of the Attorney General of Venezuela to the General Counsel of PDVSA, dated March 31, 2004. The letter references a request by the recipient, contained in a communication dated March 30, 2004, for “authorization to access all information relevant to the case, including authorization to exhibit electronic documentation produced during the period covering 1998 to 2002.” The letter denied the request, “based on the provisions established in article 304 of the Internal Penal Procedural Code.” Plaintiff asked the Court for an informal discovery conference, and for an order that the defendants “produce within two weeks all responsive electronic discovery, including the summary sales spreadsheets.”
*2 In an order dated April 13, 2004, the Court granted plaintiff's request for a discovery conference, and required the parties to submit letters addressing plaintiff's allegations.
In a letter dated April 19, 2004, defendants stated that “the Attorney General's order has rendered PDVSA unable to produce electronic data,” and that “[a]lthough PDVSA is currently vigorously pursuing reconsideration and administrative review of the Attorney General's decision, until such time as the decision is reversed PDVSA is simply unable to produce any information or data covered by such an order.”
Plaintiff sent to the Court a letter dated April 26, 2004, which provided, in part, as follows:
PDVSA does not dispute it is withholding important, relevant documents. Through third-party discovery, LCR has established that PDVSA sold crude to third parties for higher prices under spot and new short-term contracts while refusing to deliver crude to LCR under a claim of force majeure.
What LCR does not know, however, is (i) the identity of all the third parties; (ii) how much crude was sold to each of them; (iii) the contractual terms of each sale; (iv) the method PDVSA used to allocate available crude among its customers while the force majeure
was pending; and (v) the substance of the internal discussions within PDVSA concerning the force majeure
and its effect on LCR. LCR does not know this information, because PDVSA has withheld it and other relevant information through a strategy of delay and, now, based on the Attorney General's directive.
The letter requested that the Court order, inter alia,
the production by PDVSA of “all responsive documents, both hard copy and electronic discovery within thirty days,” and that “[i]f PDVSA fails to comply with the Court's production order within thirty days, this Court will enter a default judgment against Defendants.”
On May 6, 2004, the parties appeared before the Court for a conference. In his initial description of the nature of the dispute, plaintiff's counsel alleged that plaintiff was “being refused crucial discovery in the case that is in the documents and materials of PDVSA concerning who they were selling to, what they were selling for, how they were allocating this crude oil that should have been being shipped and sold to us among these other customers and what were they saying and writing to each other internally about what they were doing and why they were doing it. It is the information that goes right to the heart of our cause of action.” He alleged that defendants had stated “that the attorney general of Venezuela has directed PDVSA that they cannot produce to us any material that is in the electronic form including material that has once been in electronic form but is now in hard copy, even such a thing as a fax, e-mails, what have you. And they are actually removing from materials that are already in possession of counsel this so-called electronic material that had been gathered and collected weeks or months ago and that they don't intend to, or cannot produce this material to us notwithstanding there is no dispute about its criticality, there is no dispute about its relevance.”
*3 At the conference, defense counsel “recommend[ed] an order from [the Court] requiring production within 60 days.”
An order of this Court dated May 6, 2004, provided, in part, as follows:
With regard to electronic discovery and hard copy, defendants shall produce all responsive documents to plaintiff within 30 days of the date of entry of this order. With regard to the sales summary spreadsheet(s), defendants shall produce to plaintiff both a hard copy and an electronic copy of such document(s). Defendants shall certify their compliance with this order to the Court and plaintiff as soon as compliance is achieved.
The order further stated that:
The Court reserves judgment on what sanctions it will impose if defendants fail to make the production and certify their compliance within 30 days of the date of entry of this order.
In an order dated May 7, 2004, the Court ordered the parties to attend a conference on June 15, 2004, so that the Court could “monitor the parties' attempts to ameliorate the discovery difficulties in the [case], as discussed in the conference of May 6, 2004, and as addressed in the Court's order of the same date.” The order also required each party “to submit to the Court, on or before June 11, 2004, a letter describing any issues to which they would like the Court's attention to turn during this conference.”
On June 8, 2004, defendants sent the Court a letter providing, in part, as follows:
We wish to inform you that PDVSA has not yet been successful in reversing the order of the Office of the Attorney General of Venezuela prohibiting it from disclosing electronic documents and email to third parties. As a result, it will not be able to produce such electronic data by June 9 as established by Your Honor's order of May 6, 2004. PDVSA is continuing its efforts to convince the Attorney General to permit it to disclose the electronic data and is hopeful of receiving permission to do so soon.
Plaintiff wrote a letter dated June 11, 2004, to the Court, providing, in part, as follows:
On June 8, 2004, Defendants notified this Court that they have not complied with the Court's May 6, 2004 order. Defendants have not produced any electronic discovery, and defendants are continuing to remove from the hard copy production documents that were transmitted electronically (e.g.emails, rightfaxes, etc.). Specifically, defendants have not produced a sales summary spreadsheet; documents sufficient to determine how crude oil was allocated among customers during the force majeure;
or all documents concerning internal discussions about the force majeure.
In a letter dated June 14, 2004, defendants informed the Court that “LCR is correct that PDVSA has not yet been able to obtain clearance from the Attorney General of Venezuela to produce electronic documents and printed emails. PDVSA has made and continues to make every effort to obtain that clearance so that it may produce the material.” Defendants attached a letter from the Attorney General of Venezuela, dated June 8, 2004. In that letter the Attorney General informed defendants that “an opinion before the Legal Department will be requested with regards to the ... request to disclose [electronic documents],” and stated that “we hereby advise you that once the opinion by the Legal Department of this Office is given, we will inform you, in writing, the results [sic] of the reconsideration ...” Defendants stated that “PDVSA is hopeful, as a result, of being able to produce the electronic material within the next 30 days.”
