Business Court Awards $38,000 in Fees for Opposing Party's Failure to Comply with Discovery Order

Business Court Awards $38,000 in Fees for Opposing Party's Failure to Comply with Discovery Order

Have you ever billed a client nearly $65,000 for pursuing a motion to compel? Maybe you routinely handle mega-cases and you aren't goggled by the size of that kind of fee  But that was the amount of the fee sought last month, in Out of the Box Developers, LLC  v. Logicbit Corp. following Plaintiff's win on a motion for sanctions growing out of a discovery dispute. It was sizeable enough to catch my attention.

The case is about the Defendants' alleged theft of Plaintiff's customizations to its case management software. The Defendants' product, aimed at  use by bankruptcy attorneys, is marketed under the name HoudiniEsq. During discovery, Plaintiff requested production of the version of HoudiniEsq used by one of the Defendants in May 2010, which would have allowed Plaintiff to isolate the customization to the software as of that time.

Despite an April 12, 2013 Order from the Court directing the production of that version of the software, the two Defendants at which the Order was directed -- The Doan Law Firm and Doan Law, LLP -- failed to comply. Judge Gale ruled in 2013 NCBC 32 that there was no justifiable reason for the noncompliance. Op. ¶41 [an enhanced version of this opinion is available to subscribers]

. He found it egregious enough to warrant the "severe sanctions" allowed by Rule 37(b)(2) of the North Carolina Rules of Civil Procedure. Op. ¶44.

Instead of imposing those severe sanctions -- like striking pleadings or barring the Defendants from defending against a claim as allowed by Rule 37(b)(2) --  Judge Gale ruled that the Plaintiff should be reimbursed its "reasonable costs and expenses" associated with the several motions to compel made necessary by the Doan Defendants' failure to produce the software.

The issue of the reasonableness of the costs and expenses was decided by the Business Court in 2013 NCBC 34 [enhanced version]. Plaintiff's lead counsel had filed an Affidavit requesting an award of $63,714.57. That was based on fees the fim had billed for three motions to compel and the hearing for sanctions which led to the Court's final discovery ruling.

Read this article in its entirety on North Carolina Business Litigation Report, a blog for lawyers focusing on issues of North Carolina business law and the day-to-day practice of business litigation in North Carolina courts.

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