CHRISTIAN G. PLASMAN, in his individual capacity and derivatively for the benefit of, on behalf of and right of nominal party BOLIER & COMPANY, LLC, Plaintiffs,
DECCA FURNITURE (USA), INC., DECCA CONTRACT FURNITURE, LLC, RICHARD HERBST, WAI THENG TIN, TSANG C. HUNG, DECCA FURNITURE, LTD., DECCA HOSPITALITY FURNISHINGS, LLC, DONGGUAN DECCA FURNITURE CO., LTD., DARREN HUDGINS, DECCA HOME, LLC, and ELAN BY DECCA, LLC, Defendants, and BOLIER & COMPANY, LLC, Nominal Defendant,
CHRISTIAN J. PLASMAN a/k/a BARRETT PLASMAN, Third-Party Defendant.
in the Court of Appeals 21 February 2017.
by plaintiffs and third-party defendant from order entered 26
February 2016 by Judge Louis A. Bledsoe, III in Catawba
County No. 12 CVS 2832 Superior Court.
Offices of Matthew K. Rogers, PLLC, by Matthew K. Rogers, for
plaintiffs-appellants and third-party defendant-appellant.
McGuireWoods LLP, by Robert A. Muckenfuss, Jodie H. Lawson,
and Andrew D. Atkins, for defendants-appellees.
appeal comes to the Court as the result of a bitter corporate
dispute that has yet to reach the discovery phase nearly five
years after the action was filed. Plaintiff Christian G.
Plasman (Plasman) and third-party defendant Christian J.
Plasman (Barrett) (collectively with Plasman, the Plasmans)
appeal from an order of the North Carolina Business
Court holding them in civil contempt of court.
contempt order was entered after the Plasmans failed to
comply with a Business Court order enforcing the terms of a
preliminary injunction entered against them in federal court.
On appeal, the Plasmans argue that the Business Court lacked
jurisdiction to enter the contempt order while their appeal
from the order enforcing the injunction was pending in this
Court. The Plasmans then make a series of arguments that
attack the sufficiency of the contempt order itself. After
careful review, we conclude that the Business Court retained
jurisdiction to enter the contempt order, and that the order
should be affirmed in its entirety.
April 2002, Plasman formed Bolier & Company, LLC
(Bolier), a closely held North Carolina company offering
residential furniture designs that were also suited for use
in the hospitality industry. Shortly thereafter, Plasman
partnered with Decca Furniture, Ltd. (Decca China), which
manufactured Bolier's furniture lines. Decca China then
formed Decca Furniture (USA), Inc. (Decca USA) to own Decca
China's interest in Bolier. Richard Herbst (Herbst) was
Decca USA's president at all relevant times.
August 2003, Plasman and Herbst executed an operating
agreement that granted Decca USA a 55% majority ownership
interest in Bolier, and that allowed Plasman to retain a 45%
minority ownership interest for himself. The operating
agreement also vested Decca USA with the authority to make
all employment decisions related to Bolier. In November 2003,
Plasman entered into an employment agreement with Bolier,
which provided that Plasman could be terminated without
cause. Plasman executed the employment agreement on his own
behalf, and Herbst signed on behalf of Decca USA and Bolier.
