Blanchard v. Britthaven, Inc. ( 2014 )

An unpublished opinion of the North Carolina Court of Appeals does not constitute
controlling legal authority. Citation is disfavored, but may be permitted in accordance
with the provisions of Rule 30(e)(3) of the North Carolina Rules of Appellate Procedure.
NO. COA12-1286
NORTH CAROLINA COURT OF APPEALS
Filed: 18 February 2014
ANNE BLANCHARD, Executrix of the
Estate of Mary Lou Barthazon,
deceased,
Plaintiff,
v. Orange County
No. 09 CVS 1109
BRITTHAVEN, INC., and HILLCO,
LTD.,
Defendants.
Appeal by defendants from orders entered 12 October 2011
and 8 May 2012 by Judge Shannon R. Joseph in Orange County
Superior Court. Heard in the Court of Appeals 23 May 2013.
Henson & Fuerst, P.A., by Anne Duvoisin; Connor & Connor,
LLC, by Kenneth L. Connor; and Brian G. Brooks, Attorney at
Law, PLLC, by Brian G. Brooks, for plaintiff-appellee.
Hurley Law Office, by Michael C. Hurley and Katherine L.
Jones, for defendants-appellants.
GEER, Judge.
Defendants Britthaven, Inc. and Hillco, Ltd. appeal from
the trial court's order awarding sanctions to plaintiff Anne
Blanchard, Executrix of the Estate of Mary Lou Barthazon, and
the trial court's subsequent order setting the amount of fees
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and costs to be awarded as sanctions. Defendants primarily
argue that the trial court was divested of jurisdiction over
plaintiff's sanctions motion by various notices of appeal.
Defendants argue that the trial court lacked jurisdiction to
hear the sanctions motion, lacked jurisdiction to order
sanctions, and lacked jurisdiction to enter an order setting the
amount of fees and expenses to be awarded as sanctions.
After reviewing the issues encompassed by the sanctions
motion and the issues involved in the other appeals, we hold
that, under N.C. Gen. Stat. § 1-294 (2013), the trial court
retained jurisdiction to conduct the proceedings and enter the
orders. Because defendants' remaining arguments are either
unpersuasive or not properly raised on appeal, we affirm.
Facts
On 13 July 2009, plaintiff filed a wrongful death action
against defendants alleging negligence by defendants in
connection with their care for Ms. Barthazon at defendant
Britthaven's nursing home in Chapel Hill, North Carolina. A
more detailed description of the facts giving rise to
plaintiff's lawsuit is set forth in this Court's opinion
addressing plaintiff's appeal from the final judgment in
Blanchard v. Britthaven, Inc., ___ N.C. App. ___, ___ S.E.2d
-3-
___, COA12-1366 (2013), filed contemporaneously with this
opinion.
On 18 June 2010, defendants filed a response to plaintiff's
first set of interrogatories and request for production of
documents. Plaintiff had requested, among other things,
production of "[a]ll balance sheets, statements of assets and
liabilities, federal and state income tax returns, and profit
and loss statements for the Defendants for the period starting
one year prior to the commencement of [Ms. Barthazon's]
residency [at Britthaven] through the present" (the "financial
documents"). Defendants objected to production of the financial
documents and moved for a protective order prohibiting their
discovery. On 13 July 2010, plaintiff filed a motion to compel
production of the financial documents.
On 6 August 2010, in opposition to plaintiff's motion to
compel, defendants filed an affidavit of Britthaven's Chief
Financial Officer, Raymond J. Baker. Mr. Baker's affidavit
stated that the financial documents sought by plaintiff were
"highly confidential and proprietary to [defendants] and, with
the exception of provisions of such confidential information to
their outside legal counsel, accountants, and lenders, these
documents are not disseminated to any persons and are kept in a
secure and confidential location."
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On 21 September 2010, plaintiff filed a second motion to
compel defendants to produce the financial documents. On 28
December 2010, plaintiff served defendants with notices of
deposition for Steven Farrar, the Chief Financial Officer of
Hillco, and Mr. Baker, with each notice requesting production of
"[a]ll Financial Statements" for defendants "and their
subsidiaries or affiliates for the years including 2004 through
2010."
