BB&T BOLI Plan Trust v. Massachusetts Mutual Life Ins. Co., November 20, 2009 (Diaz)(unpublished)

The Court stayed discovery pending its resolution of a Motion to Dismiss. There is no discussion in the very short Order of the reasons for the Court's decision, but the briefs are useful.

Full Opinion

MassMutual's Brief in Support of Stay of Discovery

Clark Consulting's Brief in Support of Stay of Discovery

BB&T's Opposition to Both Motions

MassMutual's Reply Brief in Support of Stay of Discovery

Clark Consulting's Brief in Support of Stay of Discovery

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Azalea Garden Board & Care, Inc. v. Vanhoy, 2009 NCBC 9 (N.C. Super. Ct. March 26, 2009)(Tennille)

This case involves sanctions under Rule 26(g) of the North Carolina Rules of Civil Procedure, which provides that an attorney's signature on a discovery response is a certification that it is "consistent with the rules," and "not interposed for any improper purpose," and "not unreasonable or unduly burdensome or expensive."

The Court determined that sanctions under Rule 26(g) are mandatory in the event of a violation, and that Rule 11 cases don't have much relevance in a Rule 26(g) sanctions motion.

Plaintiff was sanctioned because its counsel had (1) designated one person (Wagner) as an expert "without an intention of having  Wagner prepare any expert report containing his opinions and the basis therefore, (2) failing to make inquiry into Wagner’s qualifications to give any expert opinions, and (3) designating [another witness, Tarr] as an expert without even having communicated with Tarr." Op. ¶28.

Lawyers have a duty to cooperate in discovery in complex cases. Forthright discovery is particularly important, said Judge Tennille, when expert discovery is involved.  He held that "[o]ur rules are designed to flush out what opinions are going to be expressed at trial so that challenges to those opinions can be heard pretrial without wasting the jurors’ time. Responses to discovery that comply with the rules save the parties and the courts substantial time and money." Op. ¶13.

Another factor leading to sanctions was Plaintiff's counsel refusal to discuss matters with Defendant's counsel.  Judge Tennille said that ""[l]awyers have a responsibility and a duty to their clients, the Court, and opposing counsel to communicate openly and civilly with each other. A failure to do so is a breach of their professional duties and results in unnecessary delay and expense to the parties and the Court." Op. ¶32.

Full Opinion

Brief in Support of Motion for Sanctions

Brief in Opposition to Motion for Sanctions

Medicus Healthcare, LLC v. Nazemetz, February 25, 2009 (Diaz)(unpublished)

The Court struck Defendants' Motion for Summary Judgment because it violated Business Court Rule 15.2, which requires that "[]ll motions, unless made orally during a hearing or trial, . . . be in paper writing or electronic form and . . . be accompanied by a brief . . . set out in a separate paper."  Defendants had incorporated their Motion and the arguments in support of the Motion into a single filing. 

The Court granted leave to refile the Motion, but observed that it had been filed before the close of discovery, and stated that "[w]hile it is true that, pursuant to Rule 56, '[a] party seeking to recover upon a claim . . . may, at any time after the expiration of 30 days from the commencement of the action . . . move with or without supporting affidavits for a summary judgment in his favor[,]' N.C. R. Civ. P. 56(a) (2007), a 'motion filed at the outset of a case that is not limited to purely legal issues should be carefully scrutinized because at least some discovery is usually warranted where factual contentions are in dispute,' 2 G. Gray Wilson, North Carolina Civil Procedure § 56-7 (3d ed. 2007)."

The Court said that it would "carefully scrutinize any such Motion to determine whether it should be heard before the close of discovery."

Full Opinion

Allen v. Land Resource Group, February 18, 2009 (Tennille)(unpublished)

The Court entered a stay of discovery pending its resolution of a Motion to Dismiss.

Full Opinion

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Hilb Rogal & Hobbs Co. v. Sellars, December 31, 2008 (Diaz)(unpublished)

Business Court Rule 15.12, which is titled "Determination Of Discovery Motions Through Oral Argument Without Briefs" states that "with the consent of both parties and as allowed by the Court, the parties may present motions and the Court may resolve disputes regarding discovery matters through the use of an expedited oral argument procedure. Such motions will routinely be limited to matters which can be argued and determined in one hour or less."

The Court will not consider the use of this expedited procedure without the consent of the non-moving party, as required by the language of the Rule.

In Hilb, the Court struck the Motion to Compel filed by the Plaintiff because consent had not been obtained.

Full Opinion

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Wallace & Graham, P.A. v. Jackson, December 16, 2008 (Diaz)(unpublished)

In this case, the Court rejected the unopposed motion of the plaintiff to place the entire contents of a case which had been settled under seal.  

