Tetra Tech Tesoro, Inc. v. JAAAT Technical Services, LLC
| Decision Date | 06 December 2016 |
| Docket Number | No. COA15-1369,COA15-1369 |
| Citation | 250 N.C.App. 791,794 S.E.2d 535 |
| Court | North Carolina Court of Appeals |
| Parties | TETRA TECH TESORO, INC., Plaintiff, v. JAAAT TECHNICAL SERVICES, LLC, Rickey B. Barnhill, and Clyde E. Cummings, II, Defendants. |
Vandeventer Black LLP, Raleigh, by David P. Ferrell and Kevin A. Rust, for plaintiff-appellee.
Brooks, Pierce, McLendon, Humphrey & Leonard LLP, Raleigh, by Walter L. Tippett, Jr. and Charles E. Coble, and DurretteCrump PLC, by Wyatt B. Durrette, Jr. and J. Buckley Warden IV, for defendants-appellants.
This case came to the Court of Appeals posing as a complicated construction law dispute raising novel issues concerning who owns portions of the Fort Bragg military installation and whether the parties are covered by North Carolina law or instead by the federal laws that apply at Fort Bragg. The parties’ appellate briefs deal exclusively with the merits of these contract, venue, and choice-of-law issues.
Unfortunately, this Court cannot reach these issues because the appeal also is plagued by jurisdictional problems stemming from the way in which it was appealed. Specifically, Appellant JAAAT Technical Services challenges a series of decisions by the trial court reaching all the way back to a preliminary injunction order, but the only orders from which JAAAT timely appealed are a motion seeking to modify certain language in the preliminary injunction, and a contempt order and corresponding sanctions order.
As explained below, even if styled as a "Rule 59" motion, a pretrial motion to modify a preliminary injunction does not toll the time in which to appeal the underlying preliminary injunction order. This Court has held that Rule 59 of the Rules of Civil Procedure, which governs motions to alter or amend a judgment, only applies to post-trial motions, and that holding is confirmed by the plain text of Rule 59. Moreover, separate provisions in Rule 54(b) and Rule 62(c) permit parties to move to modify a preliminary injunction at any time, even while the case is on appeal. Thus, the underlying purpose of Rule 59 and its corresponding tolling provision in the appellate rules is unnecessary in this context—a fact the drafters of the rules understood. In short, our review in this appeal is limited to the denial of the motion to modify the preliminary injunction because the appeal from the underlying preliminary injunction order is untimely.
We affirm the denial of that motion to modify, which is subject to a broad abuse-of-discretion standard of review. But we reverse the trial court's contempt and sanctions orders that came after JAAAT appealed the denial of its motion to modify. Once JAAAT appealed, the trial court was divested of jurisdiction over the order from which it appealed and all matters "embraced therein." N.C. Gen. Stat. § 1–294. Under long-standing precedent from our Supreme Court, the appeal prevented the trial court from conducting a contempt proceeding or imposing sanctions for violation of the injunction. See Joyner v. Joyner , 256 N.C. 588, 591, 124 S.E.2d 724, 726–27 (1962). Accordingly, we vacate the trial court's contempt orders and corresponding sanctions.
Defendant JAAAT Technical Services, LLC was the general contractor on three construction projects located at Fort Bragg. JAAAT is a Virginia limited liability company. Defendants Rickey B. Barnhill and Clyde Cummings are employees of JAAAT.1
JAAAT subcontracted its Fort Bragg projects to Plaintiff Tetra Tech Tesoro, Inc. Tesoro is a Virginia corporation. All of the contracts between JAAAT and Tesoro contain a forum selection clause requiring any disputes over the contracts to be litigated in Virginia.
On 21 November 2014, Tesoro filed three complaints against JAAAT in Cumberland County Superior Court. The complaints contained various claims concerning payment for work on the Fort Bragg projects. Tesoro alleged that JAAAT failed to pay it in full for the subcontract work performed, and that JAAAT had misappropriated project funds.
JAAAT and Tesoro also contracted for similar work at U.S. military installations in other states, and similar disputes arose with respect to those projects. After Tesoro sued JAAAT in Cumberland County, JAAAT sued Tesoro in federal district court in Virginia in an action that also included the parties’ claims concerning the other military bases outside North Carolina. During this appeal, the federal court in Virginia held that it has jurisdiction over that larger, more complete action and declined Tesoro's request to dismiss that action. JAAAT Tech. Servs., LLC v. Tetra Tech Tesoro, Inc. , No. 3:15cv235, 2016 WL 1271039 (E.D. Va. Mar. 29, 2016).
