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MB Realty Group, Inc. v. The Gaston County Board of Education

United States District Court, W.D. North Carolina, Charlotte Division

May 28, 2019

MB REALTY GROUP, INC. and MATT BECKHAM, Plaintiffs,
v.
THE GASTON COUNTY BOARD OF EDUCATION, GASTON COUNTY, CARSTAPHEN FAMILY FOUNDATION, THE STOWE FOUNDATION, INC., CATHERINE ROBERTS, and TRACY PHILBECK, Defendants.

          ORDER

          Frank D. Whitney, Chief United States District Judge.

         THIS MATTER is before the Court on Plaintiffs' Motion for Default Judgment and Sanctions Against Defendants Tracy Philbeck (“Philbeck”) and Catherine Roberts (“Roberts”). (Doc. No. 93). Defendants Philbeck and Roberts responded to the motion, (Docs. Nos. 95, 97), Plaintiffs replied, (Docs. Nos. 111, 112), and this matter is now ripe for review. For the reasons stated below, Plaintiffs' Motion for Default Judgment and Sanctions against Defendants is DENIED. Plaintiffs' earlier Motion for Default Judgment and Sanctions, (Doc. No. 92), is hereby DENIED AS MOOT.

         I. BACKGROUND

         In the interests of judicial economy, the Court provides a general overview of the case here but summarizes the specific background relevant to the issues raised by the parties' motions and answers in the analysis. This litigation stems from Plaintiffs' contention MB Realty Group, Inc. (“MBRG”) was “cut . . . out” of a deal wherein Plaintiffs planned to purchase a 78-acre parcel from Defendants Carstarphen Family Foundation and The Stowe Foundation (“the Foundations”) and then subsequently sell the same parcel of land to Defendant Gaston County Board of Education (“GCBOE”) whereby Plaintiffs would realize a roughly $400, 000 profit. (Doc. No. 32, pp. 4-8). After Plaintiffs failed to close on the property by the extended closing date of May 16, 2017, provided by the Foundations, the GCBOE eventually purchased the parcel directly from the Foundations. Id.

         Plaintiffs sued Defendants Philbeck and Roberts for libel per se, unfair and deceptive trade practices (“UDTPA”), and punitive damages. Id. at 13-14. Plaintiffs alleged Defendant Roberts, a member of the GCBOE, published and Defendant Philbeck, a Gaston County Commissioner, “re-published an email to various members of GCBOE and others, ” which:

“[M]ade false statements about a prior transaction involving Mr. Beckham, specifically stating that ‘Pearson, Gray and Hoyle refuse to take the commission owed to them, due to the fact of the land purchase going on before the foreclosure process and because of the relationship between Kevin and Matt Beckham. Matt Beckham is paid a commission fee.'”

Id. at 5.

         Plaintiffs' Motion for Default Judgment and Sanctions Against Defendants Philbeck and Roberts (“Motion”) seeks an order pursuant to Federal Rule of Civil Procedure 37(e) containing the following: (1) a presumption that the lost information from the emails was unfavorable to Defendant Philbeck, (2) a default judgment against Defendant Philbeck, (3) in the alternative, a jury instruction to presume the information in the emails was unfavorable to Philbeck, (4) a presumption the information in the text messages not handed over by Roberts was unfavorable as to Roberts, (5) a default judgment against Roberts, (6) a jury instruction presuming the information in the text messages was unfavorable to Roberts, (7) “measures no greater than necessary to cure the prejudice, ” and (8) Defendants Philbeck and Roberts to be liable jointly and severally for reasonable expenses and attorney's fees connected to the Motion. (Doc. No. 93-1, p. 5).

         II. LEGAL STANDARD

         A sanction for spoliation of evidence should “(1) deter the parties from engaging in spoliation; (2) place the risk of an erroneous judgment on the party who wrongfully created the risk; and (3) restore the prejudiced party to the same position he would have been in absent the wrongful destruction of evidence. . . .” Eshelman v. Puma Biotechnology, Inc., No. 7:16-cv-18-D, 2017 WL 2483800, at *11-12 (E.D. N.C. June 7, 2017) (quoting West v. Goodyear Tire & Rubber Co., 167 F.3d 776, 779 (2nd Cir. 1999)). There are two avenues by which a court may impose sanctions for spoliation, “(1) Fed.R.Civ.P. 37(e); and (2) [the Court's] ‘inherent power'” Silvestri v. Gen. Motors Corp., 271 F.3d 583, 590 (4th Cir. 2001) (quoting Chambers v. NASCO, Inc., 501 U.S. 32, 45 (1991)).

         According to Rule 37(e) of the Federal Rules of Civil Procedure:

If electronically stored information that should have been preserved in the anticipation of litigation is lost because a party failed to take reasonable steps to preserve it, and it cannot be restored or replaced through additional discovery, the court:
(1) Upon finding prejudice to another party from loss of the information, may order measures no greater than necessary to cure the prejudice; or
(2) Only upon finding that the party acted with the intent to deprive another party of the information's use ...

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