in the Court of Appeals 31 January 2019.
by Defendant from order entered 2 November 2017 by Judge
Elaine M. O'Neal and two orders entered 23 January 2018
by Judge Orlando F. Hudson, Jr., in Durham County No. 16 CVS
5386 Superior Court.
& Wolf, P.A., by William R. Sparrow and Joseph R.
Shuford, for Plaintiffs-Appellees.
Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P., by
Clint S. Morse, for Defendant-Appellant.
appeals from three discovery orders entered in Durham County
Superior Court. The underlying case involves a sales
commission dispute between Plaintiffs and Defendant over
commissions allegedly owed to Plaintiffs by Defendant. In the
first order (November Order), the trial court granted
Plaintiffs' motion to compel discovery. In the second
order (Sanctions Order), the trial court granted
Plaintiffs' motion for sanctions based on Defendant's
failure to comply with the November Order. In the third order
(Denial Order), the trial court denied Defendant's motion
to compel discovery and motion for sanctions.
November Order did not unreasonably expand the manner of
discovery production, and the trial court did not abuse its
discretion in entering that order. Moreover, the trial court
did not abuse its discretion by striking Defendant's
answer and entering judgment for Plaintiffs on liability
pursuant to the Sanctions Order, and the order did not
violate Defendant's due process rights. Finally, the
Denial Order is an interlocutory order that does not affect a
substantial right and we dismiss Defendant's appeal from
Procedural History and Factual Background
2015, Feeassco, LLC, and JW Company, LLC, (Plaintiffs)
entered into separate contracts with The Steel Network, Inc.,
(Defendant) wherein Plaintiffs would sell and solicit orders
for Defendant's products within assigned territories. The
contracts included a two-tiered commission structure, which
paid different rates for "Basic Commission" and
"Growth Commission." Plaintiffs commenced this
action on 12 December 2016, asserting claims for breach of
contract, quantum meruit, unfair and deceptive trade
practices, and attorneys' fees. Plaintiffs alleged,
amongst other things, that over the nearly two years under
the contract, Defendant improperly calculated commissions
payments, stopped paying commissions, and failed to provide
contractually required commissions statements and sales
12 December 2016, Plaintiffs served Defendant with a
"First Set of Interrogatories" and a "First
Requests for Production of Documents." Defendant
objected to each interrogatory as "overly broad, unduly
burdensome, and not reasonably calculated to lead to the
discovery of admissible evidence[, ]" and provided
minimal information for some interrogatories.
objected to each request for production as follows:
[Defendant] objects to this request as overly broad, unduly
burdensome, and not reasonably calculated to lead to the
discovery of admissible evidence. Subject to and without
waiving the foregoing objections, [Defendant] will produce or
make available for inspection and copying nonprivileged
documents responsive to this request within its possession at
a mutually convenient time and place after entry of an
appropriate confidentiality agreement and protective order.
filed an Answer on 13 February 2017.
March 2017, Defendant responded to the First Requests for
Production of Documents with a one-page spreadsheet entitled
"Sales Rep Summary - December 2016." On 8 May 2017,
Defendant produced three more documents, one of which was a
copy of the "Sales Rep Summary - December 2016."
Defendant produced 430 documents on 19 June 2017.
parties attempted mediation in September 2017, but were
unable to reach an agreement. Plaintiffs filed a motion to
compel discovery on 3 October 2017. In late October and early
November 2017, Defendant produced approximately 19, 000 pages
of documents. The trial court heard Plaintiffs' motion to
compel on 2 November 2017. At the conclusion of the hearing,
the trial court granted Plaintiffs' motion, ordering
Defendant to restate its responses to the First Set of
Interrogatories without objection, except as to privilege,
and to comply fully with Plaintiffs' First Requests for
Production by 20 November 2017. This November Order required
Defendant to produce, amongst other things: correspondence
related to Plaintiffs; all "customer orders, invoices,
sales confirmations and return forms for Plaintiffs'
territories"; commission statements and sales reports;
Defendant's state and federal tax returns for 2015 and
2016; and financial statements for 2015 and 2016.
