Addison Whitney, LLC v. Cashion, 2017 NCBC 23.
STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION MECKLENBURG COUNTY 17 CVS 1956
ADDISON WHITNEY, LLC,
Plaintiff,
v.
BRANNON CASHION; VINCENT ORDER AND OPINION ON BUDD; RANDALL SCOTT; PLAINTIFF’S MOTION FOR ANDREW CUYKENDALL; AMY BAYNARD; and JENNIFER PRELIMINARY INJUNCTION RODDEN, Defendants.
1. Plaintiff Addison Whitney LLC’s (“Addison Whitney”) Motion for
Temporary Restraining Order and/or Preliminary Injunction pursuant to Rule 65 of
the North Carolina Rules of Civil Procedure is currently pending before the Court.
2. Having considered the motion; the briefs, exhibits, and affidavits
supporting and opposing the motion; and the parties’ arguments at the hearing on
March 7, 2017, the Court GRANTS in part and DENIES in part the motion for
preliminary injunction.
Littler Mendelson, P.C., by Stephen D. Dellinger and Elise Hofer McKelvey, for Plaintiff.
Van Hoy, Reutlinger, Adams & Dunn, PLLC, by G. Bryan Adams, III, for Defendants.
Conrad, Judge. I. PROCEDURAL HISTORY
3. Addison Whitney filed its complaint and supporting affidavits on January
30, 2017. The complaint asserts six claims for relief, all of which arise out of the circumstances surrounding Defendants’ resignation from Addison Whitney with the
intent to begin a competing business.
4. Addison Whitney’s February 9, 2017 preliminary-injunction motion relies
on only three causes of action: (1) misappropriation of trade secrets, (2) breach of
contract, and (3) breach of fiduciary duty. Addison Whitney seeks to enjoin
Defendants from using, disclosing, or otherwise misappropriating its confidential
information and trade secrets; from soliciting or encouraging employees of Addison
Whitney to leave the company; and from competing against Addison Whitney.
5. This motion has been fully briefed, and the Court held a hearing on March
7, 2017, where all parties were represented by counsel. The motion is ripe for
determination.
II. FINDINGS OF FACT
6. The Court makes the following findings of fact solely for the purpose of
deciding this motion. These findings are not binding at a trial on the merits. See
Lohrmann v. Iredell Mem’l Hosp., Inc., 174 N.C. App. 63, 75, 620 S.E.2d 258, 265
(2005).
7. Addison Whitney, a North Carolina company, is a wholly owned subsidiary
of inVentiv Health, Inc. (Compl. ¶¶ 3, 13.) Addison Whitney “specializes in verbal
branding, visual branding, brand strategy, and research and analysis.” (Compl. ¶ 13.)
The company often assists pharmaceutical companies in creating pharmaceutical brand names that the appropriate regulatory authority will approve. (Compl. ¶¶ 14–
16.)
8. Defendants Brannon Cashion, Vincent Budd, Randall Scott, Andrew
Cuykendall, Amy Baynard, and Jennifer Rodden are former employees of Addison
Whitney. Defendants all resigned from Addison Whitney on January 21, 2017.
(Compl. ¶¶ 27–32.) At the time of their resignations, Cashion was Addison Whitney’s
President; Budd and Scott were Senior Vice Presidents; Cuykendall and Baynard
were Vice Presidents; and Rodden was a Senior Project Manager. (Compl. ¶¶ 27–32.)
9. All Defendants except for Rodden began their employment with Addison
Whitney’s predecessor, Addison Whitney, Inc. (Compl. ¶¶ 27–31.) During this period,
Scott, Budd, Baynard, and Cuykendall each signed a Confidential Information and
Unauthorized Disclosure agreement (“Unauthorized Disclosure Agreement”).
Cashion did not sign this agreement. (Freeman-Greene Aff. Exs. A–E.)
10. The Unauthorized Disclosure Agreement seeks to prevent the employee
from using or disclosing
any Confidential Information to any third party without the prior written consent of Addison Whitney, Inc. Furthermore, [employee] shall not disclose any Confidential Information to any Addison Whitney employee, consultant or temporary worker unless there is a legitimate business “need to know” such information by such employee, consultant or temporary worker.
(Freeman-Greene Aff. Exs. A–E.) It defines “Confidential Information” to mean “all
data or information not generally known outside of Addison Whitney whether
developed by or for Addison Whitney or received by Addison Whitney from an outside source.” (Freeman-Greene Aff. Exs. A–E.) The agreement further defines
“Confidential Information” to include four categories of business or technical
information, along with “any other information which, due to its nature, would cause
a reasonable person to know that it is confidential and proprietary to Addison
Whitney.” (Freeman-Greene Aff. Exs. A–E.)
11. inVentiv acquired Addison Whitney, Inc. on June 1, 2007 via an asset
purchase, dissolving the corporation and creating Addison Whitney, LLC as the
successor. (Compl. ¶ 27.) Following the asset purchase, Addison Whitney required
its employees to sign an Employee Confidentiality and Non-Compete Agreement
(“Employee Confidentiality Agreement”). (See Kempf Aff. ¶ 6.) The Employee
Confidentiality Agreement states that it is made “[a]s a condition of Employee’s
employment or continued employment,” and no employee received any additional
consideration in return for signing the agreement. (Freeman-Greene Aff. Exs. F–J.)
12. Cashion signed the Employee Confidentiality Agreement on September 1,
2007; and Scott, Budd, and Cuykendall signed it on September 17, 2007. (Freeman-
Greene Aff. Exs. F–I.) Baynard did not sign this agreement. (Freeman-Greene Aff.
