Opinion
No. 04-1724.
Filed 18 October 2005.
Catawba County No. 02 CVS 2584.
Appeal by defendants from order entered 7 July 2003 by Judge Timothy S. Kincaid; order entered 25 August 2003 by Judge Robert P. Johnston; order entered 9 October 2003 by Judge Robert C. Ervin; and orders entered 28 April 2004 and 28 June 2004 by Judge Preston Cornelius in Catawba County Superior Court. Heard in the Court of Appeals 14 September 2005.
Patrick Harper Dixon, L.L.P., by David W. Hood and Michael P. Thomas, for plaintiff appellees. Ferikes Bleynat, P.L.L.C., by Edward L. Bleynat, Jr., and Susan L. Evans, for defendant appellants.
Defendants Best Advantage Marketing Group, Best Publications Incorporated and Susan Long (BAM) appeal from entry of a partial summary judgment on their counterclaim of breach of contract, and sanctions pursuant to N.C. Gen. Stat. § 1A-1, Rule 37 striking their pleadings and entry of summary judgment in favor of plaintiffs (the Gagnes). We affirm.
FACTS
The Gagnes entered into a contract on 28 October 1997 with BAM, a Tennessee corporation, which stated that the Gagnes would provide BAM with a mailing list which was to remain the exclusive property of the Gagnes and to be used only for the purpose of distribution of a publication of BAM and solicitation of advertising. At the end of the contract, the corporate seal of BAM was affixed to the document. On 23 August 2002, the Gagnes filed a complaint in Catawba County Superior Court against BAM for violation of the Trade Secret Protection Act, unfair competition, unfair trade practice and breach of contract. The Gagnes alleged that BAM had misappropriated photographs and a confidential mailing list which were the exclusive property of the Gagnes developed through information not generally known or ascertainable. On 17 December 2002 a consent order and injunction was entered to enjoin the use of the photographs and mailing lists until trial could be held.
BAM filed an answer and counterclaim on 18 December 2002 alleging breach of contract for failure to pay invoices. All of the invoices were from 1999. On 6 May 2003 counsel for BAM filed a motion to withdraw which was granted, leaving BAM without counsel. The Gagnes then filed a motion for partial summary judgment as to the counterclaim for failure to bring the claim within the appropriate statute of limitations. Partial summary judgment was granted 7 July 2003 and an order was entered by Superior Court Judge Timothy Kincaid. Notice of appeal was given as to the entry of partial summary judgment on 21 July 2003.
A motion to compel discovery was filed 25 June 2003 by the Gagnes for insufficient responses to discovery which was granted on 11 July 2003 ordering BAM to fully comply with certain discovery requests by providing the mailing list and other documents requested within 10 days of that order. BAM then produced additional answers to discovery and made a motion to reconsider the order to compel and protective order on 21 July 2003 and further filed a motion to strike certain interrogatories. On 28 July 2003 the Gagnes brought a motion for discovery sanctions and motion to strike the pleadings. On 20 August 2003, BAM submitted a letter to the court asking the court to delay the entry of the order as to the motion to strike the pleadings until new counsel could appear. The letter indicated that counsel would be able to appear as of the following Monday, 25 August 2003. At this time BAM had been unrepresented by counsel for almost 4 months.
With no counsel appearance on behalf of BAM, Superior Court Judge Robert P. Johnston entered an order on 25 August 2003 finding that the corporate defendants could not litigate pro se, that BAM had failed to comply with the court order to produce certain documents, and that the refusal was willful and not privileged in any way. The order also provided that lesser sanctions had been considered, that these sanctions may still be insufficient, and pursuant to N.C. Gen. Stat. § 1A-1, Rule 37 and the corporate defendants' inability to act pro se BAM's pleadings were stricken. The order further stated that if BAM did not produce the required documents, then further sanctions would be considered.
The Gagnes filed a motion for judgment on the pleadings pursuant to N.C. Gen. Stat. § 1A-1, Rule 12(c) on 29 August 2003. On 2 September 2003, a notice of appearance was filed on behalf of BAM by counsel. Then on 9 September 2003 BAM filed a motion for relief from the order or, alternatively, to reconsider. On 9 October 2003 Superior Court Judge Robert C. Ervin entered an order for judgment on the pleadings as to all issues other than damages.
Lastly, the Gagnes filed a motion for summary judgment and injunctive relief on 24 February 2004. The motion, as well as BAM's response, were submitted with affidavits. BAM contended in its affidavit that the mailing list was not a trade secret. Superior Court Judge Preston Cornelius entered an order for summary judgment in favor of the Gagnes and a permanent injunction restraining use of names, addresses and photographs by BAM on 28 April 2004 and a final order and injunction on 28 June 2004.
