Srvan Brick & Stone, Inc. v. WB Hunt Corp., unpublished opinion per curiam of the Court of Appeals, decided January 22, 2015 (Docket No. 316585, 319213).
Van Poppelen Bros., Inc. (“VPB”), was in the business of manufacturing concrete blocks, and was wholly owned by Mark Van Poppelen. SRVAN was a separate entity owned by Mark’s wife, Renee Van Poppelen. SRVAN was in the business of selling building materials. As it often occurs when small businesses are owned by family members, the operations became intertwined around 2007.
Due to financial difficulties of VPB, including a $750,000 debt to independent bank, Renee and Mark contemplated an asset sale to William Hunt’s company, WB Hunt, for a total sum of $225,000. Subsequently, due defaulting on their loan secured by Independent Bank, VPB was placed into receivership by the Circuit Court. Due to the intertwined operations, SRVAN claimed that certain assets of VPB were owned by SRVAN and should not be part of the receivership. Despite having full disclosure of VPB’s financial difficulties, WB Hunt entered a conditional purchase agreement for all of SRVAN’s assets as well. This agreement was conditioned upon assuming $34,000 in debt, purchasing VPB’s assets currently tied up in the receivership action and Renee and Mark signing non-compete agreements. The court in the VPB receivership ordered liquidations of VPB’s assets over SRVAN’s objections. Consequently, SRVAN filed claims against WB Hunt for tortious interference of contract, fraud and conversion, and WB Hunt filed counter complaint alleging tortious interference with contract and seeking specific performance of the asset purchase agreement.
SRVAN alleged that WB Hunt failed to turn over requested documents and filed a motion for default judgment as a discovery sanction. The compact disc containing WB Hunt’s files and documents was at the center of the dispute. SRVAN claimed that files produced were not accessible and WB Hunt deleted important documents from the production. Although not clearly stated in the opinion, the record seems to imply that WB Hunt copied the data himself prior to producing it. The presiding Judge found SRVAN’s Motion premature, however warned WB Hunt that failure to comply with the request could subject them to sanctions.
Following an evidentiary hearing on March 20, the Judge concluded that Mr. Hunt had tampered with and attempted to delete electronic data. Therefore, discovery sanctions were awarded, which included dismissal of WB Hunts counterclaim and awarded reasonable attorney fee to SRVAN.
SANCTIONS AFFIRMED BY THE COURT OF APPEALS
WB Hunt appealed, and the court of appeals provided that standard for review for a decision regarding sanctions for discovery violations is abuse of discretion. Factors to consider prior to imposing sanctions for discovery violations include:
- Whether failure to respond to discovery requests extends over a substantial period of time;
- Whether an existing discovery order was violated;
- Time elapsed between the violation and the motion for Default Judgment;
- The prejudice to opposing party;
- Whether the conduct was willful.
The sanctions must also be proportionate and just relative to the harm suffered by the opposing party. WB Hunt had received a court order to assist SRVAN in accessing the data provided and also produce any missing information within one week. At a subsequent evidentiary hearing the judge heard testimony of multiple witnesses with personal knowledge of how the data was compiled and produced. The Judge concluded that the data was tampered with prior to production, especially considering Mark Hunt was in possession of the data/disc at the time the tampering could have occurred.
The sanctions were appropriate in this instance because the actions were willful and deliberate, plus the violations had an irreversible impact on the merits of the case, considering SRVAN could no longer properly prosecute their claims. The court may have ruled differently, if WB Hunt had made a good faith efforts in complying with the court orders. Accordingly, the Court of Appeals affirmed the lower court’s decision.