¶ 5.)
13. Although the title of the Employee Confidentiality Agreement refers to a
“Non-Compete,” the agreement does not include a covenant not to compete.
(Freeman-Greene Aff. Exs. F–I.) Accordingly, the Court finds that Cashion, Budd,
Scott, Cuykendall, and Baynard are not subject to a covenant not to compete. 14. The Employee Confidentiality Agreement includes a confidentiality and
non-disclosure provision that is substantially similar to the one contained in the
Unauthorized Disclosure Agreement. These provisions require the employee
not to disclose, use, copy, publish, summarize, or remove from the premises of Addison Whitney any Information developed by Employee except (a) as necessary to carry out any assigned responsibilities as an Addison Whitney employee, and (b) after termination of employment, only as specifically authorized in writing by an officer of Addison Whitney.
(Freeman-Greene Aff. Exs. F–J.) The provisions further require that, upon
termination, the employee must “promptly deliver to Addison Whitney all documents,
data and other information pertaining to Information, and Employee shall not take
any documents, or other information, or any reproduction or excerpt thereof,
containing or pertaining to any Information.” (Freeman-Greene Aff. Exs. F–J.)
15. The Employee Confidentiality Agreement also contains a non-solicitation
provision. This provision requires employees not to “directly or indirectly hire, solicit
or encourage or induce any employee, director, consultant, contractor or
subcontractor to leave the employ of Addison Whitney” during the period of
employment and for one year following termination. (Freeman-Greene Aff. Exs. F–
J.)
16. When Addison Whitney hired Rodden in April 2010, she signed an
Unauthorized Disclosure Agreement substantially similar to the one signed by the
other Defendants. (Compl. ¶ 32; Freeman-Greene Aff. ¶ 4.) She also signed an
Employee Confidentiality Agreement. (Freeman-Greene Aff. ¶ 5.) Unlike the agreements signed by the other Defendants, Rodden’s Employee Confidentiality
Agreement includes a covenant not to compete in addition to the non-solicitation and
confidential information provisions. (Freeman-Greene Aff. Ex. J.)
17. In addition to requiring its employees to sign non-disclosure agreements,
Addison Whitney took steps to protect its confidential information and to train
employees regarding confidentiality. (See Compl. ¶ 38.) For example, Addison
Whitney stores its documents and information on a password-protected server, which
is not accessible to the public. (Guterma Aff. ¶ 5.)
18. To facilitate its business of preparing regulatory submissions, Addison
Whitney “created a database that contains information regarding drug product
characteristics for nearly 4,000 drug products on the market.” (McPhail Aff. ¶ 4.)
Much of this information is publicly accessible and “has been gathered and organized”
by Addison Whitney employees “over the course of seven years.” (McPhail Aff. ¶ 5.)
The database also includes information that is not publicly available and is chosen
based on the “professional judgment” of Addison Whitney employees. (2d McPhail
Aff. ¶ 18.) The information in the database would be difficult “to compile anew for
each regulatory submission” and therefore provides a competitive advantage to
Addison Whitney. (McPhail Aff. ¶¶ 4–5.)
19. Addison Whitney maintains this database on its password-protected
server. (See McPhail Aff. ¶ 4.) It also protects the database with a secondary
password, given to only certain Addison Whitney employees. (See McPhail Aff. ¶ 4;
2d McPhail Aff. ¶ 19.) 20. Addison Whitney also maintains a collection of case studies, each of which
contains information about work the company has done for a client. (See Guterma
Aff. ¶ 4.) According to Addison Whitney, 246 case studies are confidential because
they contain non-public information regarding its work and, sometimes, the
confidential information of clients. (See Guterma Aff. ¶ 4.) Addison Whitney has
published 46 additional case studies on the company’s website; these case studies do
not include sensitive business or client information. (See Guterma Aff. ¶¶ 7, 10.) The
non-public case studies provide a competitive advantage to Addison Whitney in
securing new business. (See McPhail Aff. ¶ 6; Compl. ¶ 22.) Addison Whitney stores
these documents on the password-protected server. (See Guterma Aff. ¶ 5.)
21. Addison Whitney maintains its client and prospective client information
on SalesForce, a password-protected, electronic platform. (See Guterma Aff. ¶ 3;
Compl. ¶¶ 25–26, 37.) SalesForce contains non-public information about clients’
buying habits and upcoming products that benefits Addison Whitney’s business-
development team. (See Guterma Aff. ¶ 3; Feenstra Aff. ¶ 5.) Addison Whitney
permits only certain employees to access SalesForce. (See Feenstra Aff. ¶ 3.)
22. In 2016, Defendants began formulating a plan to leave Addison Whitney
and create a competing company. On December 8, 2016, Addison Whitney’s Director
of Marketing Lizzy Guterma was informed that some of the Defendants might leave
Addison Whitney. (Guterma Aff. ¶ 12; see also Lard Aff. ¶ 3.) On December 15, 2016,
Cuykendall informed Rodden that several Defendants were planning to resign, and the two discussed the possibility that Rodden might join them. (Guterma Aff. ¶¶ 13–
15.) Defendants carried out this plan and resigned on January 21, 2017.
