Bldg. Ctr., Inc. v. Carter Lumber, Inc., 2016 NCBC 77.
STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION MECKLENBURG COUNTY 16 CVS 4186
THE BUILDING CENTER, INC., ) ) Plaintiff, ) v. ) OPINION AND ORDER ) CARTER LUMBER, INC. and ) TIMOTHY HURD, ) ) Defendants. )
THIS MATTER came before the Court upon Defendants Carter Lumber, Inc.
and Timothy Hurd’s Motion to Dismiss Plaintiff The Building Center, Inc.’s Amended
and Verified Complaint pursuant to Rule 12(b)(6) of the North Carolina Rules of Civil
Procedure (“Rule(s)”) (the “Motion”).
THE COURT, having considered the Motion, briefs in support of and in
opposition to the Motion, and arguments of counsel at the hearing, concludes that the
Motion should be DENIED in part, and GRANTED in part, for the reasons below.
Moore & Van Allen, PLLC, by Benjamin P. Fryer, Esq. and William M. Butler, Esq. for Plaintiff The Building Center, Inc.
Van Hoy, Reutlinger, Adams & Dunn, PLLC, by Stephen J. Dunn, Esq. for Defendants Carter Lumber, Inc. and Timothy Hurd.
McGuire, Judge. FACTUAL AND PROCEDURAL BACKGROUND
1. Plaintiff The Building Center, Inc. (“Plaintiff”) is engaged in the supply
and distribution of building materials and has six locations in North and South Carolina, including Pineville and Gastonia, North Carolina, and Rock Hill, South
Carolina.
2. Defendant Carter Lumber, Inc. (“Carter Lumber”) is engaged in the
supply and distribution of building materials and has nearly 150 locations across 12
states, including Charlotte, North Carolina, and Rock Hill, South Carolina.
3. Defendant Timothy Hurd (“Hurd”) served as Residential Sales Manager
for Plaintiff’s Pineville, Gastonia, and Rock Hill locations. Hurd was employed with
Plaintiff from approximately October 8, 2012, through January 23, 2015. In August
2015, Carter Lumber hired Hurd. Hurd and Carter Lumber are referred to
collectively as “Defendants.”
4. As a Residential Sales Manager for Plaintiff, Hurd “had access to, and
acquired detailed knowledge of . . . Plaintiff’s confidential and proprietary business
information” including: “names and contacts of customers”; “customer preferences,
including the needs, requirements, and values of [Plaintiff’s] customers”; “sales and
marketing strategies”; “pricing structures”; “margins and profits”; “manufacturing
technologies”; and, “other confidential business information” (designated by Plaintiff
in the Complaint as “Trade Secrets”). (Am. Compl. ¶ 11.) Plaintiff “invested
substantial time, money, and resources in developing and maintaining business
relationships with customers and prospective customers.” (Id. ¶ 13.) Plaintiff alleges
the Trade Secrets and customer relationships are “not generally known or readily
ascertainable through independent development . . . .” (Id. ¶ 14.) Plaintiff took
“reasonable measures to protect the Trade Secrets from disclosure,” which included “security measures, including but not limited to password-protected login, controlled
and permission-restricted access on a need-to-know basis, and confidentiality policies
and/or agreements.” (Id. ¶¶ 15–16.)
5. Hurd also was responsible for “the employment, development, and
performance of salespersons and other employees in [Plaintiff]’s Pineville, Gastonia,
and Rock Hill” locations. (Id. ¶ 17.) Hurd had “detailed knowledge” of “information
such as salaries, commissions, bonuses, benefits, and employment terms” of these
salespersons and employees. (Id. ¶ 18.)
6. Hurd resigned from Plaintiff’s employment on January 23, 2015.
Plaintiff alleges “upon information and belief” that before resigning, “Mr. Hurd
misappropriated [Plaintiff]’s Trade Secrets by accessing and taking Trade Secrets in
physical and/or electronic form.” (Id. ¶ 24.)
