Defendants Chelda, Inc., Barn Dinner Theatre, Inc., Make Sense Dining of Florida, LLC, Make Sense Dining, Inc., and Chelda, Inc. CEO Charles B. Erwin (“Erwin”) (collectively, “Chelda”)
Chelda owns various restaurants and restaurant chains, including the corporate defendants named in the caption of this opinion. IFH is a distributor of food to restaurants and chains. IFH does not manufacture food, but instead orders, warehouses, and delivers food products from manufacturers to restaurants, essentially serving as a “middleman” between the manufacturers and restaurants. Capital Resources is a financial services affiliate of IFH. Chelda manages several restaurants and chains and, between 1997 and 2009, IFH sold and delivered food products to Chelda. The evidence at trial relevant to this appeal primarily concerns two sources of income to IFH and a bonus scheme Erwin arranged with a longtime employee: (1) markup percentages on food products which IFH charged Chelda for providing food products, (2) marketing allowances IFH charged some food product manufacturers for advertising and other marketing services, and (3) bonus payments consisting of percentages of savings resulting from the employee’s negotiation of lower prices for certain food products.
Compensation for IFH’s services to Chelda was outlined in a series of Product Purchase Agreements (“PPA”) negotiated over the years between the parties. According to the PPA, the price Chelda paid IFH for food products was IFH’s cost plus a certain markup percentage listed in an attachment to the PPA. Because food product prices change frequently, the specific prices IFH charges for food
For many food products, IFH handled all aspects of supplying Chelda, including negotiating the best prices with manufacturers. In addition, IFH allowed restaurant customers like Chelda a “direct negotiation option,” under which restaurants negotiate prices directly with manufacturers. Under the direct .negotiation option, if Chelda negotiated a lower price from a manufacturer than what IFH had secured, IFH would put the directly negotiated price into IFH’s pricing schedule. IFH would then determine its charge to Chelda by applying the appropriate markup percentage listed in the PPA to the directly negotiated price. In such circumstances, Chelda would receive the benefit of its successful negotiation skills, while IFH would still be compensated for its services in ordering, warehousing, and delivering the food products.
From 2001 to 2008, Steven Stem was a purchasing manager for Chelda, in charge of direct negotiations with food product manufacturers. To “incentivize” Stern, Erwin set up a bonus program whereby if Stern secured savings to Chelda for one year on a food product, Stern would receive half the savings during the first ninety days as a bonus and Chelda would retain all savings after ninety days. IFH agreed to assist Chelda with implementing this bonus program. At trial, the assistance from IFH and the route of bonus payments to Stern was disputed: IFH claimed Chelda requested that IFH send bonus payments consisting of half of the amount saved directly to Stem, which is what in fact occurred, while Chelda claimed it had requested only the information on savings from IFH and had intended that bonus payments to Stern be paid through Chelda. Erwin testified that he only learned of the direct payments from IFH to Stem in late June 2008.
IFH also presented evidence of a common restaurant industry practice known as “marketing allowances.” Marketing allowances are funds that food manufacturers pay the distributors of their products, usually as a lump sum or a percentage of the volume of a product ordered by a distributor. Distributors like IFH use marketing allowances to promote the manufacturer’s food products in a variety of ways, including: hosting food shows, training chefs and menu
In April 2008, prior to Erwin’s alleged discovery of the direct payments to Stern, Chelda was $2 million behind on payments due IFH under the PPA. Chelda and IFH agreed to reduce this debt to a promissory note, with monthly payments of approximately $10,000 and a balloon payment due 1 May 2009. When Chelda failed to make the balloon payment, Capital Resources initiated this action by filing a complaint on 20 May 2009. Plaintiffs’ amended complaint was filed 9 June 2009. By order entered 10 January 2010, IFH was joined as an intervenor-plaintiff.
On 7 January 2010, Chelda filed an answer and counterclaim, alleging seven claims for relief: two claims each of civil conspiracy (claims 1 and 5) and breach of the duty of good faith and fair dealing (claims 2 and 4), and one claim each of breach of contract (claim 3), constructive fraud (claim 6), and unfair and deceptive trade practices (claim 7). These counterclaims were based on two primary allegations: (1) that, as a result of IFH paying bonuses to Stern directly, Chelda never realized any of the “post-ninety-day” savings as intended under Erwin’s bonus scheme, and (2) that the cost to which the PPA markups applied should have included adjustments based on IFH’s receipt of marketing allowances from manufacturers through back-billing.
