Alamance Family Practice, P.A. v. Lindley, 2018 NCBC 82.
STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION ALAMANCE COUNTY 18 CVS 913
ALAMANCE FAMILY PRACTICE, P.A.,
Plaintiff,
v. ORDER AND OPINION ON DEFENDANTS’ CHERYL LINDLEY and JEFF MOTION TO DISMISS KIMBALL, Individually and d/b/a PREFERRED PRIMARY CARE, PLLC,
Defendants.
1. THIS MATTER is before the Court on Defendants’ Rule 12(b)(6) Motion to
Dismiss (the “Motion”) filed on June 26, 2018. For the reasons set forth herein, the
Court GRANTS the Motion.
Whited, Doby & Ray, by Julian M. Doby, for Plaintiff.
The Noble Law Firm, PLLC, by Jennifer L. Bills and Kathryn F. Abernethy, for Defendants.
Robinson, Judge.
I. FACTUAL BACKGROUND
2. The Court does not make findings of fact on a motion to dismiss under Rule
12(b)(6) of the North Carolina Rules of Civil Procedure (“Rule(s)”) but only recites
those factual allegations of the Amended Complaint that are relevant and necessary
to the Court’s determination of the Motion. 3. Plaintiff Alamance Family Practice, P.A. (“Plaintiff”) is a North Carolina
professional corporation with an established medical practice that has treated
patients since 1989. (Am. Compl. ¶¶ 1, 27, ECF No. 3.) Plaintiff treats many patients
and families for ongoing medical issues. (Am. Compl. ¶ 27.)
4. Defendant Cheryl Lindley (“Lindley”) is a North Carolina resident and a
licensed nurse practitioner who was hired by Plaintiff in July 2013 to work in
Plaintiff’s medical practice. (Am. Compl. ¶¶ 2, 8; Am. Compl. Ex. A, ECF No. 4.2.)
5. Defendant Jeff Kimball (“Kimball”) is a North Carolina resident who
worked as Plaintiff’s office manager since before Lindley was hired. (Am. Compl.
¶¶ 3, 6.) As part of his role as Plaintiff’s office manager, Kimball set up Plaintiff’s e-
mail account as alamancefp@yahoo.com. (Am. Compl. ¶ 15.)
6. Defendant Preferred Primary Care, PLLC (“PPC”) is a North Carolina
professional limited liability company formed by Lindley in 2016. (Am. Compl. ¶¶ 4,
11.)
7. When Plaintiff’s owner, Dr. Meindert Niemeyer, agreed to employ Lindley,
Plaintiff and Lindley executed an employment agreement on July 15, 2013 for a term
of one year. (Am. Compl. ¶ 8, Ex. A.) Pursuant to the employment agreement,
Plaintiff and Lindley stood in an employer-employee relationship. (Am. Compl. Ex.
A, § 3.) As part of the agreement, Lindley agreed to maintain her professional licenses
and “devote her utmost knowledge and best skill to the care of such patients as shall
be entrusted to her.” (Am. Compl. Ex. A, §§ 1, 5, 12.) 8. The employment agreement obligated Lindley not to disclose “any
information relating to [Plaintiff], its officers, employees, or patients, including
information regarding the affairs or operation of [Plaintiff], to any third parties
during or after the term of [the] [a]greement without the prior written consent of
[Plaintiff.]” (Am. Compl. Ex. A, § 5.) The agreement further provided that Lindley
agreed to treat all matters and information related to [Plaintiff]’s business, including . . . lists and identities of patients, as confidential information entrusted to the parties solely for their use in the performance of this [a]greement, and not to use such information or divulge, disclose, or communicate such information in any way to any person or entity (other than to an officer, employee, or authorized agent of [Plaintiff] for use in the business of [Plaintiff]) during the term of this [a]greement and any renewals thereof, and thereafter.
(Am. Compl. Ex. A, § 18.)
9. In addition, the agreement prohibited Lindley, during the term of the
agreement and any renewals, from being “an owner, employee or agent of any
business, partnership or limited liability company engaged in the practice of
medicine” unless she obtained Plaintiff’s prior written permission. (Am. Compl. Ex.
A, § 17(e).)
10. After the initial one-year term of Lindley’s employment agreement, Lindley
and Plaintiff agreed to renew the contract. (Am. Compl. ¶ 9.)
11. Between 2015 and 2018, Kimball helped Lindley to establish Piedmont
Diagnostic Services, LLC (“PDS”), a separate business formed to provide allergy
testing for patients. (Am. Compl. ¶ 11.) Kimball and Lindley established PDS
without Dr. Niemeyer’s knowledge or consent and began ordering allergy testing
supplies and storing them at Plaintiff’s medical practice and conducting the allergy tests in Plaintiff’s medical offices. (Am. Compl. ¶ 11.) Lindley then used a fictitious
address to form PPC in 2016 to operate within Plaintiff’s practice. (Am. Compl. ¶ 11.)
PPC would conduct allergy testing and buy the allergy kits necessary to do such
testing from PDS. (Am. Compl. ¶ 11.)
12. At some point, Dr. Niemeyer discovered Lindley’s operation and asked that
she cease conducting allergy tests at Plaintiff’s practice because it was unauthorized
and more patients were referred for testing than necessary. (Am. Compl. ¶ 12.) In
response, Lindley offered to provide Dr. Niemeyer a referral fee (or a “kickback”) for
allergy testing, but Dr. Niemeyer refused because he believed such an arrangement
would be illegal. (Am. Compl. ¶ 12.)
13. At some point between 2015 and 2018, Kimball began giving himself
unauthorized pay raises and also began paying to himself and Lindley other
unauthorized benefits, including cell phone payments, gym memberships, fees for
seminars, and professional association dues. (Am. Compl. ¶¶ 13, 15.) Some of these
benefits were paid after Lindley and Kimball had decided they would leave Plaintiff’s
practice. (Am. Compl. ¶ 15.)
