Carmed 45, LLC v. Huff

Decision Date13 July 2021
Docket NumberNo. ED 108990,ED 108990
Citation630 S.W.3d 842
Parties CARMED 45, LLC, Respondent, v. Wesley Adam HUFF, Appellant.
CourtMissouri Court of Appeals

Sean Cronin, 15 North 1st Street, Ste. A, Belleville, IL 62220, Alec Rosenblum, 120 S. Central Avenue #130, Clayton, MO 63105, for appellant.

Matthew Landwehr, One U.S. Bank Plaza, 505 N. 7th Street, Ste. 3400, St. Louis, MO 63101, for respondent.

Gary M. Gaertner, Jr., P.J.

Introduction

Wesley Huff (Huff) appeals the trial court's entry of default judgment as a sanction for discovery violations1 and subsequent award of liquidated damages granted to Carmed 45, LLC (Carmed 45) on Carmed 45's suit for breach of a covenant not to compete. Huff also appeals the trial court's entry of an injunction extending the non-compete period two years from the date of the judgment. Because we find no abuse of discretion in light of the whole record regarding the trial court's imposition of sanctions, we affirm the court's judgment in that respect. However, because the record lacks evidence of actual or ongoing harm to Carmed 45 resulting from Huff's breach, we reverse the trial court's liquidated damages award and injunction extending the non-compete period.

Background

Carmed 45 is a business in the auto repair service industry whose services include paintless dent repair (PDR). In 2010, Huff, as agent of his company, Mirror Finish PDR, entered a partnership agreement with Carmed 45 that contemplated Huff would perform PDR in a designated territory in southern Illinois (the Operations Area). When Huff joined the partnership, Carmed 45 provided Huff with a variety of confidential business development and marketing resources, intellectual property related to PDR, pricing and customer data, and financial information.

The partnership agreement included a non-compete, non-disclosure, and non-solicitation provision (non-compete clause), which prohibited Huff2 from providing PDR services within a 50-mile radius of the Operations Area for 24 months after leaving the partnership. Additionally, the non-compete clause provided that if Huff breached the clause, the non-compete period would be extended by the amount of time Huff was in breach. The clause also included a liquidated damages provision, to be calculated as an "amount equal to the previous two (2) years [’] adjusted net income before interest and taxes derived by [Carmed 45] plus any salary paid [to Huff] during such period."

On March 31, 2015, Huff resigned his membership in the partnership. On February 22, 2017, Carmed 45 filed suit for breach of contract, alleging that Carmed 45 had discovered Huff was performing PDR services in the Operations Area in violation of the non-compete clause. On November 9, 2017, Carmed 45 served its first set of interrogatories, requests for admission, and requests for production.

Huff requested an extension of time to respond from Carmed 45, and then on the new due date, Huff filed a motion with the trial court to stay discovery or grant an extension of time to complete discovery until the court ruled on Huff's motion to dismiss for failure to state a claim, which Huff filed the same day. Huff argued Carmed 45 requested highly sensitive, confidential, and proprietary information, which would be detrimental to his business if he had to disclose, and asked the court to rule on the enforceability of the non-compete clause prior to Huff producing any discovery. Carmed 45 responded that it had already agreed to Huff's initial request for an extension of time to respond to discovery and asked the court to deem admitted Carmed 45's requests for admission.

On January 22, 2018, the trial court granted Carmed 45 leave to file an amended petition and denied Huff's motion to stay discovery. The court also granted Huff an additional 14 days to respond to Carmed 45's discovery requests. The trial court chose not to deem Carmed 45's requests admitted, but appointed a special master to oversee discovery, finding that the issues to be litigated were complicated, that the parties had had difficulty completing discovery in an orderly and timely manner, and that such exceptional circumstances warranted referral to a special master to ensure the orderly completion of discovery.

Over the following months, the parties conferred with the special master, and served discovery requests, objections, and responses. After a lengthy hearing before the special master, the master drafted an order, later adopted by the trial court, finding that a protective order was the appropriate means to address Huff's concerns regarding the propriety information he objected to producing. The special master attached a protective order, also entered by the court, which laid out parameters for designating documents either as "confidential" or as "for attorneys’ eyes only," depending on each document's date.3 Finally, the special master considered Huff's objections to each of Carmed 45's discovery requests and determined Huff must fully respond to seven interrogatories, 44 requests for production, and three requests for admission. The trial court's July 18, 2018 order, adopting the special master's orders, required Huff to fully respond to discovery within 30 days.