*4 On June 15, 2004, the parties appeared before the Court for a conference. In introducing the discovery dispute, plaintiff's counsel made the following statement:
When we were last before Your Honor on May the 6th of this year, Your Honor entered an order that made it very clear that the defendants needed to produce documents within 30 days, documents that they were withholding from production. The documents that we sought were central to the case. They showed the sales of crude by the defendants to other customers other than my client, LCR, and those sales were in violation of LCR's contractual agreements with PDVSA.
The basis for the defendant's failure to produce documents was an order from the attorney general of Venezuela that the defendants claimed prohibited them from producing documents.
He later added that “as we stand right now, really we are in the same position we were when we appeared before Your Honor on May the 6th.”
At the conclusion of the conference, the parties and the Court agreed to the proposal that plaintiff “have prepared a default judgment which becomes effective in 60 days [from May 10, the date of entry of the original order] if the documents are not produced.”
On June 25, 2004, plaintiff filed a motion for default judgment, claiming that defendants had failed to comply with the order of the Court that was entered on May 10, 2004:
Specifically, Defendants failed to produce a sales summary spreadsheet in either hard copy or electronic form; failed to produce any other responsive electronic documents; and continued to remove from hard copy productions documents such as emails and faxes that were transmitted electronically.
On July 8, 2004, defendants filed a reply to plaintiff's motion. Defendants argued that plaintiff's motion was “premature and unwarranted because the only issue before the Court concerns the production of electronic data, which Defendants will be producing by July 9, 2004 as required by the Court.” Defendants stated that the Attorney General of Venezuela had “just conveyed to PDVSA's general counsel, Dr. Porro, that he would reverse his order prohibiting disclosure of electronic data,” and that, “accordingly,” defendants would “be complying fully with the Court's May 10 Order and [would] be producing by July 9 all electronic discovery, including emails that had been in hard copy and spreadsheets of sales data—both electronic and hard copies—that is available to and in the possession of Defendants.”
On July 9, 2004, defendants sent a letter to the Court providing, in part, as follows:
Defendants Petroleos de Venezuela, S.A. and PDVSA–Petroleo, S.A. are pleased to certify to the Court that they have achieved compliance with the May 6, 2004 order—entered on May 10, 2004—requiring the production of a hard and electronic copy of the sales summary spreadsheet(s) and all responsive electronic documents, including hard copies of such electronic documents, to plaintiff within 60 days of entry of that order.
*5 In a letter dated July 13, 2004, plaintiff wrote to the Court in response. The letter provided, in part, as follows:
Last week, PDVSA produced a summary spreadsheet reflecting crude oil sales (both in hard copy and electronically) and over thirty boxes of additional documents. We are in the process of reviewing these documents and, at the present time, are unsure, whether PDVSA has actually achieved compliance with this Court's orders.
The letter also stated that “[b]ased on our review, the crude sales spreadsheet is incomplete,” and gave examples of that claim, such as an absence of “sales to PDVSA affiliates located outside the United States.”
In a letter to the Court dated July 15, 2004, defendants stated that “PDVSA has complied with this Court's May 10, 2004 order. PDVSA has produced all electronic sales information responsive to the plaintiff's requests that it had agreed to produce and that is available to it.”
Defense counsel wrote a letter to plaintiff dated July 22, 2004, which provided, in part, as follows: “[f]irst, as a general matter, I want to reiterate my view that PDVSA has complied with the Court's order of May 6 (entered May 10, 2004). Responsive electronic documents, hard copies of such documents, and hard and electronic copies of the sales summary spreadsheets have been produced.” It went on to state that “[a]s with any voluminous document production, there may have been some inadvertent holes in the production.” In addressing plaintiff's concerns, defendants stated that “some data may have been inadvertently omitted” from the spreadsheets recently produced and stated that they would send a “corrected version” of the spreadsheet the same day.
On July 26, 2004, plaintiff wrote to the Court “to provide further information concerning the [default judgment] motion and to request that this Court grant the pending motion.” Plaintiff alleged that “[c]ontrary to their representations to the Court, Defendants have not complied with this Court's orders. Based on recent statements from Defendants, it is clear that the certification of compliance was inaccurate.” Plaintiff claimed that “defendants have not produced a comprehensive sales summary spreadsheet,” and outlined alleged omissions. Plaintiff claimed that new spreadsheets produced by defendants on July 23, 2004, “included some of the information previously identified by LCR as missing,” but that they were “still incomplete.” Plaintiff's letter also claimed that responsive documents other than the spreadsheets had not been produced, and requested various forms of relief for alleged discovery abuses.
In a letter dated August 2, 2004, defendants responded to plaintiff's letter. They claimed that “the discovery concerns raised by Plaintiff's counsel in his July 26 letter are wholly unrelated to those raised in Plaintiff's motion for default judgment .”
In a letter dated August 3, 2004, plaintiff responded to defendants' letter, stating in part as follows:
*6 During [meetings held on July 20, 2004, and July 22, 2004], we asked defendants to produce a comprehensive sales summary that would include deliveries made to affiliate refineries. Defendants refused. To this day, defendants have not provided a comprehensive spreadsheet setting forth crude deliveries to internal refineries and have not provided comprehensive crude production data—either in hard copy or electronically. Defendants have also failed to remedy the other discovery deficiencies identified in my July 26, 2004, letter.