14. In the fall of 2017, Kimball told Dr. Niemeyer that Lindley would be leaving
Plaintiff’s practice soon. (Am. Compl. ¶ 14.) Around that same time, Lindley began
telling Plaintiff’s patients that she would be moving to her own practice and gave
them notice of her change of employment on Plaintiff’s letterhead. (Am. Compl. ¶ 15.)
Lindley and Kimball also began telling Plaintiff’s patients that Plaintiff’s owner Dr.
Niemeyer was about to be “shut down” and that he would no longer be able to treat patients. (Am. Compl. ¶ 54.) In addition, Kimball and Lindley accessed Plaintiff’s
confidential business and patient information that was stored in Dr. Niemeyer’s
electronic database in order to use the information to solicit Plaintiff’s patients to
leave Plaintiff’s practice and seek treatment at PPC. (Am. Compl. ¶ 18.)
15. At some point during the relevant time period, Kimball refused to let
anyone else access the Yahoo! e-mail account that Kimball had previously set up for
Plaintiff. (Am. Compl. ¶ 15.) The e-mail account contains valuable communications
regarding Plaintiff’s patients and billing. (Am. Compl. ¶ 35.)
16. On February 1, 2018, Lindley e-mailed Dr. Niemeyer to inform him that
she would be leaving Plaintiff’s practice. (Am. Compl. ¶ 17.) On February 20, 2018,
Lindley refused to see more than five patients per day until she left the practice and
then told Dr. Niemeyer that February 20 would be her last day. (Am. Compl. ¶ 17.)
II. PROCEDURAL HISTORY
17. The Court sets forth here only those portions of the procedural history
relevant to its determination of the Motion.
18. Plaintiff initiated this action by filing its verified Complaint on May 11,
2018. (ECF No. 15.)
19. On May 29, 2018, Plaintiff filed its verified Amended Complaint. (ECF No.
3.) The Amended Complaint asserts claims against Lindley and Kimball for breach
of contract; “intentional and negligent tortious interference with contract”; breach of
duty of loyalty; and fraud, and requests that punitive damages be awarded. (Am.
Compl. 3–5.) Plaintiff also asserts a claim for intentional misappropriation and use of trade name against only Kimball and a claim for unfair and deceptive trade
practices (“UDTP”) against only Lindley. (Am. Compl. 4–5.)
20. This action was designated as a mandatory complex business case by order
of Chief Justice Mark Martin of the Supreme Court of North Carolina dated June 12,
2018, (ECF No. 1), and was assigned to the undersigned by order of then-Chief
Business Court Judge James L. Gale on the same date, (ECF No. 2).
21. The Motion was filed on June 26, 2018 and seeks dismissal, pursuant to
Rule 12(b)(6), of all of Plaintiff’s claims except for the breach of contract claim against
Lindley.
22. The Motion has been fully briefed and the Court held a hearing on the
Motion on August 8, 2018 at which all parties were represented by counsel.
23. The Motion is ripe for resolution.
III. LEGAL STANDARD
24. In ruling on a motion to dismiss pursuant to Rule 12(b)(6), the Court
reviews the allegations of the Amended Complaint in the light most favorable to
Plaintiff. The Court’s inquiry is “whether, as a matter of law, the allegations of the
complaint, treated as true, are sufficient to state a claim upon which relief may be
granted under some legal theory.” Harris v. NCNB Nat’l Bank of N.C., 85 N.C. App.
669, 670, 355 S.E.2d 838, 840 (1987). The Court construes the Amended Complaint
liberally and accepts all allegations as true. Laster v. Francis, 199 N.C. App. 572,
577, 681 S.E.2d 858, 862 (2009). 25. Where the pleading refers to and depends on certain documents, the Court
may consider those documents without converting the motion into one for summary
judgment under Rule 56. Schlieper v. Johnson, 195 N.C. App. 257, 261, 672 S.E.2d
548, 551 (2009). At the same time, the Court may not consider materials that are not
mentioned, contained in, or attached to the pleading; otherwise, a Rule 12(b)(6)
motion will be converted into a Rule 56 motion and subject to its standards of
consideration and review. Fowler v. Williamson, 39 N.C. App. 715, 717, 251 S.E.2d
889, 890−91 (1979).
26. Dismissal of a claim pursuant to Rule 12(b)(6) is proper “(1) when the
complaint on its face reveals that no law supports [the] claim; (2) when the complaint
reveals on its face the absence of fact sufficient to make a good claim; [or] (3) when
some fact disclosed in the complaint necessarily defeats the . . . claim.” Oates v. JAG,
Inc., 314 N.C. 276, 278, 333 S.E.2d 222, 224 (1985); see also Jackson v. Bumgardner,
318 N.C. 172, 175, 347 S.E.2d 743, 745 (1986). Otherwise, “a complaint should not
be dismissed for insufficiency unless it appears to a certainty that plaintiff is entitled
to no relief under any state of facts which could be proved in support of the claim.”
Sutton v. Duke, 277 N.C. 94, 103, 176 S.E.2d 161, 166 (1970) (emphasis omitted).
27. The Court is not required “to accept as true allegations that are merely
conclusory, unwarranted deductions of fact, or unreasonable inferences.” Good Hope
Hosp., Inc. v. N.C. Dep’t of Health & Human Servs., 174 N.C. App. 266, 274, 620
S.E.2d 873, 880 (2005). A “trial court can reject allegations that are contradicted by
the documents attached, specifically referred to, or incorporated by reference in the complaint.” Laster, 199 N.C. App. at 577, 681 S.E.2d at 862. The Court can also
ignore a party’s legal conclusions set forth in its pleading. McCrann v. Pinehurst,
LLC, 225 N.C. App. 368, 377, 737 S.E.2d 771, 777 (2013).
