K2 Asia Ventures v. Trota

• Decision Date: 06 September 2011
• Docket Number: No. COA10–1065.,COA10–1065.
• Parties: K2 ASIA VENTURES, Ben C. Broocks, and James G.J. Crow, Plaintiffs, v. Robert TROTA, et al., Defendants.
• Court: North Carolina Court of Appeals

717 S.E.2d 1

K2 ASIA VENTURES, Ben C. Broocks, and James G.J. Crow, Plaintiffs,

v.Robert TROTA, et al., Defendants.

No. COA10–1065.

Court of Appeals of North Carolina.

Sept. 6, 2011.

Appeal by Defendants from orders entered 15 June 2010 by Judge James M. Webb in Forsyth County Superior Court. Heard in the Court of Appeals 8 March 2011.

Watts Guerra Craft LLP, Austin, TX, by Christopher V. Goodpastor, and Blanco Tackabery & Matamoros, P.A., Winston–Salem, by Peter J. Juran, for Plaintiffs.

Bell, Davis & Pitt, P.A., Winston–Salem, by William K. Davis, Alan M. Ruley, and Bradley C. Friesen, for Defendants Robert Trota, Veronica Trota, Joselito Saludo, Carolyn T. Salud, Roland V. Garcia, Cristina T. Garcia, Jim Fuentebella, Mavis Fuentebella, Sharon Fuentebella, Max's Baclaran, Inc., Chickens R Us, Inc., Max's Makati, Inc., Max's Ermita, Inc., Max's of Manila, Inc., The Real American Donut Company Inc., Trofi Ventures, Inc., and Ruby Investment Company Holdings, Inc.

Kilpatrick Stockton LLP, Winston–Salem, by Daniel R. Taylor, Jr., Adam H. Charnes, and Jason M. Wenker, for Defendants Krispy Kreme Doughnut Corporation and Krispy Kreme Doughnuts, Inc.STEPHENS, Judge.

I. Procedural History and Factual Background

In April 2009, Plaintiffs K2 Asia Ventures, Ben C. Broocks, and James G.J. Crow filed a complaint in Forsyth County against Defendants Robert Trota, Veronica Trota, Joselito Saludo, Carolyn T. Salud, Roland V. Garcia, Cristina T. Garcia, Jim Fuentebella, Mavis Fuentebella, Sharon Fuentebella, Max's Baclaran, Inc., Chickens R Us, Inc., Max's Makati, Inc., Max's Ermita, Inc., Max's of Manila, Inc., The Real American Donut Company Inc., Trofi Ventures, Inc., Ruby Investment Company Holdings, Inc., Krispy Kreme Doughnut Corporation, and Krispy Kreme Doughnuts, Inc., asserting various causes of action arising out of alleged breaches of business agreements between Plaintiffs and various Defendants. All Defendants filed motions to dismiss Plaintiffs' lawsuit on various grounds, including an assertion of lack of personal jurisdiction by, inter alia, Defendants Robert Trota, Carolyn T. Salud, Cristina T. Garcia, Jim Fuentebella, and Sharon Fuentebella (collectively, “the K2 I appellants”). These Defendants agreed to postpone the hearing on their motion to allow Plaintiffs to conduct limited discovery on the issue of personal jurisdiction.

On 11 August 2009, Plaintiffs served their first set of interrogatories, requests for production of documents, and requests for admissions on Defendants Krispy Kreme Doughnut Corporation and Krispy Kreme Doughnuts, Inc., (collectively, “the KKD Defendants”), and also on the remaining Defendants, including the K2 I appellants, who will be referred to collectively in this opinion as “the Philippine Defendants.” On 13 October 2009, the Philippine Defendants responded to Plaintiffs' discovery requests, including stating various objections. On 14 October 2009, the KKD Defendants timely served their responses and objections to Plaintiffs' discovery requests.

After receiving Defendants' responses to interrogatories, requests for production of documents, and requests for admissions, Plaintiffs sought to supplement their jurisdictional discovery by deposing the K2 I appellants. The K2 I appellants, who are residents of the Philippines, objected to the depositions and moved the trial court for a protective order. Plaintiffs filed an amended notice of depositions, but when they were unable to secure the K2 I appellants' voluntary appearance at the depositions, Plaintiffs filed a 10 March 2010 motion to compel depositions.

Following a 5 April 2010 hearing on these discovery motions, on 19 April 2010, the trial court entered an order granting Plaintiffs' motion to compel depositions and denying the K2 I appellants' motion for a protective order. The trial court ordered the K2 I appellants to appear for depositions in Glendale, California, where Defendant Max's of Manila, Inc., a corporation in which three of the K2 I appellants are directors or officers, has its headquarters. On 20 April 2010, the K2 I appellants appealed the trial court's 19 April 2010 order. On 1 March 2011, this Court issued an opinion dismissing the appeal as interlocutory. K2 Asia Ventures v. Trota, –––N.C.App. ––––, ––––, 708 S.E.2d 106, 112 (2011) (“ K2 I ”).