7. Plaintiff alleges “upon information and belief” that Carter Lumber hired
Hurd “specifically to exploit the misappropriated Trade Secrets and his detailed
knowledge of and relationships with certain [Plaintiff’s] salespersons and employees
to target such salespersons and employees and lure them to Carter Lumber.” (Id. ¶
25.) Carter Lumber intended to “carry out a plan, spearheaded by Mr. Hurd, to
acquire [Plaintiff]’s most important customers for the dual purpose of crippling
[Plaintiff]’s ability to compete and immediately establishing Carter Lumber as a
competitive building materials supplier in the Carolinas.” (Id. ¶ 28.) Plaintiff alleges
that Carter Lumber paid Hurd a $5,000 commission for every employee he
successfully hired away from Plaintiff. (Id. ¶ 26.) Plaintiff further alleges, that in order to facilitate the hiring away of its employees, Carter Lumber authorized Hurd
to offer Plaintiff’s employees “a bonus and significantly increased compensation to
join Carter Lumber.” (Id. ¶ 36.)
8. Plaintiff claims that Defendants have successfully carried out Carter
Lumber’s plan and hired several of its key salespersons and solicited a number of its
customers to take their business to Carter Lumber. (Id. ¶¶ 31–42.) Additionally,
Plaintiff claims that Defendants continue to solicit Plaintiff’s employees and
customers. (Id. ¶¶ 42–57.) As such, Defendants have “crippled [Plaintiff]’s ability to
conduct business from its Rock Hill office,” and “[i]f continued, [Defendants’] conduct
similarly will incapacitate [Plaintiff]’s business operations in the Gastonia and
Pineville offices.” (Id. ¶ 58.)
9. Plaintiff alleges that the foregoing actions “demonstrate Carter
Lumber’s intent to conduct a coordinated pirating of [Plaintiff]’s top salespersons in
order to acquire [Plaintiff]’s Trade Secrets, confidential information, customers, and
goodwill and to cripple [Plaintiff]’s ability to do business and compete with Carter
Lumber.” (Id. ¶ 59.) Plaintiff further alleges that Defendants’ conduct “amounts to
anti-competitive business tactics designed to restrain [Plaintiff]’s ability to compete
for both the retention of its employees and the business of its customers.” (Id. ¶ 60.)
10. On March 3, 2016, Plaintiff initiated this lawsuit by filing the initial
Complaint in Mecklenburg County Superior Court. On March 17, 2016, Defendants
designated this case to the North Carolina Business Court. 11. On April 7, 2016, Plaintiff filed the Amended and Verified Complaint
(hereinafter referred to as the “Complaint”). The Complaint alleges claims against
Defendants for violation of North Carolina’s Trade Secrets Protection Act (“TSPA”)
(Count One), tortious interference with contract (Count Two), tortious interference
with prospective economic advantage (Count Three), and, against Carter Lumber
individually, for unfair and deceptive trade practices (“UDTP”) (Count Four). The
Complaint seeks both injunctive relief and monetary compensation for damages
sustained as a result of Defendants’ conduct.
12. On April 8, 2016, Defendants filed the Motion, seeking dismissal of all
of Plaintiff’s claims. After having been fully briefed and argued in front of the Court,
the Motion is now ripe for determination.
DISCUSSION AND ANALYSIS
13. Defendants move to dismiss Plaintiff’s claims pursuant to Rule 12(b)(6).
On a motion under Rule 12(b)(6), the Court must determine “whether, as a matter of
law, the allegations of the complaint . . . are sufficient to state a claim upon which
relief may be granted.” Harris v. NCNB Nat'l Bank, 85 N.C. App. 669, 670, 355 S.E.2d
838, 840 (1987). In making this determination, the Court must take all well-pleaded
allegations of the complaint as true. Sutton v. Duke, 277 N.C. 94, 98, 176 S.E.2d 161,
163 (1970). Nonetheless, the Court is not required “to accept as true allegations that
are merely conclusory, unwarranted deductions of fact, or unreasonable inferences.”
Strickland v. Hedrick, 194 N.C. App. 1, 20, 669 S.E.2d 61, 73 (2008). In deciding a
motion to dismiss, the Court must always bear in mind that North Carolina remains a “notice pleading” state, Radcliffe v. Avenel Homeowners Ass'n, 2016 N.C. App.