IV. ANALYSIS
A. Breach of Contract
28. The Amended Complaint alleges that Lindley and Kimball “breached the
agreement between themselves and [Plaintiff]” by removing confidential patient
information from Plaintiff’s business, disclosing confidential patient information to
PPC, and using Plaintiff’s funds to pay for Lindley’s professional memberships and
programs and other benefits not provided for in the employment agreement. (Am.
Compl. ¶¶ 20–23.) The Amended Complaint further alleges that Lindley breached
her employment agreement by establishing a competing business while employed by
Plaintiff. (Am. Compl. ¶ 24.)
29. Defendants seek dismissal of Plaintiff’s breach of contract claim as to
Kimball and PPC, arguing that the Amended Complaint fails to allege the existence
of a valid contract between either Kimball or PPC, on the one hand, and Plaintiff, on
the other. (Defs.’ Rule 12(b)(6) Mot. Dismiss ¶¶ 1–2, ECF No. 6 [“Mot. Dismiss”];
Defs.’ Br. Supp. Rule 12(b)(6) Mot. Dismiss 1–2, ECF No. 7 [“Defs.’ Br. Supp.”].)
Plaintiff conceded, in its brief and at the hearing, that the Amended Complaint
asserts a breach of contract claim against only Lindley. (Pl.’s Br. Resp. Defs.’ 12(b)(6)
Mot. Dismiss 1, ECF No. 10 [“Pl.’s Br. Opp’n”].) 30. Accordingly, to the extent the Motion seeks dismissal of a breach of contract
claim against Kimball and PPC, the Motion is granted and Plaintiff’s claim, as it
relates to Kimball and PPC, is dismissed. Notwithstanding the Court’s conclusion
that this claim should be dismissed, “[t]he decision to dismiss an action with or
without prejudice is in the discretion of the trial court[.]” First Fed. Bank v. Aldridge,
230 N.C. App. 187, 191, 749 S.E.2d 289, 292 (2013). The Court concludes, in the
exercise of its discretion, that dismissal of Plaintiff’s breach of contract claim against
Kimball and PPC should be without prejudice to Plaintiff’s right to attempt to
reassert such claim.
B. Tortious Interference
31. Plaintiff alleges that it has treated and continues to treat many of its loyal
patients for ongoing medical issues but that Defendants accessed and used Plaintiff’s
confidential patient information to solicit patients to leave Plaintiff’s practice and
seek medical treatment at PPC instead. (Am. Compl. ¶¶ 27–28.) Specifically,
Plaintiff alleges that from the fall of 2017 until February 2018, Lindley told Plaintiff’s
patients that she would be leaving Plaintiff and moving to her own practice and that
Dr. Niemeyer would be shut down and no longer able to treat patients. (Am. Compl.
¶¶ 16, 18, 54.) Plaintiff further alleges that such conduct was done “intentionally and
with malice” because Plaintiff would not permit Defendants to conduct their allergy
testing business within Plaintiff’s medical practice. (Am. Compl. ¶¶ 28–29, 31.)
Plaintiff alleges that, as a result of Defendants’ conduct, at least 100 of Plaintiff’s
patients have been solicited to seek treatment at PPC, thus amounting to tortious interference with contract and tortious interference with prospective business
relations. (Am. Compl. ¶¶ 29–30.)
32. Defendants argue that the Amended Complaint fails to state a claim for
tortious interference with contract or prospective economic advantage because
Plaintiff neither alleges the existence of a valid contract nor a prospective contractual
relationship between Plaintiff and any of its patients. (Defs.’ Br. Supp. 2.) Plaintiff
counters that the Amended Complaint alleges enough information to put Defendants
on notice of the basis for its tortious interference claims and that further facts will be
provided through discovery. (Pl.’s Br. Opp’n 2–3.)
33. Plaintiff is correct that under North Carolina’s notice pleading standard, a
claim for relief need only set forth “[a] short and plain statement of the claim
sufficiently particular to give the courts and the parties notice of the transactions,
occurrences, or series of transactions or occurrences, intended to be proved showing
that the pleader is entitled to relief[.]” N.C. Gen. Stat. § 1A-1, Rule 8(a)(1). “[D]espite
the liberal nature of the concept of notice pleading, a complaint must nonetheless
state enough to give the substantive elements of at least some legally recognized
claim or it is subject to dismissal under Rule 12(b)(6).” Stanback v. Stanback, 297
N.C. 181, 204, 254 S.E.2d 611, 626 (1979); see also Turner v. Thomas, 369 N.C. 419,
444, 794 S.E.2d 439, 456 (2016) (notwithstanding the fact that Rule 8(a)(1) does not
require detailed fact-pleading, “no amount of liberalization should seduce the pleader
into failing to state enough to give the substantive elements of his claim”).
Accordingly, and separate and apart from the question of whether a complaint gives defendants adequate notice of the basis for a claim, dismissal is proper under Rule
12(b)(6) “when the complaint reveals on its face the absence of fact sufficient to make
a good claim[.]” Oates, 314 N.C. at 278, 333 S.E.2d at 224.
34. To state a claim for tortious interference with contract, a plaintiff must
allege
(1) a valid contract between the plaintiff and a third person which confers upon the plaintiff a contractual right against a third person; (2) the defendant knows of the contract; (3) the defendant intentionally induces the third person not to perform the contract; (4) and in doing so acts without justification; (5) resulting in actual damage to plaintiff.
Krawiec v. Manly, 370 N.C. 602, 606–07, 811 S.E.2d 542, 546 (2018).
35. “To establish tortious interference with prospective economic advantage, a
plaintiff must show that the defendant, without justification, induced a third party
to refrain from entering into a contract with the plaintiff, which would have been
made absent the defendant’s interference.” MLC Auto., LLC v. Town of S. Pines, 207
N.C. App. 555, 571, 702 S.E.2d 68, 79 (2010). “However, a plaintiff’s mere expectation
of a continuing business relationship is insufficient to establish such a claim.”