While the K2 I appeal was pending, on 30 April 2010, Plaintiffs filed separate motions to compel the KKD Defendants and the Philippine Defendants to produce additional documents. Each motion asked the trial court to strike or limit any objections and “compel[ ] full responses” to Plaintiffs' discovery requests. Following a hearing on 17 May 2010, on 15 June 2010, the trial court entered orders compelling both the KKD and Philippine Defendants to produce certain documents. From these orders, the KKD and Philippine Defendants appeal.

II. Grounds for Appellate Review

At the outset, we must consider the interlocutory nature of both the KKD and Philippine Defendants' appeals. Interlocutory orders are immediately appealable only if they have been certified by the trial court pursuant to Rule 54(b) or if the order affects a substantial right of the appellants. See N.C. Gen.Stat. § 1A–1, Rule 54(b) (2009); N.C. Gen.Stat. § 1–277(a) (2009) (“An appeal may be taken from every judicial order or determination of a judge of a superior or district court ... which affects a substantial right claimed in any action or proceeding.”). Here, there has been no Rule 54(b) certification by the trial court. In determining whether an interlocutory order may be appealed because of its effect on a party's substantial rights, our State's appellate courts have developed the following two-part test: (1) the right itself must be substantial, and (2) the “deprivation of that substantial right must potentially work injury to [the appellant] if not corrected before appeal from final judgment.” Goldston v. Am. Motors Corp., 326 N.C. 723, 726, 392 S.E.2d 735, 736 (1990) (citing Wachovia Realty Investments v. Housing, Inc., 292 N.C. 93, 232 S.E.2d 667 (1977)).

“An order compelling discovery is generally not immediately appealable because it is interlocutory and does not affect a substantial right that would be lost if the ruling were not reviewed before final judgment.” Sharpe v. Worland, 351 N.C. 159, 163, 522 S.E.2d 577, 579 (1999). However, where “a party asserts a statutory privilege which directly relates to the matter to be disclosed under an interlocutory discovery order, and the assertion of such privilege is not otherwise frivolous or insubstantial, the challenged order affects a substantial right under [N.C. Gen.Stat. § ] 1–277(a) and [N.C. Gen.Stat. § ] 7A–27(d)(1).” Id. at 166, 522 S.E.2d at 581. This Court has applied the reasoning of Sharpe to the common law attorney-client privilege. Evans v. United Servs. Auto. Ass'n, 142 N.C.App. 18, 24, 541 S.E.2d 782, 786, cert. denied and disc. review dismissed, 353 N.C. 371, 547 S.E.2d 810 (2001).

Here, the KKD Defendants argue that the trial court abused its discretion in compelling it to produce the documents covered by Plaintiffs' request 3. As the record reveals and Plaintiffs concede, the KKD Defendants asserted attorney-client privilege and work product immunity in their specific response to Plaintiffs' request 3. Thus, that portion of the trial court's 15 June 2010 order compelling the KKD Defendants to produce the documents covered by Plaintiffs' request 3 is immediately appealable under Evans and Sharpe, and the KKD Defendants' appeal is therefore addressed infra.

III. Philippine Defendants' Appeal

A. General Objections

Unlike the KKD Defendants, the Philippine Defendants did not assert attorney-client privilege or work product immunity in any of their specific responses to Plaintiffs' individual requests. However, they first contend they are entitled to immediate appeal from the trial court's discovery order because they made a “general objection” as to all of Plaintiff's “ ‘Definitions' to the extent that they seek to require the disclosure of information or documents protected by the attorney/client privilege, the work product doctrine, or any other applicable privilege or doctrine.” This general objection is one of twelve “Objections to ‘Definitions' ” listed at the beginning of the Philippine Defendants' responses to Plaintiffs' first set of interrogatories and document requests. The Philippine Defendants assert that this general objection was sufficient to comply with the mandate of Evans (quoting Sharpe) that, to be immediately appealable, an appellant must “ ‘assert[ ] a statutory privilege which directly relates to the matter to be disclosed under an interlocutory discovery order, and the assertion of such privilege is not otherwise frivolous or insubstantial.’ ” 142 N.C.App. at 24, 541 S.E.2d at 786. We disagree.

Civil Procedure Rule 34, concerning production of documents, provides in pertinent part:

The response shall state, with respect to each item or category, that inspection and related activities will be permitted as requested, unless the request is objected to, in which event the reasons for objection shall be stated. If objection is made to part of an item or category, the part shall be specified....

There shall be sufficient space following each request in which the respondent may state the response. The respondent shall: (1) state the response in the space provided, using additional pages if necessary; or (2) restate the request to be followed by the response. An objection to a request shall be made by stating the objection and the reason therefor either in the space following the request or following the restated request.

N.C. Gen.Stat. § 1A–1, Rule 34(b) (2009) (emphasis added). We conclude that the blanket general objection provided by the Philippine Defendants based on “the attorney/client privilege, the work product doctrine, or any other applicable privilege or doctrine” does not comply with ...