LEXIS 824, *52, 789 S.E.2d at 893 (2016), and a plaintiff is only required to set forth
“[a] short and plain statement of the claim sufficiently particular to give the court
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.” G.S.
§ 1A-1, Rule 8. “The complaint must be liberally construed,” and should not be
dismissed “unless it appears beyond a doubt that the plaintiff could not prove any set
of facts to support his claim which would entitle him to relief.” Holleman v. Aiken,
193 N.C. App. 484, 491, 668 S.E.2d 579, 584–85 (2008) (rejecting the “plausibility
standard” of Bell Atl. Corp. v. Twombly, 550 U.S. 544, 560, 127 S. Ct. 1955 (2007)).
a. Misappropriation under North Carolina’s Trade Secrets Protection Act
14. In its First Count in the Complaint, Plaintiff alleges that Defendants
misappropriated its Trade Secrets in violation of the TSPA. Plaintiff alleges that
Defendants’ actions, “including taking and disclosing [Plaintiff’s] Trade Secrets,
pirating [Plaintiff]’s salespersons who were entrusted with and possessed the Trade
Secrets, and using the Trade Secrets in order to compete against [Plaintiff]” amount
to a misappropriation of trade secrets that directly and proximately caused, and will
continue to cause, Plaintiff damage. (Am. Compl. ¶ 65.) Defendants argue for
dismissal of this claim on the grounds that: (1) Plaintiff has not identified the Trade
Secrets allegedly misappropriated with sufficient particularity to state a valid claim
under the TSPA; (2) the allegations fail to establish any connection between the
allegedly misappropriated Trade Secrets and the alleged measures taken to protect their secrecy, or, alternatively that such measures, as alleged, are insufficient for
vagueness; and (3) Plaintiff fails to allege with sufficient specificity the acts by which
Defendants misappropriated the Trade Secrets. (Defs.’ Br. Supp. Mot. Dis. 2–5.)
15. North Carolina’s TSPA provides that the owner of a trade secret “shall
have a remedy by civil action for misappropriation of [the] trade secret.” G.S. § 66-
153. The TSPA defines a “Trade Secret” as:
[B]usiness or technical information, including but not limited to a formula, pattern, program, device, compilation of information, method, technique, or process that: a. Derives 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; and
b. Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
G.S. § 66-152(3). In North Carolina, courts consider the following factors in
determining whether information constitutes 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., Inc., 125 N.C. App. 174,
180–81, 480 S.E.2d 53, 56 (1997). “Misappropriation” is defined as the “acquisition,
disclosure, or use of a trade secret of another without express or implied authority or consent, unless such trade secret was arrived at by independent development, reverse
engineering, or was obtained from another person with a right to disclose the trade
secret.” G.S. § 66-152(1).
16. “To plead misappropriation of trade secrets, ‘a plaintiff must identify a
trade secret with sufficient particularity so as to enable a defendant to delineate that
which he is accused of misappropriating and a court to determine whether
misappropriation has . . . occur[ed].’ ” VisionAIR, Inc. v. James, 167 N.C. App. 504,
510–11, 606 S.E.2d 359, 364 (2004) (quoting Analog Devices, Inc. v. Michalski, 157
N.C. App. 462, 468, 579 S.E.2d 449, 453 (2003)). The complaint must also set forth
with sufficient specificity the acts by which the alleged misappropriation occurred.
Washburn v. Yadkin Valley Bank & Tr. Co., 190 N.C. App. 315, 327, 660 S.E.2d 577,
586 (2008). A complaint making only “general allegations in sweeping and conclusory
statements, without specifically identifying the trade secrets allegedly
misappropriated, is insufficient to state a claim for misappropriation of trade secrets.”
Id., 660 S.E.2d at 585–86 (internal quotation marks omitted).
i. Identification of the allegedly misappropriated trade secrets
17. In the Complaint, Plaintiff defines its allegedly misappropriated trade
secrets as “confidential and proprietary business information . . . such as: names and
contacts of customers; customer preferences, including the needs, requirements, and
values of [Plaintiff’s] customers; sales and marketing strategies; pricing structures;
margins and profits; manufacturing technologies; and other confidential business
information.” (Am. Compl. ¶ 11.) Plaintiff also alleges that Hurd had “detailed knowledge” about Plaintiff’s employees’ compensation. (Id. ¶ 18.) Defendants argue
that the allegations are “just a list of categories” and that “[t]here is nothing
inherently confidential about any item on the list.” Defendants refer to VisionAIR
and Washburn as support for their position that Plaintiff’s allegations are “sweeping
and conclusory” and too “broad and vague” to set forth a valid misappropriation claim.