BAM now appeals.
ANALYSIS I
In its first argument on appeal BAM contends that the trial court erred in granting partial summary judgment on its counterclaim concluding that the statute of limitations had run. They contend that this was a contract under seal to which a 10-year statute of limitations applies and further that Tennessee law should have applied rather than the law of North Carolina. We disagree.
Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law." N.C. Gen. Stat. § 1A-1, Rule 56(c) (2003). On a motion for summary judgment, "[t]he evidence is to be viewed in the light most favorable to the nonmoving party." Moore v. Coachmen Industries, Inc., 129 N.C. App. 389, 394, 499 S.E.2d 772, 775 (1998). When determining whether the trial court properly ruled on a motion for summary judgment, this Court conducts a de novo review. Va. Electric and Power Co. v. Tillett, 80 N.C. App. 383, 385, 343 S.E.2d 188, 191, cert. denied, 317 N.C. 715, 347 S.E.2d 457 (1986). Claims from a breach of contract are governed by N.C. Gen. Stat. § 1-52(1) (2003), which provides for a three-year statute of limitations. Miller v. Randolph, 124 N.C. App. 779, 781, 478 S.E.2d 668, 670 (1996). There was no contention that three years had not passed from the time of breach to the time the action was brought before the Court.
Section 1-47(2) provides that an action upon a sealed instrument "against the principal thereto" must be commenced within ten years. N.C. Gen. Stat. § 1-47(2) (2003). There is no dispute that the corporate seal of defendant is impressed upon the contract at issue here. However, "`[t]he seal of a corporation is not in itself conclusive of an intent to make a specialty [sealed instrument].'" Square D Co. v. C.J. Kern Contractors, 314 N.C. 423, 426, 334 S.E.2d 63, 65 (1985) (citation omitted). "[T]he determination of whether an instrument is a sealed instrument . . . is a question for the court." Id.
In Square D Co., the North Carolina Supreme Court considered whether the impression of a corporate seal on a construction contract would transform the contract into a specialty so that the 10-year statute of limitations under N.C. Gen. Stat. § 1-47(2) would apply. The Court stated that "the question to be answered in order to determine whether the corporate seal transforms the party's contract into a specialty is whether the body of the contract contains any language that indicates that the parties intended that the instrument be a specialty or whether extrinsic evidence would demonstrate such an intention." Square D Co., 314 N.C. at 428, 334 S.E.2d at 66. In concluding that the contract in that case did not evince any intention on the part of the parties to create a specialty, the Court stated that
[t]he contract contains no language in the body which would indicate that the parties intended the contract to be a specialty. There is no language such as "I have hereunto set my hand and seal," "witness our hands and seals," or other similar phrases contained within the contract that would explicitly support plaintiff's assertion that the instrument is a specialty under seal. See 68 Am. Jur. 2d, Seals § 3-4 (1973). Neither is there any extrinsic evidence that would indicate the parties intended the instrument to be a specialty.
Id. This Court has also stated that "[b]ecause the routine use of a corporate seal is merely to demonstrate authority to execute adocument, the mere presence of a corporate seal, without more, does not convert the document into a specialty." Blue Cross and Blue Shield v. Odell Associates, 61 N.C. App. 350, 362, 301 S.E.2d 459, 465, disc. review denied, 309 N.C. 319, 306 S.E.2d 791 (1983).
In the instant case the only indication of a seal on the contract was the corporate seal affixed to the bottom of the contract. There were neither words indicating an intention for the contract to be a specialty nor extrinsic evidence from which to determine intent. Therefore, standing alone, this contract does not fall with the 10-year statute of limitations.
BAM further contends that Tennessee's 6-year statute of limitations should apply to the breach of contract issue instead of North Carolina's 3-year statute of limitations.
"North Carolina adheres to the lex loci contracti rule, which holds that the law of the state in which a contract was formed governs matters of execution, validity, and interpretation." Cunningham v. Brown, 51 N.C. App. 264, 268, 276 S.E.2d 718, 722 (1981). However, in matters of procedure, North Carolina courts apply the rule of lex fori and adhere to the procedural rules of the forum state. Charnock v. Taylor, 223 N.C. 360, 361, 26 S.E.2d 911, 913 (1943). Additionally, North Carolina law "is dispositive on whether an issue is substantive or procedural." Williams v. Riley, 56 N.C. App. 427, 429, 289 S.E.2d 102, 104 (1982). Under North Carolina law, a statute of limitations is a procedural device, and in actions in North Carolina courts, the forum's statute of limitations must be applied. Sayer v. Henderson, 225 N.C. 642, 643, 35 S.E.2d 875, 876 (1945).