On 3 January 2011, plaintiff filed a third motion to compel
production of the financial documents. On 12 January 2011,
defendants filed an objection to plaintiff's requests for
production in connection with the depositions of Mr. Farrar and
Mr. Baker and a motion to quash the requests. On 3 June 2011,
the trial court entered an order granting plaintiff's motion to
compel production of the financial documents, subject to a
previously entered protective order.
On 28 June 2011, defendants filed a notice of appeal from
the trial court's 3 June 2011 order and from an unrelated 17
June 2011 discovery order. On 29 June 2011, defendants filed an
amended notice of appeal, again appealing the 3 and 17 June 2011
discovery orders. On 6 July 2011, plaintiff filed a motion to
disregard defendants' notice of appeal.
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The transcript of a 6 July 2011 hearing on plaintiff's
motion to disregard defendants' notice of appeal indicates that
defendants had withheld production of the financial documents,
as well as items at issue in the 17 June 2011 discovery order.
Defendants confirmed at the hearing that they did not oppose
plaintiff's motion to the extent that it "ask[ed] . . . that the
Court retain jurisdiction and . . . ignore the notice of appeal
and proceed with the case as if no appeal had been taken."
The trial court informed plaintiff that she had a choice:
she could push back the trial date pending defendants' appeal --
giving her a chance to receive prior to trial the documents
ordered produced in the appealed orders -- or she could proceed
to trial on the set date without the discovery at issue. On 1
September 2011, the court entered an order granting plaintiff's
motion to disregard defendants' appeal. The order provided that
the motion was granted because "neither party sought a global
stay of the case pending interlocutory appeal," and "Plaintiff
elected to proceed to trial notwithstanding the appeal."
On 22 July 2011, plaintiff filed a motion for sanctions
pursuant to Rules 26 and 37 of the Rules of Civil Procedure,
"the Court's inherent authority," and Chapter 5A of the General
Statutes. Plaintiff alleged that statements in Mr. Baker's
affidavit concerning the financial documents were inaccurate or
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misleading since plaintiff had recently learned that defendants'
audited financial documents were filed annually pursuant to
Virginia regulations and were generally available as Virginia
public records. Plaintiff asserted that her expert, certified
public accountant Brad Rush, had obtained defendants' audited
consolidated financial statements for the years 2006 to 2010
through a Virginia public records request made on 24 June 2011.
Plaintiff also contended that statements in an affidavit by
defendants' in-house counsel, Erik Lindberg, were inaccurate or
misleading regarding electronic information maintained by
defendants, referred to as "Kronos" information. Finally,
plaintiffs argued that defendants improperly withheld discovery
by producing "data-less budgets" until the court re-ordered
production and complete budgets were produced. At a 16 August
2011 pretrial hearing, the court stated it would take
plaintiff's motion for sanctions under advisement.
On 23 September 2011, the jury returned a verdict in favor
of defendants. The court entered a final judgment on 12 October
2011, which provided that the court retained jurisdiction "for
the determination of taxable costs, and for the appropriate
sanctions against Defendants." Also on 12 October 2011, the
court entered an order granting plaintiff's motion for sanctions
pursuant to Rule 37 and the court's inherent authority.
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In the sanctions order, the court found that defendants
knew or should have known after reasonable inquiry and diligence
that the statement in Mr. Baker's affidavit concerning
dissemination of the financial documents was not correct.
Further, the misstatement related to a material issue: whether
the documents were confidential and proprietary and should not
be ordered produced. This finding was based in part on the fact
that financial documents were filed with the Virginia agency,
and the affidavit made no mention of filings with any
governmental authorities. The finding was further based on the
fact that there was no credible evidence that any reasonable
inquiry or due diligence was made before Mr. Baker's affidavit
was presented to the trial court or during the multiple
discovery motions and hearings relating to the financial
documents.
The court further found sanctions were proper based on the
statements Mr. Lindberg made in his affidavit regarding the
availability of the "Kronos" information for discovery. The
court found the relevant statements were not false, but "at a
minimum evince a materially incomplete inquiry into whether and
how the Kronos information could be obtained; or an incomplete
and somewhat misleading explanation of the situation."
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Finally, the court found sanctions were appropriate based
on defendants' production, in response to an order compelling
production, of a disc containing budget information that did not
show values in many fields where there should have been values.
At a hearing on the adequacy of the budget information,
defendants initially did not have an explanation for the
problem, despite being on notice of the issue. Defendants then
produced the complete budget information after intervention and
inquiry by the trial court. The court observed that discovery
mistakes should be remedied once brought to the attention of
counsel and before court intervention and that defendants'
conduct regarding the budgets showed a failure to reasonably and
adequately respond to plaintiff's discovery requests.