Thereafter, Plasman served as President and CEO of Bolier,
and his son, Barrett, worked as Bolier's operations
to defendants, despite the significant investments of Decca
USA and Decca China in Bolier's operations, they
sustained losses in excess of $2 million between 2003 and
2012. As a result, Decca USA terminated the employment of
Plasman and Barrett on 19 October 2012. The Plasmans,
however, refused to accept their terminations and continued
to work out of Bolier's office space. During this time,
the Plasmans set up a new bank account in Bolier's name,
and they diverted approximately $600, 000.00 in Bolier
customer payments to that account. From these diverted funds,
the Plasmans paid themselves, respectively, approximately
$33, 170.49 and $17, 021.66 in salaries and personal
expenses. Plasman also wrote himself a $12, 000.00 check,
dated 5 December 2012, from the new account for "Bolier
Legal Fees." Decca USA eventually changed the locks to
October 2012, the Plasmans filed the instant action in
Catawba County Superior Court alleging claims for, inter
alia, corporate dissolution, breach of contract, fraud,
constructive fraud, and trademark as well as copyright
infringement. Two days later, the action was designated as a
mandatory complex business case and assigned to the North
Carolina Business Court. After removing the case to the
United States District Court for the Western District of
North Carolina, Decca USA moved Judge Richard L. Vorhees for
a preliminary injunction against the Plasmans. On 27 February
2013, Judge Vorhees entered an order (the injunction) that
enjoined the Plasmans from acting on Bolier's behalf in
any manner. Judge Vorhees further ordered the Plasmans to
return all diverted funds to Bolier within five business
days, and to provide Decca USA with an accounting of those
funds. Judge Voorhees did not require Decca USA to post a
security bond pursuant to Rule 65(c) of the Federal Rules of
Civil Procedure, but the injunction did contain various terms
that were meant to protect Plasman's rights as a minority
owner of Bolier while the litigation continued.
week after the injunction was entered, the Plasmans filed
their "Response to Court Order" in federal court,
which challenged certain provisions of the injunction and
stated that "Plaintiffs have fully complied to the best
of their ability with the Court Order signed on February 27,
2013." Shortly thereafter, the Plasmans filed another
motion that sought to have the federal court provide
additional safeguards protecting "Plaintiffs Chris
Plasman and Bolier . . . pending final resolution of the
merits." This motion also sought to "clarify the .
. . [injunction] . . . to specifically permit [the Plasmans]
to retain funds paid to Chris Plasman and Barrett Plasman for
wages earned and Bolier . . . expenses paid (including the
$12, 000.00 paid as reimbursement for legal expenses) prior
to January 14, 2013[.]" Although Judge Vorhees never
ruled on these motions, the Plasmans neither appealed the
injunction nor properly sought to have it reconsidered.
action was remanded to the North Carolina Business Court in
September 2014 when Judge Voorhees dismissed the
Plasmans' federal copyright claims and declined to
exercise supplemental jurisdiction over the state law claims
that remained. Upon remand, the parties filed competing
motions for consideration by Judge Louis A. Bledsoe, III. In
a document entitled "Plaintiffs Motion to Amend
Preliminary Injunction, to Dissolve Portions of the
Preliminary Injunction and Award Damages, and Motion for
Sanctions[, ]" the Plasmans moved Judge Bledsoe to,
inter alia, amend and dissolve certain portions of
the injunction. In contrast, Decca USA sought to enforce the
injunction's terms. Contending that the Plasmans were in
willful violation of the injunction, Decca USA moved Judge
Bledsoe to hold the Plasmans in civil contempt and to impose
sanctions against them. After conducting a hearing on the
parties' motions, Judge Bledsoe entered an order on 26
May 2015 (the 26 May Order) denying the Plasmans' motion,
and reasoning that because the preliminary injunction was
carefully crafted and narrowly tailored, it should not be
"modified, amended, or dissolved in any
respect." Although Judge Bledsoe declined to hold
the Plasmans in contempt, he did grant Decca USA's motion
to enforce the injunction's requirements. To that end,
the Plasmans were ordered to pay Decca USA $62, 191.15 plus
interest and to provide the accounting required by the
June 2015, the Plasmans filed notice of appeal from the 26
May Order. Defendants later filed with this Court a motion to
dismiss the Plasmans' appeal, arguing that the 26 May
Order was not immediately appealable because it was an
interlocutory order that did not affect a substantial right
of the Plasmans.
2015, the Business Court, sua sponte, directed the
parties to "submit short briefs advising the Court
whether this case may proceed with further pleadings and
discovery, and to a determination on the merits, or whether
this case must be stayed pending resolution" of the
Plasmans' interlocutory appeal from the 26 May Order. The
case was temporarily stayed to allow for the parties'
submissions. On 22 September 2015, while the Plasmans'
appeal was pending in this Court, defendants filed a motion
in the Business Court seeking to have the Plasmans held in
contempt for failure to comply with the 26 May Order.
