ESSEX GROUP, INC.,
Plaintiff,
v
.
EXPRESS WIRE SERVICES, INC., SCOTT RAMSEY and WAYNE SEARCY,
Defendants.
Moore & Van Allen, P.L.L.C., by Jonathan D. Sasser and Reed J.
Hollander, for plaintiff-appellee.
Helms, Henderson & Porter, P.A., by Christian R. Troy, for
defendant-appellants.
EAGLES, Chief Judge.
Defendants Express Wire Services, Inc. (“EWS”), Scott Ramsey
and Wayne Searcy appeal from the trial court's entry of default
judgment as a sanction against them. Defendants' sole argument on
appeal is that their ultimate compliance with the trial court's
discovery order precludes the court from assigning sanctions under
G.S. § 1A-1, Rule 37. We disagree and therefore affirm the trial
court's order imposing sanctions.
Plaintiff Essex Group, Inc. (“Essex”) is a corporation that
has a place of business in Charlotte. Its primary business
activity is the manufacture and sale of electrical wire products.
Defendants Ramsey and Searcy were employed by plaintiff. Ramsey
quit his job with plaintiff in March 2001 and opened defendantcorporation EWS. EWS's primary business activity is the sale of
emergency magnet wire, which made EWS a competitor of plaintiff.
Before he began working for plaintiff, Searcy signed a document
entitled “Intellectual Property Agreement” in which he agreed not
to disseminate business information or trade secrets of plaintiff
to third parties. Defendant Searcy left plaintiff corporation in
May 2001 and began working for EWS.
Essex filed a complaint against EWS, Searcy and Ramsey on
claims of breach of fiduciary duty, unfair and deceptive trade
practices, conversion, misappropriation of trade secrets,
conspiracy, interference with prospective business advantage and
breach of contract. Essex claimed that defendants Searcy and
Ramsey had used Essex's resources to set up their new business. In
addition, Essex accused Searcy and Ramsey of absconding with a
number of documents belonging to Essex that pertained to the Essex
customer and supplier list.
Essex obtained an expedited discovery order allowing Essex to
search defendant EWS's facilities. In addition, the discovery
order requested the production of documents regarding the creation
of EWS. Plaintiff's attorney sent a facsimile to defendants Searcy
and Ramsey on 26 July 2001 informing them that the search was to
take place on 27 July 2001. On the afternoon of 26 July 2001
defendant Searcy deleted multiple emails from his computer. At
approximately 5:00 p.m. that same afternoon, plaintiff's private
investigator observed defendant Ramsey leaving the EWS office with
a pushcart on which several boxes were loaded. These boxes weredescribed as brown, except for one black and white Gateway computer
box. Defendant Ramsey took the boxes to a storage facility in
Mooresville.
On 30 July 2001 Ramsey testified during his deposition that he
had not removed any documents from the EWS office on the evening of
26 July 2001. Defendant Searcy testified on 31 July that he
deleted several emails but stated he did not think he was forbidden
from doing so.
On 31 July 2001, defendant Ramsey returned to the storage unit
in Mooresville. Ramsey removed four brown boxes and the Gateway
box from the storage unit and loaded the boxes in his car. After
being confronted by plaintiff's private investigator, Ramsey
allowed the investigator to videotape the contents of the boxes.
The boxes contained numerous files and notebooks clearly marked
with the name “Essex Group, Inc.” Both Ramsey and Searcy admitted
that their deposition testimony regarding the removal of documents
had been false. The documents requested by plaintiff and removed
by defendants were delivered to plaintiff's counsel on 1 August
2001. The trial court's order required that the documents be
delivered to plaintiff by 1 August 2001.
Upon plaintiff's motion, the trial court issued an order
sanctioning defendants pursuant to G.S. §1A-1, Rule 37. The
sanctions included striking defendants' answer, the entry of a
default judgment against defendants, and an order to pay costs and
attorney fees in the amount of $7,000. From this sanction order,
defendants appeal. We note that defendants are appealing from an order of
sanctions against them. These sanctions include the striking of
defendants' answer and the entry of default judgment against
defendants. Orders of this type have been described as affecting
a substantial right. See Clark v. Penland, 146 N.C. App. 288, 291,
552 S.E.2d 243, 245 (2001). Accordingly, the order instituting
sanctions pursuant to Rule 37 is immediately appealable.
Defendants argue that the trial court abused its discretion in
assigning sanctions to defendants after they complied with the
request for production of documents and the request for entry onto
defendants' premises. This Court may overturn a trial court's
order of sanctions only in the event of an abuse of discretion.
See Clark v. Penland, 146 N.C. App. 288, 552 S.E.2d 243 (2001);
Hursey v. Homes By Design, Inc., 121 N.C. App. 175, 464 S.E.2d 504
(1995); Segrest v. Gillette, 96 N.C. App. 435, 386 S.E.2d 88
(1989), rev'd on other grounds, 331 N.C. 97, 414 S.E.2d 334 (1992).
“A trial court may be reversed for abuse of discretion only upon a
showing that its ruling was so arbitrary that it could not have
been the result of a reasoned decision.” Hursey, 121 N.C. App. at
177, 464 S.E.2d at 505. Here, numerous facts cited by the trial
court justify its imposition of sanctions on defendants.
Defendants admitted that they attempted to remove documents from
their office so that plaintiff would not have those documents
available to them. Defendants have also formally admitted that
they had not been truthful during their earlier deposition
testimony. It is no defense that defendants eventually produced the
requested documents and allowed plaintiff to inspect its premises.
Rule 37 sanctions are powers granted to the trial courts of our
state to prevent or eliminate dilatory tactics on the part of
unscrupulous attorneys or litigants. This Court has held that
failure to answer interrogatories or turn over requested documents
in a timely manner constitute proper grounds for a sanction. See
Roane-Barker v. Southeastern Hospital Supply Corp., 99 N.C. App.
30, 392 S.E.2d 663 (1990), disc. review denied, 328 N.C. 93, 402
S.E.2d 418 (1991); Vick v. Davis, 77 N.C. App. 359, 335 S.E.2d 197
(1985), aff'd per curiam, 317 N.C. 328, 345 S.E.2d 217 (1986);
Plumbing Co. v. Associates, 37 N.C. App. 149, 245 S.E.2d 555,
disc. review denied, 295 N.C. 648, 248 S.E.2d 250 (1978). Our
Court has held that a litigant's answering of interrogatories after
the trial court ordered the litigant to answer did not prevent the
court from imposing sanctions upon the dilatory party. See Segrest
v. Gillette, 96 N.C. App. 435, 442, 386 S.E.2d 88, 92 (1989).
Defendants' actions here were at best dilatory and at worst
dishonest. In either case, the trial court's decision to sanction
defendants cannot be said to be so arbitrary that it was not the
result of a reasoned decision.
Accordingly, the trial court's order imposing sanctions
against defendants and entering default judgment against them is
affirmed.
Affirmed.
Judges MARTIN and HUDSON concur.
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