Based on its findings, the court ordered defendants to pay
the expenses, costs, and reasonable attorney's fees incurred by
plaintiff (1) to pursue production of the financial documents
ultimately obtained by the Virginia public records search, (2)
to compel production of the Kronos information that was
ultimately produced, (3) to compel and obtain production of the
budgets, and (4) to prepare for and pursue plaintiff's 22 July
2011 motion for sanctions. The trial court's 12 October 2011
order left for later determination the precise amount of fees
and expenses to be paid.
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On 14 October 2011, defendants filed a notice of appeal
from the sanctions order. On or about 13 January 2012, after
the trial court denied plaintiff's motion for a new trial,
plaintiff filed notice of appeal from the final judgment.
On 8 May 2012, the trial court entered an order addressing
the sanctions amount to be paid. The court found that the
proposed hourly rate of $475.00 for plaintiff's counsel, Anne
Duvoisin, was supported by Ms. Duvoisin's affidavits and
supporting affidavits and accepted that rate as reasonable. The
court found, however, that the proposed hourly rate of $475.00
for Camille Godwin, one of plaintiff's other attorneys, was not
sufficiently supported by Ms. Godwin's affidavit. The trial
court noted that Ms. Godwin appeared to serve in the same
capacity as defendants' associate counsel who, according to
defendants' submissions related to the award of monetary
sanctions, charged an hourly rate of $150.00. Based on Ms.
Godwin's role as associate counsel, the court applied the
$150.00 hourly rate for Ms. Godwin's time. Totaling attorney's
fees, expenses, and costs, the court ordered defendants to pay
the sum of $29,242.31. Defendants timely appealed the order
setting the award of fees and costs for sanctions.
On 13 July 2012, plaintiff filed a motion to dismiss the
appeal in COA12-664, the June 2011 appeal from the orders
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compelling production. On 20 November 2012, this Court entered
an order allowing plaintiff's motion to dismiss defendants'
appeal in COA12-664: "The motion filed in this cause on the
13th of July 2012 and designated 'Motion to Dismiss Appeal' is
allowed. Appellants' appeal from the two discovery orders is
now moot. Appellants' appeal from the sanctions order is
interlocutory, and the issues raised therein can be argued in
appellants' subsequent appeal, COA12-1286, which is now
pending." We now address defendants' appeal in COA12-1286.
I
Defendants first contend that, under N.C. Gen. Stat. § 1-
294, their appeal in COA12-664 from the 3 June 2011 order
compelling production of the financial documents divested the
trial court of jurisdiction over plaintiff's motion for
sanctions. N.C. Gen. Stat. § 1-294 provides in relevant part:
"When an appeal is perfected as provided by this Article it
stays all further proceedings in the court below upon the
judgment appealed from, or upon the matter embraced therein; but
the court below may proceed upon any other matter included in
the action and not affected by the judgment appealed from."
Pursuant to N.C. Gen. Stat. § 1-294, "[w]hen a party gives
notice of appeal from an appealable order, the trial court is
divested of jurisdiction and the related proceedings are stayed
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in the lower court." Dalenko v. Peden Gen. Contractors, Inc.,
197 N.C. App. 115, 121-22, 676 S.E.2d 625, 630 (2009) (per
curiam). However, when a litigant appeals from a non-appealable
interlocutory order, "a trial court is not divested of its
jurisdiction to determine a case on its merits" and "is not
required to stay the proceedings." Id. at 122, 676 S.E.2d at
630. In the latter case, the court "'may disregard the appeal
and proceed to try the action[.]'" Id. (quoting Velez v. Dick
Keffer Pontiac-GMC Truck, Inc., 144 N.C. App. 589, 591, 551
S.E.2d 873, 875 (2001)).
There is no dispute in this case that defendants' appeal
from the order compelling production of the financial records
was interlocutory. However, defendants contend that the
interlocutory order affected a substantial right, and,
therefore, the order was properly appealable. See Romig v.
