Nolte v. MT Tech. Enters., LLC
| Decision Date | 07 June 2012 |
| Docket Number | Record No. 111490. |
| Court | Virginia Supreme Court |
| Parties | Bruce B. NOLTE, et al. v. MT TECHNOLOGY ENTERPRISES, LLC. |
OPINION TEXT STARTS HERE
L. Steven Emmert, Virginia Beach (Jeffrey M. Summers; Sykes, Bourdon, Ahern & Levy, on briefs), for appellants.
D. Hayden Fisher (Fisher Clarke, on brief), for appellee.
Present: KINSER, C.J., LEMONS, GOODWYN, MILLETTE, MIMS, and POWELL, JJ., and KOONTZ, S.J.
Opinion by Justice DONALD W. LEMONS.
Among the several issues we address in this appeal are whether the Circuit Court of the City of Richmond (“trial court”) erred when it held that MT Technology Enterprises, LLC (“MT”) satisfied the registration requirements of Code § 13.1–1057(A) and when it imposed sanctions, pursuant to Rule 4:12(b), against Cristol, LLC (“Cristol”), Bruce Nolte (“Nolte”), Andrew Miller (“Miller”), Koichi Fukuda (“Fukuda”), and Gregory Koenig (“Koenig”).
I. Facts and Proceedings Below
MT is a Delaware entity “that acquires intellectual property for license and sale and acquires equipment for lease or sale.” MT owns intellectual property rights related to the development of totally reflecting transmitter film (“TRT”), “one component of many hundred components that are used in liquid crystal display[s]” utilized in flat screen televisions, computers, and cell phones. Ronald Trice (“Trice”), a patent attorney, and Dr. John Magno (“Magno”), a scientist, formed MT and held controlling membership interests.
Trice and Magno also formed Cristol, a Delaware entity, at approximately the same time they formed MT. Cristol is a technology development company in the business of developing high strength fibers. Together, Trice and Magno held a controlling membership interest in Cristol. Trice was a member of Cristol's Board of Managers (“Board”) and served as the corporate secretary, and Magno was the Chief Executive Officer (“CEO”) and chairman of the Board. Christopher Miller (“C. Miller”), Nolte, Miller, and Fukuda (together, the “minority owners”) were also members of Cristol's Board.
In April 2008, MT licensed its rights to the TRT diffuser technology to Laser Energetics, Inc. (“LEI”). Pursuant to the agreement between MT and LEI, Magno owed duties to LEI for a period of two years. In August 2008, MT and Cristol executed a lease agreement. Pursuant to the agreement, MT leased equipment to Cristol for $3,000 per month.
The relationship between Magno and Trice and the minority owners began to decline. The minority owners insisted that Magno resign his position as CEO and from the Board. The minority owners would not agree to dedicate funding to product development, so Magno and Trice began looking for outside funding in the fall of 2008. They also considered selling Cristol. As a result, the minority owners accused Magno and Trice of performing “a coup” and trying to “take over” Cristol.
In January 2009, Miller sent an e-mail to the other minority owners and to Koenig, an employee of Cristol. Miller's e-mail first discussed Magno's financial situation. Miller informed the minority owners and Koenig that he spoke with Magno about an upcoming Board meeting that Magno “should attend, for the sole purpose of discussing [Magno's] financial situation and determining what we can do to increase money in his pocket.” Miller's e-mail next discussed Magno's thoughts on Trice. Miller stated that “[Magno] is not yet willing to cut the ties with [Trice],” but after an outside patent lawyer reviews “the quality of [Trice's] work, [I] can take another round on chiseling away at [Trice's] and [Magno's] relationship.”
A meeting of Cristol's Board was held, as scheduled, on February 4, 2009. When Magno arrived, Nolte, Koenig, C. Miller, and Cristol's attorney Charles W. Hundley (“Hundley”) were present and Miller participated by telephone. These individuals told Magno that Trice was the reason for an unrelated company's bankruptcy, Trice was going to sue him, and he should not communicate with Trice. During the meeting, Trice called Magno on his cell phone, but the individuals at the meeting did not permit him to answer. Magno was directed to turn over his electronic mail (“e-mail”) password so they could install an auto-forwarding device on his e-mail and intercept any e-mails from Trice. They threatened to withhold Magno's paycheck unless he ended all communication with Trice, and Magno acceded to their demands.
Trice then arrived at the meeting where he was presented with a memorandum containing “a list of allegations against [him] followed by a list of demands.” The demands included, among other things, resigning from Cristol's Board and ceasing all communications with Magno about Cristol.
After the February 2009 meeting, demands continued to be placed on Magno, which prevented him from fulfilling his duties to MT and to LEI. Additionally, Cristol stopped making regular payments to MT on the equipment lease.