The Court's rationale ran like this:

  • It is inconsistent with the North Carolina Public Records Act, N.C. Gen. Stat. §§ 132-1 to 132-10 (2007), to put everything in a case file under seal.
  • The Public Records law provides that there should be "liberal access to public records," and that public records "must be made available for public inspection" in the absence of a “clear statutory exemption or exception."
  • Civil and criminal case filings are public records.  The public has a statutory right of inspection of court filings pursuant to N.C. Gen. Stat. § 7A-109(a) (2007).
  • The public's right of access to court filings can be limited only “when there is a compelling countervailing public interest and closure of the court proceedings or sealing of documents is required to protect such countervailing public interest,” per the North Carolina Supreme Court's decision in Virmani v. Presbyterian Health Servs., 350 N.C. 449, 476, 515 S.E.2d 675, 693 (1999).

Judge Diaz indicated that he would consider the arguments of the parties as to the need for sealing particular documents in "due course."

This isn't the first time that the parties to this case tried to keep their dispute out of the public eye.  Back in September 2008, Judge Diaz entered an Order denying their request for a blanket protective order permitting them to file all exhibits to their briefs and pleadings under seal.  The rationale of that Order was pretty much the same as the order entered in December.

Full Opinion

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Garrett v. Parton, December 15, 2008 (Jolly)(unpublished)

The Court allowed a stay of discovery while it considered the Defendants' Motions to Dismiss, stating that "a brief stay of discovery initiatives has the laudable potential of minmizing fees, expenses and the various costs of litigation for the parties in this matter.  Such a stay is in the best interests of justice."

Full Opinion

Brief in Support of Motion to Stay Discovery

Brief in Opposition to Motion to Stay Discovery

Bonus: Delaware Court of Chancery Letter Opinion staying discovery

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Ehrenhaus v. Baker, 2008 NCBC 19 (N.C. Super. Ct. November 3, 2008)(Diaz)

The Court denied a Motion for Expedited Discovery in a shareholder class action seeking injunctive relief against the merger of two national banks, finding that the facts necessary to decide the motion were already publicly known.

The Court considered several different tests for when expedited discovery should be allowed, including:

Crown Crafts, Inc. v. Aldrich, 148 F.R.D. 151, 152 (E.D.N.C. 1993), in which the court held that the plaintiff should be required “to demonstrate (1) irreparable injury, (2) some probability of success on the merits, (3) some connection between the expedited discovery and the avoidance of the irreparable injury, and (4) some evidence that the injury that will result without expedited discovery looms greater than the injury that the defendant will suffer if the expedited relief is granted.”

Dimension Data N. America, Inc. v. NetStar-1, Inc., 226 F.R.D. 528, 531 (E.D.N.C. 2005), requiring a showing of reasonableness and good cause for the expedited discovery, "taking into account the totality of the circumstances."

Marie Raymond Revocable Trust v. MAT Five LLC, 2008 Del. Ch. LEXIS 77, at * 6 (June 26, 2008), requiring a plaintiff to “articulate a sufficiently colorable claim and shoe a sufficient possibility of a threatened irreparable injury to justify imposing on the defendants and the public the extra (and sometimes substantial) costs of an expedited . . . proceeding.”

The Court did not endorse any particular test.

Full Opinion

Plaintiff's Brief In Support of Expedited Discovery

Defendant's Brief in Opposition to Expedited Discovery

Plaintiff's Reply Brief in Support of Expedited Discovery 

 

Armacell LLC v. Bostic, October 29, 2008 (unpublished)(Tennille)

Judge Tennille drew an adverse inference as a result of the Defendant's claiming of his Fifth Amendment privilege against self incrimination and entered a Preliminary Injunction, holding:

In a civil case, adverse inferences may be drawn against a party who asserts the Fifth Amendment and remains silent.  Baxter v. Palmigiano, 425 U.S. 308, 318 (1976) (“the Fifth Amendment does not forbid adverse inferences against parties to civil actions when they refuse to testify in response to probative evidence offered against them”); see Arminius Schleifmittel GMBH v. Design Indus., Inc., 2007 WL 534573 (M.D.N.C. Feb. 15, 2007) (granting injunction against defendant who asserted Fifth Amendment privilege because by asserting the privilege he rendered plaintiff’s factual presentation unrebutted). Because Bostic has not rebutted Plaintiff’s evidence, Plaintiff has established a likelihood of success on the merits of its claims for misappropriation of trade secrets and breach of his confidentiality agreement.

Order at 3.

Full Opinion

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Robert Half Int'l Inc. v. Revis, July 28, 2008 (Diaz)(unpublished)

The Business Court denied the Plaintiff's Motion for Expedited Discovery, without discussion, in its Order in this covenant not to compete case.  From looking at Defendant's brief in opposition, what probably doomed the motion was that the one year non-compete period had nearly expired when Plaintiff requested expedited discovery.  The same Order was entered on the same day in a companion case, Robert Half Int'l Inc. v. Flood.