Jefferson-Pilot Life Ins. Co., 132 N.C. App. 682, 685, 513
S.E.2d 598, 600 (1999) ("A party may . . . appeal an
interlocutory order 'if it affects a substantial right and will
work injury to the appellant[] if not corrected before final
judgment.'" (quoting Perry v. Cullipher, 69 N.C. App. 761, 762,
318 S.E.2d 354, 356 (1984))), aff'd per curiam, 351 N.C.
349, 524 S.E.2d 804 (2000).
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Defendants assert that the order affected a substantial
right since the financial documents were confidential,
proprietary documents and, if defendants had complied with the
order compelling production, "the damage from th[at] disclosure
could not be undone." Defendants further assert that the order
affected a substantial right because some of the financial
documents -- tax returns -- were subject to a qualified
privilege arising from a reasonable expectation of privacy.
Assuming, without deciding, that the order compelling
production of the financial documents affected a substantial
right and was properly appealable, defendants must still show
that plaintiff's motion for sanctions and the trial court's 12
October 2011 sanctions order were matters "embraced" in the
appeal from the order compelling production of the financial
documents. See N.C. Gen. Stat. § 1-294.
Defendants argue that the order compelling production of
the financial documents involved "the competency of" Mr. Baker's
affidavit filed by defendants in opposition to plaintiff's
motion to compel. Defendants then contend that because the
sanctions order imposed sanctions based in part on an
"inaccurate and misleading" statement in Mr. Baker's affidavit,
the sanctions order involved a matter embraced by the order
compelling production. We disagree.
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The issues embraced by defendants' interlocutory appeal
from the order compelling production of the financial documents
included, according to defendants' counsel at a pretrial hearing
following the appeal of the production order, whether the
financial documents were privileged or otherwise discoverable,
whether plaintiff's ability to obtain the documents from a
Virginia public records search impacted their discoverability,
and whether Judge Joseph improperly overruled an earlier
discovery order by Judge Marvin K. Blount regarding production
of the financial documents. By contrast, in the sanctions
order, the trial court did not, in any way, address the nature
of the financial records or whether they should be produced, but
rather the order addressed the propriety of representations made
to the trial court in filings with the court -- a matter not at
issue in COA12-664. Under the specific facts of this case, the
matters at issue in the sanctions motion were not embraced in
the appeal, and, as a result, N.C. Gen. Stat. § 1-294 did not
stay proceedings on the sanctions motion.
We also note that defendants' arguments in their brief and
at oral argument touch upon the merits of the order compelling
production of the financial documents. Defendants' appeal from
that order has, however, previously been dismissed as moot.
Further, with respect to the financial documents, defendants
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were sanctioned for filing an inaccurate and misleading
affidavit without reasonably determining whether the affidavit's
statements were true. Defendants were not sanctioned for
failing to comply with the order compelling production of the
financial documents. Consequently, the merits of the order
compelling production of the financial documents are not
presently before this Court.
Defendants next argue that their appeal from the 12 October
2011 sanctions order and plaintiff's appeal from the final
judgment each divested the trial court of jurisdiction over the
remaining issue of the amount of fees and costs to be awarded as
sanctions. With respect to defendants' appeal from the 12
October 2011 sanctions order, this Court has already issued an
order, in COA12-664, determining that defendants' appeal from
the sanctions order was interlocutory and dismissing the appeal
from that order.
This Court's prior determination that the sanctions order
was not appealable is binding here. In re Civil Penalty, 324
N.C. 373, 384, 379 S.E.2d 30, 37 (1989) ("Where a panel of the
Court of Appeals has decided the same issue, albeit in a
different case, a subsequent panel of the same court is bound by
that precedent, unless it has been overturned by a higher
court."). Since defendant's appeal was from a non-appealable
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interlocutory order, that appeal did not divest the trial court
of jurisdiction to receive evidence pertaining to the amount of
sanctions and to enter the order awarding fees and costs. See
Dalenko, 197 N.C. App. at 122, 676 S.E.2d at 630.