Chelda substituted counsel twice, in January and October 2010. On no fewer than five occasions between September 2009 and October 2010, Chelda requested a continuance to conduct more discovery. In January 2011, Chelda filed nine motions for orders of commission for out-of-state subpoenas duces tecum to non-party manufacturers that conducted business with IFH (“the 2011 Subpoenas”). The 2011 Subpoenas were issued on a rolling basis and sought information on marketing allowances paid to IFH by various manufacturers during the ten-year relationship between IFH and
On 21 February 2011, the Honorable Eric L. Levinson, Catawba County Superior Court, presided over a hearing on IFH’s motions. By order entered 28 February 2011, Judge Levinson entered a protective order quashing the 2011 Subpoenas and ordering Chelda to consult with IFH before obtaining any additional subpoenas duces tecum. On 23 February 2011, Chelda sought a continuance of the pending trial claiming a denial of opportunity to obtain evidence, which was denied. On 4 March 2011, Chelda moved this Court for a temporary stay of proceedings, which was also denied.
On 7 March 2011, the case went to trial. At the close of evidence, IFH and Chelda each moved for a directed verdict with respect to the other’s claims. Chelda withdrew its counterclaims 1, 5, and 6. The court denied Chelda’s motion and granted IFH’s motion as to Chelda’s counterclaims 2, 3, 4, and, in part, 7. The jury found that Chelda had breached the PPA and promissory note and that IFH was entitled to damages totaling $2,489,422.82. The jury found that neither party committed unfair and deceptive trade practices: Chelda appeals from the trial court’s order entered 28 February 2011 issuing a protective order and quashing the 2011 Subpoenas and from judgment entered upon the jury’s verdict 26 April 2011 following the trial court’s granting a directed verdict to IFH on Chelda’s counterclaims.
Discussion
On appeal, Chelda brings forward three arguments: that the trial court erred in (1) quashing the 2011 Subpoenas; (2) issuing a directed verdict dismissing Chelda’s counterclaims for breach of contract, breach of the covenant of good faith and fair dealing, and unfair and deceptive trade practices related to IFH’s marketing allowances; and (3) submitting the issues and instructing the jury as to Chelda’s coun
I. The 2011 Subpoenas
Chelda makes two contentions of error with respect to the trial court’s 28 February 2011 order regarding the 2011 Subpoenas: (1) the trial court lacked jurisdiction to quash the 2011 Subpoenas because they were issued by other jurisdictions, and (2) the court abused its discretion in quashing the 2011 Subpoenas because it based its decision on speculation.
The 28 February 2011 order states that the trial court is allowing IFH’s motions “for protective orders and to quash various subpoenas duces tecum[.]” The order then provides “that each out-of-state subpoena ... be and hereby are [sic] quashed” and that a copy of the order be served upon “the recipient of any such subpoena and to each [out-of-state] Clerk of Court to whom such a subpoena was directed.” The order also provides that Chelda not serve any additional subpoenas duces tecum without properly notifying IFH and obtaining authorization from the trial court.
Upon motion by a party or by the person from whom discovery is sought, and for good cause shown, the judge of the court in which the action is pending may make any order which justice requires to protect a party or person from unreasonable annoyance, embarrassment, oppression, or undue burden or expense^]
N.C. Gen. Stat. § 1A-1, Rule 26(c) (2012) (emphasis added). Among the orders that Rule 26(c) authorizes a trial court to enter are:
(i) that the discovery not be had;
(ii) that the discovery may be had only on specified terms and conditions, including a designation of the time or place; [and]
(iii) that the discovery may be had only by a method of discovery other than that selected by the party seeking discovery[.]
Id. Protective orders issued pursuant to Rule 26(c) are left to the trial court’s discretion and will only be disturbed for an abuse of discretion. Hartman v. Hartman,
We agree with Chelda that a superior court judge in this State does not have any authority over the courts of other states, and thus could not quash subpoenas issued by such courts. See, e.g., Irby v. Wilson,
However, these speculations are merely that, and are thus unavailing to Chelda. The record before us is silent on any actions Chelda may have undertaken in the courts of other states or the content of any documents it thus obtained. The only conclusion the record thus permits is that Chelda failed to pursue its subpoenas. Given this failure, we cannot conclude that Chelda was deprived of the opportunity to obtain and present evidence in support of its cases.
