Dunhill Holdings, LLC v. Lindberg

• Decision Date: 01 March 2022
• Docket Number: COA20-384
• Citation: 870 S.E.2d 636
• Parties: DUNHILL HOLDINGS, LLC, Plaintiff/Counterclaim Defendant, v. Tisha L. LINDBERG, Defendant/Counterclaim Plaintiff, Tisha L. Lindberg, Third-Party Plaintiff, v. Greg Lindberg, Third-Party Defendant.
• Court: North Carolina Court of Appeals

870 S.E.2d 636

DUNHILL HOLDINGS, LLC, Plaintiff/Counterclaim Defendant,

v.Tisha L. LINDBERG, Defendant/Counterclaim Plaintiff,Tisha L. Lindberg, Third-Party Plaintiff,

v.Greg Lindberg, Third-Party Defendant.

No. COA20-384

Court of Appeals of North Carolina.

Filed March 1, 2022

Fox Rothschild LLP, by Matthew Nis Leerberg, Raleigh, and Kip D. Nelson, Greensboro, for plaintiff/counterclaim defendant-appellant and third-party defendant-appellant.

Zaytoun Ballew & Taylor, PLLC, by Matthew D. Ballew, Robert E. Zaytoun, John R. Taylor, Raleigh, and N. Cole Williams, Durham, for defendant/ counterclaim plaintiff, third-party plaintiff-appellee.

STROUD, Chief Judge.

¶ 1 Appellants, Dunhill Holdings, LLC ("Dunhill") and Greg Lindberg, appeal from an order imposing sanctions on them for discovery violations and, pursuant to a previous opinion from this Court in this case, from a discovery order requiring them to submit their electronic devices for forensic examination. Because we find the trial court did not abuse its discretion in imposing sanctions and did not err in its choice of sanctions in most respects, we affirm in part. We vacate in part and remand because two paragraphs of the ordered sanctions are inconsistent with the remainder of the order or improperly bar objections, including objections for attorney-client privilege. Finally, since we affirm the relevant parts of the sanctions order, we dismiss the forensic examination issue as moot.

I. Background

¶ 2 This is the second appeal to this Court in this case. The first appeal concerned an order from 27 June 2018 ("June 2018 Order") that, inter alia , ordered Appellants to make certain electronic devices available for a forensic examination to determine if any relevant emails were deleted. Dunhill Holdings, LLC v. Lindberg , No. COA18-1112, 270 N.C. App. 820, *7, *10–11, 840 S.E.2d 536 (2020) [hereinafter " Dunhill I "] (unpublished). The prior appeal dismissed the case "without deciding whether the appeal [was] an interlocutory appeal that does not affect a substantial right" and "refer[red the forensic examination issue] to the panel of this Court that will decide Dunhill and Greg E. Lindberg's appeals of the discovery order and the sanctions order together." Dunhill I at *12, 840 S.E.2d 536. Based upon the prior opinion, this panel must address the sanctions order, and we will also address the discovery order at issue in the prior appeal.² Id. The prior ruling from this Court is the law of the case and thus binds us. See, e.g., North Carolina Nat. Bank v. Virginia Carolina Builders , 307 N.C. 563, 567, 299 S.E.2d 629, 631 ("[O]nce a panel of the Court of Appeals has decided a question in a given case that decision becomes the law of the case and governs other panels which may thereafter consider the case."). We therefore recount the facts and procedural history from Dunhill I and only include additional details where necessary to understand the sanctions order that was not before this Court in the prior appeal.

¶ 3 Dunhill I summarizes the initiation and pre-discovery occurrences in this lawsuit:

Dunhill Holdings, LLC ("Dunhill") filed a complaint against Tisha L. Lindberg, as well as four former employees of Dunhill on 24 July 2017.^[3] According to Dunhill, the company is owned by Greg E. Lindberg, who is "the founder and sole manager and member of Dunhill." Greg E. Lindberg and Tisha L. Lindberg married on 19 September 2003 and separated on 22 May 2017. In its amended complaint filed 24 August 2017, Dunhill described Tisha L. Lindberg as Dunhill's "Chief Executive Officer"; however, she denied this characterization in her answer, saying that "while [Mr.] Lindberg purported to call [her] the ‘C.E.O.’ of [Dunhill] on occasion, [Dunhill] never employed [Tisha L.] Lindberg in any capacity and [Dunhill] was merely a vehicle through which [Greg E.] Lindberg funded the personal lifestyle of the parties and their family...."

Dunhill described itself as a "real estate holding company" in its amended complaint and the primary asset owned by Dunhill was the family home of Greg E. Lindberg and Tisha L. Lindberg on Stagecoach Drive in Durham, North Carolina. In its amended complaint, Dunhill claimed Tisha L. Lindberg took funds from Dunhill and it asserted claims against her for breach of fiduciary duty, constructive fraud, civil liability for theft and embezzlement, civil conspiracy, conversion and an action for accounting, in addition to claims for unjust enrichment, disgorgement, and civil conspiracy against the other Defendants.

