Judge Robinson boldly went where no North Carolina Judge writing published Opinions had gone before last month in the case of Wheeler v. Wheeler, 2018NCBC117. The subject was a corporate officer’s right to the advancement of legal fees incurred in defending against a lawsuit.
Judge Robinson noted that there was only “one case
Do you really have to rush to Court to obtain an injunction for a misappropriation of trade secrets? Maybe not. But for an injunction enforcing a non-compete agreement, maybe yes. The Plaintiff in American Air Filter Co. v. Price, 2017 NCBC 9 didn’t get its non-compete enforced (partly due to its delay in filing
In the NC Business Court’s first Opinion of the new year, Judge Bledsoe denied Defendants’ Motion for Rule 11 Sanctions in Kure Corp. v. Peterson, 2017 NCBC 1. The decision holds a few lessons about the operation of Rule 11 of the NC Rules of Civil Procedure.
You Can’t Avoid A Rule
You may have pondered over the question whether a Judge or an Arbitrator decides if a particular dispute is subject to an agreement to arbitrate.
If you have wondered who makes that sort of decision, it’s actually not an open question. The U.S. Supreme Court held twenty years ago that:
[u]nless the parties clearly
This month, for the second time in the last two months, Judge McGuire of the NC Business Court entered Rule 11 sanctions against a party whose attorney relied on inaccurate information from the client in making claims against the opposing party.
This month’s decision was in NC Bioremediation, LLC v. Sea Winds, LLC, 2015 NCBC
If you are a regular reader of this blog, you know that litigating a trade secrets case in the Business Court can be tough. Last year, the Court barred a plaintiff from engaging in any discovery at all until it identified its allegedly misappropriated trade secrets with sufficient particularity. And the Court has frequently
I can’t remember the last time that the Business Court granted a motion opposing the designation of a case as a mandatory complex business case. And since the Business Court Modernization Act went into effect in October 2014? I don’t think one has been granted.
But earlier this week, Judge Gale did exactly that, in
I said yesterday that there was too much in DSM Dyneema, LLC v. Thagard, 2015 NCBC 47 for just one post, so here are the rest of the key points from the case. They involve two claims you might not want to bother to make in North Carolina — the first one suing a former
If you were unsure whether customer information held by your client — like customer contact information, sales reports, prices and terms books, sales memos, sales training manuals, commission reports, and vendor information — can be considered a "trade secret", the Business Court’s opinion this week in Southern Fastening Systems, Inc. v. Grabber Construction Products, Inc., 2015 NC 40 should resolve your uncertainty.
The Parties And The Claimed Trade Secrets
Defendant Farrell had been a sales representative for the Plaintiff Southern. He left Southern to work for Defendant Grabber, a competitor in the business of selling construction supplies.
Farrell had not signed a non-competition agreement, but he had signed a Non-Disclosure Agreement during his employment with Southern. The NDA said that Farrell would "not directly or indirectly disclose or use for any reason whatsoever any Confidential Information obtained by" him due to his employment. Op. ¶6.
"Confidential Information" was defined under the NDA to include:
customer lists containing customer names and addresses; customer sales records and reports containing product preferences and usual prices charged; price lists containing product sales prices and their cost; sales invoices, packing lists, routing books, customer files, personnel files, computer records, financial records and marketing plans containing tactics and strategies.
Op. ¶7. The NDA contained an acknowledgment that Southern’s "Confidential Information constitutes Trade Secrets." Op. ¶8.
Southern filed suit against Grabber and Farrell alleging a substantial loss of business after Farrell began working for Grabber. The Defendants moved to dismiss, asserting that Southern had not adequately identified the alleged trade secrets, that the information in question was "readily available . . . from customers and potential customers," and that Southern had not identified any steps that it took to keep its claimed trade secrets a secret. Op. ¶22.
Judge Bledsoe disagreed. On the point of whether the trade secrets were adequately identified, he cited six court decisions, four from the North Carolina Court of Appeals, recognizing that this type of description of customer information is sufficient to plead a trade secret. Op. ¶23. He also cited and called "persuasive" an unpublished decision from Judge McGuire of the Business Court finding a similar description by the same Plaintiff to be adequate. (I missed that case — Southern Fastening Systems, Inc. v. Duo-Fast Carolina, Inc. (February 9, 2015) — and I really try hard not to miss much of interest in the Business Court. Sorry about that.)
The Court rejected the other defenses given the Plaintiff’s allegations in its Complaint that its trade secrets involved "non-public information" that it did not disseminate to its employees unless they first executed an NDA.
The Validity Of The NDA
This decision represents the first time I can remember seeing a Defendant argue that the validity of an NDA should be determined based upon the standard applied to a covenant not to compete. The Defendant argued that the practical effect of the NDA was to keep Farrell from working for the Plaintiff’s competitor so it therefore needed to be supported by consideration and be reasonable as to time and to territory.
Judge Bledsoe ruled that the NDA only restricted Farrell from disclosing Southern’s Confidential Information and required him to return that information upon the termination of his employment. He said that the NDA "permits Farrell to work for any person or entity provided he does not disclose [the Plaintiff’s] Confidential Information." Op. ¶33. The NDA was therefore not a restrictive covenant subject to the requirements of G.S. §75-4.
Even after deciding that this NDA did not need to be evaluated under covenant not to compete principles, the Court went on to consider the issues of consideration and time and territory.
On the point of consideration the Court did not need to resolve the question whether continued employment by Farrell was sufficient consideration for the NDA since Farrell had been provided with Confidential Information in exchange for signing the NDA.
The question whether the lack of limitation as to time and territory rendered the NDA invalid had already been resolved by the NC Court of Appeals in Chemimetals Processing v. McEneny, 124 N.C. App. 194, 476 S.E.2d 374 (1996). There, the COA held that such an agreement can be valid "even when the agreement is unlimited as to time and area upon a showing that it protects a legitimate business interest" of the employer. Id. at 197, 476 S.E.2d at 377. Judge Bledsoe ruled that protecting customer relationships and goodwill was a legitimate business interest of the Plaintiff.Continue Reading An Interesting Trade Secrets Case From The Business Court
Can an exclusive licensee of a trade secret sue for its misappropriation? Maybe, even though North Carolina’s version of the Uniform Trade Secrets Protection Act reserves the right to sue to an "owner." N.C. Gen. Stat. §66-153.
The Uniform Act, by contrast, allows a "complainant" to bring an action for misappropriation. The Fourth Circuit