October 2015, Judge Bledsoe entered an order that reflected
his consideration of a stay pending appeal. Relying in part
on this Court's decision in RPR & Assocs., Inc.
v. Univ. of N. Carolina-Chapel Hill, 153 N.C.App. 342,
344, 570 S.E.2d 510, 512 (2002), cert. denied and disc.
review denied, 357 N.C. 166, 579 S.E.2d 882 (2003),
Judge Bledsoe determined that he had the authority to
determine whether the 26 May Order was immediately
appealable. Exercising that authority, Judge Bledsoe found
that "no substantial right of the Plasmans was affected
by the May 26 Order" because it "simply ordered
[the Plasmans] to comply with the never-appealed, legally
valid and binding, 2013 [Injunction] Order requiring [the
Plasmans] to return money that the Federal Court found they
had diverted from Bolier." Consequently, Judge Bledsoe
dissolved the temporary stay that he had entered in July
2015, and determined that the "action [would] proceed in
th[e Business] Court during the pendency of the Plasmans'
appeal unless otherwise ordered by the Court[.]"
holding a show cause hearing on defendants' contempt
motion, Judge Bledsoe entered an order on 26 February 2016
(the Contempt Order) concluding that the Plasmans were in
civil contempt of court because of their willful
noncompliance with the 26 May Order. The Contempt Order
contained a finding that repeated Judge Bledsoe's
previous determination that "the appeal of the May 26
Order was interlocutory, did not affect a substantial right,
and . . . did not stay the case." The Plasmans filed
notice of appeal from the Contempt Order on 24 March 2016.
eight months later, in November 2016, this Court filed an
opinion that dismissed the Plasmans' interlocutory appeal
from the 26 May Order. See Bolier & Co., LLC
v. Decca Furniture (USA), Inc., ___ N.C.App. ___, 792
S.E.2d 865 (2016) (Bolier I). This Court
reached three conclusions in support of its holding that the
Plasmans had failed to demonstrate the loss of a substantial
right absent immediate review of the 26 May Order:
First, we conclude that Judge Voorhees' Order was, in
fact, appealable. It is well settled that preliminary
injunction orders issued by a federal court are immediately
appealable. . . .
Second, Plaintiffs contend that their subsequent filings in
federal court tolled their deadline for appealing Judge
Voorhees' Order. We disagree. . . .
Had Plaintiffs intended to seek reconsideration of Judge
Voorhees' Order so as to toll their deadline for
appealing the preliminary injunction, they were required to
file a motion that unambiguously sought such relief. However,
they failed to do so. While Plaintiffs may have held out hope
that the federal court would nevertheless modify its
preliminary injunction as a result of their motion, it was
still incumbent upon them to protect their appeal rights
during the interim by taking an appeal of Judge Voorhees'
Order to the Fourth Circuit within the thirty-day deadline
provided by Rule 4 of the Federal Rules of Appellate
Procedure. . . .
Finally, we reject Plaintiffs' argument that [the 26 May]
Order was independently appealable. The specific aspects of
[the 26 May] Order cited by Plaintiffs as depriving them of a
substantial right are essentially identical to the
preliminary injunction terms contained in Judge Voorhees'
Order, which Plaintiffs never appealed. Thus, because Judge
Bledsoe's Order merely enforces the preliminary
injunction entered by Judge Voorhees, our consideration of
the substantive issues raised by Plaintiffs in the present
appeal would enable them to achieve a "back door"
appeal of Judge Voorhees' Order well over three years
after its entry.
Id. at ___, 792 S.E.2d at 872 (internal citations
omitted). In sum, the Bolier I Court determined that
the 26 May Order "simply reiterate[d] that [the Plasmans
were] . . . bound to comply with the federal preliminary
injunction that was entered on 27 February 2013."