part of complying fully with Plaintiffs' First Requests
for Production," the November Order also required
Defendant to submit to an audit of its sales data within its
electronic sales and accounting systems by an independent
accounting firm selected by Defendant on or before 20
November 2017. It further required Defendant to make someone
available to guide the auditor through Defendant's
electronic systems. The November Order allowed
Plaintiffs' counsel to be present at the audit, but
prohibited other Plaintiffs' representatives from being
present. In auditing the electronic systems, the auditor was
to have "access to all information that is
'reasonably calculated to lead to the discovery of
admissible evidence' within the meaning of Rule 26 of the
NC Rules of Civil Procedure." The scope of the audit was
"limited to data, documents[, ] and information
regarding or related to the product categories identified in
the Plaintiffs' sales representative agreements and to
sales recorded from 2014 through the date of the audit in
Plaintiffs' sales territory only."
December 2017, Defendant moved to compel Plaintiffs'
answer to Defendant's interrogatory number 3 for failure
to provide a complete damages calculation. Defendant also
moved for sanctions, asserting Plaintiffs had not targeted
discovery to the needs of the case and sought discovery
disproportionately large to any amount in controversy.
December 2017, Plaintiffs moved for an order sanctioning
Defendant for violations of the November Order. Following an
8 January 2018 hearing on the parties' motions, the trial
court granted Plaintiffs' motion for sanctions (Sanctions
Order) and denied Defendant's motion to compel and motion
for sanctions (Denial Order). Defendant appeals.
raises four issues on appeal: (1) the trial court erred when
it ordered Defendant to submit to an audit of its electronic
systems in the November Order; (2) the trial court's
findings of fact and conclusions of law do not support the
entry of the Sanctions Order; (3) the Sanctions Order
violated Defendant's due process rights; and (4) the
trial court erred by denying Defendant's motion to compel
and motion for sanctions.
first address our jurisdiction to hear the appeals from the
November Order, Sanctions Order, and Denial Order as all
three orders are interlocutory. See Veazey v.
Durham, 231 N.C. 357, 362, 57 S.E.2d 377, 381 (1950)
(noting that an interlocutory order "does not dispose of
the case, but leaves it for further action by the trial court
in order to settle and determine the entire
controversy"). Generally, an appeal from an
interlocutory order will be dismissed by this Court unless
the trial court has entered certification under N.C. Gen.
Stat. § 1A-1, Rule 54(b), or the appeal affects a
substantial right which would be jeopardized absent a review
prior to a final determination on the merits. In re
Pedestrian Walkway Failure, 173 N.C.App. 254, 262, 618
S.E.2d 796, 802 (2005) (citation omitted).
a discovery order, including an order compelling discovery,
is not immediately appealable. Id. (citation
omitted). However, when a discovery order is enforced by
sanctions pursuant to N.C. Gen. Stat. § 1A-1, Rule
37(b), the order affects a substantial right and is
immediately appealable. Id. (citation omitted). The
appeal tests the validity of both the discovery order and the
sanctions imposed. Id. (citation omitted). Moreover,
although it is interlocutory, a party may appeal from an
order imposing sanctions by striking its answer and entering
judgment as to liability. Vick v. Davis, 77 N.C.App.
359, 360, 335 S.E.2d 197, 198 (1985).
trial court's Sanctions Order struck Defendant's
answer and entered judgment for Plaintiffs as to liability as
sanctions pursuant to Rule 37(b) for alleged violations of
the November Order compelling discovery. Accordingly, the
November Order as enforced by the Sanctions Order, and the
Sanctions Order striking Defendant's answer, affect a
substantial right and are immediately appealable, and this
appeal testing the validity of both the November Order and
the Sanctions Order is properly before us. Id.
Denial Order denies Defendant's motion to compel and
motion for sanctions. Again, "[d]iscovery orders are
generally not immediately appealable because they are
interlocutory and do not affect a substantial right that
would be lost if the ruling were not reviewed before final
judgment." Stokes v. Crumpton, 369 N.C. 713,
719, 800 S.E.2d 41, 45 (2017) (quotation marks, brackets, and
citations omitted). However, orders denying discovery are
immediately appealable when "the desired discovery would
not have delayed trial or have caused the opposing party any
unreasonable annoyance, embarrassment, oppression or undue
burden or expense, and if the information desired is
highly material to a determination of the critical
question to be resolved in the case." Id.