Beverage Sys. of the Carolinas, LLC v. Associated Beverage Repair, LLC, 368 N.C.
693, 701, 784 S.E.2d 457, 463 (2016). “Instead, a plaintiff must produce evidence that
a contract would have resulted but for a defendant’s malicious intervention.” Id.
36. Viewing the allegations of the Amended Complaint as true and taking all
reasonable inferences in Plaintiff’s favor, the Court concludes that the Amended
Complaint fails to adequately allege a claim for tortious interference with contract or
prospective economic advantage. 37. As to tortious interference with contract, the Amended Complaint nowhere
alleges that Plaintiff’s patients were contractually obligated to continue receiving
treatment from Plaintiff. Plaintiff’s patients cannot be induced not to perform a
contract that does not exist. Therefore, the Court concludes that the Amended
Complaint fails to state a claim for tortious interference with contract because it fails
to allege the existence of a valid contract between Plaintiff and a third party.
38. As to tortious interference with prospective economic advantage, the Court
concludes that the Amended Complaint’s allegation that Plaintiff’s loyal customers
received treatment from Plaintiff for ongoing medical problems is insufficient to show
that Plaintiff had anything more than a mere expectation that its patients would
continue seeking treatment from Plaintiff. Plaintiff alleges no facts from which the
Court can infer that Plaintiff’s patients would have continued to seek treatment from
Plaintiff but for Defendants’ alleged conduct. The Amended Complaint, therefore,
fails to state a claim for tortious interference with prospective economic advantage.
39. Accordingly, the Court concludes that Plaintiff’s tortious interference
claims should be dismissed and the Motion is granted as to that claim without
prejudice.
C. Misappropriation of Trade Name
40. Plaintiff alleges that Kimball, while employed by Plaintiff as an office
manager, set up a Yahoo! e-mail account for Plaintiff using the e-mail address
alamancefp@yahoo.com but would not let anyone else access the account or Plaintiff’s
financial information. (Am. Compl. ¶¶ 6, 15.) The Amended Complaint alleges a claim for “intentional misappropriation and use of trade name” based on allegations
that Plaintiff owns the Yahoo! account, which contains valuable communications
regarding Plaintiff’s patients and billing, but that Kimball has refused to turn over
the password and has disabled the account. (Am. Compl. ¶¶ 34–35.)
41. Defendants contend that Plaintiff’s claim for misappropriation of trade
name should be dismissed as to Lindley and PPC because the Complaint fails to allege
any facts showing that Lindley or PPC misappropriated or misused any trade name.
(Defs.’ Br. Supp. 4.) Plaintiff has conceded that the trade name claim relates only to
Kimball. (Pl.’s Br. Opp’n 3.)
42. Defendants further contend that the misappropriation of trade name claim
against Kimball must be dismissed because (1) Plaintiff does not allege that the
e-mail account constitutes a protectable trade name and (2) Plaintiff fails to allege
that Kimball used the e-mail address after the termination of his employment with
Plaintiff. (Defs.’ Br. Supp. 4–5.)
43. Usually, claims premised on misappropriation of a trade name are brought
by a company that has acquired a proprietary interest in a trade name against a
company that is using a confusingly similar name in the public sphere. Two Way
Radio Serv., Inc. v. Two Way Radio of Carolina, Inc., 322 N.C. 809, 814, 370 S.E.2d
408, 411 (1988) (citing R. Robinson, North Carolina Corporation Law and Practice
§ 4-1, at 52 (3d ed. 1983)). Here, Plaintiff does not allege that any Defendant is using
a trade name that is confusingly similar to Plaintiff’s trade name, but that Kimball
is denying Plaintiff access to an e-mail account that uses an abbreviation for Plaintiff’s business name. (Am. Compl. ¶¶ 34–36.) The Court is not aware of (and
Plaintiff has not alleged) a “misappropriation of trade name” claim that may be
brought to remedy the conduct alleged. Nevertheless, the Court will proceed to
analyze whether Plaintiff may state a valid claim were such a cause of action to be
recognized by our courts.
44. “The law will afford protection against the tortious appropriation of
tradenames and trademarks alike.” Charcoal Steak House of Charlotte, Inc. v. Staley,
263 N.C. 199, 202, 139 S.E.2d 185, 187 (1964). “[A] corporate name (i.e., a trade
name) is like a trademark to the extent that a proprietary interest therein can be
acquired only by adoption and continuous use” Two Way Radio Serv., Inc., 322 N.C.
at 816, 370 S.E.2d at 412. However, “generic, or generally descriptive, words and
phrases, as well as geographic designations, may not be appropriated by any business
enterprise either as a tradename or as a trademark.” Id. Thus, a geographic term,
such as “Carolina,” is by itself, a generic or descriptive term that is not protectable as
a trademark. Johnson & Morris, PLLC v. Abdelbaky & Boes, PLLC (Johnson &
Morris II), 2017 NCBC LEXIS 89, at *15 (N.C. Super. Ct. Sept. 28, 2017).