In her answer, Tisha L. Lindberg moved to dismiss Dunhill's complaint for failure to state a claim for which relief may be granted under N.C. Gen. Stat. § 1A-1, Rule 12(b)(6), denying various allegations of Dunhill and asserting affirmative defenses of breach of fiduciary duty by Greg E. Lindberg, fraud, constructive fraud, equitable estoppel, waiver, ratification, actual authority, and laches.

She also filed a third-party complaint against Greg E. Lindberg and counterclaim against Dunhill, seeking "all right, title, and interest in the Key West House" and "all right, title, and interest in the tennis complex" Greg E. Lindberg allegedly promised to give her. Tisha L. Lindberg subsequently filed an amended third-party complaint against Greg E. Lindberg and a counterclaim against Dunhill, asserting breach of fiduciary duty, constructive fraud, indemnity, declaratory relief, abuse of process, malicious prosecution, intentional infliction of emotional distress, spoliation of material evidence, and for a constructive trust over the tennis court.

In her amended third-party complaint and counterclaim, Tisha L. Lindberg alleged Dunhill was merely an "alter-ego" of Greg E. Lindberg and was therefore liable for his actions. Dunhill and Greg E. Lindberg did not file an answer to Tisha L. Lindberg's counterclaim and third-party complaint or her amended counterclaim and third-party complaint, instead filing a motion to dismiss each complaint.

Dunhill I at *2–4, 840 S.E.2d 536. These motions to dismiss were later denied.

¶ 4 Before Appellants’ motions to dismiss had been ruled on, Dunhill and Ms. Lindberg proceeded with discovery:

Dunhill served Tisha L. Lindberg with its first request for production of documents on 24 October 2017 and she replied with objections and responses on 22 December 2017. On 26 February 2018, Tisha L. Lindberg submitted her first set of interrogatories and request for production of documents to Greg E. Lindberg and Dunhill. Dunhill moved to compel discovery on 9 March 2018. Tisha L. Lindberg filed a motion to compel discovery and request for attorney's fees on 21 May 2018.

Dunhill I at *4, 840 S.E.2d 536. In relevant part, Ms. Lindberg's discovery requests included interrogatories, requests for document production, and a request for production for forensic inspection of all electronic storage devices owned by Appellants "that [are] the repository for electronic messaging and communication." Appellants made a series of objections to the discovery requests. In response to the forensic examination request specifically, both parties objected:

In his responses, Greg E. Lindberg responded as follows to this request:

Third Party Defendant objects to Request No. 23 on the ground that it is harassing, overly broad, unduly burdensome, not proportional to the needs of this case, not reasonably calculated to lead to the discovery of admissible evidence, and seeks information that is not relevant to the subject matter of the pending action.

Third-Party Defendant further objects to Request No. 23 on the ground that, on its face it seeks production of records that are confidential or privileged, including records that are protected by the work product and attorney-client privileges, and violates the privacy rights of third persons who are not parties to this lawsuit.

Dunhill made an identical response to this request.

Dunhill I at *5, 840 S.E.2d 536.

¶ 5 Ms. Lindberg's motion to compel discovery argued the court should reject the objections proffered by Mr. Lindberg and Dunhill. In response to objections to the forensic examination, Ms. Lindberg argued she needed the examination to support her spoliation of evidence claim:

Upon information and belief, Mr. Lindberg and Dunhill have intentionally attempted to destroy evidence from computers and electronic devices that is relevant to this matter. The spoliation of evidence by Mr. Lindberg and Dunhill was set out in the pleadings in this matter in Mrs. Lindberg's^{[4 ]} Amended Counterclaims and Third-Party Complaint. For example, upon information and belief, Mr. Lindberg and Dunhill destroyed emails and computer files maintained by Mr. Lindberg's companies soon after Mr. Lindberg took out the Ex Parte Domestic Violence Protective Order and restricted her access to email servers. Requests for Inspection 23 and 24 to Dunhill and Requests for Inspection 23 and 24 to Greg Lindberg seek to inspect the computers, drives and devices of Mr. Lindberg and Dunhill, but they have refused to allow for this inspection. Mrs. Lindberg respectfully requests that the Court order such a forensic computer inspection.

Ms. Lindberg's spoliation claim in turn argued, inter alia , that Mr. Lindberg had deleted emails showing he gifted the tennis complex to Ms. Lindberg, thereby supporting her third-party claim for a constructive trust over the tennis complex.

¶ 6 The trial court heard the motions to compel from Ms. Lindberg and from Dunhill on 25 June 2018. As of the time of the hearing, neither Dunhill nor Mr. Lindberg had produced "a single document in discovery." Much of the hearing focused on the forensic examination issue, and Ms. Lindberg continued to argue that the forensic examination would support her spoliation claim as well as her claim the tennis complex was a personal gift.

¶ 7 Ms. Lindberg also argued the forensic examination would support her on two other liability issues. First, she argued the forensic examination would...