23. In early to mid-January 2017, Cashion and inVentiv representative Dan
Jones began discussing the possibility of a management buyout, where Defendants
would buy Addison Whitney. (See Cashion Aff. ¶ 39; Eldredge Aff. ¶ 6.) These
discussions continued after Defendants resigned, but the parties were unable to reach
an agreement. (See Cashion Aff. ¶¶ 39, 45, 50–54.) Addison Whitney contends, and
Defendants deny, that Cashion used the threat of opening a competing business as
leverage during the negotiations. (See Eldredge Aff. ¶ 8; Cashion Aff. ¶ 39.)
24. In the weeks prior to submitting their resignations, Defendants continued
to access Addison Whitney’s trade secrets and confidential information. Scott
directed two Addison Whitney trainees to print and deliver to him hard copies of
Addison Whitney’s case studies and also to print and e-mail to him a list of
prospective clients. (See Norrdahl Aff. ¶¶ 6, 7; Hansen Aff. ¶¶ 6, 7; Compl. ¶¶ 72,
79–80.) Scott also e-mailed Cashion a list of clients with open opportunities. (See 2d
McPhail Aff. ¶ 6; Compl. ¶ 81.) Defendants Budd, Cuykendall, and Scott each
accessed the SalesForce platform between January 13 and January 20, 2017. (See
Feenstra Aff. ¶ 10.)
25. Defendants also accessed, downloaded, copied, or printed a host of other
documents both before and after resigning. Rodden accessed the guidelines for
creating logos for clients, multiple templates, and approximately 50 other documents.
(See Ragone Aff. ¶¶ 7, 14; Compl. ¶¶ 73, 75.) Between January 16 and 20, Cuykendall accessed or printed approximately 100 documents, including templates, “client brand
guidelines, market research, linguistic reports, naming strategy briefs, and client
strategy presentations.” (Bendinelli Aff. ¶ 7.) After resigning, Baynard and Rodden
each accessed or printed dozens of additional documents. (See Bendinelli Aff. ¶¶ 8,
9.) Three Defendants have acknowledged that they continue to possess certain
documents obtained during their employment with Addison Whitney. (See Supp.
Budd Aff. ¶ 3; Supp. Cuykendall Aff. ¶¶ 10, 11; Rodden Aff. ¶ 30.)
26. Although Addison Whitney contends that it has lost business since
Defendants’ departure, the record does not include evidence that Defendants have
obtained that business or that Defendants are currently performing work for Addison
Whitney’s clients. At the time Defendants resigned, they did not have an operating
business. (See Compl. ¶ 88.) Defendants had not leased office space, created a
website or marketing materials, or purchased and set up servers. (See, e.g., Cashion
Aff. ¶ 44.) Defendants have also referred some clients back to Addison Whitney. (See
Budd Aff. ¶ 48, Ex. 1; Scott Aff. ¶ 44; Cuykendall Aff. ¶ 58.)
III. CONCLUSIONS OF LAW
27. A preliminary injunction is “an extraordinary measure taken by a court to
preserve the status quo of the parties during litigation.” Ridge Cmty. Inv’rs, Inc. v.
Berry, 293 N.C. 688, 701 239 S.E.2d 566, 574 (1977). The plaintiff bears the burden
to establish the “right to a preliminary injunction,” Pruitt v. Williams, 288 N.C. 368,
372, 218 S.E.2d 348, 351 (1975), and is entitled to relief only: “(1) if [the] plaintiff is able to show [a] likelihood of success on the merits of his case and (2) if [the] plaintiff
is likely to sustain irreparable loss unless the injunction is issued, or if, in the opinion
of the Court, issuance is necessary for the protection of [the] plaintiff’s rights during
the course of litigation.” A.E.P. Indus., Inc. v. McClure, 308 N.C. 393, 401, 302 S.E.2d
754, 759–60 (1983) (internal quotation marks omitted).
28. “Injunctive relief is granted only when irreparable injury is real and
immediate.” Hall v. City of Morganton, 268 N.C. 599, 600–01, 151 S.E.2d 201, 202
(1966). The plaintiff may demonstrate irreparable injury by showing that “the injury
is beyond the possibility of repair or possible compensation in damages” or “that the
injury is one to which the complainant should not be required to submit or the other
party permitted to inflict, and is of such continuous and frequent recurrence that no
reasonable redress can be had in a court of law.” A.E.P., 308 N.C. at 407, 302 S.E.2d
at 763 (emphasis omitted). A court should not enter an injunction if there is a “full,
complete and adequate remedy at law.” Bd. of Light & Water Comm’rs v. Parkwood
Sanitary Dist., 49 N.C. App. 421, 423, 271 S.E.2d 402, 404 (1980); see also A.E.P., 308
N.C. at 406, 302 S.E.2d at 762. In addition, the trial court must weigh the potential
harm a plaintiff will suffer if no injunction is entered against the potential harm to a
defendant if the injunction is entered. See Williams v. Greene, 36 N.C. App. 80, 86,
243 S.E.2d 156, 160 (1978).
29. For the reasons discussed below, the Court determines that Addison
Whitney is entitled to a preliminary injunction, but limited to its request to prevent
Defendants from using and retaining Addison Whitney’s confidential information and trade secrets. The Court determines that Addison Whitney is not entitled to an order
enjoining Defendants from competing against Addison Whitney or soliciting its
employees.
A. Misappropriation of Trade Secrets
30. Addison Whitney first argues that the Court should enjoin Defendants
from using its trade secrets. Addison Whitney identifies three categories of
information that it contends are trade secrets: its database of drug information; its
collection of 246 non-public case studies; and its client lists and related information
contained in the Salesforce platform. (Pl.’s Br. in Supp. Prelim. Inj. 4–5 [“Pl.’s Op.