On 15 December 2014, in the Cumberland County action, Tesoro moved for a temporary restraining order and preliminary injunction that would require JAAAT to segregate funds related to the construction projects and not to pay those funds out without court approval. On 5 January 2015, JAAAT moved to dismiss Tesoro's claims based on the forum selection clause in the contracts at issue. The trial court granted the TRO and held a series of hearings.
The proper venue for this dispute was the key legal issue in these hearings. Under a relatively recent North Carolina statute, North Carolina courts cannot enforce a forum selection clause like the one in the parties’ contracts. N.C. Gen. Stat. § 22B–2. But in a federal enclave, such as Fort Bragg, courts apply a special form of federal law that incorporates only the North Carolina law in existence when the federal enclave is created. Thus, the central issue in determining the proper venue for this dispute was whether the projects at Fort Bragg actually were on property that was part of a federal enclave and thus governed by federal law that does not include this recently enacted North Carolina statute.
On 6 May 2015, the trial court entered an order denying JAAAT's motion to dismiss and granting Tesoro's motion for a preliminary injunction. The preliminary injunction required JAAAT "to hold in escrow and ... not disburse or distribute any funds or monies ... received ... from the federal government on the Projects to any person(s) or entity(s) other than Plaintiff." It also required JAAAT to provide accountings to Tesoro of "monies received from the federal government on the Projects and the disbursement or other disposition of those monies."
On 21 May 2015, JAAAT moved to modify the preliminary injunction, purportedly under Rules 59 and 60 of the North Carolina Rules of Civil Procedure, on the ground that the preliminary injunction prevented JAAAT from paying its subcontractors and other innocent third parties who performed work on the project and were owed payment for their work.
On 27 May 2015, Tesoro moved for contempt, alleging that JAAAT had disbursed funds and failed to provide accountings in violation of the preliminary injunction order. In response to that motion, JAAAT continued to insist that the case was governed by federal law and that venue was proper only in Virginia.
On 7 July 2015, the trial court held a hearing on JAAAT's motion to modify the preliminary injunction order. On 16 July 2015, the court rejected JAAAT's motion to modify the preliminary injunction in the specific manner JAAAT requested, but entered an order modifying the injunction to allow the federal government to make payments to the project surety, who in turn could pay subcontractors. That same day, the trial court entered an order instructing JAAAT to "appear and show cause ... why they should not be held in contempt of court."
On 20 July 2015, JAAAT filed a notice of appeal from the 16 July 2015 order denying JAAAT's motion to modify the preliminary injunction. JAAAT's notice of appeal also indicated that JAAAT appealed from the trial court's original 6 May 2015 preliminary injunction order on the ground that the time to appeal that order was "tolled" by its motion to modify, which purportedly was filed under Rules 59 and 60.
On 27 July 2015, Tesoro moved to dismiss JAAAT's counterclaims with prejudice as a sanction under North Carolina Rule of Civil Procedure 41(b) for noncompliance with the preliminary injunction. The court held a joint contempt hearing and hearing on Tesoro's motion to dismiss JAAAT's counterclaims on 17 August 2015 and, on 10 September 2015, issued orders holding JAAAT in contempt for violating the preliminary injunction and dismissing JAAAT's counterclaims with prejudice as a sanction. JAAAT timely appealed those orders on 18 September 2015.
We begin our analysis by examining JAAAT's appeal from the underlying preliminary injunction order. The trial court entered that order on 6 May 2015 and JAAAT appealed it on 20 July 2015, well past the thirty-day jurisdictional deadline to appeal.
JAAAT argues that when it timely filed its Rule 59 motion to alter or amend the preliminary injunction on 21 May 2015, that motion tolled the time to file a notice of appeal. And, indeed, Rule 3(c)(3) of the Rules of Appellate Procedure states that "if a timely motion is made by any party for relief under Rules 50(b), 52(b) or 59 of the Rules of Civil Procedure, the thirty day period for taking appeal is tolled as to all parties until entry of an order disposing of the motion." N.C. R. App. P. 3(c)(3).
But Rule 59, by its plain terms, does not apply to an interlocutory, pretrial order like the preliminary injunction order in this case. Rule 59(a) states:
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