(quotation marks and citations omitted).
desired is highly material to the determination of the
critical question where the information is
"essential" to proving the elements of a claim,
cf. Harbour Point Homeowners' Ass'n v. DJF
Enters., 206 N.C.App. 152, 163, 697 S.E.2d 439, 447
(2010), and withholding that information would
"effectively preclude" the requesting party from
making or defending that claim, cf.
Tennessee-Carolina Transp. Inc. v. Strick
Corp., 291 N.C. 618, 625, 231 S.E.2d 597, 601 (1977).
motion requested the trial court to compel Plaintiffs to
"fully and completely respond to Interrogatory No.
3." Interrogatory No. 3 requested Plaintiffs to
"[i]dentify and describe all damages claimed by you in
as much detail as you are able to provide, including: (a) a
complete description of the method of calculation of each
category of damages; [and] (b) a detailed description of each
item of individual damages . . . ." Plaintiffs responded
JWC is claiming damages for breach of contract, quantum
meruit, unfair and deceptive trade practices and
attorneys' fees. In particular, [Defendant] has failed to
properly calculate and pay the growth commission due for both
2015 and 2016. This includes making improper deductions,
failing to report or credit all sales within JWC's
territory, failing to make payments on a monthly basis and
failing to make any payments for 2016. The exact amount due
cannot be determined as of the date of this response due to
[Defendant]'s failures to allow an audit per the contract
and to produce documents in a timely and complete manner
during the lawsuit. [Defendant] has also failed to pay all of
the basic commission due for 2016. Interest is due on all
overdue growth and basic commission payments at the legal
rate allowed by law until paid. There will also be additional
commission due for 2017 and 2018 per Section 7·of the
contract. The method by which JWC calculates its damages is
as follows: the total commission due to JWC as provided in
JWC's contract with [Defendant] minus the payments
[Defendant] has already made to JWC. JWC's contract with
[Defendant] may be found at TSN_0020113 together with
TSN_0011814. Further, due to [Defendant]'s unfair and/or
deceptive trade practices, these damages should be trebled
and attorneys' fees and costs added. Finally, JWC is
entitled to recover its attorney fees, costs and expenses
incurred in having to file a suit to enforce the parties'
contract. These fees, costs and expenses continue to accrue
each day this lawsuit continues.
asserted that "Plaintiffs' argument as to why it
cannot calculate their alleged damages is unfounded" as
Defendant had already given them all the information needed
to make such calculations. While Plaintiffs' damages
calculations are "essential" to Plaintiffs proving
their claims for breach of contract, quantum meruit, and
unfair and deceptive trade practices, Defendant essentially
conceded that the information necessary for both Plaintiff
and Defendant to calculate those damages is in
Defendant's possession as "Defendant had already
given them all the information." Moreover,
Plaintiffs' inability or refusal to provide the requested
calculations to Defendant would not "effectively
preclude" Defendant from defending against
Plaintiffs' claims, as Defendant was in as good or better
position than Plaintiffs to make those calculations.
Accordingly, the information desired is not "highly
material to a determination of the critical question to
be resolved in the case[, ]" Stokes, 369 N.C.
at 719, 800 S.E.2d at 45, and the order denying
Defendant's motion to compel does not affect a
substantial right. Defendant's appeal from the Denial
Order denying its motion to compel is dismissed.
brief does not address the interlocutory nature of the denial
of its motion for sanctions and does not contain "facts
and argument to support appellate review on the ground that
the challenged order affects a substantial right." N.C.
R. App. P. 28(b)(4) (2018). "It is not the duty of this
Court to construct arguments for or find support for
appellant's right to appeal from an interlocutory order;
instead, the appellant has the burden of showing this Court
that the order deprives the appellant of a substantial right
which would be jeopardized absent a review prior to a final
determination on the merits." Jeffreys v. Raleigh
Oaks Joint Venture, 115 N.C.App. 377, 380, 444 S.E.2d
252, 254 (1994). Defendant's appeal from Denial Order
denying its motion for sanctions is dismissed.