259 N.C. App. 443
N.C. Ct. App.2018Background
- GEA (GEA, Inc., DeVine, Farkas) licensed trademarks, domains, software, and a customer database to Luxury after LeClair purchased Luxury; disputes arose over alleged misuse and unpaid royalties.
- GEA served a Rule 34 inspection demand for company and employee computers after LeClair moved Luxury’s offices and allegedly discarded many devices.
- At deposition LeClair admitted discarding numerous computers but claimed some data had been copied and produced certain items (server, accounting computer, employee backups); he refused to permit inspection of his personal laptop.
- The trial court’s 12 June 2017 order required production and inspection of the server, accounting computer, other existing hardware, and data from destroyed devices, with protections for personal information.
- GEA moved to show cause after Luxury failed to provide server credentials, LeClair backups, and LeClair’s laptop; the court ordered production and threatened sanctions.
- On 10 July 2017 the court struck Luxury’s defenses and entered default as sanctions for noncompliance; Luxury appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the court considered lesser sanctions before striking defenses/default | Court should impose severe sanction given willful destruction and refusal to comply | Luxury argued court failed to consider or make findings about lesser sanctions | Court inferred lesser sanctions were considered from record and GEA’s limited request; no abuse of discretion |
| Whether Luxury violated the 12 June Order by not producing inspectable server and laptop | 12 June required production and inspection of server and devices; Luxury’s failure prevented inspection | Luxury said it produced the server and lacked credentials, so could not comply | Court found Luxury’s production was insufficient (server inaccessible) and that order required making items available for inspection; violation affirmed |
| Whether ordering server credentials was impossible / whether court erred by finding credibility | Luxury: lacked password and could not produce it; sanction required impossible act | GEA: testimony showed LeClair likely had or could obtain credentials; LeClair was not credible | Trial court credited GEA and discredited LeClair’s claim of ignorance; credibility determinations within trial court’s discretion; no error |
| Whether ordering production of LeClair’s personal laptop violated privacy or required in camera review | Luxury: laptop is personal; in camera review should have been done to protect privacy | GEA: laptop used for business and likely contained relevant evidence; 12 June Order precluded broad exposure and limited use | Court held laptop likely contained relevant evidence, protections in prior order sufficed, denial of late time‑sensitive in camera review not an abuse of discretion; sanction standing |
Key Cases Cited
- Vick v. Davis, 77 N.C. App. 359 (N.C. Ct. App.) (sanctions striking defenses/default affect substantial right; immediately appealable)
- American Tel. & Tel. Co. v. Griffin, 39 N.C. App. 721 (N.C. Ct. App.) (discovery aims to disclose unprivileged relevant information to prepare for trial)
- Clawser v. Campbell, 184 N.C. App. 526 (N.C. Ct. App.) (trial court must consider lesser sanctions before striking defenses, but findings not always required)
- In re Pedestrian Walkway Failure, 173 N.C. App. 237 (N.C. Ct. App.) (sanction order may be affirmed where record permits inference that lesser sanctions were considered)
- Phelps v. Phelps, 337 N.C. 344 (N.C.) (trial judge is the sole determiner of witness credibility)
- Lee v. Shor, 10 N.C. App. 231 (N.C. Ct. App.) (court should not resolve credibility by affidavits on summary judgment)