Eletech, Inc. v. Conveyance Consulting Grp., Inc.

308 Neb. 733

956 N.W.2d 692

ELETECH, INC., appellee,

v.CONVEYANCE CONSULTING GROUP, INC., et al., appellants.

No. S-19-787.

Supreme Court of Nebraska.

Filed March 26, 2021

Bell Island, of Island Law Office, P.C., L.L.O., Gering, and Jeff R. Dingwall, of Eight & Sand, for appellants.

Brian T. McKernan and Jay Koehn, of McGrath, North, Mullin & Kratz, P.C., L.L.O., Omaha, for appellee.

Heavican, C.J., Miller-Lerman, Cassel, Stacy, Funke, Papik, and Freudenberg, JJ.

Funke, J. Conveyance Consulting Group, Inc. (CCG); Jones Consulting Inc.; and Jonathan Jones (collectively appellants) appeal from an adverse $407,187.46 judgment entered by the district court. Eletech, Inc., filed a complaint against appellants, alleging that former Eletech vice president Jones engaged in self-dealing and interfered with business opportunities. As a discovery sanction, the court entered judgment in favor of Eletech and dismissed appellants’ counterclaim. Appellants appeal.

BACKGROUND

On October 7, 2016, Eletech filed a complaint in the district court for Douglas County against appellants, alleging Jones, as an officer and employee of Eletech, engaged in self-dealing and diverted corporate opportunities to CCG and Jones Consulting, companies which Jones formed while employed with Eletech. Eletech's complaint asserted seven causes of action, including (1) breach of duty of loyalty, (2) breach of fiduciary duty—usurping corporate opportunity and self-dealing, (3) tortious interference, (4) unjust enrichment, (5) deceptive acts and trade practices, (6) theft by deception, and (7) aiding and abetting. On November 18, appellants filed an answer and counterclaim. The counterclaim listed four causes of action: (1) breach of contract, (2) nonpayment of wages under the Nebraska Wage Payment and Collection Act, (3) quantum meruit, and (4) unjust enrichment.

On January 3, 2017, Eletech served appellants with requests for production of documents and interrogatories. On March 6, appellants served written responses to those interrogatories and requests for production of documents. In December 2017, the court entered a proposed scheduling order which set a deadline for fact discovery to be completed by June 1, 2018, and advised the parties they must be prepared for trial by August 3.

On May 16, 2018, appellants filed an amended and supplemental counterclaim which added causes of action of breach of fiduciary duty, conversion, and breach of oral contract. On May 29, the district court issued an amended scheduling order, ordering fact discovery to be completed by October 1 and dispositive pretrial motions to be filed by November 2. The order advised that the parties must be prepared for trial by December 3. Due to multiple scheduling conflicts, the pretrial conference was continued to August 27, and later to October 10.

On November 21, 2018, Eletech filed a motion to compel appellants to respond to particular interrogatories and requests for production of documents. On December 21, appellants’ counsel moved for leave to withdraw. According to the motion, counsel made several attempts to remedy "the situation" and had given appellants reasonable warning that counsel would withdraw if the situation were not remedied. The motion also stated that neither appellants nor Eletech would be prejudiced if the motion were granted. The motion served appellants with a notice for hearing set for January 3, 2019.

Though not in our record, the court held a hearing concerning the motion to withdraw and the motion to compel on January 3, 2019. The next day, the court entered an order noting that all parties appeared and that an off-the-record discussion was held in chambers. The court then sustained the motion to withdraw and continued the motion to compel to January 17, to be held in conjunction with a status conference. The court ordered appellants to appear either personally or through new counsel. On January 17, appellants appeared, unrepresented, and verbally requested a continuance to allow them more time to secure new counsel. In response, the court continued the hearing on the motion to compel and the status hearing to February 14. The court advised Jones that he could represent himself in an individual capacity, but that he would need to secure counsel to represent CCG and Jones Consulting. The court also reminded the parties of the April 22 trial date.

On February 14, 2019, the court held a hearing on the motion to compel and a status hearing. Appellants failed to appear. As a result, on February 19, the court entered an order sustaining Eletech's motion to compel and ordered appellants to provide full and complete discovery responses within 10 days. Additionally, the court's order listed the specific interrogatories and discovery requests that needed full and complete answers/responses. In its order, the court admonished appellants that failure to comply with its order would result in sanctions, which could include an entry of liability against appellants and a dismissal of their counterclaim, with prejudice.