(Defs.’ Br. Supp. Mot. Dismiss 3.) Plaintiff, on the other hand, argues that its
“identification of trade secrets stands in stark contrast to [those found insufficient in]
Washburn and VisionAIR, and are more than sufficient to enable the Defendants to
delineate that which they are accused of misappropriating,” citing in support Sunbelt
Rentals, Inc. v. Head & Engquist Equip., LLC, 174 N.C. App. 49, 620 S.E.2d 222
(2005), and Byrd’s Lawn & Landscaping, Inc. v. Smith, 142 N.C. App. 371, 542 S.E.2d
689 (2001), both of which held that historical pricing and cost information and certain
customer information could be trade secrets. (Pl.’s Br. Opp. Mot. Dismiss 7.)
18. The Court is mindful of the fact that at this stage of the case, Plaintiff’s
only obligation is to provide notice sufficient to enable Defendants to understand the
trade secrets it “is accused of misappropriating and [the] court to determine whether
misappropriation has . . . occur[ed].’” VisionAIR, Inc., 167 N.C. App. at 510–11, 606
S.E.2d at 364. While Plaintiff’s identification of its Trade Secrets here is threadbare,
and further development of the facts may reveal that the identified information does
not constitute a trade secret, when liberally construed the allegations are sufficient
to put Defendants on notice as of the trade secrets that they are accused of
misappropriating. Compare cases holding allegations sufficient to raise trade secrets claim, Ge Betz, Inc. v. Conrad, 231 N.C. App. 214, 234, 752 S.E.2d 634, 649 (2013)
(“pricing information, customer proposals, historical costs, and sales data”); Sunbelt
Rentals, 174 N.C. App. at 55, 620 S.E.2d at 227 (“customer information, preferred
customer pricing, employees’ salaries, equipment rates, fleet mix information, budget
information and structure of the business”); Byrd's, 142 N.C. App. at 375, 542 S.E.2d
at 692 (“Confidential data regarding operating and pricing policies can also qualify
as trade secrets. It is apparent that the ability to predict a competitor's bid with
reasonable accuracy would give a distinct advantage to the possessor of that
information.”); State ex rel. Utils. Comm'n v. MCI Telecomms. Corp., 132 N.C. App.
625, 634, 514 S.E.2d 276, 282 (1999) (concluding that a “compilation of information”
involving customer data and business operations which has “actual or potential
commercial value from not being generally known” is sufficient to constitute a trade
secret under the TSPA); S. Fastening Sys. v. Grabber Const. Prods., Inc., 2015 NCBC
LEXIS 42, *11 (N.C. Super. Ct. 2015) (“confidential customer information and
customer buying preferences and history . . . confidential freight information, sales
reports, prices and terms books, sales memos, sales training manuals, commission
reports, and information concerning [Plaintiff’s] relationship with its vendors”); with
cases holding allegations insufficient to raise trade secrets claim, VisionAIR, 167 N.C.
App. at 511, 606 S.E.2d at 364 (“all information about Employer and its business,
products, and services, furnished to the Employee[.]”); Washburn, 190 N.C. App. at
327, 660 S.E.2d at 586 (“business methods; clients, their specific requirements and
needs . . . other confidential information pertaining to [plaintiff's] business . . . confidential client information and confidential business information”); Aecom Tech.