Br.”].)
31. In their opposition brief, Defendants argue that Addison Whitney failed to
identify any protectable trade secrets. (See Defs.’ Br. in Supp. Prelim. Inj. 6–8 [“Defs.’
Resp.”].) At the hearing, Defendants’ counsel appeared to retreat from that position,
challenging only the non-public case studies. Nevertheless, the Court will consider
Defendants’ arguments as briefed.
32. The North Carolina Trade Secrets Protection Act defines a trade secret to
include “business or technical information,” including a “compilation of information,”
that satisfies certain conditions. N.C. Gen. Stat. § 66-152(3). The information must
“[d]erive[] independent actual or potential commercial value from not being generally
known or readily ascertainable through independent development or reverse
engineering by persons who can obtain economic value from its disclosure or use.” Id. In addition, the information must be “the subject of efforts that are reasonable under
the circumstances to maintain its secrecy.” Id.
33. The Court generally considers six factors to determine if information
qualifies as a trade secret:
(1) [t]he extent to which information is known outside the business; (2) the extent to which it is known to employees and others involved in the business; (3) the extent of measures taken to guard secrecy of the information; [4] the value of information to business and its competitors; [5] the amount of effort or money expended in developing the information; and [6] the ease or difficulty with which the information could properly be acquired or duplicated by others.
Wilmington Star-News, Inc. v. New Hanover Reg’l Med. Ctr., 125 N.C. App. 174, 180–
81, 480 S.E.2d 53, 56 (1997). As this Court recently explained, “[t]he factors overlap,
and courts considering these factors do not always examine them separately and
individually.” Computer Design & Integration, LLC v. Brown, 2017 NCBC LEXIS 8,
at *23 (N.C. Super. Ct. Jan. 27, 2017).
34. The Court concludes, for the purpose of deciding this motion, that all three
categories of information constitute protectable trade secrets. Contrary to
Defendants’ argument, Addison Whitney’s database of drug information is not
“simply a tool of convenience.” (Defs.’ Resp. 6.) It is a voluminous compilation of both
private and publicly available information, which required approximately 1,000
hours of work over a 7-year period to create. (See McPhail Aff. ¶¶ 4–5; 2d McPhail
Aff. ¶¶ 16–18.) The database provides a competitive advantage by ensuring that
Addison Whitney employees have quick, accurate access to drug information for
regulatory submissions. (See McPhail Aff. ¶ 5; 2d McPhail Aff. ¶¶ 21–23.) In addition, Addison Whitney protects the secrecy of the database by maintaining it on
a password-protected server and requiring a secondary password to access the
database. (See McPhail Aff. ¶ 4; 2d McPhail Aff. ¶¶ 19–20.) The database is entitled
to trade-secret protection because of its competitive value, Addison Whitney’s effort
to keep it secret, and the amount of time and effort required to create and maintain
it. See, e.g., Sunbelt Rentals, Inc. v. Head & Engquist Equip., L.L.C., 174 N.C. App.
49, 53–56, 620 S.E.2d 222, 226–28 (2005) (affirming trial court’s holding that
compilation of business information was protectable as trade secret).
35. Addison Whitney’s confidential client information is also protectable as a
trade secret. Although Defendants object that Addison Whitney publishes the names
of its clients on its public website (Defs.’ Resp. 8), the SalesForce platform includes
protectable, non-public information of a different nature. The information includes
open business opportunities, clients’ past buying habits, and upcoming products. (See
Guterma Aff. ¶ 3.) This information is valuable to Addison Whitney’s business-
development team, not generally known to the public, and maintained on a password-
protected platform with access limited to certain employees. (See Guterma Aff. ¶ 3;
Compl. ¶ 26.) North Carolina courts routinely hold that such information is
protectable as a trade secret. See, e.g., Drouillard v. Keister Williams Newspaper
Servs., Inc., 108 N.C. App. 169, 174, 423 S.E.2d 324, 327 (1992); Computer Design,
2017 NCBC LEXIS 8, at *27–28.
36. The non-public case studies present a closer question. According to
Addison Whitney, these documents describe confidential work performed for clients; sometimes contain confidential client information; are maintained on a password-
protected server; and provide a competitive advantage when used for internal
purposes and for client pitches. (See Guterma Aff. ¶¶ 4, 5, 9; 2d Guterma Aff. ¶ 5;
McPhail Aff. ¶¶ 6, 7, 11.) Defendants contend that these case studies are not actually
confidential because Addison Whitney and its employees frequently send the case
studies to clients without confidentiality restriction and also post the information on
the company’s public website. (See Defs.’ Resp. 7–8; Cashion Aff. ¶ 15.)
37. Having considered the record as a whole, the Court finds Addison
Whitney’s argument persuasive. Although Addison Whitney has posted a number of
case studies to its public website, the company removed sensitive business
information before posting them and does not seek protection for the remaining
publicly available information. (See McPhail Aff. ¶¶ 9, 12.) Addison Whitney’s
affidavits sufficiently establish that it maintains the confidentiality of 246 non-public
case studies and that these studies have competitive value. (See McPhail Aff. ¶ 6.)
Accordingly, on this record, the Court concludes that Addison Whitney’s non-public
case studies are entitled to trade-secret protection.