With respect to plaintiff's appeal from the final judgment,
it well established that the exception in N.C. Gen. Stat. § 1-
294 for continued jurisdiction over matters not affected by the
appealed judgment allows the court to continue to exercise
jurisdiction over motions for sanctions as long as the matter
does not depend upon the validity of the appealed order or
judgment. See Overcash v. Blue Cross & Blue Shield of N.C., 94
N.C. App. 602, 617, 618, 381 S.E.2d 330, 340 (1989) (holding
"termination of the action and defendant's filing of notice of
appeal did not automatically deprive the court of jurisdiction"
over defendant's post-trial motion for sanctions, but "[s]ince
the substantive basis of defendant's motion had been adjudicated
in the earlier order, defendant's appeal therefrom divested the
trial court of its jurisdiction to entertain the post-trial
motion"). Cf. McClure v. Cnty. of Jackson, 185 N.C. App. 462,
471, 648 S.E.2d 546, 551 (2007) ("When, as in the instant case,
the award of attorney's fees was based upon the plaintiff being
the 'prevailing party' in the proceedings, the exception set
forth in N.C. Gen. Stat. § 1–294 is not applicable."). Since
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plaintiff's motion for sanctions did not depend upon the
validity of the final judgment, the exception to N.C. Gen. Stat.
§ 1–294 is applicable here.
Defendants nonetheless cite McClure and Swink v. Weintraub,
195 N.C. App. 133, 672 S.E.2d 53 (2009), in support of their
argument. In both of those cases, however, this Court concluded
that the trial court lacked jurisdiction to impose an award of
attorneys' fees following appeal from a judgment because the fee
award was entered as a result of a party prevailing on the
merits, a circumstance not present here. See McClure, 185 N.C.
App. at 471, 648 S.E.2d at 551 (holding "exception set forth in
N.C. Gen. Stat. § 1–294 is not applicable" since "award of
attorney's fees was based upon the plaintiff being the
'prevailing party' in the proceedings"); Swink, 195 N.C. App. at
160, 672 S.E.2d at 70 (holding trial court lacked jurisdiction
under N.C. Gen. Stat. § 1-294 to enter order taxing costs after
appeal from judgment since "award of costs [was] directly
dependent upon whether the judgment [was] sustained on appeal").
In sum, none of the prior notices of appeal stayed the
proceedings on the sanctions matter. The trial court,
therefore, properly exercised its jurisdiction over the
sanctions matter throughout this case.
II
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Defendants next argue that the trial court abused its
discretion in ordering defendants sanctioned. "[T]rial courts
have inherent authority to impose sanctions for wilful failure
to comply with the rules of court." Few v. Hammack Enters.,
Inc., 132 N.C. App. 291, 298, 511 S.E.2d 665, 670 (1999). The
exercise of a court's inherent authority is reviewed for abuse
of discretion. Dunn v. Canoy, 180 N.C. App. 30, 45, 636 S.E.2d
243, 253 (2006). Similarly, "[t]he imposition of sanctions
under Rule 37 'is in the sound discretion of the trial judge and
cannot be overturned absent a showing of abuse of that
discretion.'" In re Pedestrian Walkway Failure, 173 N.C. App.
237, 246, 618 S.E.2d 819, 826 (2005) (quoting Bumgarner v.
Reneau, 332 N.C. 624, 631, 422 S.E.2d 686, 690 (1992)).
Defendants first argue that "the trial court's finding that
Baker [CFO of Britthaven], Farrar [CFO of Hillco], and Lindberg
[defendants' in house counsel] wrongfully failed to appear at
the Sanctions hearing is contradicted by the record" since
"[t]he trial court refused Plaintiff's request to summon these
witnesses to the hearing and granted Defendants' motion to the
[sic] quash subpoenas issued to them for that purpose."
(Internal record citations omitted.) Contrary to defendants'
contention, however, the trial court never found that Mr. Baker,
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Mr. Farrar, and Mr. Lindberg "wrongfully failed to appear at the
Sanctions hearing." (Emphasis omitted.)
In the trial court's explanation of why sanctions were
appropriate for the factually incorrect statement in Mr. Baker's
affidavit about dissemination of the financial documents, the
court found that defendants never produced evidence that
reasonable inquiries had been made to ensure the affidavit was
accurate. In noting the absence of evidence, the court pointed
out that defendants had moved to quash the subpoenas issued to
Mr. Baker and Mr. Lindberg compelling their testimony at the
sanctions hearing.
The trial court further found that rather than bringing Mr.
Baker and Mr. Lindberg to court, defense counsel represented
that neither of those individuals knew how the financial
documents had been filed in Virginia and, only after several
calls, was defense counsel able to represent to the trial court
that the documents had purportedly been filed by an outside
accounting firm. The trial court's order for sanctions was,
therefore, based on the "submission of misleading and inaccurate
affidavit statements," resulting from defendants' inadequate
inquiry prior to making the statements. Defendants' failure to
produce witnesses at the sanctions hearing and their rationale
for the motion to quash the subpoenas were pertinent to whether
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defendants had any justification for the statements in the
affidavits.
