THOMAS RAYMOND WALSH, M.D. and JAMES DASHER, M.D., Plaintiffs,
CORNERSTONE HEALTH CARE, P.A., Defendant.
in the Court of Appeals 13 March 2019.
by defendant from order entered 21 March 2018 by Judge
Jeffery K. Carpenter in Davidson County Superior Court. No.
14 CVS 3289
Mullins Riley & Scarborough LLP, by G. Gray Wilson and
Lorin J. Lapidus, for plaintiffs-appellees.
Bennett Guthrie Latham, PLLC, by Rodney A. Guthrie, Roberta
King Latham, and Mitchell H. Blankenship, for
Cornerstone Health Care, P.A. appeals from the trial
court's order striking Defendant's answer as a
sanction for discovery violations. We vacate and remand.
Thomas Raymond Walsh, M.D. and James Dasher, M.D. filed the
instant action against Defendant, their former employer, on
20 November 2014 asserting claims for breach of the implied
covenant of good faith and fair dealing, breach of contract,
common law unfair competition, and quantum meruit. A
protracted discovery dispute thereafter arose between the
parties, which, for purposes of the instant appeal, primarily
involves Plaintiffs' claim for breach of the implied
covenant of good faith and fair dealing.
of the basis of their claim for breach of the implied
covenant of good faith and fair dealing, Plaintiffs alleged
that "[i]n recent years, defendant . . . became
fundamentally unprofitable, and was able to pay its business
debts only by arbitrarily reducing the compensation of
certain disfavored physicians." Plaintiffs maintain that
they were included among said group of "disfavored
physicians," and that when Plaintiffs expressed
dissatisfaction with their decreased compensation, Defendant
retaliated by essentially demoting Plaintiffs in an effort to
further reduce their compensation. On 20 September 2014,
Plaintiffs voluntarily resigned from their employment with
Defendant. Plaintiffs maintained that "Defendant's
capricious, malicious, and retaliatory actions"
constituted a breach of the implied covenant of good faith
and fair dealing in their employment contracts.
served its initial response to Plaintiffs' First Set of
Interrogatories and Request for Production of Documents on 4
May 2015. Interrogatory 7 directed Defendant to
"[i]dentify, with specificity, all relevant documents
that you or your attorney have which pertain to any issues or
facts in this suit." Plaintiffs' Request 7 sought
[a]ll statements, summaries of statements, correspondence,
letters, memoranda, documents, records, notes, telephone
logs, electronic mail, ms word documents, pdf files, or other
papers, whether in written, printed, or electronic format, in
your possession or control or to which you, your counsel, or
representatives have access regarding or pertaining to the
professional performance, competency, or personal opinions or
views of either or both plaintiffs by [Defendant].
(Hereafter "professional and personal opinion
documents"). Defendant objected to Request 7 on the
grounds of privilege,  but nevertheless responded that it had
nothing to produce. Defendant's CEO verified under oath
that the response to Request 7 was "true of her own
knowledge and belief except those matters therein stated upon
information and belief, and, as to those, she believe[d] them
to be true."
July 2016, following the parties' fourth
discovery-related motion, the Honorable Mark E. Klass entered
an order requiring the parties to "confer and select . .
. a qualified and capable forensic e-discovery vendor for the
purpose of collecting and cataloging electronically stored
communications, specifically e-mails, generated by" six
of Defendant's corporate officers ("the e-discovery
order"). According to Plaintiffs, when Defendant's
e-discovery database became available to them in August 2017,
Plaintiffs learned that Defendant had "intentionally
withheld a vast number of highly relevant and damaging
documents"-namely, e-mails between Defendant's
officers-"which squarely pertain" to
Defendant's professional and personal opinions of
Plaintiffs, despite the CEO having attested, under oath, that
no such documents existed. Accordingly, on 21 September 2017,
Plaintiffs filed a motion for mandatory sanctions
"pursuant to Rule 26(g) of the North Carolina Rules of
Civil Procedure." Plaintiffs maintained that "[t]he
discovery responses signed and attested to under oath by
[Defendant's CEO] were interposed for the improper
purpose of intentionally withholding a substantial cache of
damaging documents, which has served to harass plaintiffs,
cause unnecessary delay, and has needlessly and exponentially
increased the cost of litigation." Plaintiffs argued
that "[a]t this juncture, only the severe sanction of
striking [Defendant's] answer is appropriate."
motion came on for hearing on 2 October 2017. The
professional and personal opinion documents that Plaintiffs
alleged were responsive to Interrogatory 7 and Request 7 were
presented to the trial court for in camera review.
Rule 26(g) is cited in our brief in full. . . . [It]
essentially addresses the issue of improper purpose and that
is to use the discovery process for a number of different
improper reasons, but in this case to use the discovery
process to wear down the opponent to needlessly increase the
cost of litigation so eventually the party collapses under
We think that's exactly what has occurred in this case. .
. . The discovery responses that were signed by the
defendant's CEO, falsely, were for the clear purpose of
improperly withholding a substantial number of damaging
documents pertaining again to our ...