45. “A well established exception to this rule applies when the descriptive
phrase in question has acquired ‘secondary meaning.’” Two Way Radio Serv., Inc.,
322 N.C. at 814, 370 S.E.2d at 411. Secondary meaning exists when a business has
used generic or descriptive words “for so long or so exclusively or when it has
promoted its product to such an extent that the words do not register their literal
meaning on the public mind but are instantly associated with one enterprise[.]” Staley, 263 N.C. at 201–02, 139 S.E.2d at 187. In determining whether a mark has
acquired secondary meaning, our courts look to the factors established by the Court
of Appeals for the Fourth Circuit (the “Perini Factors”). Johnson & Morris II, 2017
NCBC LEXIS 89, at *15–16 (citing Perini Corp. v. Perini Constr., Inc., 915 F.2d 121,
125 (4th Cir. 1990)). The six Perini Factors are “(1) plaintiff’s advertising
expenditures; (2) consumer studies linking the mark to the source; (3) the plaintiff’s
record of sales success; (4) unsolicited media coverage of the plaintiff’s business;
(5) attempts to plagiarize the mark; and (6) the length and exclusivity of the plaintiff’s
use of the mark.” Johnson & Morris, PLLC v. Abdelbaky & Boes, PLLC (Johnson &
Morris I), 2016 NCBC LEXIS 78, at *15 (N.C. Super. Ct. Oct. 11, 2016).
46. The Court first observes that the e-mail address, alamancefp@yahoo.com,
which Plaintiff claims as its “trade name,” consists almost entirely of the name of a
county and the domain name of Yahoo!, a separate company that provides free e-mail
services to the public. Plaintiff’s e-mail address, by itself, is likely a generic or
descriptive name that is not entitled to trade name protection absent secondary
meaning. See id. at *12–13.
47. Plaintiff has failed to allege any facts from which the Court could conclude
that alamancefp@yahoo.com could have acquired secondary meaning for purposes of
the Motion. See Old S. Apparel, LLC v. JEB Designs, Inc., 272 F. Supp. 3d 734, 738–
39 (E.D.N.C. 2017) (concluding that plaintiff failed to state a claim for trademark
infringement under federal or North Carolina law where plaintiff failed to allege facts
that would show how its purported mark has secondary meaning). Finally, even had Plaintiff adequately alleged that it owned a protectable trade name, Plaintiff has not
alleged that any Defendant has used Plaintiff’s trade name or a confusingly similar
name. Thus, even if a misappropriation of trade name case could be premised on
Kimball’s alleged conduct, Plaintiff would fail to state a claim because it has not
alleged the existence of a protectable trade name.
48. Therefore, the Court concludes that Plaintiff’s misappropriation of trade
name claim should be dismissed.
D. Breach of Duty of Loyalty
49. Plaintiff alleges that Lindley and Kimball, as employees of Plaintiff, owed
Plaintiff a duty of loyalty that obligated them to act in the best interest of Plaintiff
and its patients. (Am. Compl. ¶ 38.) Plaintiff alleges that Lindley and Kimball
breached this duty of loyalty by performing unnecessary allergy testing on patients,
paying for personal benefits without authorization, misusing patient information,
interfering in Plaintiff’s business relationships, and preparing a new business while
employed by Plaintiff. (Am. Compl. ¶ 39.)
50. Defendants contend that Plaintiff’s breach of the duty of loyalty claim must
be dismissed because a standard employer-employee relationship does not give rise
to a fiduciary duty under North Carolina law and Plaintiff does not allege the
existence of a fiduciary relationship apart from Kimball and Lindley’s status as
employees of Plaintiff. (Defs.’ Br. Supp. 6.) In response, Plaintiff’s counsel
represented in its brief in opposition to the Motion that Plaintiff does not wish to be heard on the Motion as to this claim, thus conceding the correctness of the Motion as
it relates to this claim. (Pl.’s Br. Opp’n 3.)
51. Accordingly, the Court concludes that Plaintiff has failed to state a claim
against Lindley or Kimball for breach of the duty of loyalty and this claim is
dismissed.
E. Unfair or Deceptive Acts or Practices
52. Plaintiff alleges that Lindley committed an unfair or deceptive act or
practice by “fraudulently obtaining patient information,” misappropriating Plaintiff’s
trade name and internet contacts, soliciting Plaintiff’s patients, and using Plaintiff’s
funds to pay unauthorized expenses. (Am. Compl. ¶ 43.) Plaintiff further alleges
that Lindley’s conduct of forming her own business while employed by Plaintiff and
soliciting Plaintiff’s patients was “in or affecting commerce” as defined by the North
Carolina Unfair and Deceptive Trade Practices Act (“UDTPA” or the “Act”). (Am.
Compl. ¶¶ 41–42.)
53. The Amended Complaint alleges a UDTP claim against Lindley alone.
Further, because the Amended Complaint alleges that only Kimball misappropriated
Plaintiff’s trade name and internet contacts, such conduct cannot form part of the
basis for a UDTP claim against Lindley. Accordingly, Plaintiff’s UDTP claim against
Lindley is premised on allegations that she fraudulently obtained Plaintiff’s patient
information to solicit patients to PPC and used Plaintiff’s funds to pay expenses
without authorization. 54. Defendants argue that Plaintiff’s UDTP claim is barred by the learned
profession exemption. (Defs.’ Br. Supp. 6.) Defendants contend that Lindley, as a
licensed nurse practitioner, is entitled to the exemption because her alleged conduct
fell within the broad definition of “rendering of professional services” that exempts
her from the UDTPA. (Defs.’ Br. Supp. 6–7.)
55. The UDTPA declares unlawful “unfair or deceptive acts or practices in or
affecting commerce[.]” N.C. Gen. Stat. § 75-1.1(a). The Act defines commerce to
include “all business activities, however denominated, but does not include
professional services rendered by a member of a learned profession.” Id. § 75-1.1(b).
For the learned profession exemption to apply, (1) the entity or person whose conduct
is being challenged must be a member of a learned profession, and (2) the challenged
conduct must constitute a rendering of professional services. Wheeless v. Maria
Parham Med. Ctr., Inc., 237 N.C. App. 584, 589, 768 S.E.2d 119, 123 (2014); Reid v.
Ayers, 138 N.C. App. 261, 266, 531 S.E.2d 231, 235 (2000).
56. Our courts have interpreted membership in a learned profession broadly,
including both individuals and entities, largely in the medical and legal fields.