Full Opinion

Brief in Support of Motion for Expedited Discovery

Brief in Opposition to Motion for Expedited Discovery

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State ex rel. Cooper v. McClure, January 4, 2007 (Tennille)(unpublished)

The Court granted a Motion for Protective Order preventing Defendant from determining the identity of a confidential informant to the Department of Environment and Natural Resources.  The Court found that the identity of the confidential informant was "of no consequence to the issues in this case."  The Court further found that there was good cause for the entry of the Protective Order, holding:

Here, the burdens of the proposed discovery greatly outweigh any benefits, and Plaintiffs have demonstrated good cause for the entry of a protective order. The most significant burden of forcing DENR to reveal the identity of the informant is the chilling effect such a ruling would have on potential informants. The Court wishes to encourage individuals who believe a fraud is being committed on the state to present such information to the proper authorities. Without the promise of confidentiality, such individuals are less likely to come forward. There may be instances in which circumstances require disclosure of the identity of a confidential informant under the discovery rules, but this is not one of them. Here, where the Defendants already know the substance of the informant’s communications and have demonstrated no genuine need for the informant’s identity, the Court is unwilling to erode the incentives offered to the public to speak out when they observe a possible fraud on their government.

Full Opinion

Brief in Support of Motion for Protective Order

Reply Brief in Support of Motion for Protective Order

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UPS Capital Business Credit (Inc.) v. Royal American Company, LLC, January 31, 2007 (Tennille)(unpublished)

This opinion dealt with subpoenas to a party's attorney and its accounting firm.  The Court quashed the subpoena to the law firm (Gray Layton), holding:

Service of a subpoena duces tecum on a law firm seeking documents from the firm’s client files clearly raises worrisome issues of attorney-client and work product privilege. The attorney-client privilege protects confidential communications between attorney and client “made on the faith of the relationship between them.” Kenneth S. Broun, Brandis & Broun on North Carolina Evidence § 129 (4th ed. 1993). The work product privilege prevents disclosure of the “mental impressions, conclusions, opinions, or legal theories of an attorney or other representative of a party concerning the litigation in which the material is sought.” N.C. R. Civ. P. 26(b)(3). The Court may quash a subpoena if it “requires disclosure of privileged or other protected matter.” N.C. R. Civ. P. 45(c)(3)(b), (c)(5). Gray Layton’s files may well contain materials protected by one or both of these privileges.

 The Court enforced the subpoena to the accounting firm, however, holding:

In 2001, the Court of Appeals restated that “[a]n accountant-client privilege is not recognized in North Carolina.” Miles v. Martin, 147 N.C. App. 255, 261, 555 S.E.2d 361, 365 (2001) (citing State v. Agnew, 294 N.C. 382, 394, 241 S.E.2d 684, 692 (1978)). In the absence of such a privilege, the Court finds no reason to quash the subpoena served on McCannon Rogers.

Full Opinion

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Hilb Rogal & Hobbs Co. v. Sellars, October 23, 2007 (Diaz)(unpublished)

The Court denied a motion for expedited discovery, but noted that the discovery at issue had already been served, and stated that "[i]n light of the claims alleged in the Complaint, the Court is not inclined to look favorably upon a motion by Defendant for an extension of time to respond to those requests."

Full Opinion

Brief in Support of Motion for Expedited Discovery

Brief in Opposition to Motion for Expedited Discovery

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Harco Nat'l Ins. Co. v. Grant Thornton LLP, December 27, 2006 (Tennille)(unpublished)

Plaintiff was entitled to discovery of documents relating to an arbitration proceeding involving similar claims, even though the legal issues were not identical, and also notwithstanding a confidentiality agreement entered by the arbitrator in the arbitration case. 

The Court made this comment on the standard of relevancy for discovery purposes:

A fundamental requirement of Rule 26, and the focus of the Court’s analysis here, is that the information sought to be discovered must be “relevant” to the pending action. The test of relevancy under Rule 26 is not the same as the more stringent relevancy requirement of Rule 401 of the North Carolina Rules of Evidence. See N.C. R. Evid. 401 (“‘Relevant evidence’ means evidence having any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence.”); see also Adams v. Lovette, 105 N.C. App. 23, 29, 411 S.E.2d 620, 624 (1992), aff’d, 332 N.C. 659, 422 S.E.2d 575 (1992). Moreover, a determination that information is relevant for discovery purposes does not necessarily mean that the information is admissible at trial. The latter determination is made according to Rule 401 of the Rules of Evidence. Shellhorn v. Brad Ragan, Inc., 38 N.C. App. 310, 314, 248 S.E.2d 103, 106 (1978). To be relevant for discovery purposes, the information sought need only be “reasonably calculated” to lead to the discovery of relevant evidence admissible at trial. See N.C. R. Civ. P. 26(b)(1).