Defendants also contend that "the finding that Raymond
Baker's statements in his affidavit were 'inaccurate and
misleading' is not supported by the bare fact that Plaintiff's
expert succeeded in obtaining financial statements from a state
agency." (Internal record citation omitted.) In relevant part,
the court found that Mr. Baker's affidavit contained a factual
inaccuracy regarding dissemination of the financial documents
since it omitted the fact that the financial statements were
filed with government agencies or produced in other litigation.
The court's actual finding was supported by exhibits
attached to plaintiff's motion for sanctions and admissions by
defense counsel at the hearing. Given the evidence, we cannot
conclude that the trial court abused its discretion in finding
both that Mr. Baker's affidavit contained an inaccurate and
misleading statement and that defendants had not shown they made
a reasonable inquiry into whether Mr. Baker's statement was
correct prior to filing his affidavit.
Defendants next argue that the trial court abused its
discretion in sanctioning defendants based on the content of Mr.
Lindberg's affidavit regarding discovery of the Kronos
information. Defendants specifically dispute the trial court's
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finding that even though the "statements were not false on their
face," those statements "at a minimum evince a materially
incomplete inquiry into whether and how the Kronos information
could be obtained; or an incomplete and somewhat misleading
explanation of the situation." Defendants do not challenge any
of the order's other findings that supported this ultimate
finding. The court's detailed supporting findings explain that
Mr. Lindberg made the misleading statements in his affidavit
about the accessibility of the Kronos information based upon
only limited communications with a Britthaven employee. He did
not fully explore with that employee the possible ways in which
the information could have been obtained. The unchallenged
supporting findings fully support the trial court's ultimate
finding.
Defendants nonetheless assert that "the statements in
Lindberg's Affidavit, executed 28 February 2010, were made based
on his knowledge, information, and belief of the Kronos computer
system at that time." Defendants further argue that "an affiant
is required to have only personal knowledge, information, or a
reasonable belief of the facts stated in the affidavit" and "is
not required to have complete or infallible knowledge."
However, defendants' arguments fail to recognize the actual
basis for the trial court's concern regarding defendants'
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conduct in discovery. As with Mr. Baker's statements regarding
the financial documents, Mr. Lindberg also made statements that
demonstrated that he had made "a materially incomplete inquiry"
into the matter or was providing "an incomplete and somewhat
misleading explanation of the situation." Thus, the court did
not sanction defendants for failing to have "infallible
knowledge," but rather for failing to adequately look into the
matter prior to filing an affidavit making representations to
the trial court.
Finally, defendants argue that the trial court abused its
discretion in sanctioning defendants for their failure to
produce the full budget information prior to repeated court
intervention. Defendants challenge the trial court's finding
that "[a]t the hearing, Defendants did not initially have any
explanation for the [budget] problem, despite being on notice of
the issue, and obtained the information and produced the correct
information only after yet another intervention and inquiry by
the Court." Defendants argue that this finding does not present
"an accurate reflection of what actually occurred during that
hearing."
At a 26 May 2011 hearing, plaintiff's counsel explained to
the court that the budgets she received from defendants were
missing information. Plaintiff's counsel stated she had
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notified defendants of the problem. Upon the trial court asking
why defendants had not cured the problem prior to the hearing
and why plaintiff had to raise the issue with the court, defense
counsel responded that he had "no excuse for that." Defense
counsel then stated he could have an explanation for the problem
shortly.
At a continuation of the hearing the next day, 27 May 2011,
defense counsel explained that the issue leading to incomplete
information in the budgets as produced resulted from the need
for a certain macro on a computer system for the documents, and
defendants' prior counsel had printed the documents from a
computer without the necessary macro, leaving out the
information that would otherwise have been present. Defense
counsel further indicated that he had corrected the problem and
would produce the complete budget information by the end of the
day. Thus, the court's finding accurately reflects the events
at the hearings.
Also with respect to the budgets, defendants argue that the
trial court abused its discretion in stating at the 27 May 2011
hearing that it believed "the error with the budgets was due to
a failure of Plaintiff's counsel and Defendants' counsel to
communicate" and that the issue had been "'resolved,'" but
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later, in the sanctions order, "revers[ing]" itself and ordering
sanctions based on this issue. We disagree.