38. The Court next considers whether Addison Whitney is likely to succeed on
its claim for misappropriation. A prima facie case of misappropriation requires
substantial evidence that the wrongdoer “(1) [k]nows or should have known of the
trade secret; and (2) [h]as had a specific opportunity to acquire it for disclosure or use
or has acquired, disclosed, or used it without the express or implied consent or
authority of the owner.” N.C. Gen. Stat. § 66-155. Although a party can rely on circumstantial evidence to establish a prima facie case, see TSG Fishing, LLC v.
Bollinger, 238 N.C. App. 586, 595, 767 S.E.2d 870, 878 (2014), a wrongdoer’s access
to and opportunity to acquire a trade secret—without more—is insufficient, see Am.
Air Filter Co. v. Price, 2017 NCBC LEXIS 9, at *23 (N.C. Super. Ct. Feb. 3, 2017).
Rather, there must be substantial evidence (1) that the wrongdoer accessed the trade
secret without consent, or (2) of misappropriation resulting in an inference of actual
acquisition or use of the trade secret. Id.
39. In this case, because Defendants are former employees with access to the
protected information as part of their job duties, Addison Whitney must show that
Defendants accessed that information without permission. See RLM Commc’s, Inc.
v. Tuschen, 831 F.3d 190, 202 (4th Cir. 2016). For example, an employer may
demonstrate unauthorized access by showing that an employee continued to access
trade secrets after receiving a job offer from a competitor and then later accepted the
offer. See Am. Air Filter, 2017 NCBC LEXIS 9, at *24. Here, the relevant inquiry is
when Defendants’ plan to resign and to open their own competing business became
sufficiently concrete to render continued access to trade secrets unauthorized.
40. Addison Whitney contends that Defendants began conspiring to resign in
the summer of 2016 and that any access of trade secrets after that point was
unauthorized. (See Pl.’s Op. Br. 9.) The Court disagrees. Addison Whitney bases its
argument solely on an unsworn allegation in its Complaint that Defendants applied
to trademark the name “Leaderboard Branding” on July 28, 2016. (Compl. ¶ 57.) In
the absence of evidence of additional actions by Defendants during that time, the Court cannot conclude that Defendants’ continued performance of their duties (which
involved access to confidential information) was suspicious or unauthorized.
41. The record reveals a narrower range of unauthorized access. Addison
Whitney has introduced evidence that, as of December 2016, Defendants reported to
others their intent to resign and create a competing business. (See Guterma Aff.
¶¶ 12, 13; Compl. ¶¶ 65–69.) The Court therefore concludes that Defendants’ access
of information during and after December 2016 may support an allegation of
unauthorized access and a prima facie case of misappropriation.
42. Addison Whitney has not identified any instance in which a Defendant
accessed the drug-information database after December 2016. It argues only that
Defendant Rodden obtained a copy of the database in October 2016—two months
before she became aware that the other Defendants were considering leaving the
company. (See Pl.s’ Op. Br. 9; Ragone Aff. ¶ 6; McPhail Aff. ¶ 15.) Addison Whitney
has failed to demonstrate that Defendants accessed the database at any other time;
that any other documents accessed by Defendants are encompassed in the database;
or that Defendants continue to possess the database. On this record, the Court
concludes that Addison Whitney has not shown threatened misappropriation of the
drug-information database.
43. By contrast, Addison Whitney has introduced substantial evidence that
Defendants accessed protected client information and case studies just prior to
resigning. For example, Scott obtained a list of prospective clients on January 5;
directed two trainees to print all case studies and give him the copies on January 13; e-mailed Cashion a list of clients with open opportunities on January 16; and logged
into SalesForce on January 20. (See Norrdahl Aff. ¶¶ 6, 7; Hansen Aff. ¶¶ 6, 7;
Feenstra Aff. ¶ 10; 2d McPhail Aff. ¶ 6; see also Compl. ¶¶ 72, 81.) In addition, Budd
and Cuykendall logged into SalesForce on January 13 and 17, respectively. (See
Feenstra Aff. ¶ 10.) Given the close proximity to Defendants’ resignations and their
undisputed intent to compete against Addison Whitney, the Court concludes that
Defendants accessed this information without permission and that Addison Whitney
is likely to succeed on its claim for misappropriation.
44. Defendants respond that they do not continue to possess any protected
information. (See Cashion Aff. ¶¶ 14, 15, 17; Budd Aff. ¶¶ 13, 14, 16; Scott Aff. ¶¶ 12,
13, 15; Cuykendall Aff. ¶¶ 16, 18, 23; Baynard Aff. ¶ 16; Rodden Aff. ¶¶ 9, 10.) The
Court has considered these blanket denials of wrongdoing and finds them insufficient
to rebut Addison Whitney’s showing. See Am. Air Filter, 2017 NCBC LEXIS 9, at
*25–26 (granting preliminary injunction despite defendant’s denial of possession of
trade secrets).
45. Defendants also contend that they accessed these documents only “to
perform their job duties.” (Defs.’ Resp. 10.) That argument would be compelling for
events before December 2016. But continued access to trade secrets at a time when
Defendants were planning to leave the company and then compete against it “is
precisely the type of threatened misappropriation, if not actual misappropriation,
that the [statute] aims to prevent through issuance of a preliminary injunction.” TSG
Finishing, LLC v. Bollinger, 238 N.C. App. 586, 595, 767 S.E.2d 870, 878 (2014); see also Horner Int’l Co. v. McKoy, 232 N.C. App. 559, 570, 754 S.E.2d 852, 860 (2014)
(“Defendant’s knowledge of trade secrets and opportunity to use those” in a competing
business “create a threat of misappropriation.”).
