Solara Ventures IV v. PNC Bank

Opinion

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

SOLARA VENTURES IV, LLC, IN THE SUPERIOR COURT OF PENNSYLVANIA

Appellant

v.

PNC BANK, NATIONAL ASSOCIATION, SUCCESSOR-IN-INTEREST TO NATIONAL CITY BANK,

Appellee No. 1212 WDA 2013

Appeal from the Judgment Entered September 11, 2013 In the Court of Common Pleas of Allegheny County Civil Division at No(s): GD 10-009270

BEFORE: BENDER, P.J.E., OLSON, J., and FITZGERALD, J.* MEMORANDUM BY BENDER, P.J.E.: FILED AUGUST 07, 2014 Appellant, Solara Ventures IV, LLC, appeals from the judgment entered September 11, 2013, against Appellant and in favor of PNC Bank, National Association, Successor-in-Interest to National City Bank (PNC), for $70,000. At issue are three orders: the first, entered January 29, 2013, imposed sanctions against Appellant for discovery violations, and the remaining two, entered July 23, 2013, dismissed this action and awarded

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*

Former Justice specially assigned to the Superior Court.

Appellant is a real estate developer.1 In 2007, Appellant commenced a development project in the city of Pittsburgh known as the Otto Milk Factory Condominiums (the Project). Appellant secured financing for the Project through National City Bank. Subsequently, Appellant sought additional financing to cover higher than expected construction costs. According to Appellant, National City Bank assured Appellant that additional financing was forthcoming. However, National City Bank was acquired by PNC, which thereafter declined Appellant further financing. Appellant obtained financing from a third party and completed the Project.

In May 2010, Appellant commenced this litigation, asserting breach of

The parties began the discovery process, and in October 2010, PNC requested electronically-stored information from Appellant.

Thereafter, in a dispute ongoing for more than two years, Appellant offered a series of inconsistent, seemingly contradictory reasons for its le, in December

2010, Appellant suggested that a computer virus had rendered such electronically-stored information irretrievable but claimed the computer hard

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1 ute

certain actions taken by Mr. Benoff to Appellant.

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drives had been preserved for inspection. See Sanctions, Exhibit 2, at 4. Later, in April 2011, Appellant indicated that the virus- the computer hard drives were not preserved. See id., Exhibit 3, at 2.

In March 2012, Appellant informed PNC that (1) a virus had not impacted its ability to retrieve email correspondence; (2) it had compiled

maintained a copy of the discs for inspection. See id., Exhibit 6, at 3 (document paginated incorrectly). In April 2012, Appellant testified via deposition that it did not maintain historical emails relevant to the Project sfer email from

an old computer onto a new one; (2) Appellant had purchased at least one new computer since the Project began; (3) Appellant did not archive old - See id., Exhibit 1, at 200-06. Also in April 2012, Appellant reiterated that it had

See id., Exhibit 7, at 2. Thereafter, in May 2012, Appellant produced the two discs, previously mentioned, containing approximately 740 emails. None of the emails produced predated the commencement of this litigation. Nevertheless, Appellant had attached historical emails, contemporaneous with the Project, to his complaint.

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In July 2012, PNC filed a motion seeking sanctions based upon

spoliation of evidence. Appellant responded in August 2012, advising the trial court that (1) Appellant had engaged a technical services company to

email application; (2) the emails were neither organized nor indexed; and (3) Appellant had reviewed the emails and selected approximately 2,100 emails for production. See for Spoliation Sanctions, at 2-4. The period in which this email correspondence occurred is not clear from the record.

Following at least one hearing and extensive briefing, the trial court See Trial Court Order (01/29/2013). The

bad faith required an adverse inference.

motion.2 As a further sanction, the court directed Appellant to make available to PNC the approximately 41,000 emails retrieved from Appellan

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2 Thereafter, PNC submitted documentation supporting its request for

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secure these documents at the same time counsel informed Appellant of the mails available to PNC.

Appellant did not file a motion for reconsideration, nor did Appellant

substance of the order but failed to either secure the 41,000 emails or make them available to PNC. Thereafter, Appellant filed an interlocutory appeal, which was quashed by this Court. See Order of the Superior Court, 322 WDA 2013 (05/20/2013).

In February 2013, PNC moved for further sanctions, again seeking -compliance with

motion, Appellant asserted, for the first time, that a portion of the 41,000 emails were subject to the attorney-client privilege.