The Court also held that there might be circumstances where an arbitrator's ruling on confidentiality might be enforced:

The Court emphasizes the narrow and fact-specific nature of this ruling. There may be instances in which recognition of an arbitration panel’s confidentiality order is warranted. This Court recently acknowledged the strong state and federal public policy in favor of resolving disputes through arbitration. See, e.g., State v. Philip Morris USA, Inc., 2006 NCBC 22 ¶ 35 (N.C. Super. Ct. Dec. 4, 2006), http://www.ncbusinesscourt.net/opinions/2006%20NCBC%2022.htm. Confidentiality is an important part of the settlement process and is perceived as a clear advantage of arbitration. See, e.g., Richard C. Reuben, Constitutional Gravity: A Unitary Theory of Alternative Dispute Resolution and Public Civil Justice, 47 UCLA L. Rev. 949, 1086 (2000) (noting that “privacy can be an important consideration in the decision to waive full-blown trial rights in favor of the arbitral forum). However, in this case, the arbitration involves facts and witness that are also relevant to cases before this Court. Disclosure of the reinsurance arbitration information will be protected by the confidentiality order in place in this case and will promote the efficient resolution of these cases by streamlining the discovery process and refining the issues to be determined at trial.

Full Opinion

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Hilb Rogal & Hobbs Co. v. Sellars, July 8, 2008 (Diaz)(unpublished)

A North Carolina court has no authority to enforce a subpoena issued to an out-of-state non-party, even if the non-party has a registered agent in North Carolina.

Full Opinion

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Robert Half International, Inc. v. Revis, June 26, 2008 (Diaz)(unpublished)

The Court, sua sponte, struck Plaintiff's Motion for Expedited Discovery because Plaintiff had not included a Rule 18.6 certification regarding its counsel's efforts to confer with opposing counsel.

Full Opinion

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Harco National Ins. Co. v. BDO Seidman, LLP, June 10, 2008 (Tennille)(unpublished)

The actions and impressions of a non-lawyer sent by counsel to conduct an interview were subject to work product privilege.  

Judge Tennille held that the interviewer (Ms. Lister):

declined to answer questions which called for her mental impressions and litigation strategy based upon attorney-client privilege and work product. Ms. Lister conducted the interview at the direction and under the supervision of the General Counsel of BDO in order to prepare BDO’s defense to the claims asserted in the lawsuit. The Court concludes that the limited amount of information withheld by Ms. Lister was protected as attorney work product under N.C. R. Civ. P. 26(b)(3). Harco elicited testimony about what was said and done at the interview. The information it now seeks relates to impressions and opinions Ms. Lister formed and conveyed to BDO’s General Counsel. Harco has not demonstrated any hardship as it has obtained discovery of the underlying facts. Harco’s Motion to Compel is denied.

Full Opinion

Brief in Opposition to Motion to Compel

Reply Brief in Support of Motion to Compel 

(Brief in Support of Motion to Compel not available)

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Delhaize America, Inc. v. Hinton, June 9, 2008 (Tennille)(unpublished)

The Court granted a Motion for Protective Order over the objection of the North Carolina Department of Revenue in tax refund litigation.  The opinion is very short, but the Briefs have good general discussion on protective order issues.

Full Opinion

Defendant's Brief in Opposition to Motion for Protective Order

Defendant's Brief in Support of Motion for Protective Order 

Hilb Rogal & Hobbs Co. v. Sellars, 2008 NCBC 12 (N.C. Super Ct. June 6, 2008)(Diaz)

The "General Objections" that many lawyers put up front in their responses to discovery requests may not be effective.  The Business Court held that such objections may violate the Rules of Civil Procedure, which require a party to state its objections in response to each interrogatory:

Rule 33 of the North Carolina Rules of Civil Procedure requires that each interrogatory “be answered separately and fully in writing under oath, unless it is objected to, in which event the reasons for objection shall be stated in lieu of an answer.” N.C. Gen. Stat. § 1A-1, Rule 33 (2007). Moreover, “[a]n objection to an interrogatory shall be made by stating the objection and the reason therefore either in the space following the interrogatory or following the restated interrogatory.” N.C. Gen. Stat. § 1A-1, Rule 33 (2007) (emphasis added).

The Court then stated what it said was the ruling of most federal courts on the subject of general objections:

'objections stated at the beginning of the response to the interrogatories, are ineffective and are an abuse of the discovery process because such objections block discovery without explaining why and to what extent.' Waters Edge Living, LLC v. RSUI Indem. Co., 2008 U.S. Dist. LEXIS 33049, at *11 (N.D. Fla. Apr. 22, 2008).

Full Opinion

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Wicks v. Moody, May 14, 2008 (Tennille)(unpublished)

Compliance with the meet and confer obligations contained in Business Court Rule 18.6 is essential before the filing of a discovery motion.

In this case, the Court denied the Plaintiff's Motion for a Protective Order because of counsel's failure to comply with the certification requirements of that Rule.  Judge Tennille held that "this reason alone is sufficient for the Court to deny Plaintiff's motion."