46. For these reasons, the Court concludes that Addison Whitney would be
irreparably harmed in the absence of an order enjoining Defendants from using and
disclosing its trade secrets. This harm is immediate and ongoing, and Addison
Whitney has no adequate remedy at law. See N.C. Gen. Stat. § 66-154(a) (“actual or
threatened misappropriation of a trade secret may be preliminarily enjoined”). A
preliminary injunction is therefore necessary to protect Addison Whitney’s rights
during the course of the litigation.
47. The irreparable harm that Addison Whitney would suffer in the absence of
injunctive relief far outweighs any potential harm to Defendants if the injunction is
issued. Defendants will suffer little or no harm if the injunction is issued because
they submitted affidavits stating that they could obtain similar information through
other means. (See Cashion Aff. ¶¶ 8, 14, 17.)
48. Accordingly, in its discretion, the Court concludes that Addison Whitney is
entitled to a preliminary injunction preventing Defendants and all persons in active
concert or participation with any Defendant from retaining, using, disclosing, or
distributing any trade secret information improperly accessed during or after
December 2016. Defendants remain free, however, to use their own skills, experience,
and personal relationships with clients. See, e.g., Analog Devices, Inc. v. Michalski,
157 N.C. App. 462, 471, 579 S.E.2d 449, 455 (2003); Novacare Orthotics & Prosthetics E., Inc. v. Speelman, 137 N.C. App. 471, 478, 528 S.E.2d 918, 922 (2000); Travenol
Labs., Inc. v. Turner, 30 N.C. App. 686, 695, 228 S.E.2d 478, 485 (1976).
B. Breach of Contract
49. Addison Whitney asserts two claims for breach of contract. First, it argues
that Defendants Cashion, Scott, Budd, and Cuykendall breached a non-solicitation
provision in their Employee Confidentiality Agreements. Second, it contends that all
Defendants breached restrictions on the use and disclosure of confidential
information in the Unauthorized Disclosure Agreement and the Employee
Confidentiality Agreement.
50. Cashion, Scott, Budd, and Cuykendall contend that their Employee
Confidentiality Agreements, including the non-solicitation provisions, are not
enforceable due to a lack of consideration. All Defendants contend that they have not
breached any provision.1
1. Non-solicitation Restrictions
51. The Court first considers the non-solicitation provision in the Employee
Confidentiality Agreements, which were signed by all Defendants except Baynard.
52. Cashion, Scott, Budd, and Cuykendall contend that their Employee
Confidentiality Agreements were not based on valuable consideration and are
1 Rodden also contends that the covenant not to compete in her Employee Confidentiality
Agreement is overbroad and unenforceable. (See Defs.’ Resp. 17–19.) Addison Whitney has not sought a preliminary injunction on the basis of that provision, and the Court therefore declines to address the issue. therefore unenforceable. Addison Whitney alleges that the agreements were
executed “in consideration for . . . employment with Addison Whitney, LLC.” (Compl.
¶ 41.) Accordingly, the Court must decide whether Defendants’ employment
relationship with Addison Whitney was itself valuable consideration.
53. The issue boils down to a question of timing. A contract, or “any
modification to an existing contract,” must be supported by consideration.
RoundPoint Mortg. Co. v. Florez, 2016 NCBC LEXIS 17, at *46 (N.C. Super. Ct. Feb.
18, 2016). An offer of employment “may serve as consideration” when the employee
makes a promise at the beginning of the employment relationship “as a part of the
initial employment terms.” Id. at *47. If the agreement is entered into after the
creation of the employment relationship, it must be supported by new consideration
beyond the promise of continued at-will employment. See id. at *48 (citing Kadis v.
Britt, 224 N.C. 154, 161–63, 29 S.E.2d 543, 547–49 (1944)). Thus, because Addison
Whitney relies on only the employment relationship as consideration (and not a pay
raise or other incentive), it must demonstrate that the restrictions in the Employee
Confidentiality Agreements were entered into at the time Defendants’ employment
began.
54. Addison Whitney has not carried its burden. There is no dispute that
Cashion, Scott, Budd, and Cuykendall’s employment relationships began in June
2007. That is the date inVentiv purchased the assets of Addison Whitney, Inc., which
terminated these Defendants’ existing employment relationships and initiated new
employment with Addison Whitney, LLC. See AmeriGas Propane, LP v. Coffee, 2014 NCBC LEXIS 4, at *9–10 (N.C. Super. Ct. Feb. 11, 2014). Yet Defendants did not
sign the Employee Confidentiality Agreements until September 2007—roughly 90
days after their employment relationship began. (Freeman-Green Aff. Exs. F–I.)
55. In its reply, Addison Whitney contends that the 90-day gap “was simply a
result of [Defendants’] receiving a ‘reasonable amount of time’ to sign the
agreements.” (Pl.’s Reply in Supp. Prelim. Inj. 5 n.1 [“Pl.’s Reply”]; see also Kempf
Aff. ¶ 7.) This explanation does not hold water. Defendants testify that they first
received the agreements in September 2007, and Addison Whitney has not introduced
any evidence that it first obtained Defendants’ oral agreement at the time of
employment and then merely reduced the agreement to writing later. (See Supp.
Budd Aff. ¶ 11; Supp. Cashion Aff. ¶ 30; Supp. Scott Aff. ¶ 8; Supp. Cuykendall Aff.
¶ 13.)