Shelton v. Duke Univ. Health Sys., Inc., 179 N.C. App. 120, 126, 633 S.E.2d 113, 117
(2006) (hospitals); Reid, 138 N.C. App. at 266, 531 S.E.2d at 235 (law firms and
attorneys); Sykes v. Health Network Sols, Inc., 2017 NCBC LEXIS 73, at *54–55 (N.C.
Super. Ct. Aug. 18, 2017) (chiropractors). Moreover, our Court of Appeals “has made
clear that unfair and deceptive acts committed by medical professionals are not included within the prohibition of [N.C. Gen. Stat.] § 75-1.1(a).” Wheeless, 237 N.C.
App. at 590, 768 S.E.2d at 123.
57. Despite Plaintiff’s suggestion in its brief that a nurse practitioner is,
arguably, “not contemplated under the learned profession exception,” at the hearing,
Plaintiff’s counsel conceded that a nurse practitioner is a medical professional. (Pl.’s
Br. Opp’n 4.) Plaintiff instead argues that the exception applies to unfair or deceptive
conduct directed toward a member of the consuming public, but not to anticompetitive
conduct between two learned professionals. (Pl.’s Br. Opp’n 4.) Thus, the issue before
the Court is whether Lindley’s alleged conduct constituted the rendering of
professional services such that Plaintiff’s UDTP claim is barred.
58. “It is well-settled by our Courts that a matter affecting the professional
services rendered by members of a learned profession . . . falls within the exception.”
Wheeless, 237 N.C. App. at 590, 768 S.E.2d at 123 (quotation marks omitted). “This
exception for medical professionals has been broadly interpreted by this Court . . . .”
Shelton, 179 N.C. App. at 126, 633 S.E.2d at 117. Further, and contrary to Plaintiff’s
argument, it has been held to apply where a plaintiff alleges that the unfair or
deceptive acts constituted anticompetitive conduct directed by one learned
professional at another. Cameron v. New Hanover Mem’l Hosp., Inc., 58 N.C. App.
414, 446, 293 S.E.2d 901, 920 (1982) (rejecting plaintiffs’ argument that the learned
profession exemption does not exclude from coverage anticompetitive conduct
involving commercial activity); Wheeless, 237 N.C. App. at 590–91, 768 S.E.2d at 123
(concluding that defendant-medical professionals’ sending of an anonymous letter to the medical board about plaintiff-medical professional was within the exemption,
notwithstanding plaintiff’s allegations that defendants illegally accessed and used
confidential peer review and patient records and acted out of malice and for financial
gain).
59. Given the breadth with which our courts have applied the learned
profession exemption, the Court concludes that the face of the Amended Complaint
reveals that the UDTP claim against Lindley is barred. Plaintiff complains that
Lindley engaged in unfair and deceptive conduct by creating a business within
Plaintiff’s business, illegally obtaining patient data, using that data to solicit
Plaintiff’s patients, paying unauthorized personal expenses, and attempting to give
Dr. Niemeyer kickbacks for allergy testing referrals. (Am. Compl. ¶¶ 11–13, 15–16,
18, 41–43; Pl.’s Br. Opp’n 4.) In its simplest form, Plaintiff’s claim is based on
allegations that Lindley began an allergy testing practice, obtained patient
information, solicited patients, and attempted to secure a referral agreement.
60. In considering whether a defendant’s conduct is exempt from the UDTPA’s
definition of commerce, the Court is not concerned with whether the conduct runs
afoul of other legal or ethical standards, but only whether the conduct affects the
professional services rendered by members of a learned profession. Burgess v. Busby,
142 N.C. App. 393, 406–07, 544 S.E.2d 4, 11–12 (2001) (holding that dismissal of
UDTP claim was proper because defendant-doctor’s conduct in sending a letter
naming patients who had sued defendant and jurors who found against defendant to
other medical professionals to discourage those professionals from treating the persons named in the letter was within the exemption); Gaunt v. Pittaway, 139 N.C.
App. 778, 784, 534 S.E.2d 660, 664 (2000) (“[M]edical professionals are expressly
excluded from the scope of [N.C. Gen. Stat.] § 75-1.1(a) and thus it clearly does not
follow that a statement by a medical professional, criminal or otherwise, is governed
by this particular statute.”). Accordingly, the Court concludes that Lindley’s alleged
conduct, all of which related to the provision of allergy testing services and
communications with patients, falls within the learned profession exemption.
61. Apart from the question of whether Defendants’ conduct is excluded from
the UDTPA’s definition of commerce, the allegations that form the basis for Plaintiff’s
UDTP claim against Lindley are the same allegations that constitute Lindley’s
alleged breaches of her employment agreement. (Compare Am. Compl. ¶¶ 20–24,
with Am. Compl. ¶¶ 41–43.) Our courts generally disfavor allowing UDTP claims to
“piggyback” on breach of contract claims, “[b]ecause section 75-1.1 and contract law
serve different purposes and rest on divergent remedial principles[.]” Post v. Avita
Drugs, LLC, 2017 NCBC LEXIS 95, at *9 (N.C. Super. Ct. Oct. 11, 2017). Therefore,
absent “some type of egregious or aggravating circumstances,” Dalton v. Camp, 353
N.C. 647, 657, 548 S.E.2d 704, 711 (2001) (emphasis omitted), “a mere breach of
contract, even if intentional, is not sufficiently unfair or deceptive to sustain an action
under [N.C. Gen. Stat.] § 75-1.1[,]” Branch Banking & Tr. Co. v. Thompson, 107 N.C.
App. 53, 62, 418 S.E.2d 694, 700 (1992). Circumstances that are sufficiently egregious
or aggravating to permit a UDTP claim based on conduct that occurred during the
course of contractual performance involve “clear deception,” such as forgery, destruction of documents, or concealment of the breach combined with other acts to
deter plaintiff from investigating the conduct. Post, 2017 NCBC LEXIS 95, at *11–
12.
