Billionaire’s discovery violations justified ‘harsh’ sanctions 

Repeated discovery violations committed by a real estate holding company and its owner-founder justified the “harsh” of striking their pleadings and entering a default judgment, the North Carolina Court of Appeals has ruled in a case involving a billionaire currently serving a prison sentence for attempting to bribe the state’s insurance commissioner. 

The dispute at issue involved Greg Lindberg—the businessman and political donor convicted in a bribery scandal—his ex-wife, Tisha Lindberg, and Dunhill Holdings, LLC, a real estate holding company of property they shared. After the couple divorced, Dunhill filed a complaint against Tisha, asserting claims of breach of fiduciary duty, constructive fraud, civil liability for theft and embezzlement and conversion, among others. 

Tisha responded with her own counterclaims and the parties began a highly contentious discovery process. Greg and Dunhill objected to Tisha’s various requests, and Tisha accused them of spoliation of evidence. 

In June 2018 Durham County Superior Court Judge Orlando F. Hudson Jr. granted Tisha’s request for a forensic examination and entered orders compelling discovery by Greg and Dunhill. The order was affirmed on the case’s first trip to the Court of Appeals. 

On remand, discovery continued to be a battle, and in March 2019 and August 2019 orders, Hudson granted Tisha’s motions for sanctions against Greg and Dunhill. It ruled in her favor on all liability issues by dismissing Dunhill’s claims with prejudice and granted default judgment against Greg and Dunhill on all of Tisha’s claims. The only issue reserved for trial was damages. 

Greg and Dunhill appealed, arguing that the orders were in error. But in a unanimous March 1 opinion, Chief Judge Donna Stroud disagreed, affirming the orders almost in their entirety. 

“Appellants’ failures to comply with the [2019 orders] were due to their own conduct and circumstances within their control,” Stroud wrote. “Considering the entire history of this discovery dispute, the multiple orders addressing appellants’ objections and late and deficient responses, as well as Dunhill’s and [Greg’s] deposition testimony, appellants have not shown good faith in appellants’ responses to the discovery requests.” 

Sanctions orders stand 

The appellants challenged all aspects of the sanctions orders. 

The 2018 order required Greg and Dunhill to completely reply to each and every interrogatory and discovery request for production, and incorporated by reference documents designated by Tisha in her discovery requests. The 2018 order also rejected objections to those discovery requests, which the appellants tried to raise again, Stroud said. 

“The parties must comply with the order actually entered, regardless of what a party wishes the order had required,” Stroud wrote. “What appellants wish the June 2018 order required is not relevant. What matters is the June 2018 order actually identified the documents to be produced, ordered appellants to respond without objection and required appellants to indicate to which discovery request each document responded.” 

Considering Tisha’s request for document production, Stroud noted that the appellants produced 129,000 pages of discovery just days before scheduled depositions. The appellants had these documents in their possession, control or custody and the document dump that occurred did not demonstrate a good faith effort at compliance, she said. 

As for sanctions for depositions, Stroud identified predicate orders that were violated, eliminating one of the appellants’ arguments, and was not persuaded that Greg was inappropriately sanctioned for invoking his Fifth Amendment privilege against self-incrimination during his deposition. 

“The key issue with [Greg’s] argument is that he never invoked his Fifth Amendment privilege during his deposition,” Stroud wrote. “Rather, [he] instead decided to repeatedly—over 100 times according to the unchallenged Findings of Facts—say he ‘can’t comment on that.’ The use of the phrase, ‘I can’t comment on that’ was not language that a person could ‘reasonably be expected to understand as an attempt to invoke the privilege’ because it does not reference the privilege or even the Fifth Amendment.” 

Dunhill’s contention that it was sanctioned because its witnesses couldn’t recall the exact date of events overlooked the extent to which its designees were “completely unprepared” as to certain topics, she added. 

“The case law it cites is about whether a witness should be expected to predict the exact questions in a deposition and to have all the information at its fingertips,” Stroud wrote. “Here, Dunhill’s deponents did not have any information on certain topics … Put another way, this was not an imperfect deposition; as to certain topics on which the designees provided no answers, this deposition in effect did not happen at all.” 

Inconsistencies addressed on remand 

Stroud also affirmed the choice of sanctions, as the trial court properly considered lesser sanctions and ultimately rejected them, recounting the previous misconduct by Greg and Dunhill before concluding that lesser sanctions wouldn’t have an impact on the parties. 

The court did vacate two aspects of the sanctions order, however, finding them inconsistent. First was the order for an additional deposition for Dunhill, as the majority of the specified topics were issues relevant to liability alone, which the trial court already determined. 

“We cannot reconcile this inconsistency because the emphasis on ‘all’ in the order makes it clear the trial court’s intention to include topics unrelated to damages,” Stroud wrote. “Therefore, we vacate the paragraph ordering Dunhill to sit for another deposition and remand for clarification that Dunhill’s new deposition only cover damages.” 

In addition, the trial court erred when it barred Greg from asserting new attorney-client privilege objections. While he could be ordered to sit for a new deposition on damages, the trial court should clarify on remand that he “can assert objections, including privileges, that have not been previously overruled.” 

Stroud also found the provisions regarding forensic examination moot. All of the claims Tisha was seeking evidence on related to a dispute on liability issues. 

“Since the August 2019 order has already determined all issues on liability, the relief [Tisha] sought via the forensic examination has been granted, and the provisions regarding forensic examination are moot,” Stroud wrote. 

Matthew Nis Leerberg of Fox Rothschild in Raleigh, who represented Greg and Dunhill, did not respond to a request for comment. 

Neither did Raleigh attorney Matthew D. Ballew of Zaytoun Ballew & Taylor, who represented Tisha. 

The 100-page decision is Dunhill Holdings, LLC v. Lindberg (Lawyers Weekly No. 011-043-22). The full text of the opinion is available online at nclawyersweekly.com.