Fayetteville Pub. v. Advanced Internet

• Decision Date: 02 September 2008
• Docket Number: No. COA07-1203.,COA07-1203.
• Citation: 665 S.E.2d 518
• Parties: FAYETTEVILLE PUBLISHING COMPANY, Plaintiff, v. ADVANCED INTERNET TECHNOLOGIES, INC., Defendant.
• Court: North Carolina Court of Appeals

665 S.E.2d 518

FAYETTEVILLE PUBLISHING COMPANY, Plaintiff, v. ADVANCED INTERNET TECHNOLOGIES, INC., Defendant.

No. COA07-1203.

Court of Appeals of North Carolina.

September 2, 2008.

Appeal by defendant from summary judgment entered 26 March 2007 by Judge Gregory A. Weeks in Cumberland County Superior Court. Heard in the Court of Appeals 19 March 2008.

Helms Mulliss & Wicker, PLLC, by H. Landis Wade, Jr. and A. Jordan Sykes, Charlotte, for plaintiff-appellee.

Amber A. Corbin, Fayetteville, for defendant-appellant.

STROUD, Judge.

Defendant Advanced Internet Technologies, Inc. appeals from order entered 7 March 2007 dismissing its counterclaims and order entered 26 March 2007 granting summary judgment for plaintiff. We affirm both orders.

I. Background

Plaintiff Fayetteville Publishing Company ("Fayetteville Publishing" or "FPC") filed a verified complaint on 4 January 2006 against Advanced Internet Technologies, Inc. ("AIT"). The complaint sought injunctive relief for the recovery of four computer servers, with a total value of eight-thousand dollars ($8,000.00). Plaintiff alleged that it entered into four co-location agreements with defendant to provide services related to four computer servers owned by plaintiff. The four servers were placed at defendant's facility, and three of the four servers were used to make plaintiff's website available to Internet users. Plaintiff and defendant also had other business relationships in addition to the co-location agreements, including web hosting and online advertising.

Plaintiff further alleged that by letter dated 29 November 2005, defendant claimed that plaintiff was in breach of a contract for online advertising. Over the next several weeks, plaintiff requested information from defendant regarding the alleged breach. During this time, one of plaintiff's servers located at defendant's facility had a problem which needed attention by plaintiff's technical staff, but defendant would not allow plaintiff's employee access to the server. On 16 December 2005, plaintiff notified defendant by letter that defendant's services regarding the four servers and the co-location agreements were no longer required. Despite plaintiff's demands for return of the servers, defendant failed to return them.

Plaintiff alleged that it had terminated the co-location agreements, paid all sums due under the agreements, and that it was entitled to immediate return of the four servers. Plaintiff's complaint requested an interim order for immediate possession pursuant to N.C. Gen.Stat. § 1-472 et seq. as well as temporary and permanent injunctive relief. Plaintiff obtained an order of seizure in claim and delivery on 23 January 2006 and posted a bond pursuant to N.C. Gen.Stat. § 1-475 in the amount of sixteen thousand dollars ($16,000.00). However, the servers were not seized as defendant also posted a bond on 23 January 2007 in the amount of sixteen thousand dollars ($16,000.00) pursuant to N.C. Gen.Stat. § 1-478.

On 27 January 2006, plaintiff filed a Verified Motion for Temporary Restraining Order and Injunctive Relief pursuant to N.C. Gen.Stat. § 1A-1, Rule 65. The motion described in detail plaintiff's concerns that defendant had copied or intended to copy information from plaintiff's servers for use, possibly in a class action lawsuit defendant was pursuing as lead plaintiff against Google. The motion alleged that defendant had been "totally uncooperative" with plaintiff in its efforts to prevent any use by defendant of the servers in violation of N.C. Gen.Stat. § 14-458(5). The motion sought a temporary restraining order and injunction to prevent defendant from copying, imaging, or taking any other action regarding the information on the servers. It also sought an injunction requiring defendant to turn over to plaintiff any such information which it might have already copied and to turn the servers over to a third party designated by the court to secure them until further order of the court.

On 30 January 2006, the court entered a temporary restraining order and preliminary injunction with the consent of both parties. The order required that defendant "not copy, image or otherwise take any physical or other action of any kind with respect to the computer servers, except the action specifically required to comply with the terms of th[e] Temporary Restraining Order." The order further required defendant to turn the servers and any information which defendant had copied or imaged from the servers over to David McCarn, the designated third party, within 2 days from entry of the order.