On August 17, 2018, Huff filed a supplemental response, which answered the three requests for admission but contained no responses to the interrogatories or requests for production. He also filed a motion to bifurcate the proceedings and a motion to amend the protective order, again asserting that these discovery requests sought highly proprietary information that would be detrimental to his business to disclose, and arguing that the trial court should rule on the enforceability of the non-compete clause before requiring disclosure of such information. On September 5, 2018, Carmed 45 filed a motion for sanctions due to discovery violations.

The trial court held a hearing on October 31, 2018, after which it denied Huff's motion to bifurcate the proceedings and granted Carmed 45's motion for sanctions, finding that Huff's conduct during discovery was a "willful and wanton" attempt to avoid disclosing information that both the special master and the court found was discoverable pursuant to the protective order. The trial court ordered Huff to pay the full cost of the special master and Carmed 45's attorney fees expended in prosecuting the motion for sanctions. The court additionally stated it would consider default judgment as a future sanction if Huff did not provide discovery within 10 days of its December 28, 2019 order.

Huff filed an emergency motion to extend time for discovery and file responses under seal, and a motion to vacate the order of reference to a special master and the discovery-related orders that the court had adopted from the special master. Huff also requested a protective order under Rule 56.01(c)(7) and again sought to bifurcate the proceedings. Huff filed petitions for writs of prohibition and mandamus with this Court and the Missouri Supreme Court on January 4 and 7, 2019, respectively. The petitions challenged the trial court's appointment of the special master, the special master's discovery orders, the trial court's award of sanctions, and the trial court's denial of bifurcated proceedings. Both courts issued orders denying all writs.

On January 17, 2019, Huff produced over 6,000 pages of documents to Carmed 45, consisting primarily of customer invoices and payments since Huff left the partnership, all of which he designated "for attorneys’ eyes only." Huff simultaneously filed a renewed motion to amend the protective order, requesting the trial court allow him to designate all such information as "for attorneys’ eyes only."

On January 20, 2019, Carmed 45 filed its second motion for sanctions, arguing that Huff was still in violation of the special master's and the trial court's discovery orders, both by improperly designating several documents as "for attorneys’ eyes only" and by failing to produce requested documents. After a hearing, the trial court denied Huff's request to amend the protective order and took the motion for sanctions under submission. On December 27, 2019, the trial court granted Carmed 45's second motion for sanctions. The court found that Huff "continue[s] to object and file Motions to reconsider which have been denied and yet [Huff] has failed to produce the discovery subject to a protective order or otherwise." The court found Huff's actions to be willful and wanton, and entered default judgment on behalf of Carmed 45.

The trial court held a damages hearing on February 13, 2020, at which Huff's counsel was present but could not present evidence or cross-examine witnesses. The trial court did allow Huff's counsel to make objections during the hearing. Carmed 45 presented documentary and testimonial evidence about the operating agreement, non-compete clause, and calculation of liquidated damages. Carmed 45's attorney, Shaun Broeker, testified regarding documents designated "for attorneys’ eyes only" over Huff's objection.

The trial court awarded $322,933.83 in liquidated damages to Carmed 45 for Huff's breach of the non-compete clause, $90,138.35 in pre-judgment interest, $20,453.20 in costs and attorneys’ fees for the costs of the special master and litigating the sanctions motions, and $275,872.60 in costs and attorneys’ fees under the terms of the operating agreement. The trial court found the non-compete clause's terms were reasonable and entered an injunction extending the non-compete period two years from the date of the judgment because Huff never complied with the original term. This appeal follows.

Discussion

Huff raises several arguments on appeal. His first four points raise procedural error concerning Carmed 45's petition and the proceedings involving the special master. Huff's fifth and sixth points claim the trial court erred in imposing discovery sanctions. Huff's seventh and eighth points address the damages...

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2 cases
  • In re M. N. V.
    • United States
    • Court of Appeal of Missouri (US)
    • 13 Julio 2021
  • City of Columbia v. Spectra Commc'ns Grp., LLC
    • United States
    • Court of Appeal of Missouri (US)
    • 19 Julio 2022
    ...broad discretion in controlling discovery, including the choice of sanctions for non-disclosure of discovery. Carmed 45, LLC v. Huff , 630 S.W.3d 842, 856 (Mo. App. E.D. 2021). A circuit court's imposition of sanctions is reviewed for abuse of discretion. Id. We defer to the circuit court's......

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