At the hearing, the court actually stated: "It sounds like
it's resolved; seems like it took an awfully long time to get
here; still have concerns about that; realize it may not be
entirely present counsel's fault. . . . [I]t just seems to me
to be a failure to communicate among counsel. And that's a
problem. So that's a problem." The court's statement about
"present counsel" refers to assertions by defense counsel that
defendants' former attorney had mistakenly produced the budgets
containing the missing data. In response to defense counsel's
assertions that the issue may have received little attention
since discovery of the budgets was not strongly contested by the
parties, the court responded, "Then how did it get to me? . . .
It's been pending for so long."
Thus, the court did not "reverse" itself by ordering
sanctions pursuant to a matter that it had previously determined
to be completely resolved. Rather, the court noted at the
hearing that it believed the issue was attributable to a failure
of counsel, including defense counsel, to communicate and that
it was very concerned that defendants had failed to correct the
issue, despite being on notice of it, before further court
intervention was necessary.
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Each of the findings of fact challenged by defendants are
supported by evidence or other unchallenged findings. Given
those findings, defendants have not shown that the trial court
abused its discretion in deciding that defendants should be
sanctioned.
III
Defendants next argue that the trial court's entry of the
sanctions order violated their constitutional rights in a number
of ways. Defendants first argue that the trial court violated
their due process rights by sanctioning them for matters
embraced by their pending appeal of the order compelling
production of the financial documents despite the trial court's
acknowledgement at the 6 July 2011 hearing that the order
compelling production was automatically stayed pending appeal
pursuant to N.C. Gen. Stat. § 1-294.
Initially, we note that defendants cite no authority in
support of this argument, thereby violating Rule 28(b)(6) of the
Rules of Appellate Procedure. In any event, we have already
held that the court's sanctions order did not pertain to matters
"embraced" within the appeal from the order compelling
production of the financial documents. N.C. Gen. Stat. § 1-294.
Even if defendants' due process rights could be implicated by a
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violation of the stay set out in N.C. Gen. Stat. § 1-294, no
violation occurred in this case.
Defendants next contend that the sanctions order violated
their due process rights given "the inordinate and unexplained
delay in the issuance of the order awarding sanctions."
Defendants assert that the timing of the order demonstrates that
the trial court used the sanctions order "as a consolation prize
for a plaintiff disappointed by the jury's verdict." Defendants
again cite no authority in support of their contention, and we
decline to address a claimed constitutional violation when
defendants have not considered the argument important enough to
warrant even minimal research.
Defendants further argue that the trial court's entry of
the sanctions order violated their constitutional rights on
three additional grounds related to (1) defendants' claim
(already found unsupported) that the trial court sanctioned
defendants for failing to produce witnesses at the sanctions
hearing; (2) the trial court's "refus[ing] to hear Mr. Baker's
offer of proof" at the trial following the sanctions hearing;
and (3) the trial court's violation of "Defendants'
constitutional right to due process and equal protection of the
law by making findings based on matters outside the record of
which Defendants had been given no notice or an opportunity to
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be heard, including hearsay related to motions filed in the
Hopper case and Defendant's [sic] alleged failure to comply with
orders by other judges."
Defendants did not make any of these three additional
constitutional arguments to the trial court. Moreover,
defendants cite no authority in support of the second and third
additional constitutional arguments, in violation of Rule
28(b)(6) of the Rules of Appellate Procedure.
"A constitutional issue not raised at trial will generally
not be considered for the first time on appeal." Anderson v.
Assimos, 356 N.C. 415, 416, 572 S.E.2d 101, 102 (2002) (per
curiam). See N.C.R. App. P. 10(a)(1) (providing that, in order
to preserve argument for appeal, party must present to trial
court "a timely request, objection, or motion, stating the
specific grounds for the ruling the party desired the court to
make"). Since defendants did not raise these constitutional
issues below, they cannot now argue them on appeal.1
Finally, although not set out in their brief, defendants
raised an additional due process issue at oral argument before
this Court, asserting that the trial court's failure to enter
the sanctions order until after entry of final judgment
1
We note, in passing, however, that defendants' articulation
of what the trial court did is not necessarily consistent with
what appears in the actual record.
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necessarily precluded the trial court from considering lesser
sanctions that would otherwise have been available. Since this
argument was not raised in defendants' brief, defendants cannot
properly raise it for the first time at oral argument. See Atl.
