Red Valve, Inc. v. Titan Valve, LLC

2019 NCBC 76

RED VALVE, INC. and HILLENBRAND, INC., Plaintiffs, v. TITAN VALVE, LLC; BEN PAYNE; FABIAN AEDO ORTIZ; and JOHN DOES 1-10, Defendants.

No. 18 CVS 1064

Superior Court of North Carolina, Gaston

December 17, 2019

Nelson Mullins Riley & Scarborough LLP, by David N. Allen Benjamin S. Chesson, and Anna Majestro, for Plaintiffs Red Valve, Inc. and Hillenbrand, Inc.

Bell Davis & Pitt, P.A., by Edward B. Davis and Joshua B Durham, for Defendants Titan Valve, Inc., Ben Payne, and Fabian Aedo Ortiz.

ORDER AND OPINION STAYING DEADLINES PENDING APPEAL

Louis A. Bledsoe, III Chief Business Court Judge

1. THIS MATTER is before the Court sua sponte to consider whether certain relief previously ordered by the Court must or should be stayed in light of Defendants Titan Valve, Inc. ("Titan"), Ben Payne ("Payne"), and Fabian Aedo Ortiz's ("Aedo") (collectively, the "Titan Defendants") recent appeal of various orders, including those in which the Court ordered the relief at issue here.

2. Having considered the parties' briefs, the arguments of counsel at the October 29, 2019 hearing, and the relevant record, the Court concludes that the enforcement of the deadlines set forth in paragraph 149 of the Second Sanctions Order and paragraph 81 of the Second Fee Award should be STAYED pending resolution of the Titan Defendants' appeal.

I. FACTUAL AND PROCEDURAL BACKGROUND

3. On September 3, 2019, the Court issued its Order and Opinion on Plaintiffs Red Valve, Inc. and Hillenbrand, Inc.'s ("Plaintiffs") Verified Motion for Order to Show Cause and Second Motion for Sanctions and Contempt ("Second Sanctions Order"). (ECF No. 217.) In the Second Sanctions Order, the Court: (i) struck the Titan Defendants' Answer and entered default against them, (Order & Op. Pls.' V. Mot. Order Show Cause & Second Mot. Sanctions & Contempt ¶ 149(a)(i) [hereinafter "2nd Sans. Order"]); (ii) ordered the parties, within fourteen (14) days of entry of the Order, to meet, confer, and submit for the Court's review and approval a revised Return Protocol (the "Modified Return Protocol"), (2nd Sans. Order ¶ 149(a)(ii)(1)); (iii) ordered the Titan Defendants, in conjunction with their forensic expert, Reliance Forensics, to thereafter re-conduct the Return Protocol on all of the Titan Defendants' devices as provided in the Modified Return Protocol and to bear all fees and costs of re-conducting the Return Protocol, (2nd Sans. Order ¶ 149(a)(ii)(2)-(4)); (iv) ordered the Titan Defendants to pay Plaintiffs' reasonable expenses, including attorneys' fees, incurred in investigating the conduct necessitating the Second Sanctions Motion and seeking and obtaining the relief afforded through the Second Sanctions Motion, with the total amount of fees and expenses and allocation of payment to be addressed by separate order, (2nd Sans. Order ¶ 149(a)(iii)); and (v) ordered the Titan Defendants to pay to Plaintiffs the costs associated with the forensic examination ordered in the First Sanctions Order, (ECF Nos. 139 and 141, filed under seal and publicly, respectively), with the total amount of costs and allocation of payment again to be addressed by separate order, (2nd Sans. Order ¶ 149(a)(iv)).

4. Two days later, on September 5, 2019, the Court issued its Order and Opinion on Plaintiffs' Petition for Reasonable Expenses Resulting from Plaintiffs' Second Motion for Sanctions ("Second Fee Award"). (ECF No. 218.) As forecasted in the Second Sanctions Order, the Court in the Second Fee Award ordered the Titan Defendants to pay, within thirty-five (35) days of the entry of the Second Fee Award, Plaintiffs' reasonable expenses, including reasonable attorneys' fees, as follows: (i) Titan was ordered to pay Plaintiffs the total amount of $246, 577.50, with Aedo and Payne held jointly and severally liable for specific portions of that amount, (Order & Op. Pls.' Pet. Reasonable Expenses Resulting Pls.' Second Mot. Sanctions ¶ 81(a) [hereinafter "2nd Fee Award"]); (ii) Aedo and Titan were held jointly and severally liable to Plaintiffs for $106, 995.89 of the $246, 577.50 awarded, (2nd Fee Award ¶ 81(b)); and (iii) Payne and Titan were held jointly and severally liable for $85, 821.20 of the $246, 577.50 awarded, (2nd Fee Award ¶ 81(c)), (collectively, "Awarded Expenses").

5. Shortly thereafter, on September 6, 2019, the Titan Defendants filed a Notice of Appeal to the Supreme Court of North Carolina appealing twelve of the Court's orders, including the Second Sanctions Order and the Second Fee Award.^[1](ECF No. 219.)