II. Directed Verdict
Chelda next argues that the trial court erred by entering directed verdicts for IFH on Chelda’s counterclaims for breach of contract and of the covenant of good faith and fair dealing, and its counterclaim
On appeal, our standard of review of a directed verdict granted at the close of all evidence is whether the evidence, taken in the light most favorable to the non-movant, is sufficient to go to the jury. Ligon v. Strickland,
“[W]here the parties have deliberately put their engagements in writing in such terms as import a legal obligation free of uncertainty, it is presumed that the writing was intended by the parties to represent all their engagements as to the elements dealt with in the writing.” Franco v. Liposcience, Inc.,
In support of its contract and Chapter 75 counterclaims, Chelda alleged that IFH had fraudulently concealed from Chelda the existence of the marketing allowances it received from some food manufacturers. Chelda alleged it intended that the markup percentages
We begin by noting that we can find no “conclusion” by the trial court that parol evidence was precluded by the PPA nor any suggestion that parol evidence was actually excluded from admission at trial. To the contrary, the trial court permitted witnesses for both sides to testify at length about their intent and understanding of the PPA. Indeed, although Chelda’s brief states that “witnesses would supplement the PPA with [p]arol [e]vidence, [sic] which does not contradict or change the writing, namely that the PPA was a ‘cost-plus contract,’ ”
The true dispute at trial was to what “cost” the “plus” (or markup) was intended to be applied. Chelda asserts the need for parol evidence on this point and cites definitions from legal dictionaries and case law from various other jurisdictions which state, in essence, that under a cost-plus contract, the “cost” to which any markup is applied is the “seller’s own cost[,]” Tip Top Farms v. Dairylea Coop.,
Our review of the trial transcript reveals that Erwin explicitly testified that he was unaware of the existence of marketing allowances,
In sum, the uncontradicted evidence at trial established that (1) Erwin was unaware of marketing allowances and thus cannot have intended that they be considered in determining prices to be marked up under the PPA; (2) marketing allowances were payments for IFH services provided to manufacturers and therefore unrelated to the cost of food products negotiated by IFH or directly by its restaurant customers; (3) in light of fact 2, IFH’s “own cost” of food products did not include an offset for marketing allowances, but rather consisted of the cost negotiated with a manufacturer (whether by IFH or the restaurants directly); and thus, (4) the negotiated cost for each product listed in the pricing schedules was the proper “cost” to which IFH’s markups (as contracted with Chelda) were applied. Because no evidence was presented that would have supported verdicts for Chelda on its contract and Chapter 75 counterclaims, the trial court’s entry of directed verdicts in favor of IFH was proper. Accordingly, this argument is overruled.
III. Jury Issues
Chelda also argues that the trial court erred in submitting issues and instructing the jury about Chelda’s Chapter 75 counterclaim arising out of alleged commercial bribery, namely, the payments from IFH to Stern. Specifically, Chelda asserts error in the court’s instruction that this counterclaim required proof of IFH’s intent to influence Stern’s purchasing decisions to the benefit of IFH and the detriment of Chelda. We disagree.
As both parties note, the intent and knowledge of the parties is generally irrelevant in UDTP actions:
A UDTP claimant need not establish the defendant’s bad faith, intent, willfulness, or knowledge. Our Supreme Court explained that state courts have generally ruled that the consumer need only show that an act or practice possessed the tendency or capacity to mislead, or created the likelihood of deception, in order to prevail under the states’ unfair and deceptive practices act. Thus, if unfairness and deception are gauged by consideration of the effect of the practice on the marketplace, it follows that the intent of the actor is irrelevant. Good faith is equally irrelevant. . . .
Moreover, not only is the defendant’s intent irrelevant when evaluating a UDTP claim, the plaintiff’s intent and conduct is also irrelevant.
Media Network, Inc. v. Long Haymes Carr, Inc.,
Any person who gives, offers or promises to an agent, employee or servant any gift or gratuity whatever with intent to influence his action in relation to his principal’s, employer’s or master’s business [is guilty of commercial bribery];
[A]ny person who gives or offers [an employee authorized to procure materials by purchase or contract for his employer a] commission, discount or bonus [is guilty of commercial bribery.]
Id. (emphasis added); see also State v. Brewer,
In Brewer, our Supreme Court concluded that acts constituting commercial bribery under the first prong could be the basis of a UDTP claim, and that in such cases, “[t]he intent specified [in the statute] is an essential element of the offense.” Id. at 552,
Chelda further contends that, even if “intent to influence” is an element of the offense of UDTP arising from commercial bribery under prong one, the court erred in instructing the jury that IFH’s intent must have been specifically that Stem act to benefit IFH and harm Chelda. In- other words, Chelda asserts that IFH committed commercial bribery if it intended to “influence” Stem in any way, whether helpful, harmful, or unrelated to Chelda’s or IFH’s business interests. We find this assertion nonsensical. The statute in question is titled “Influencing agents and servants in violating duties owed employers.” N.C. Gen. Stat. § 14-353. In addition “commercial bribery” is defined as “[c]orrupt dealing with the agents or employees of prospective buyers to secure an advantage over business competitors.” Black’s Law Dictionary 204 (8th ed. 2007) (emphasis added). As reflected by the statute’s title and the very definition of the term, as
We next turn to Chelda’s contention that the trial court erred in refusing to instruct the jury under the fourth prong under section 14-353: “any person who gives or offers [an employee authorized to procure materials by purchase or contract for his employer a] commission, discount or bonus [is guilty of commercial bribery.]” N.C. Gen. Stat. § 14-353. As Chelda notes, unlike the first prong of the commercial bribery statute, the fourth prong does not explicitly mention “intent to influence.” Thus, Chelda contends that, even without any proof of intent to influence Stern, IFH’s payments to Stern were enough to establish commercial bribery and support their UDTP claim. At trial, Chelda sought an instruction under this prong in support of its UDTP claim, but the court denied the request. After careful review, we believe the trial court’s decision was correct.