Full Opinion

Azalea Garden Board & Care v. Vanhoy, May 6, 2008 (Tennille)(unpublished)

There is no attorney client privilege or work product privilege between lawyers and their experts regarding information exchanged between them, even if the expert is also the client. 

The Court held:"Plaintiff’s assertion of the attorney client privilege to shield discovery of any communications with counsel involving his expert opinions is misplaced. Expert witnesses are subject to specific rules of discovery under the North Carolina Rules of Civil Procedure. N.C.R. Civ. P. Rule 26(b). Generally, the facts known to and the opinions held by an expert are discoverable as well as the materials the expert relied upon in coming to his or her opinion. See id. at Rule 26(b)(4), 26(b)(1). If [the expert's] opinions are based upon any information supplied to him by counsel that information is discoverable and Plaintiff is required to make disclosures of that information."

Full Opinion

Defendant's Brief 


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Her v. Davis, April 16, 2008 (Diaz)(unpublished)

A party cannot use its own response to an opposing party's Requests for Admission in order to defeat a Motion for Summary Judgment. 

The Court held that "while admissions of a party-opponent are not hearsay, 'a party may not utilize his own admissions at trial.'"  Since evidence that would not be admissible at trial may not be considered on a Motion for Summary Judgment, there was no competent evidence contradicting Defendant's properly supported factual position.  The Court also refused to rely on letters presented by Plaintiff's counsel containing unsworn facts.

As the Court put it, "the bottom line is that neither Plaintiff nor any member of the firm representing Plaintiff have submitted Affidavits refuting the facts set forth" in the Affidavit submitted by Defendant.  On the record before it, the Court granted Defendant's Motion for Summary Judgment.

Full Opinion

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Azalea Garden Board & Care, Inc. v. Vanhoy, April 22, 2008 (Tennille)(unpublished)

A settlement agreement between the plaintiff and a co-defendant was discoverable.  Motion to Compel granted. 

Full Opinion

 

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Bueche v. Noel, April 17, 2008 (Diaz)(unpublished)

Pursuant to Rule 30(e) of the North Carolina Rules of Civil Procedure, a deponent can make substantive changes to her deposition transcript during the thirty day review period, so long as the deponent signs "a statement reciting such changes and the reasons given . . . for making them."  The deponent will, however, be subject to cross-examination on the original answers, which may be used for impeachment or any other relevant purpose. 

If a deponent wants an extension of the thirty day period allowed by Rule 30(e) of the Rules to read and sign a deposition, that extension must come from the Court, not from the court reporter.

Full Opinion

Brief In Support Of Motion To Strike

Brief In Opposition To Motion To Strike

Reply Brief In Support Of Motion To Strike

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International Legwear Group, Inc. v. Legassi Int'l Group (Diaz)(unpublished)

The Court entered a series of discovery rulings in this case.

In a July 2007 ruling, the Court struck a Motion to Compel because the moving party had not included a certificate of compliance with Business Court Rule 18.6(a).  The Court found an attachment including the correspondence between the parties over discovery matters to be insufficient: "[t]he purpose of the certificate is to have the moving party succinctly set out what was done to resolve the dispute short of judicial intervention—the Court has no interest in, nor should it be burdened with, sifting through 23 pages of correspondence to determine whether the parties have complied with its rules."

In an October 2007 opinion, the Court expressed its frustration with the discovery conduct of the lawyers for the parties: "[r]ather than focusing on the merits of the claims, counsel have opted for personal combat, engaging in chest-thumping and mud-slinging the likes of which would make a professional wrestler blush."  The Court admonished that "counsel are not awarded points for gamesmanship in discovery; rather, the proper focus should be on the orderly disclosure of relevant facts."  The Court stayed all further discovery pending its consideration of a raft of Motions to Compel filed by the parties, and reminded the parties of the possibility of sanctions for their conduct.

In a January 2008 opinion,the Court found that Defendant's counsel had "abused the discovery process" by surreptitiously copying privileged documents from electronically stored information (ESI) produced by the Plaintiff.  The Court ordered the data returned to Plaintiff and ruled that the Defendant could not use any of the information.

In a February 2008 ruling, the Court ruled that the Defendant could not make use of any information contained in the returned ESI, even if that information was obtained legitimately, from other sources, during discovery.

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Latigo Investments II, LLC v. Waddell & Reed Financial, Inc., January 14, 2008 (Diaz)(unpublished)

A party must comply with Business Court Rule 15.8 (word limitation for briefs) and 18.6 (requiring certification prior as to resolution efforts before filing a motion to compel) even when pursuing discovery from a non-party.