6. At the Court's request, the parties met and conferred concerning the impact of the Titan Defendants' appeal on the procedural posture of the case, and, on September 13, 2019, the parties filed a joint status report on that issue. (ECF No. 220.) The Court convened a status conference on September 18, 2019 to discuss the matters reflected in the joint status report, including whether the Court could proceed on any matters in this litigation pending the resolution of the Titan Defendants' appeal.

7. The day before the status conference, on September 17, 2019, the parties filed a Joint Motion for Extension of Time, (ECF No. 222), to meet, confer, and submit to the Court the Modified Return Protocol required under paragraph 149(a)(ii)(1) of the Second Sanctions Order, which the Court granted the same day, (ECF No. 224). On September 19, 2019, and consistent with the Court's discussions with counsel at the September 18, 2019 status conference, the Court entered an Order of Interim Stay of Deadlines Pending Appeal, (ECF No. 226), staying until further order all deadlines for compliance with the Second Sanctions Order and the Second Fee Award, as well as all unexpired deadlines in the Case Management Order filed on July 6, 2018, (ECF No. 63), as amended by the Court's December 20, 2018 Order, (ECF No. 137). That same day, the Court issued a scheduling order, (ECF No. 225), requesting briefing and hearing on whether the Court must or should stay the enforcement of the deadlines set forth in paragraph 149 of the Second Sanctions Order concerning the Modified Return Protocol and paragraph 81 of the Second Fee Award concerning the payment of the Awarded Expenses.

8. These matters have been fully briefed, and the Court held a hearing on these matters on October 29, 2019, at which all remaining represented parties were represented by counsel.

II. ANALYSIS

9. The parties' various arguments for and against a stay of the enforcement of the deadlines at issue center around the following questions: (i) whether the enforcement of certain deadlines must be automatically stayed under N.C. G.S. § 1-294; (ii) whether N.C. G.S. §§ 1-289 and 1-290 and North Carolina Rule of Civil Procedure 62 ("Rule 62") permit enforcement pending the appeal; and (iii) whether the Court should, in any event, exercise its inherent authority to enter a discretionary stay of enforcement of the deadlines at issue.

A. N.C. G.S. § 1-294

10. N.C. G.S. § 1-294 provides, in relevant part, that

[w]hen an appeal is perfected . . . it stays all further proceedings in the court below upon the judgment appealed from, or upon the matter embraced therein, unless otherwise provided by the Rules of Appellate Procedure; but the court below may proceed upon any other matter included in the action and not affected by the judgment appealed from.

The same result occurs upon perfection of an appeal from an "appealable interlocutory order[.]" Veazey v. Durham, 231 N.C. 357, 363, 57 S.E.2d 377, 382 (1950). An interlocutory order "does not dispose of the case[ ] but leaves it for further action by the trial court in order to settle and determine the entire controversy." Id. at 362, 57 S.E.2d at 381. Although generally not appealable, an interlocutory order is immediately appealable when it "affects a substantial right that 'will clearly be lost or irremediably adversely affected if the order is not review[ed] before final judgment.'" SED Holdings, LLC v. 3 Star Props., LLC, 250 N.C.App. 215, 221, 791 S.E.2d 914, 919 (2016) (quoting Edmondson v. Macclesfield L-P Gas Co., 182 N.C.App. 381, 391, 642 S.E.2d 265, 272 (2007)); see also N.C. G.S. § 1-277(a) ("An appeal may be taken from every judicial order . . . which affects a substantial right claimed in any action or proceeding[.]"). An appealable interlocutory order is treated as a judgment for purposes of § 1-294, so no further proceedings in connection with such an order are permitted. See Veazey, 231 N.C. at 363, 57 S.E.2d at 382; SED Holdings, LLC, 250 N.C.App. at 221, 791 S.E.2d at 919; N.C. G.S. § 1-277(a).

11. A "two-part test has developed" to determine whether an interlocutory order affects a substantial right: "the right itself must be substantial and the deprivation of that substantial right must potentially work injury to [the appellant] if not corrected before appeal from final judgment." Plasman v. Decca Furniture (USA), Inc., 800 S.E.2d 761, 768 (N.C. Ct. App. 2017) (quoting Goldston v. Am. Motors Corp., 326 N.C. 723, 726, 392 S.E.2d 735, 736 (1990)), disc. rev. denied, 812 S.E.2d 849 (N.C. 2018). Yet, "the 'substantial right' test for appealability of interlocutory orders is more easily stated than applied." Waters v. Qualified Pers., Inc., 294 N.C. 200, 208, 240 S.E.2d 338, 343 (1978). Moreover, "[n]o hard and fast rules exist for determining which appeals affect a substantial right." Cagle v. Teachy, 111 N.C.App. 244, 246, 431 S.E.2d 801, 802 (1993); see also RPR & Assocs. v. Univ. of N.C. -Chapel Hill, 153 N.C.App. 342, 347-48, 570 S.E.2d 510, 514 (2002).

12. Rather, whether an interlocutory order affects a substantial right involves a case-by-case inquiry, SED Holdings LLC, 250 N.C.App. at 221, 791 S.E.2d at 919 (citing Waters, 294 N.C. at 208, 240...