As noted above, the proper title of the commercial bribery statute is “Influencing agents and servants in violating duties owed employers.” N.C. Gen. Stat. § 14-353. Where the undisputed evidence at trial shows that the plaintiff himself has designed and established the system of payments in question with the explicit purpose of rewarding an employee’s diligence, we hold that the cooperation of a defendant in facilitating such a scheme at the plaintiff’s request cannot constitute “influencing agents” to violate their duties to their employers. Here, Erwin testified that it was he who conceived of the bonus payments to Stern, with the intent that they “incentivize” Stern to secure the lowest prices on behalf of Chelda. According to Erwin’s own testimony, Stern only received the payments when he secured lower prices on food products, to the benefit of Chelda. No evidence was
VACATED IN PART; AFFIRMED IN PART.
Notes
. All claims against Defendant Ham’s Restaurant, Inc. were dismissed without prejudice on I December 2009 after Ham’s began bankruptcy proceedings. Although no dismissal appears in the record before this Court, other documents in the record
. Previously, on 8 June 2009, Chelda filed a separate complaint in Guilford County Superior Court against IFH, alleging the same theories Chelda alleges as defenses and counterclaims here. On 8 June 2009, Chelda issued subpoenas duces tecum to several out-of-state manufacturers (“2009 Subpoenas”). The 2009 Subpoenas were identical to the 2011 Subpoenas at issue in this appeal — requesting information on marketing allowances paid to IFH — and sent to many of the same manufacturers. After IFH moved for a protective order, Chelda dismissed that lawsuit in October 2009 without pursuing a motion to compel. Discovery served on IFH in this case did not seek information or documents related to marketing allowances.
. Chelda also lists an additional “Issue Presented” in its brief, to wit, that the trial court erred in awarding Capital Resources attorney’s fees in the amount of 15% of the jury award for damages due on the promissory note, but by failing to argue this issue in the text of the brief, Chelda abandons this challenge.
. In its brief, Chelda also argued that Judge Levinson did not have the authority to quash the 2011 Subpoenas because they were issued upon orders of commission entered by Judge Timothy Kincaid, and thus Judge Levinson’s order in effect “overruled” that of another superior court judge. However, at oral argument, Chelda explicitly withdrew this contention, and we do not address it here.
. Rule 5(a) of the North Carolina Rules of Civil Procedure provides that “every paper relating to discovery required to be served upon a party unless the court otherwise orders, every written motion other than one which may be heard ex parte, and every written notice, . . . shall be served upon each of the parties[.]” N.C. Gen. Stat. § 1A-1, Rule 5(a) (2012). “This Court has held the General Assembly’s use of the word ‘shall’ [in Rule 5(a)] establishes a mandate, and failure to comply with the statutory mandate is reversible error.” In re D.A.,
. We also note that, despite his error in attempting to “quash” the out-of-state subpoenas, Judge Levinson unquestionably had both the jurisdiction and authority to enter a Rule 26(c) protective order as part of his duty to control discovery in the case before him. As noted supra, the 28 February 2011 order also allowed IFH’s motions for a protective order, and, as expressly permitted by Rule 26(c)(ii), ordered “that the discovery may be had only on specified terms and conditions],]” to wit, that Chelda consult with and properly notify IFH prior to serving any additional subpoenas. Chelda has not brought forward any argument based on this portion of the order, and in any event, we observe no abuse of discretion in this portion of the order.
. The trial court denied IFH’s motion for directed verdict as to Chelda’s counterclaim for unfair and deceptive trade practices to the extent that counterclaim relied on the direct payments of funds from IFH to Stern. To the extent Chelda’s Chapter 75 counterclaim arose from those payments, the issue went to the jury and is addressed in section III of this opinion.
. While the term “cost-plus” does not appear in the PPA, Chelda uses this term to refer to the system of percentage markups on the cost of various food products that IFH charged Chelda per the PPA and its attachments.
. In our State’s case law, claims brought under Chapter 75 are often referred to as “unfair and deceptive trade practices” or “UDTP” claims, referencing language used in previous versions of the Chapter. For ease of reading, we use the term UDTP here.