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Scalzo v. Brandenburg

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

January 14, 2020

RICHARD SCALZO Plaintiff,
v.
JAMES ETSON BRANDENBURG, Defendant.

          ORDER

          W. CARLETON METCALF, UNITED STATES MAGISTRATE JUDGE

         This matter is before the Court on Defendant's Motion to Compel Discovery (the “Motion, ” Doc. 22). Plaintiff has filed a response in opposition and Defendant has filed a reply. Docs. 26 & 28.

         On January 13, 2020, the undersigned conducted a hearing on the Motion. Attorneys Joseph McGuire and Murphy Fletcher appeared for Defendant and attorneys Brian D. Gulden and Joseph Sullivan appeared for Plaintiff.

         I. Background Relevant to the Motion

         On May 2, 2019, Plaintiff filed a Complaint for Declaratory Judgment (the “Complaint”) seeking a declaration of the parties' rights pursuant to a Stock Appreciation Rights Agreement (“SAR Agreement”). Under the SAR Agreement, and upon a “payment event, ” Defendant was to receive payment for Defendant's interest in “Units, ” which were defined as stock appreciation rights based on shares of common stock in Gaia Herbs, Inc. (“Gaia”). Doc. 1-1.[1]

         Defendant's rights, however, were subject to termination under the following provision:

(c) If the Original Employee ceases to be employed by the Company at any time for any reason or no reason and such Employee, within two years of such Employee's employment with the Company, (i) becomes employed by, engaged by (in any capacity, including as a consultant) or otherwise associated with a Competitor (as defined below), (ii) owns, directly or indirectly, any interest in a Competitor, or (iii) induces or attempts to persuade any client, customer or supplier to terminate or materially reduce its business with the Company or induces or attempts to persuade any officer, employee or consultant of the Company to resign or sever a relationship with the Company, then all of such Employee's rights and interests to all Units, whether vested or unvested, and in this Agreement shall automatically expire and terminate. "Competitor" shall mean any individual, corporation, partnership, limited liability company, joint venture or other entity conducting business in the United States that is similar to, or in direct or indirect competition with, the business of the Company.
SAR Agreement at ¶ 7(c).

         The SAR Agreement stated that all determinations relative to this Section “shall be made by [Plaintiff], whose decisions will be final and binding.” Id. at ¶ 7(e).

         Plaintiff contends that Defendant accepted employment with a competitor of Gaia, that Defendant thereby forfeited his rights under the SAR Agreement, and that Plaintiff had the sole the discretion to determine that Defendant's rights had been forfeited in this manner.

         Defendant has counterclaimed, alleging that he resigned from Gaia due to Plaintiff's harassment of him, that Section 7(c) of the SAR Agreement is unenforceable, and that Plaintiff's determination that Defendant forfeited his stock appreciation rights was done maliciously and in bad faith. Doc. 4.

         II. Motion to Compel

         A. Legal Standards

         Under Rule 26 of the Federal Rules of Civil Procedure, “[p]arties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case.” This determination is to be made “considering the importance of the issues at stake in the action, the amount in controversy, the parties' relative access to relevant information, the parties' resources, the importance of the discovery in resolving ...


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