On or about 7 April 2006, defendant filed its unverified Answer and Counterclaims, also raising several affirmative defenses. Defendant pled the affirmative defenses of want of consideration, unclean hands, and a security interest in the servers. Defendant made counterclaims for breach of contract, unjust enrichment, unfair or deceptive trade practices, and fraud. Defendant prayed for compensatory and punitive damages pursuant to the counterclaims, and for "declaratory judgment with respect to the special property and security interest and determining the rights of the parties[.]" On 20 July 2006, plaintiff filed a reply, denying the material allegations in the counterclaims.

On 17 July 2006, plaintiff served defendant with its first Request for Production of Documents including, inter alia, "all documents evidencing the amounts paid by Defendant for advertising of the type that is the subject of the Answer and Counterclaims." After thirty days, defendant had neither produced the requested documents nor obtained an extension of time to respond. On 5 September 2006, plaintiff's counsel sent a letter to defendant's counsel with a copy of a motion to compel discovery, advising that he would not file the motion to compel if defendant would confirm that the documents would be produced the next week. The documents still were not produced. On 28 September 2006, plaintiff filed a Motion to Compel Discovery. The motion alleged "[o]n 13 September 2006, rather than producing the requested documents, [d]efendant's counsel served ... responses and objections[.]" The motion further alleged that "[d]efendant produced a paltry number of documents in response to just a few requests" and made "numerous objections, often on multiple grounds, to practically every request." The motion to compel averred that defendant's objections were waived since they were not made within 30 days of the request for production as required by N.C. Gen.Stat. § 1A-1, Rule 34, and that even if the objections had not been waived, they were not meritorious.

On 7 November 2006, the trial court entered its order on plaintiff's motion to compel discovery. The trial court ordered defendant to copy and produce to plaintiff within ten days "all documents responsive to Requests 1 through 27 of Plaintiff's First Request for Production of Documents" and directed how defendant should address any documents which it deemed to be proprietary or documents withheld upon a claim of attorney-client or work product privilege. The trial court withheld ruling upon plaintiff's request for attorney's fees pursuant to Rule 37 until after defendant's response to the Request for Production of Documents.

On 1 December 2006, plaintiff filed a Motion for Appropriate Relief, (hereinafter referred to as the "Rule 37 motion") seeking relief under N.C. Gen.Stat. § 1A-1, Rules 37 and 11. Plaintiff alleged that defendant made an untimely response, which was also "misleading, evasive, incomplete, and non-responsive[,]" to the discovery order of 7 November 2006. Plaintiff requested that the trial court strike defendant's recent interrogatories to plaintiff and strike defendant's counterclaims against plaintiff.

On 7 December 2006, defendant filed a response to plaintiff's Rule 37 motion, claiming that defendant had responded to the discovery request with "hundreds of pages of documents and a computer disc containing 65,000 pages of material," and that although there may have been "minor deficiencies" in the materials provided and timing of production, defendant had made a "determined good faith effort to provide [p]laintiff with an enormous amount of discovery in a usable form within a short time period at the expenditure of significant resources and time."

On 20 and 21 February 2007, Steve Young ("Young") and Sean Murray ("Murray") testified for defendant at a deposition noticed by plaintiff. Young brought some responsive documents on 20 February and some on 21 February, but did not provide the requested documents in their entirety.

On 26 February 2007, Judge Gary Locklear heard plaintiff's Rule 37 motion. On 7 March 2007, the trial court entered its order dismissing defendant's counterclaims as a sanction for failure to comply with the order compelling discovery responses. The 7 March 2007 order stated that the trial court "reviewed the pleadings, the Motion, the materials and exhibits presented by the parties, the applicable authorities presented by the parties and ... fully heard and considered the arguments of counsel for both parties[.]" The order also contains twenty-one detailed findings of fact regarding the discovery issues. None of these findings were assigned as error by defendant.

On 14 March 2007, plaintiff filed a motion for summary judgment on the "one claim asserted in the Complaint, finding that Plaintiff is the rightful owner of the subject property" and for sanctions pursuant to Rule 11, including costs and attorney's fees. On 26 March 2007, the trial court heard and granted plaintiff's motion for summary judgment. On 18 June 2007, the trial court entered a further order awarding fees and expenses necessitated by Plaintiff's Motion to Compel Discovery pursuant to Rule 37 in the amount of four-thousand three hundred twenty dollars ($4,320.00). Defendant appeals from the trial court's orders of 7 March 2007, which dismissed defendant's counterclaims,...