BAM argues that a different rule should apply where N.C. Gen. Stat. § 1A-1, Rule 13, requires that certain counterclaims be brought. However, statutes of limitations are deemed only to affect the remedy and not the substantive right. We agree with the Fourth Circuit Court of Appeals' holding that the statute of the forum may bar the remedy even though the action is not barred in the jurisdiction where it arose. Eagle Nation, Inc. v. Market Force, Inc., 180 F. Supp. 2d 752 (E.D.N.C. 2001). Therefore, the trial judge properly applied the 3-year statute of limitations provided for in North Carolina.
We note that this Court is cognizant of the fact that neither the parties' briefs on the motion for partial summary judgment nor the transcript from the hearing are contained in the record on appeal. However, assuming arguendo, that these arguments were presented at the trial court, partial summary judgment was nonetheless properly granted where the 3-year statute of limitations was properly applied and there was no issue of fact as to whether it had expired.
II
Next, BAM contends that the trial court erred in striking defendants' pleadings for failure to comply with a discovery order. We disagree.
Sanctions are governed by N.C. Gen. Stat. § 1A-1, Rule 37 (2003). Subsection (b)(2) allows the trial court to impose "just" sanctions upon parties who "fail to obey an order to provide or permit discovery[.]" We review the trial court's actions for an abuse of discretion. Segrest v. Gillette, 96 N.C. App. 435, 442, 386 S.E.2d 88, 92 (1989), rev'd on other grounds, 331 N.C. 97, 414 S.E.2d 334 (1992). The fact that the trial court passed over a more severe sanction adequately demonstrates that the trial court's order was reasonable and fully within its discretion. See Hursey v. Homes by Design, Inc., 121 N.C. App. 175, 464 S.E.2d 504 (1995) (stating that by choosing not to impose the more severe sanction it can be inferred that the trial court considered all available sanctions).
In the instant case, BAM did not comply with the order compelling certain documents be provided pursuant to discovery within 10 days. Instead, they filed a motion to reconsider and a protective order. More than a month passed from the time the court entered a motion to compel and the time sanctions were entered.
Abuse of discretion would have required the trial judge to have failed to consider less severe sanctions before striking the pleadings. See Goss v. Battle, 111 N.C. App. 173, 432 S.E.2d 156 (1993) (holding that a trial judge must consider less severe sanctions before dismissing a case for failure to comply with discovery orders). Moreover, the trial judge's order specifically stated that lesser sanctions than striking the pleadings were considered and that the trial judge, believing that these sanctions may not be sufficient, ordered that if compliance was not forthcoming that a more severe sanction would be imposed enjoining publishing or disseminating magazines. Therefore, this assignment of error is overruled.
III
Lastly, BAM argues that summary judgment was improperly granted where a genuine issue of material fact existed. We have reviewed the pleadings in the record on appeal and find no merit in this argument.
A trade secret is business or technical information that "[d]erives independent actual or potential commercial value from not being generally known or readily ascertainable through independent development . . . [and] [i]s the subject of efforts that are reasonable under the circumstances to maintain its secrecy." N.C. Gen. Stat. § 66-152(3)(a)-(b) (2003). N.C. Gen. Stat. § 66-152(1) states that "acquisition, disclosure, or use of a trade secret of another without express or implied authority or consent" is misappropriation. Confidential customer lists and pricing information have been found to constitute trade secrets. Drouillard v. Keister Williams Newspaper Services, 108 N.C. App. 169, 173, 423 S.E.2d 324, 327, disc. review denied, cert. dismissed, 333 N.C. 344, 427 S.E.2d 617 (1993).
Where BAM's pleadings were stricken, they were deemed to have admitted everything in the Gagnes' pleadings thereby admitting that the mailing list in question was secretive and confidential and within the exclusive control of the Gagnes, and further admitting that the list was compiled through information of independent commercial value which is not generally known or readily ascertainable. It was impermissible for BAM to try to create a genuine issue of material fact through affidavits which contradicted their admissions. See Allstate Ins. Co. v. Lahoud, 167 N.C. App. 205, 605 S.E.2d 180, aff'd, 359 N.C. 628, 614 S.E.2d 304 (2005) (holding that it was well settled that a nonmovant may not generate a conflict simply by filing an affidavit contradicting his own sworn testimony where the only issue raised is credibility). This assignment of error is overruled.
Accordingly, we affirm the trial court's decision to grant partial summary judgment on the counterclaim where it was barred by the statute of limitations, to strike the pleadings of BAM for willful failure to comply with discovery, and to enter summary judgment on all other issues where all allegations were deemed admitted.
Affirmed.
Judges McGEE and JACKSON concur.
Report per Rule 30(e).