On March 28, 2019, Eletech filed a motion for sanctions, including a request for judgment and dismissal of the counterclaim, with prejudice. In its motion, Eletech alleged appellants failed to comply with the court's February 19 order to fully respond to outstanding discovery. The motion for sanctions was scheduled for hearing on April 10.

On April 10, 2019, Jones appeared, pro se, and requested a continuance for purposes of obtaining new counsel. Jones informed the court that he had not yet complied with the court's order to compel, but that he planned to. The court granted Jones’ request for a continuance and reset the hearing on sanctions for May 9.

On May 9, 2019, the court held a hearing on the motion for sanctions. Appellants were represented at the hearing by new counsel, Rodney Gnuse. Gnuse informed the court that although his appearance was limited to the hearing, if the hearing did not result in a dismissal of the case, he would also help appellants in the preparation of supplemental discovery responses and in trying to persuade an attorney to represent appellants during the remainder of the proceedings. The court continued the hearing on the motion for sanctions for 60 days.

On July 8, 2019, Gnuse filed a motion for withdrawal as limited-representation counsel for appellants. Gnuse's motion stated that "[he] believe[d] that given the facts involved, [he had] accomplished as much as [he could] for [appellants] and [would] not be able to continue in even [his] limited representation of them."

On July 11, 2019, the court held a hearing on the motion to withdraw. Gnuse and counsel for Eletech appeared, but appellants did not. At the hearing, Gnuse explained to the court that he was able to secure a conditional offer from another attorney to represent appellants as long as appellants demonstrated their willingness to consistently cooperate and follow through with counsel regarding the case. However, according to Gnuse, Jones failed to cooperate with him, failed to answer telephone calls, and failed to show up for meetings. As a result, the attorney that Gnuse had arranged for appellants withdrew his offer to assist. The court granted Gnuse's motion to withdraw and then proceeded with the hearing on the motion for sanctions.

On July 15, 2019, the court granted Eletech's motion for sanctions and awarded Eletech judgment in the amount of $407,187.46. The court found that Jones was liable to Eletech for the entire judgment, that Jones Consulting was jointly and severally liable with Jones to Eletech in the amount of $213,435, and that CCG was jointly and severally liable with Jones to Eletech in the amount of $39,687.97. The court also ordered postjudgment interest at the rate of 4.573 percent. The court dismissed appellants’ supplemental counterclaim, with prejudice.

Jones, as a self-represented litigant, filed this appeal on behalf of himself, CCG, and Jones Consulting. We note, however, that as a self-represented litigant, Jones could not file an appeal on behalf of CCG and Jones Consulting.¹ After the notice of appeal was filed, new counsel entered an appearance for Jones, CCG, and Jones Consulting. Jones filed a brief as an appellant, and CCG and Jones Consulting filed a nearly identical brief as "Cross-Appellees."

ASSIGNMENTS OF ERROR

Appellants assign, restated and consolidated, that the district court abused its discretion in (1) granting the withdrawal of appellants’ first counsel of record without considering all relevant factors; (2) granting Eletech's motion to compel discovery after permitting appellants’ first counsel to withdraw; (3) granting the withdrawal of appellants’ second counsel of record without considering all relevant factors; and (4) dismissing appellants’ counterclaim with prejudice as a sanction for failing to comply with the discovery order, without findings of willfulness and bad faith, a finding that appellants actually failed to comply with the discovery order, notice to appellants, and consideration of lesser sanctions.

STANDARD OF REVIEW

Generally, the control of discovery is a matter for judicial discretion, and decisions regarding discovery will be upheld on appeal in the absence of an abuse of discretion.² An abuse of discretion occurs when a trial court's decision is based upon reasons that are untenable or unreasonable or if its action is clearly against justice or conscience, reason, and evidence.³

ANALYSIS

We begin our analysis by reciting familiar propositions concerning an appellant's duty to raise objections before the trial court and the consequences of failing to do so. Our case law is clear that the failure to make a timely objection waives the right to assert prejudicial error on appeal.⁴ An appellate court will not consider an argument or theory that is raised for the first time on appeal.⁵ Thus, when an issue is raised for the first time in an appellate court, it will be disregarded inasmuch as a lower court...