Full Opinion

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Edgewater Services, Inc. v. Epic Logistics, Inc., May 24, 2007 (Jolly)(unpublished)

Plaintiff sought Defendant's psychiatric records in discovery to determine whether she had ever been treated for bipolar disorder.  The Court determined that the Defendant had not met her burden of establishing that the information sought was subject to the Psychologist-Patient privilege, and ordered the records to be produced. 

Full Opinion

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Plaintiff Entitled To Know Amount Of Coverage Remaining Under Defendant's Insurance Policy

Harco Nat'l Ins. Co. v. Grant Thornton LLP, 2008 NCBC 5 (N.C. Super. Ct. March 4, 2008)(Tennille)

Plaintiff sent discovery regarding the Defendant accounting firm's insurance coverage.  In addition to obtaining information on the face amount of the policy, plaintiff also sought information on the other claims made under the policy and the amount of coverage left under the policy.  The Court rejected the argument that plaintiff was entitled to discovery on the other claims, because it would "lead to unnecessary argument over the policy limits."

The Court ruled, however, that plaintiff was entitled to the information regarding the coverage remaining, because "when it comes time to negotiate, the amount of liability coverage available to a defendant should be disclosed to the plaintiff." A plaintiff is entitled to the "true facts" about the amount of coverage, which means the actual amount remaining to be paid under the policy.

The Court also observed that a refusal to provide accurate information about liability insurance coverage at the time of mediation would not be mediating in good faith.

Harco Nat'l Ins. Co. v. Grant Thornton LLP, 2008 NCBC 4 (N.C. Super. Ct. Mar. 4, 2008)(Tennille)

Plaintiff sought information via a discovery motion not only as to the face amount of defendant's insurance policies, but also the amount of coverage remaining.  The Court ruled that plaintiff was entitled to this information, because "when it comes time to negotiate, the amount of liability coverage available to a defendant should be disclosed to the plaintiff."  A plaintiff is entitled to the "true facts" about the amount of coverage, which means the actual amount remaining to be paid under the policy.  A refusal to provide accurate information about liability insurance coverage at the time of mediation would not be mediating in good faith. 

Full Opinion

(The briefs on this motion were filed under seal and are not available)

 

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Integrated Solutions International, LLC v. Velocitor Solutions, LLC, (June 13, 2006)(Tennille)(unpublished)

The Court ordered highly confidential information, consisting of computer source code, to be produced to an independent expert appointed by the Court.

Full Opinion

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Sea Ranch II, Inc. v. Sea Ranch II Owners Association, Inc., November 15, 2006 (Tennille)(unpublished)

The Court denied plaintiff's Motion to Compel because it failure to file a brief in support of its Motion, as required by Rule 15.11 of the Business Court Rules.

Full Opinion

JDH Capital LLC v. Flowers, 2007 NCBC 31 (N.C. Super. Oct. 12, 2007)(Tennille)

This case addresses a minor, but significant point involving discovery. Rule 33(a) of the North Carolina Rules of Civil Procedure provides that "[i]nterrogatory parts and subparts shall be counted as separate interrogatories" for purposes of counting the number of interrogatories. The Court ruled that a subpart is counted separately only if it is requesting information about a discrete subject. If the subparts are "sufficiently related to the primary question," they will count together as a single interrogatory.

The Court further held that "[i]nterrogatories are designed to elicit facts in a cost-efficient manner" and that they do not need to be "one-event, one-fact questions."

In a sidelight, the Court held that once a case is removed to the Business Court, requests for extensions of time must be addressed to the Business Court, and may not be entered by the Clerk of Court in the County where the case is pending.

Full Opinion

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Lawrence v. UMLIC-Five Corp., 2007 NCBC 30 (N.C. Super. Ct. Sept. 14, 2007)(Diaz)

Plaintiff, who held a default judgment against a North Carolina corporation, sued its directors to collect from them personally. The claims included breach of fiduciary duty, fraudulent conveyance, failure to give notice of dissolution, and piercing the corporate veil.

The directors served discovery aimed at the validity of the amount of the judgment, which potentially reached privileged material. The plaintiffs objected, and before the Court was plaintiff's Motion to Compel. The Court discussed the scope of discovery, the historic strength of the attorney client privilege, and denied the motion. It held that defendants were not entitled to information regarding plaintiffs' analysis of the value of their claims and their discussions with counsel.

In reaching this conclusion, the Court noted that a director of a company in dissolution mode has fiduciary duties to creditors, and an obligation to treat all creditors of the same class equally.

Furthermore, the plaintiffs' communications on the value of their claim were not relevant, as the issue of the damages to be recovered had already been adjudicated.

Also, if the plaintiff managed to pierce the veil of the corporation, they would have established that the directors thoroughly dominated the affairs of the corporation. The directors would then be collaterally estopped from contesting the amount of the judgment. A default judgment is entitled to preclusive effect if the party against whom judgment is entered had a full and fair opportunity to contest it.