Id. at ___, 792 S.E.2d at 873.
Plasmans now appeal from the Contempt Order.
Trial Court's Jurisdiction To Enter The Contempt
initial matter, we address the Plasmans' argument that
their appeal from the 26 May Order stayed all proceedings in
the Business Court and left the trial court without
jurisdiction to enter the Contempt Order.
North Carolina law, the longstanding general rule is that an
appeal divests the trial court of jurisdiction over a case
until the appellate court returns its mandate. E.g.,
Bowen v. Hodge Motor Co., 292 N.C. 633, 635, 234
S.E.2d 748, 749 (1977); Upton v. Upton, 14 N.C.App.
107, 109, 187 S.E.2d 387, 388 (1972). Our legislature has
codified this rule at N.C. Gen. Stat. § 1-294 (2015),
which provides that:
When an appeal is perfected as provided by this Article it
stays all further proceedings in the court below upon the
judgment appealed from, or upon the matter embraced therein,
unless otherwise provided by the Rules of Appellate
Procedure; but the court below may proceed upon any
other matter included in the action and not affected by the
judgment appealed from. . . .
the appeal, the trial judge is functus officio,
Bowen, 292 N.C. at 635, 234 S.E.2d at 749, which is
defined as being "without further authority or legal
competence because the duties and functions of the original
commission have been fully accomplished." Black's
Law Dictionary 743 (9th ed. 2009).
over a century, the Supreme Court has recognized that an
appeal operates as a stay of all proceedings at the trial
level as to issues that are embraced by the order appealed.
E.g., Bohannon v. Virginia Trust Co., 198
N.C. 702, 153 S.E. 263 (1930); Pruett v. Charlotte Power
Co., 167 N.C. 598, 83 S.E. 830 (1914). This is section
1-294 in a nutshell, for the statute itself draws a
distinction between trial court's inability to rule on
matters that are inseparable from the pending appeal and the
court's ability to proceed on matters that are "not
affected" by the pending appeal. See N.C. Gen.
Stat. § 1-294 (2015). This jurisdictional issue often
arises in the context of interlocutory orders.
Veazey v. Durham, our State's high court
examined the question of the circumstances under which the
appeal of an interlocutory order operates as a stay of the
proceedings in the trial court. 231 N.C. 357, 57 S.E.2d 377
(1950). Speaking through Justice Ervin, the Supreme Court
drew a clear distinction between the effect of immediately
appealable and nonappealable interlocutory orders on a trial
court's continuing jurisdiction:
When a litigant takes an appeal to the Supreme Court from an
appealable interlocutory order of the Superior Court and
perfects such appeal in conformity to law, the appeal
operates as a stay of all proceedings in the Superior Court
relating to the issues included therein until the matters are
determined in the Supreme Court. G.S. Sec. 1-294. . . .
But this sound principle is not controlling upon the record
in the case at bar. . . .
There is no more effective way to procrastinate the
administration of justice than that of bringing cases to an
appellate court piecemeal through the medium of successive
appeals from intermediate orders. The rules regulating
appeals from the Superior Court to the Supreme Court are
designed to forestall the useless delay inseparable from
unlimited fragmentary appeals, and to enable courts to
perform their real function, i.e., to administer 'right
and justice * * * without sale, denial, or delay.' N.C.
Const. Art. I, Sec. 35.
This being true, a litigant cannot deprive the
Superior Court of jurisdiction to try and determine a case on
its merits by taking an appeal to the Supreme Court
from a nonappealable interlocutory order of the
Superior Court. A contrary decision would necessarily require
an acceptance of the paradoxical paralogism that a party to
an action can paralyze the administration of justice in the
Superior Court by the simple expedient of doing what the law
does not allow him to do, i.e., taking an appeal from an
order which is not appealable. . . .
[W]hen an appeal is taken to the Supreme Court from an
interlocutory order of the Superior Court which is not
subject to appeal, the Superior Court need not stay
proceedings, but may disregard the appeal and proceed to try
the action while the ...