62. Upon reviewing the Amended Complaint, and taking all inferences in
Plaintiff’s favor, the factual allegations are devoid of sufficiently egregious or
aggravating conduct on the party of Lindley that would permit Plaintiff to assert a
UDTP claim based on Lindley’s alleged breach of contract. The failure to plead such
conduct serves as an additional basis for dismissal of Plaintiff’s UDTP claim.
63. Having concluded both that Plaintiff’s UDTP claim is barred by the learned
profession exemption and that Lindley’s alleged breach of contract was not
sufficiently egregious to support a UDTP claim, the Court, therefore, concludes that
Plaintiff fails to state a claim for UDTP. Plaintiff’s UDTP claim is, accordingly,
F. Fraud
64. Plaintiff alleges that Lindley and Kimball have engaged in fraud by telling
Plaintiff’s patients since the fall of 2017 that Dr. Niemeyer was about to be “shut
down” and could no longer treat patients. (Am. Compl. ¶ 54.) The Amended
Complaint alleges that Lindley and Kimball’s statements were false, made with the
intent to deceive patients and solicit them to PPC, and that the false statements did
induce patients to leave Plaintiff’s practice, thereby harming Plaintiff. (Am. Compl.
¶¶ 54–57.) 65. To state a claim for fraud, a complaint must allege “(1) [f]alse
representation or concealment of a material fact, (2) reasonably calculated to deceive,
(3) made with intent to deceive, (4) which does in fact deceive, (5) resulting in damage
to the injured party.” Hudgins v. Wagoner, 204 N.C. App. 480, 486, 694 S.E.2d 436,
442 (2010). “Additionally, any reliance on the allegedly false representations must
be reasonable.” Forbis v. Neale, 361 N.C. 519, 527, 649 S.E.2d 382, 388 (2007).
66. Defendants argue that Plaintiff fails to state a claim for fraud, among other
reasons, because North Carolina has not recognized fraud claims based on false
statements made to a non-party that caused the non-party to take action that harmed
plaintiff. (Defs.’ Br. Supp. 8.) Plaintiff’s brief did not address this argument. At the
hearing, Plaintiff’s counsel argued that the Amended Complaint alleges sufficient
facts to state a claim for constructive fraud based on allegations demonstrating a
relationship of trust and confidence between Plaintiff, on the one hand, and Lindley
and especially Kimball, on the other. The Court rejects this argument. Plaintiff’s
Amended Complaint does not allege a fiduciary relationship between Plaintiff and
any of the Defendants.
67. As to Plaintiff’s fraud claim based on Lindley and Kimball’s alleged false
statements to Plaintiff’s patients, North Carolina courts have not addressed whether
the reliance requirement for a fraud claim may be premised on a defendant’s false
representations to a third party on which the third party relies to plaintiff’s detriment.1 Furthermore, the Court is unaware of any court that currently permits
common law fraud claims to be established by third-party reliance. Even in New
York, which has the most robust (albeit conflicting) case law discussing the viability
of third-party reliance claims, the law has been less than clear. Jordan v. Mirra,
2017 U.S. Dist. LEXIS 149034, at *56–57 (Dist. Del. Sept. 14, 2017) (unpublished)
(“Federal and state courts in New York are divided as to whether a fraud-based claim
may be predicated on third-party reliance.”). However, it appears that New York, the
jurisdiction most willing to entertain the possibility of third-party reliance claims,
has concluded that allegations of third-party reliance cannot establish a claim for
common law fraud. See, e.g., Pasternack v. Lab. Corp. of Am. Holdings, 27 N.Y.3d
817, 827, 59 N.E.3d 485, 492 (N.Y. Ct. App. 2016) (“[U]nder New York law, such third-
party reliance does not satisfy the reliance element of a fraud claim.”).
68. Of note, the District Court for the Middle District of North Carolina has
suggested that North Carolina law would recognize such a claim in appropriate
circumstances because North Carolina courts recognize that a professional may be
liable for negligently performing a contract that proximately causes foreseeable
1 Apart from the typical fraud claim wherein plaintiff is alleged to have relied on a false statement that defendant made directly to plaintiff (“first-party reliance”), courts in this and other jurisdictions have also considered whether a plaintiff may state a fraud claim where (1) defendant made a false representation to a third party intending that the information would reach plaintiff and be relied on by plaintiff (“indirect reliance”), Evercrete Corp. v. H-Cap Ltd., 429 F. Supp. 2d 612, 628 (S.D.N.Y. 2006); Bucci v. Burns, 2018 NCBC LEXIS 37, at *13–17 (N.C. Super. Ct. Apr. 25, 2018), and (2) where defendant made a false representation to a third party on which the third party relied, thereby causing harm to plaintiff (“third-party reliance”). Although courts do not use these terms consistently, the designations given in the preceding sentence will be used here for clarity. injury to a third person and “it would be surprising if the same were not true in cases
of intentional deception carried out for the purpose of harming a third party.” Bardes
v. Mass Mut. Life Ins. Co., 932 F. Supp. 2d 636, 640 (M.D.N.C. 2013).
69. The Court is doubtful that our appellate courts would recognize fraud
claims premised on third-party reliance. However, even assuming arguendo that
third-party reliance claims were recognized in North Carolina, the Amended
Complaint fails to allege that any patient justifiably relied on Kimball or Lindley’s
allegedly fraudulent statements. The Amended Complaint, therefore, fails to state a
claim for fraud premised on third-party reliance, even were such a claim recognized
in North Carolina.