In May 2009, Trice told Magno that he was going to file a lawsuit against Cristol and Cristol's Board. On June 2, 2009, MT filed a complaint against Cristol, Nolte, Miller, Fukuda, Koenig, C. Miller, Hundley, and Cherry, Seymour, Hundley & Baronian, P.C. (“Hundley's firm”). Miller threatened to withhold Magno's paycheck unless he signed a letter addressed to MT's counsel requesting that MT drop the lawsuit and an affidavit supporting Cristol's, Nolte's, Miller's, Fukuda's, Koenig's, C. Miller's, Hundley's, and Hundley's firm's special plea in bar. Magno testified that he was required to sign a letter and an affidavit, neither of which he drafted, in order to receive his paycheck.
MT subsequently filed an amended complaint in October 2009. Specifically, MT's five-count amended complaint alleged:
Count I—statutory conspiracy against Cristol, Nolte, Miller, Fukuda, Koenig, C. Miller, Hundley, and Hundley's firm;
Count II—tortious interference with economic expectancy in MT technologies against Cristol, Nolte, Miller, Fukuda, Koenig, C. Miller, Hundley, and Hundley's firm;
Count III—tortious interference with agreements between Magno and MT against Cristol, Nolte, Miller, Fukuda, Koenig, C. Miller, Hundley, and Hundley's firm;
Count IV—tortious interference with relationship between Magno and Trice against Cristol, Nolte, Miller, Fukuda, Koenig, C. Miller, Hundley, and Hundley's firm; and
Count V—breach of contract and unjust enrichment against Cristol.
In response, Cristol, Nolte, Miller, Fukuda, Koenig, and C. Miller jointly filed an answer, and together Hundley and Hundley's firm filed an answer.
Prior to trial, MT filed motions to compel answers to interrogatories and the production of documents from Cristol, Nolte, Miller, Fukuda, Koenig, and C. Miller because they had not timely responded to MT's discovery requests. MT also filed motions to compel Hundley and Hundley's firm to respond to discovery requests. The trial court granted MT's motions to compel in an April 21, 2010 order.1
Thereafter, in June 2010, MT filed a motion to show cause and a motion to compel and for sanctions as to Cristol, Nolte, Miller, Fukuda, Koenig, and C. Miller because they had not complied with the trial court's April 21, 2010 order. The trial court concluded that Cristol, Nolte, Miller, Fukuda, Koenig, and C. Miller failed to fully respond to previously ordered discovery and ordered them to pay sanctions to reimburse MT for the costs of filing the motion to show cause.
MT then filed a motion for default judgment against Fukuda because he did not appear at his deposition and “his counsel indicated that he refuse[d] to travel from Japan for his deposition.” Cristol, Nolte, Miller, Fukuda, Koenig, and C. Miller continued to disregard the trial court's orders; consequently, MT filed a motion for sanctions pursuant to Rule 4:12. The trial court held a hearing on these motions on September 23, 2010, and in an October 19, 2010 order: (1) granted MT's motion for sanctions against defendants Cristol, Nolte, Miller, and Koenig pursuant to Rule 4:12(b)(2)(B); (2) denied MT's motion for sanctions against C. Miller; and (3) granted MT's motion for default judgment against Fukuda.2 Specifically, in its sanctions order, the trial court prohibited Cristol, Nolte, Miller, and Koenig “from opposing the claims [MT] alleged within its Amended Complaint or introducing any evidence at trial in support of any of the defenses they alleged within their respective Answers to said Amended Complaint” and granted default judgment against Fukuda. (Emphasis added.)
The case proceeded to a jury against Cristol, Nolte, Miller, Fukuda, and Koenig (collectively, the “defendants”) on all five counts. The trial court instructed the jury that prior rulings in this case prevent “the defendants from opposing [MT's] claims in the amended complaint and [prevent] the defendants from introducing any evidence at trial.” The trial court interpreted its pre-trial ruling to bar defendants from cross-examining MT's witnesses.
Thereafter, the jury returned a verdict in favor of MT and awarded damages as follows:
+-----------------------------------------------------------------------------+
¦Cristol, LLC ¦$784,000 in compensatory damages ¦
+-------------------------+---------------------------------------------------¦
¦Koichi Fukuda ¦$700,000 in compensatory damages and $300,000 in ¦
¦ ¦punitive damages ¦
+-------------------------+---------------------------------------------------¦
¦Andrew Miller ¦$700,000 in compensatory damages and $350,000 in ¦
¦ ¦punitive damages ¦
+-------------------------+---------------------------------------------------¦
¦Bruce Nolte ¦$700,000 in compensatory damages and $350,000 in ¦
¦ ¦punitive damages ¦
+-------------------------+---------------------------------------------------¦
¦Gregory Koenig...To continue reading
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