Corp. v. Keating, 2012 NCBC LEXIS 9, *8 (N.C. Super. Ct. 2012) (“customer lists,
customer contract information, pricing information, and product information”); Akzo
Nobel Coatings, Inc. v. Rogers, 2011 NCBC LEXIS 42, *68 (N.C. Super. Ct. 2011)
(“proprietary formulas, methodologies, customer and pricing data and other
confidential information”); and Patch Rubber Co. v. Toelke, 2013 U.S. Dist. LEXIS
84104, *11 (E.D.N.C. June 14, 2013) (“plans, pricing methods, processes, techniques,
present and prospective customer lists, manufacturing processes, product
formulations, recipes and customers' purchasing requirements, service requirements,
product preferences, and purchasing volumes.”). As such, Defendants are not entitled
to dismissal of Plaintiff’s claim for violation of the TSPA on this ground.
ii. Efforts to maintain the secrecy of its alleged trade secrets
19. To constitute a trade secret under the TSPA, the information must be
“the subject of efforts that are reasonable under the circumstances to maintain its
secrecy.” G.S. § 66-152 (3)(b). “Plaintiffs must allege the reasonable efforts taken to
maintain the secrecy of the information. The mere assertion that [trade secrets] were
kept confidential is not enough to withstand a 12(b)(6) motion to dismiss.” McKee v.
James, 2013 NCBC LEXIS 33, *37–38 (N.C. Super. Ct. 2013) (citation omitted). In
the Complaint, Plaintiff alleges that it took “reasonable measures to protect the Trade
Secrets from disclosure,” which included “security measures, including but not
limited to password-protected login, controlled and permission-restricted access on a
need-to-know basis, and confidentiality policies and/or agreements.” (Am. Compl. ¶¶ 15–16.) Defendants argue that Plaintiff’s allegations (1) fail to establish any
connection between the efforts taken to maintain secrecy and the allegedly
misappropriated Trade Secrets, and (2) are too vague to constitute reasonable efforts
as required under the TSPA. (Defs.’ Br. Supp. Mot. Dismiss 3–4.)
20. Defendants’ arguments going to Plaintiff’s allegations of the reasonable
efforts to maintain the confidentiality of the Trade Secrets are unavailing. Generally,
only where efforts to maintain secrecy of the allegedly misappropriated trade secrets
were completely absent have North Carolina courts dismissed claims at the 12(b)(6)
stage. See Thortex, Inc. v. Standard Dyes, Inc., No. COA05-1274, 2006 N.C. App.
LEXIS 1171 at *10 (June 6, 2006) (“Without any allegation of reasonable efforts to
maintain secrecy, the mere assertion that [the information] [was] kept confidential is
not enough to withstand a 12(b)(6) motion to dismiss”) (emphasis added); McKee,
2013 NCBC LEXIS 33 at *37–39 (granting a Rule 12(b)(6) motion to dismiss where
the plaintiff did not allege any efforts to protect the misappropriated trade secrets);
see also Eli Research, 312 F. Supp. 2d at 757 (“Defendants assert that Plaintiffs have
failed to allege sufficient reasonable efforts to maintain the secrecy of the alleged
trade secrets.”). Here, Plaintiff has alleged that it took at least three separate
measures in an effort to protect the specific Trade Secrets it alleges were
misappropriated by Defendants. These allegations are more than sufficient to survive
a motion to dismiss.
iii. Identification of the acts by which misappropriation occurred 21. To state a claim for misappropriation, a plaintiff also must allege the
acts by which the alleged misappropriation occurred. Washburn, 190 N.C.App. at 326,
660 S.E.2d at 586. Defendants’ final argument for dismissal of the misappropriation
claim contends that the Complaint provides “no indication [of] what the defendant
took or how they took it,” and that “Plaintiff’s allegations of misappropriation amount
to a tautology.” (Defs.’ Br. Supp. Mot. Dismiss 6.)
22. The Complaint states that: “Prior to resigning from TBC, upon
information and belief, Mr. Hurd misappropriated TBC’s Trade Secrets by accessing
them and taking Trade Secrets in physical and/or electronic form.” (Am. Compl. ¶ 24.)
The Complaint also alleges that Carter Lumber hired Hurd to acquire Plaintiff’s
Trade Secrets, that Hurd has disclosed the Trade Secrets to Carter Lumber, and that
Carter Lumber has used the Trade Secret information to hire Plaintiff’s employees
and solicit customers. Plaintiff has adequately plead the means by which Defendants
have misappropriated the Trade Secrets.