70. Apart from whether the type of fraud claim alleged by Plaintiff is cognizable
under North Carolina law, Defendants also argue that Plaintiff’s fraud claim is
subject to dismissal because it fails to satisfy the heightened pleading requirements
of Rule 9(b). (Defs.’ Br. Supp. 8–9.) Specifically, Defendants argue that Plaintiff
provides only a vague timeframe of when the alleged fraudulent statements were
made and makes no allegation as to the place where the misrepresentations were
made. (Defs.’ Br. Supp. 8–9.)
71. Our Rules require that a pleading setting forth a fraud claim state “the
circumstances constituting fraud . . . with particularity.” N.C. Gen. Stat. § 1A-1, Rule
9(b). “[I]n pleading actual fraud the particularity requirement is met by alleging
time, place and content of the fraudulent representation, identity of the person
making the representation and what was obtained as a result of the fraudulent acts or representations.” S.N.R. Mgmt. Corp. v. Danube Partners 141, LLC, 189 N.C. App.
601, 610, 659 S.E.2d 442, 449 (2008) (emphasis omitted) (quoting Terry v. Terry, 302
N.C. 77, 85, 273 S.E.2d 674, 678 (1981)).
72. Plaintiff alleges that, beginning in the fall of 2017, Lindley and Kimball told
Plaintiff’s patients that Dr. Niemeyer was about to be “shut down” and would no
longer be able to treat patients. (Am. Compl. ¶ 54.) Plaintiff further alleges that
these misstatements were intended to solicit Plaintiff’s patients to PPC and that they
deceived Plaintiff’s patients into leaving Plaintiff’s medical practice, thereby harming
Plaintiff. (Am. Compl. ¶¶ 55–57.)
73. The allegations reveal that Plaintiff has stated with particularity the
content of the fraudulent representation, identity of the persons making the
representation, and what was obtained as a result of the fraudulent representations.
Although the time of the representations is given only as a broad range, the Court
concludes that such an allegation is sufficient, on the facts alleged, to satisfy Rule
9(b). “A requirement of specificity is not a requirement of perfect and complete
specificity.” Hudgins, 204 N.C. App. at 487, 694 S.E.2d at 443.
74. However, Plaintiff makes no allegation as to where or how these
representations were made to Plaintiff’s patients. Although in some instances a
failure to state the place a misrepresentation was made may be forgiven, the Court
concludes that the Amended Complaint’s failure to allege the place where Kimball
and Lindley’s alleged misrepresentations were made runs afoul of Rule 9(b)’s
specificity requirement. Id. at 489 n.7, 694 S.E.2d at 444 n.7 (concluding that failure to allege the exact place the fraudulent misrepresentation was made or whether it
occurred in a face-to-face conversation or over telephone was not fatal where
defendants’ answer admitted that the conversation occurred on the date alleged).
75. Based on the foregoing, the Court concludes that the face of the Amended
Complaint reveals an absence of facts sufficient to state a good fraud claim and fails
to satisfy Rule 9(b)’s particularity requirement. Therefore, Plaintiff’s fraud claim is
G. Punitive Damages
76. Defendants also request that the Court strike Plaintiff’s request for
punitive damages because only Plaintiff’s breach of contract claim against Lindley
should survive dismissal and punitive damages are not permissible in ordinary
breach of contract actions. (Defs.’ Br. Supp. 9.)
77. Plaintiff’s request for punitive damages is named in the Amended
Complaint as Count VI and does not clearly identify the claims for which Plaintiff
seeks punitive damages. (Am. Compl. ¶¶ 44–45.) Instead, the Amended Complaint
alleges only that Lindley and Kimball’s conduct “has been willful, wanton, malicious,
and fraudulent[.]” (Am. Compl. ¶ 45.)
78. A request for punitive damages is not a separate cause of action but is a
type of relief that may be awarded in appropriate circumstances. Holley v. Hercules,
Inc., 86 N.C. App. 624, 627, 359 S.E.2d 47, 49 (1987) (“[T]here is no cause of action
for punitive damages . . . . Causes of action are the vehicles by which legal rights and
remedies are enforced, but no one has a legal right to punitive damages.” (emphasis omitted)). Punitive damages may be an appropriate remedy “to punish a defendant
for egregiously wrongful acts and to deter the defendant and others from committing
similar wrongful acts.” N.C. Gen. Stat. § 1D-1. However, such damages may only be
awarded if the claimant, in addition to proving that the defendant is liable for
compensatory damages, also proves the presence of fraud, malice, or willful or wanton
conduct. Id. § 1D-15. Generally, a party cannot recover punitive damages for breach
of contract. Richardson v. Bank of Am., N.A., 182 N.C. App. 531, 558, 643 S.E.2d 410,
427 (2007).
79. Having concluded that all of Plaintiff’s claims are subject to dismissal, save
for Plaintiff’s breach of contract claim against Lindley, the Court further concludes
that Plaintiff’s request for punitive damages should be stricken from the Amended
Complaint. A review of the Amended Complaint reveals that Plaintiff fails to allege
any aggravating factor that could support a punitive damages award premised solely
on Lindley’s alleged breach of contract.
80. Therefore, the Motion as to Plaintiff’s request for punitive damages is
granted.
V. CONCLUSION
81. For the foregoing reasons, the Court ORDERS as follows:
A. The Court GRANTS the Motion as to Plaintiff’s claim for breach of
contract against Kimball and PCC and Plaintiff’s claim for tortious
interference with contract and tortious interference with prospective economic advantage, and these claims are dismissed without
B. The Court GRANTS the Motion as to Plaintiff’s claims for
misappropriation of trade name, breach of the duty of loyalty, UDTP,
and fraud, and these claims are dismissed with prejudice.
C. The Court GRANTS the Motion as to Plaintiff’s request for punitive
damages, and the request for punitive damages is dismissed without
SO ORDERED, this the 14th day of August, 2018.
/s/ Michael L. Robinson Michael L. Robinson Special Superior Court Judge for Complex Business Cases