Full Opinion

Wachovia Capital Partners, LLC v. Frank Harvey Investment Family Limited Partnership, 2007 NCBC 7 (N.C. Super. Ct. Mar. 5, 2007)(Tennille)

Defendant, via a counterclaim, sought damages as a result of a concluded merger involving a Delaware LLC. The Court held that the decision whether to merge belonged to the Management Committee of the LLC, and that it would review that decision pursuant to the Business Judgment Rule.

Defendant contended that company insiders "stood on both sides of the deal," and they were therefore conflicted in their ability to properly approve this merger. The Court rejected this contention. It held that "the mere presence of managers on both sides of a merger does not mean the transaction must fail due to a conflict of interest." The Court observed that the 95% of the company's shareholders had approved the merger, and that Delaware courts "have made clear that such a 'fully informed vote of stockholders approving a merger will extinguish a claim for breach of fiduciary duty.'"

The remainder of the Court's opinion dealt with defendant's Motion to Compel, which sought information regarding the details of plaintiff's contracts with its teachers with whom it did business. The Court discussed the broad scope of relevancy, and the distinction between relevance for discovery purposes and relevancy at trial, and denied the Motion. It found that the information sought was not relevant, and that it involved confidential business information and information potentially subject to attorney-client privilege.

Full Opinion

Kornegay v. Aspen Asset Group, LLC, 2007 NCBC 5 (N.C. Super. Ct. Feb. 28, 2007)(Diaz)

Plaintiff designated its expert witness in an untimely way, without any good reason. Plaintiff furthermore had not seasonably supplemented an earlier discovery response seeking the identification of expert witnesses. The Court emphasized the duty of parties to comply with the Court's scheduling orders, and stated "[p]ut bluntly, when it comes to matters of case management and scheduling, a party is not entitled to anything unless and until the court says so."

Defendant requested that the testimony of the expert be excluded at trial. The Court recognized the significance of the witness to plaintiff's case, and noted the possibility that the plaintiff might dismiss and re-file if the expert was excluded.

It therefore declined to exclude the expert, and instead sanctioned the plaintiff by ordering him to pay the deposition costs of deposing the expert, and defendant's fees incurred in making the motion. It furthermore gave defendant leave to identify rebuttal experts, and said that defendant should provide disclosure as to the opinions of those experts but that plaintiff would not be entitled to depose them.

The Court further indicated that it would consider a motion to continue by the defendants if they were unable to properly prepare to meet the testimony of plaintiff's expert.

Full Opinion

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AARP v. American Family Prepaid Legal Corp., 2007 NCBC 4 (N.C. Super. Ct. Feb. 23, 2007)(Diaz)

The Court granted a Motion to Quash a subpoena to a non-party. The subpoena was served on the non-party at its corporate offices in Texas, and demanded production of the requested documents in North Carolina. The non-party had no presence in North Carolina, but was licensed by the North Carolina Department of Insurance to do business in North Carolina.

The Court held that although there might be personal jurisdiction in North Carolina over the non-party, the Court's subpoena power was not co-extensive with its jurisdiction. It stated "the existence of personal jurisdiction over a non-party foreign corporation, standing alone, is insufficient to extend the Court's subpoena power to that corporation for purposes of a deposition or the production of documents."

Although North Carolina's insurance law provides that a foreign insurer may be served with "process," that term refers to a summons and complaint in an action against the insurer, not a subpoena.

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Puckett v. KPMG, LLP, 2007 NCBC 2 (N.C. Super. Ct. Feb. 13, 2007)(Diaz)

The Court denied Defendant's Motion for a Protective Order seeking to delay the taking of the depositions of its representatives. It held that the defendants had unreasonably taken the position that they could not be available for depositions for nearly four months. It also rejected their argument that their primary counsel could not be available for their depositions given other commitments, noting that the law firms representing them had 650 lawyers between them, and that it was "confident that [the defendant] can find one or two other lawyers to defend the depositions."

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Bank of America Corporation v. SR International Business Insurance Company, Ltd., 2006 NCBC 15 (N.C. Super. Ct. Nov. 1, 2006)(Tennille)

This case presents the logical corollary to Analog: how should the issue of retrieval of electronically stored information, and the inevitable cost, be allocated when a non-party holds the information?

The target of the subpoena had produced approximately 50,000 documents in response to a subpoena, but balked at retrieving and producing deleted emails contained on backup tapes. The defendant estimated its costs of retrieval at over $1 million.

The Court denied the Motion to Compel, given the significant burden that the non-party would have to shoulder, and also because the moving party was unable to show that it had not already received the information that it needed and its motion was therefore premature. As the Court put it, the information sought appeared to have a "low level of marginal utility" given the early stage of the proceedings.

It held that "what the courts of this state are most likely to reject is an early and all-encompassing request to review inaccessible data stored solely for a catastrophic situation on the premise that there might be something useful and relevant in the data. Rule 45 affords greater protection to nonparties than Rule 26 provides to parties. The courts have an obligation to protect nonparties from burden and expense imposed without sufficient justification."

