in the Court of Appeals 8 March 2018.
by defendants from order entered 10 July 2017 by Judge Hugh
B. Lewis in Mecklenburg County Superior Court, No. 16 CVS
brief filed for plaintiffs-appellees.
Offices of Paul Vancil, by Paul Vancil, for
Luxury Auctions Marketing, Inc. and Jeremy LeClair appeal
from the trial court's order imposing sanctions against
Luxury and LeClair (together, "Luxury") for failing
to comply with a discovery order of the court. We affirm.
litigation at issue arose out of a business dispute between
Luxury and plaintiffs GEA, Inc., Leslie Farkas, and Valaria
DeVine (together, "GEA"). Ms. DeVine formed GEA and
the company 4K&D roughly seventeen years ago as luxury
residential auction companies. Ms. DeVine's companies
were highly successful, in part due to (1) GEA's
ownership of valuable trademarks, (2) GEA's ownership of
47 registered domain sites, and (3) a large customer database
that GEA and Ms. DeVine had assembled over the years. In
January 2016, Ms. DeVine hired Mr. LeClair as 4K&D's
Director of Operations.
April 2016, Ms. Devine's husband, Leslie Farkas, formed
Luxury. Luxury was formed "to generate new listings for
auction and to market the properties that were placed under
contract for auction." Five days after Luxury was
formed, 4K&D sold all of its tangible
assets-specifically, equipment, furniture, and office
after his hire, Mr. LeClair became aware that Ms. DeVine and
Mr. Farkas were interested in selling their businesses, and
approached them about the possibility of purchasing the
companies. The parties entered into a period of discussions
and negotiations, culminating in the agreement of Ms. DeVine
and Mr. Farkas to sell Luxury to Mr. LeClair. Ms. DeVine and
Mr. Farkas retained ownership of GEA.
parties executed Luxury's sale on 8 August 2016. The sale
took the form of a Stock Purchase Agreement, by which Mr.
Farkas sold all of his shares in Luxury to Mr. LeClair. GEA
then issued revocable, non-exclusive, ten-year licenses to
Luxury in certain trademarks, software, and intellectual
property. Pursuant to the licenses, Luxury could transact
business under GEA's trademark, could use GEA's
registered domain site, and could access GEA's valuable
customer database. Ms. DeVine and Mr. Farkas agreed to allow
Mr. LeClair to defer the entire purchase price by making
annual payments over the ten-year term of the agreement.
Among other payment provisions, Luxury "agreed to pay
10% of each gross commission received by [Luxury] for the
first ten years of the agreement, . . . for [the] revocable,
non-exclusive license Agreement."
arose between the parties shortly after the purchase, which
ultimately led to Luxury filing a complaint against GEA on 3
November 2016. GEA answered and asserted eleven counterclaims
against Luxury. Luxury thereafter voluntarily dismissed its
claims against GEA, leaving only GEA's counterclaims
pending before the trial court.
counterclaims set forth an array of complicated factual
allegations against Mr. LeClair and Luxury and asserted
causes of action for, inter alia, unpaid royalties
and license fees, improper use and transfer of a software
license and the customer database, conversion of computers
and other GEA property, trademark infringement, conversion,
the information pertaining to GEA's counterclaims, and
the proof thereof, was alleged to be stored in the various
company computers and individual computers used by
Luxury's employees. However, after LeClair acquired Luxury,
LeClair moved Luxury's offices and, according to GEA,
"took all the computer equipment, hard drives, printers,
copiers, related equipment and numerous files containing
business and personal information having nothing to do with
[Luxury]." Accordingly, GEA served Luxury with a
discovery request on 1 March 2017 for inspection of the
computers and equipment.
LeClair's 8 May 2017 deposition, however, Luxury's
counsel informed GEA that Mr. LeClair destroyed the computers
after the litigation had commenced. Mr. LeClair testified to
the following at his deposition:
Q. Do you recall Mr. Farkas making a demand for the return of
his personal computer?
A. I do.
Q. Where is that computer today?
A. That computer has been discarded.
Q. Where was it discarded?
A. I believe the Mecklenburg recycling, whatever it's
called, recycling, trash dump.
Q. Did you discard the computer?
A. I did.
Q. How many computers did you move from the [office]?
A. I don't have a specific number, but the majority of
the computers, if not all.
Q. There was a server, correct?
Q. What about the laptops used by [Luxury], where are those?
A. What about them? Those have been discarded as well.
Q. Have all of the computers transported from [the office]
LeClair also testified that he knew that GEA sought
"return of these computers as part of [the] claims in
Q. You knew that they--that my clients were seeking this--the
return of these ...