56. Based on this record, the Court concludes that Defendants Cashion, Scott,
Budd, and Cuykendall were already employed at the time they entered into the
Employee Confidentiality Agreements. The agreements therefore lack consideration
and are unenforceable. See Whittaker Gen. Med. Corp. v. Daniel, 324 N.C. 523, 527,
379 S.E.2d 824, 827 (1988). As a result, Addison Whitney is not likely to succeed on
its claim that these Defendants breached the agreements, including the non-
solicitation provisions, and it is not entitled to a preliminary injunction on that basis.
57. This conclusion also applies to Defendant Baynard because she did not sign
an Employee Confidentiality Agreement. In addition, although Defendant Rodden
concedes that she is subject to a valid non-solicitation restriction, Addison Whitney has not argued that she breached the provision. (See Pl.’s Op. Br. 19 (arguing only
that other Defendants solicited “Baynard and Rodden to leave Addison Whitney”).)
58. The Court therefore holds that Addison Whitney is not entitled to a
preliminary injunction based on its claim for breach of any contractual non-
solicitation restriction.
2. Confidentiality and Non-disclosure Restrictions
59. Addison Whitney also contends that Defendants breached contractual
provisions covering the use and disclosure of confidential information. “The elements
of a claim for breach of contract are (1) existence of a valid contract and (2) breach of
the terms of that contract.” Carcano v. JBSS, LLC, 200 N.C. App. 162, 168, 684
S.E.2d 41, 47–48 (2009) (quoting Poor v. Hill, 138 N.C. App. 19, 26, 530 S.E.2d 838,
843 (2000)) (internal quotation marks omitted).
60. The Court concludes that Addison Whitney is not likely to succeed on its
claim that Cashion, Scott, Budd, and Cuykendall breached the non-disclosure
provisions in their Employment Confidentiality Agreements. As discussed above, the
agreements are unenforceable for lack of consideration.
61. It is undisputed, however, that Scott, Baynard, Budd, Cuykendall, and
Rodden (but not Cashion) entered into valid and enforceable restrictions contained in
the Unauthorized Disclosure Agreement. Rodden is also subject to additional
restrictions in the Employee Confidentiality Agreement, which she concedes is valid
and enforceable. 62. The Court concludes that the restrictions in the two agreements are in
essence the same and cover equivalent types of confidential information. The
essential inquiry is whether Defendants improperly accessed, used, copied, disclosed,
or removed Addison Whitney’s confidential information, which broadly includes
technical, financial, and other business information that is not readily available to
the public.
63. For purposes of this analysis, the Court reiterates its conclusion that
Addison Whitney has introduced sufficient evidence that Defendants intended to
resign from Addison Whitney and to create a competing business as early as
December 2016. Accordingly, Addison Whitney may show that Defendants’ continued
access of confidential information after that date “was not authorized.” Am. Air
Filter, 2017 NCBC LEXIS 9, at *24.
64. Addison Whitney has carried its burden by introducing evidence that
Defendants repeatedly accessed large volumes of confidential documents just prior to
and shortly after resigning. Several Defendants accessed, downloaded, or printed
numerous documents just prior to submitting their resignations. (See Bendinelli Aff.
¶ 7.) Defendants Baynard and Rodden accessed or printed documents after
submitting their resignations. (See Bendinelli Aff. ¶¶ 8, 9.) In addition, Budd,
Cuykendall, and Rodden each admit that they currently possess at least some
documents that they obtained during their employment with Addison Whitney. (See
Supp. Budd Aff. ¶ 3; Supp. Cuykendall Aff. ¶¶ 10, 11; Rodden Aff. ¶ 30.) 65. Although Addison Whitney has not identified the nature of each accessed
document, it has demonstrated that these documents include confidential
information, as defined by the two agreements. The documents that Defendants
accessed or currently have in their possession include logo guidelines, templates,
market research, linguistic reports, naming strategy briefs, and a Business
Development Training Manual, among other documents. (See Pl.’s Op. Br. 18;
Ragone Aff. ¶¶ 7, 14; Bendinelli Aff. ¶ 7.) They were created by Addison Whitney
employees to assist them in performing their employment responsibilities, and there
is no evidence that they were generally known outside of Addison Whitney. Indeed,
Defendants do not appear to dispute that at least some of these documents are
covered by the relevant non-disclosure restrictions.
66. Thus, Addison Whitney has established a likelihood of success on its claim
for breach of the Unauthorized Disclosure Agreements and the non-disclosure clause
in Rodden’s Employee Confidentiality Agreement. The Court concludes that Addison
Whitney is entitled to a preliminary injunction because it will be irreparably harmed
if Defendants use or disclose Addison Whitney’s confidential information, and a
preliminary injunction is therefore necessary to protect its rights during the course
of the litigation. The Court further concludes that the potential harm to Addison
Whitney outweighs any potential harm to Defendants that would result from the
issuance of an injunction.
67. Accordingly, in its discretion, the Court concludes that Addison Whitney is
entitled to a preliminary injunction preventing Defendants and all persons in active concert or participation with them from using or disclosing Addison Whitney’s
confidential information.
C. Breach of Fiduciary Duty
68. Addison Whitney claims that Defendants Cashion, Budd, Scott,
Cuykendall, and Baynard breached their fiduciary duties by soliciting employees to
leave the company, conspiring to resign on the same day, and planning to form a
competing business. (See Pl.’s Op. Br. 19.) As relief, Addison Whitney requests that
the Court enter an injunction prohibiting Defendants from “working by and between
themselves to compete against Addison Whitney” for one year. (Pl.’s Op. Br. 2.)
