Richmark Corp. v. Timber Falling Consultants

Beijing Ever Bright Industrial Co. (Beijing) (defendant) was incorporated under the laws of the People’s Republic of China (PRC) and was an extension of the PRC government. Timber Falling Consultants, Inc. (Timber) (plaintiff) won a judgment against Beijing and filed for discovery of Beijing’s assets in federal district court. Beijing opposed discovery. The district court ordered Beijing to comply, but Beijing refused. It was undisputed that the discovery request was barred by the PRC’s State Secrets Act, which imposed criminal penalties for prohibited disclosures. Beijing’s only step toward seeking permission from the PRC government to disclose the requested material was sending a letter to the Ministry of Justice. The letter noted the wide scope of the discovery order, directed attention to the law Beijing believed barred disclosure, and highlighted the relevance of the State Secrets Act. The letter asked about the procedure to seek a waiver but did not actually ask for a waiver to be granted. Before receiving a response from the Ministry of Justice, Beijing asserted that the State Secrets Act prohibited compliance with the discovery order. The district court sanctioned Beijing, holding it in contempt and imposing daily fines for continued noncompliance. The district court made no finding that Beijing acted in good faith in attempting to obtain a waiver from the PRC. Beijing appealed. Beijing argued that reversal of the discovery order was warranted because the PRC’s laws prevented compliance, and if Beijing did comply, Beijing could be subject to criminal prosecution. Beijing further argued that even if the discovery order was upheld, reversal of the contempt sanction was warranted because Beijing made a good-faith attempt to comply with the order.