The Court's opinion attaches the Conference of Chief Justices' Guidelines for State Trial Courts Regarding Discovery of Electronically-Stored Information.

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Analog Devices, Inc. v. Michalski, 2006 NCBC 14 (N.C. Super. Ct. Nov. 1, 2006)(Tennille)

The issue here concerned the now familiar problem of the duty of a party to retrieve electronic data from back-up media, and how the cost of that effort should be allocated. The Court engaged in a thorough review of the various approaches to the issue, ranging from the now-famous Zubulake opinion to the Sedona Principles, and settled on what it called a "rules-based approach," relying heavily on the North Carolina Rules of Civil Procedure.

The Court declined to articulate a "rigid test" to be considered in these types of determinations, recognizing that each situation should be resolved on its own facts, but the Court referenced with approval the Guidelines of the Conference of Chief Justices Regarding Discovery of Electronically Stored Information as well as other factors relied upon by the other approaches to the issue. (In a companion case, SR International, the Court characterized its approach as "a straightforward application of Rule 26 of the North Carolina Rules of Civil Procedure, supplemented by Guidelines adopted by the Conference of Chief Justices.")

The Court held that the "overriding concern" in ruling on ESI issues should be whether or not they are "outcome determinative." It stated that "[i]f the party seeking production would be denied access to information which could have a material effect on a substantive issue in the case and where the cost of obtaining the information would be an insurmountable barrier to the requesting party, the denial of discovery or the allocation of costs to the requesting party could affect the final outcome. Discovery containment should not force such a result. If, on the other hand, the costs to the responding party of producing the information would be unreasonably related to the matter at issue or the amount in controversy, the responding party might be forced to settle without regard to the merits of its claims or defenses."

In the matter before it, where defendants sought the restoration of 400 backup tapes to obtain emails from persons involved in the development of the trade secret information at issue, the Court said it would consider "(1) the burden and expense of production; (2) the needs of the case; (3) the amount in controversy; (4) any limitations on the parties’ resources; and (5) the importance of the issues at stake." On the facts before it, the Court ordered the parties to share the restoration costs equally, and that the plaintiff should search the retrieved information, at its own expense, based on search terms provided by the defendant.

The Court stated that it preferred such issues to be resolved by a Motion for a Protective Order filed by the party claiming excessive cost or burden, as opposed to a Motion to Compel filed by the party seeking the information.

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Media Network, Inc. v. Mullen Advertising, Inc., 2006 NCBC 6 (N.C. Super. Ct. Apr. 21, 2006)(Diaz)

Plaintiff had settled up with a co-defendant, who had been dismissed from the action. A remaining defendant sought discovery of the settlement agreement, but the plaintiff objected on the grounds of Rule 408. The Court ordered production of the settlement agreement, noting that many courts allow discovery of settlement agreements when they are relevant to the settling parties’ bias or credibility. It made no difference that the parties to the settlement agreement had agreed to keep it confidential.

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Banc of America Securities, LLC v. Evergreen International Aviation, Inc., 2006 NCBC 2 (N.C. Super. Ct. Jan. 25, 2006)(Diaz)

The Court addressed the "at issue" exception to the attorney-client privilege in this case. The Court held that the advice of counsel becomes at issue "where the client asserts a claim or defense, and attempts to prove that claim or defense by disclosing or describing an attorney client communication." It held that the defendant had not put its attorneys' advice at issue merely because the attorney's advice was relevant. Plaintiff's motion to compel was denied.

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Praxair, Inc. v. Airgas, Inc., 2000 NCBC 10 (N.C. Super. Ct. Aug. 14, 2000)(Tennille)

The issue here was the admissibility of the testimony of plaintiff's five expert witnesses, who proposed to testify on a variety of subjects.  The Court engaged in a thorough discussion of the scope, and limits, of expert testimony.  It held that experts will not be permitted to testify that a particular legal standard or conclusion has been met, as that would invade the province of the jury. 

Following this preamble, the court considered the five experts in turn.  The first was excluded because his analysis lacked an analytically sound basis.  The second was permitted to testify on the economic considerations that would face the defendants.  The third and fourth were permitted to testify as to the economics of the transaction and the impact of certain financial incentives, but were barred from testifying as to the future actions they believed the defendants would take as a result.  The final expert was permitted to testify on accounting matters. 

The Court also considered whether the plaintiff was entitled to an adverse inference as a result of the defendant's destruction of evidence.  After discussing the issue of spoliation, the Court found that the destruction of documents had been done with an awareness of the litigation, and that the defendant's summary judgment should be denied as a result. 

It held that "although the destruction of evidence, standing alone, is insufficient to allow a party producing such evidence to support a summary judgment claim, such destruction may push a claim that might not otherwise survive summary judgment over the line.” 

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