The trial court ordered deposition testimony to establish whether Appellant had complied with the sanctions order. The court expressed its specific concern that Appellant failed to comply with the provision directing counsel to take possession of the emails at the same time as counsel informed Appellant that the emails were to be surrendered to PNC.

deposition that counsel informed Appellant of the sanctions order approximately one month prior to taking possession of the 41,000 emails.

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See Trial Court Orders (07/23/2013).

Appellant timely appealed and filed a court-ordered Pa.R.A.P. 1925(b)

statement. The trial court did not issue an opinion.

Appellant raises the following issues on appeal: (1) whether the trial

court erred in dismissing this action with the sanctions order; and (3) whether the award of $70,000 in See -6 (edited for ease of analysis).

following standard:

Generally, imposition of sanctions for a party's failure to comply with discovery is subject to the discretion of the trial court, as is the severity of the sanctions imposed. Nevertheless, the court's discretion is not unfettered: because dismissal is the most severe sanction, it should be imposed only in extreme circumstances, and a trial court is required to balance the equities carefully and dismiss only where the violation of the discovery rules is willful and the opposing party has been prejudiced.

Rohm & Haas Co. v. Lin, 992 A.2d 132, 142 (Pa. Super. 2010) (citations

requires a showing of manifest unreasonableness, partiality, ill-will, or such lack of supp Christian v. Pa. Fin. Responsibility Assigned Claims Plan, 686 A.2d 1, 5 (Pa. Super. 1996).

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In its first issue raised on appeal, Appellant contends that the trial court abused its discretion by imposing sanctions. In support of this

(2) the trial court erred by imposing sanctions without an evidentiary hearing; and (3)

arguments are devoid of merit.

Initially, Appellant argues that the record does not support the trial hat Appellant misled the court and PNC. We disagree. The

Id.

e

GMH Assocs., Inc. v.

Prudential Realty Grp., 752 A.2d 889, 898 (Pa. Super. 2000). Competent

that Appellant provided contradictory explanations for its repeated failure to

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comply with its discovery obligations. Accordingly, we are bound by the

Appellant also claims that he was entitled to an evidentiary hearing prior to the imposition of sanctions. Appellant cites in support the long- standing precedent of Borough of Nanty-Glo v. Am. Sur. Co. of N.Y., 163 A. 523 (Pa. 1932) (reversing judgment entered upon a directed verdict where movant relied solely upon testimonial evidence), and invokes his right to due process.

Appellant never requested a hearing from the trial court. Accordingly, we deem this issue waived. See Pa.R.A.P. 302(a); see, e.g., Irwin Union Nat. Bank & Trust Co. v. Famous, 4 A.3d 1099, 1103 (Pa. Super. 2010) (finding waiver where Appellant failed to seek an extension of the discovery period from the trial court); Brown v. Philadelphia Tribune Co., 668 A.2d

appeal. This is true even if the issues raised on appeal are of constitutional

Appellant offers no support for its contention that Nanty-Glo applies in the discovery context, and we are aware of none.

Testimonial affidavits of the moving party or his witnesses, not documentary, even if uncontradicted, will not afford sufficient basis for the entry of summary judgment, since the credibility of the testimony is still a matter for the [factfinder].

If, however, the moving party supports its motion for summary judgment with admissions by the opposing party, Nanty Glo does not bar entry of summary judgment.

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DeArmitt v. N.Y. Life Ins. Co., 73 A.3d 578, 595 (Pa. Super. 2013) (citations omitted). Nevertheless, assuming arguendo its application is appro admissions. Moreover, such admissions were not limited to oral testimony or affidavits, but included documentary evidence. Thus, absent e Nanty-Glo rule is misplaced.

DeArmitt, 73 A.3d at 595.

3

Appellant offers no

relevant authority for its position that due process required the trial court to afford Appellant an evidentiary hearing, particularly in the absence of a request for one. See, e.g., Rogal v. Am. Broad. Cos., Inc., 74 F.3d 40,

evi discern no abuse of discretion.

criticism of Appellant for not inviting PNC to participate in the retrieval of the

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3 Appellant erroneously invokes the Fifth Amendment of the U.S. Constitution, whereas the Fourteenth Amendment affords the right of due process in state court.