69. The parties vigorously dispute whether Addison Whitney has
demonstrated a likelihood of success, including specifically whether it has shown that
Defendants owed a fiduciary duty to Addison Whitney. (See Defs.’ Resp. 21–22; Pl.’s
Reply 2–4.) The Court does not need to resolve these disputes because it concludes
that Addison Whitney has not carried its burden to show irreparable harm.
70. In its opening brief, Addison Whitney makes no effort at all to identify the
irreparable harm allegedly caused by the breach of fiduciary duty. (Pl.’s Op. Br. 20–
21 (discussing only alleged trade secret misappropriation and violation of non-
disclosure and non-solicitation agreements).) In addition, Addison Whitney averred
that it “is not asking that Defendants be enjoined from pursuing their business.”
(Pl.’s Op. Br. 21 (emphasis added).) In the absence of any meaningful argument by
Addison Whitney, the Court is not convinced that “compensation in money cannot
atone for” any harm caused by the alleged breach of fiduciary duty. Hodge v. NC DOT, 137 N.C. App. 247, 252, 528 S.E.2d 22, 26 (2000) rev’d on other grounds, 352
N.C. 664, 535 S.E.2d 32 (2000); see also Computer Design, 2017 NCBC LEXIS 8, *36–
37 (denying preliminary injunction); Air Cleaning Equip. v. Clemens, 2016 N.C.
Super. LEXIS 121, at *27–28 (N.C. Super. Ct. Apr. 29, 2016) (same).
71. Furthermore, Addison Whitney has cited only two cases imposing a
preliminary injunction for breach of fiduciary duty. See Lake House Academy for
Girls LLC v. Jennings, 2011 NCBC LEXIS 41 (N.C. Super. Ct. Oct. 13, 2011);
GoRhinoGo, LLC v. Lewis, 2011 NCBC LEXIS 28 (N.C. Super. Ct. Sept. 29, 2011). In
each case, the court awarded injunctive relief against a manager of an LLC who, while
serving in that role, competed against the LLC and took affirmative action to harm
it. See Lake House Academy, 2011 NCBC LEXIS 41, at *15–17 (LLC manager made
disparaging public comments about LLC in addition to executing lease and hiring
employees for competing business); GoRhinoGo, 2011 NCBC LEXIS 39, at *3–5 (LLC
manager attempted “to drive [LLC] out of business,” including draining bank
accounts and beginning summary ejectment proceedings).
72. The egregious facts in these cases are simply not present here. There are
no allegations that Defendants made disparaging comments to Addison Whitney
clients, actively attempted to harm Addison Whitney’s business, or began a competing
business prior to resigning. (See Guterma Aff. Ex. A; Rodden Aff. ¶¶ 11, 33; Scott
Aff. ¶¶ 36–37, 40; Cuykendall Aff. ¶ 52.) Rather, Defendants’ evidence shows that
they have referred clients to Addison Whitney even after resigning from the company.
(See, e.g., Budd Aff. ¶ 48 & Ex. 1; Scott Aff. ¶ 44; Cuykendall Aff. ¶ 56.) 73. It also bears mention that Addison Whitney did not obtain a covenant not
to compete from five of the Defendants, and it has not sought to enforce the one
obtained from Defendant Rodden. The Court has also concluded that the non-
solicitation provisions are unenforceable. By attempting to enjoin Defendants’ new
competing business, Addison Whitney’s “requested relief seeks to provide [it] the
benefit of a bargain [it] did not make without adequate basis or justification.”
Computer Design, 2017 NCBC LEXIS 8, at *36.
74. The Court concludes that Addison Whitney has not shown the likelihood
that it will suffer irreparable harm due to a breach of fiduciary duty. Accordingly, in
its discretion, the Court denies a preliminary injunction on this claim.
IV. CONCLUSION
75. Based on the findings of fact and conclusions of law, the Court in its
discretion orders that, pending resolution of this action, and until otherwise ordered:
a. Defendants, and any persons or entities in active concert with them,
are ENJOINED from using or disclosing Addison Whitney’s 246 non-public case
studies; and the client information Addison Whitney maintains on the
SalesForce platform, including information regarding open client opportunities,
clients’ past buying habits, clients’ upcoming products, clients’ available
finances, and associated commentary prepared by Addison Whitney employees.
b. Defendants, and any persons or entities in active concert with them,
are ENJOINED from using or disclosing Addison Whitney’s confidential information, including but not limited to Addison Whitney’s Business
Development Training Manual; logo guidelines; templates; client brand
guidelines; market research; linguistic reports; naming strategy briefs; and
client strategy presentations.
c. Defendants are ORDERED to return within 10 days to Addison
Whitney any documents or other property in Defendants’ possession that fall
within the scope of paragraphs 75(a) and (b). Defendants are further ORDERED
to file a statement with the Court no later than 30 days after entry of this Order
certifying that they have fully complied with the requirements of this paragraph.
d. This Order shall become effective upon Addison Whitney’s posting
security in the amount of $5,000, which the Court concludes, in its discretion, is
reasonable and appropriate as a condition of granting the preliminary
injunction. See N.C. Gen. Stat. § 1A-1; N.C. R. Civ. P. 65(c). Any party may
move the Court to adjust the amount of security required for good cause.
e. Except as GRANTED by the terms of this Order, the motion is
DENIED.
This the 15th day of March 2017.
/s/ Adam M. Conrad Adam M. Conrad Special Superior Court Judge for Complex Business Cases