Coast Line R.R. Co. v. Beaufort Cnty., 224 N.C. 115, 119, 29
S.E.2d 201, 203 (1944) ("No such contention appears to have been
made in court below, and none is made in [sic] brief filed in
this Court. Hence, oral presentation of it comes too late, and
the point may not now be raised in this Court.").
Moreover, the argument was not made in the trial court.
Defendants claim they did not have the chance to make this
argument to the trial court since the court held no additional
hearing on the sanctions matter after trial began and did not
give defendants notice prior to entering the sanctions order.
However, defendants filed an objection to the sanctions order,
after entry of the sanctions order and prior to entry of the
order setting the award of fees and costs for sanctions, arguing
to the trial court that entry of the sanctions order violated
their due process rights in a number of other ways. Defendants'
own filing, therefore, belies their argument that they had no
opportunity to present this issue to the trial court. Because
the issue was neither preserved at the trial level nor
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appropriately argued on appeal, it is not properly before this
Court.
IV
Defendants' final argument is that "the trial court abused
its discretion when it set the hourly rate of compensation for
the legal services of Plaintiff's counsel, Anne Duvoisin, at
$475 per hour." Defendants assert that Ms. Duvoisin functioned
primarily in a second-chair capacity during trial and that since
defendants' lead counsel's hourly rate is $175.00 and
defendants' associate counsel's hourly rate is $150.00, there
was no reasonable basis for the court's finding.
We initially note that defendants presented no actual
evidence in the trial court of defendants' lead counsel's or
associate counsel's hourly rates. Our review of the record has
revealed only that, in an unverified responsive filing by
defendants entitled "defendants' objection and response to
plaintiff's affidavits in support of monetary sanctions,"
defendants made representations regarding defense counsel's
hourly rates. However, the assertions in this filing were not
evidence, and defendants did not attach any affidavits or other
evidence concerning these hourly rates.
The trial court's findings on the reasonableness of
attorney's fees must be supported by some evidence. Simpson v.
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Simpson, 209 N.C. App. 320, 325, 703 S.E.2d 890, 893 (2011). To
that end, the court may take judicial notice of the
reasonableness of fees unless it "determines that it lacks the
necessary knowledge or that the customary hourly rate is in fact
subject to debate in the community." Id. at 328, 703 S.E.2d at
895.
Here, the trial court observed the trial and was in a
position to determine Ms. Duvoisin's role at trial. Defendants
cite no authority supporting their contentions regarding the
hourly rates awarded and, therefore, have cited nothing that
suggests that Ms. Duvoisin's hourly rate should be set at the
level of a lesser experienced associate. Further, defendants
neither offered evidence of the hourly rates that they argue on
appeal would have been appropriate nor did they request that the
trial court take judicial notice of those hourly rates. There
is, however, no dispute that affidavits submitted by Ms.
Duvoisin -- the only evidence before the court on this issue --
supported the hourly rate set by the court.
Defendants also argue that the court abused its discretion
in setting Ms. Duvoisin's hourly rate in light of the court's
findings regarding the hourly rate of another one of plaintiff's
attorneys, Ms. Godwin. The court rejected the hourly rate of
$475.00 proposed in Ms. Godwin's affidavit, finding that "the
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Court does not have sufficient information to determine whether
the rate of $475.00 is the customary fee for like work and the
experience and ability of Ms. Godwin."2 The court further found
that Ms. Godwin "appeared to function in the same role as did
associate counsel for the defense who, according to Defendants'
Objections and Response to Plaintiff's Affidavits, charges an
hourly rate of $150.00." The court, "[b]ased on that role,"
applied a $150.00 hourly rate for Ms. Godwin's time.
Defendants do not challenge Ms. Godwin's fee, and her
affidavit provides no evidence that the hourly rate set for Ms.
Duvoisin was unreasonable. We, therefore, hold that the trial
court did not abuse its discretion in setting Ms. Duvoisin's
hourly rate, and we affirm the trial court's order.
Affirmed.
Judges ELMORE and DILLON concur.
Report per Rule 30(e).
2
We note that Ms. Godwin's affidavit was significantly
shorter than Ms. Duvoisin's affidavit and, unlike Ms. Duvoisin's
affidavit, was not supported by additional affidavits by other
attorneys.