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memorandum:

Because of the conflicting responses to the discovery requests, PNC has never had the opportunity to become involved in the retrieval process. If there had been a virus, the computer should be available. If the computer or its hard drive had been

for documents. Even if Mr.

Benoff had only recently learned that it was possible for documents to be retrieved, PNC should have been told and invited to participate in the process. Finally, a decision as to which of the 41,000 emails should be produced was made only by Mr. Benoff who has not acted in good faith throughout the discovery process.

Trial Court Memorandum (01/29/2013), at 7.

According to Appellant, Pennsylvania Rule of Civil Procedure 4009.12 in the discovery process.

Rule 4009.12 provides, in relevant part:

Where the documents may be identified only after review of a larger group of documents, and the burden of identifying the documents would be substantially the same for the party serving the request as for the party served, the party served may afford the party serving the request reasonable opportunity to identify the documents, to examine or inspect them and to obtain copies.

Pa.R.C.P. 4009.12(a)(2)(i) (emphasis added). Based upon this provision, Appellant asserts that it had no obligation to include PNC in the email

establishes an abuse of discretion.

um

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discovery obligations pursuant to Rule 4009.12. Rather, the court was

4019, which affords the trial court considerable discretion in crafting an See Pa.R.C.P.

a party or person otherwise fails to make discovery or to obey an order of

Rohm & Haas Co., 992 A.2d at 142.

Appellant did not proceed through the discovery process in good faith.

For more than two years, it offered contradictory explanations for its failure to produce electronically- motion for sanctions, Appell

emails.

See

that Appellant could, or even should, have included PNC in the retrieval process merely highlights the exasperation with which the court viewed

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In its second issue raised on appeal, Appellant contends the trial court erred in the sanctions order. Initially, Appellant challenges the following provisions of the sanctions order:

[1] Within twenty (20) days [Appellant] shall make available to oximately 41,000 documents that were

obtain the documents from Mr. Benoff at the same time these documents will be

See Trial Court Order (01/29/2013), at 2.

most of the documents were not relevant or were subject to attorney-client privilege. Appellant also argues that the provision directing counsel to

violate the Pennsylvania Rules of Profe Appellant.

We deem these arguments waived. Appellant did not file a motion to

provisions in a timely manner. See Pa.R.A.P. 302(a). Moreover, Appellant did not invoke the attorney-client privilege until long after the deadline to comply had passed. Id.; see also Law Office of Douglas T. Harris, Esq. v. Phila. Waterfront Partners, LP, 957 A.2d 1223, 1232 (Pa. Super.

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2008) (concluding that a party implicitly waives attorney-client privilege if counsel does not raise it in a timely manner).4 Appellant also contends that dismissal was premature, citing in support Transp., 710 A.2d 23 (Pa. 1998). According to Appellant, in deciding the

availability of a lesser sanction that will protect the opposing party's rights Schroeder, 710 A.2d at 27. Appellant contends the trial court failed to do so here.

Schroeder is misplaced. Appellant suggests to this Court that the trial court dismissed its case merely for its failure to produce documents. However, Appellant conflates several discrete steps in

court imposed sanctions upon Appellant in January 2013, it specifically decl

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remove any opportunity for Mr. Benoff to destroy records once he learned that the documents that he had not produced would be made available to -

discovery. See Trial Court Memorandum (04/11/2013), at 1-2. Thus, absent waiver, we discern no abuse of discretion.

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-party discovery. See Trial Court Memorandum (01/29/2013). Thus, the court implicitly found that PNC had suffered little or no prejudice at that time. Thereafter, in April 2013, the trial court

with the sanctions order was established. In July 2013, following further

that dismissal was premature. Rather, dismissal was the cumulative result ilures to proceed with discovery in good faith and

successfully deter Appellant from engaging in further dilatory behavior, we

Schroeder, 710 A.2d at 27; see also Rohm & Haas Co., 992 A.2d at 142 (directing a trial court to consider several factors before dismissing a case, inc

Jacobs v.

Jacobs award of one-

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discovery violations in an equitable distribution proceeding). Here, pursuant

this request, the trial court declined to award PNC the full amount, awarding instead $70,000. We discern no abuse of discretion.

Judgment affirmed.

Judgment Entered.

Joseph D. Seletyn, Esq. Prothonotary

Date: 8/7/2014