23. In view of the foregoing, the Court concludes that Plaintiff’s allegations
are sufficient to state a claim for misappropriation under the TSPA. Defendants’
Motion regarding Plaintiff’s claim for misappropriation of trade secrets in violation
of the TSPA (Count One) should be DENIED.
b. Tortious Interference with Contract
24. In the Second Count, Plaintiff alleges that it had “valid and legally
enforceable contracts with its employees,” and the Defendants “purposefully
interfered with [Plaintiff]’s employment contracts to undermine, cripple, and harm [Plaintiff].” (Id. ¶¶ 70, 73.) Plaintiff does not otherwise specify the nature of the
alleged contracts, and presumably Plaintiff means the “at will” employment
agreements it had with its employees. Defendants appear to argue that the claim for
tortious interference with contract should be dismissed because “[t]here is no
allegation that any employee breached a contractual non-compete, non-solicitation,
or confidentiality agreement by resigning from plaintiff and accepting employment
with Carter Lumber.” (Defs.’ Br. Supp. Mot. Dismiss 7.) Defendants also contend that
they were engaged in ordinary business competition and that Plaintiff has not
sufficiently pleaded that Defendants lacked justification for their alleged
interference. (Id. at 7–8.)
25. To establish a claim for tortious interference with contract, a plaintiff
must show: “(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.” United Labs., Inc. v. Kuykendall, 322 N.C. 643, 661, 370 S.E.2d
375, 387 (1988) (citing Childress v. Abeles, 240 N.C. 667, 84 S.E.2d 176 (1954)).
26. Plaintiff does not allege that the employees hired by Defendants were
anything other than at-will employees. To the extent that Defendants contend that
an at-will employment relationship cannot be the basis for a tortious interference
claim unless the employee also was subject to restrictive covenants, they are simply
incorrect as a matter of law. The North Carolina Supreme Court has expressly held that employment contracts terminable at-will may serve as the basis for a tortious
interference with contract claim in North Carolina even in the absence of a restrictive
covenant. Smith v. Ford Motor Co., 289 N.C. 71, 85, 221 S.E.2d 282, 290 (1976);
Childress, 240 N.C. at 678, 84 S.E.2d at 184 (“The fact that the employment is at the
will of the parties, respectively, does not make it one at the will of others . . . by the
weight of authority the unjustified interference of third persons is actionable
although the employment is at will.”) (citations omitted); accord Lenzer v. Flaherty,
106 N.C. App. 496, 512, 418 S.E.2d 276, 286 (1992); Sides v. Duke Hosp., 74 N.C. App.
331, 346, 328 S.E.2d 818, 828, (1985); HSG, LLC v. Edge-Works Mfg. Co., 2015 NCBC
LEXIS 91, *14–16 (N.C. Super. Ct. 2015). Accordingly, the mere fact that Plaintiff’s
employees hired by Defendants were “terminable at-will does not provide the
defendant a defense to the plaintiff's claim for tortious interference.” Peoples Sec. Life
Ins. Co. v. Hooks, 322 N.C. 216, 221, 367 S.E.2d 647, 650 (1988).
27. Defendants also argue that Plaintiff has not alleged that Defendants
acted without justification in hiring Plaintiff’s employees. The North Carolina
Supreme Court has held that if the defendant's interference is “for a legitimate
business purpose, his actions are privileged . . . . [C]ompetition in business constitutes
justifiable interference in another’s business relations and is not actionable so long
as it is carried on in furtherance of one’s own interests and by means that are lawful.”
Id. This “privilege [to interfere] is conditional or qualified; that is, it is lost if exercised
for a wrong purpose. In general, a wrong purpose exists where the act is done other
than as a reasonable and bona fide attempt to protect the interest of the defendant which is involved.” Id. at 220, 367 S.E.2d at 650 (citing Ford Motor Co., 289 N.C. at
91, 221 S.E. 2d at 294); Kuykendall, 322 N.C. at 662, 370 S.E.2d at 387 (holding that
in Hooks “[w]e concluded that the fact that the plaintiff and defendant were in
competition was sufficient to justify the defendant ‘in offering the plaintiff's
employees new jobs and locating them in their previously assigned territory’ . . .
however, we also emphasized that ‘[t]he privilege [to interfere] is conditional or
qualified; that is it is lost if exercised for a wrong purpose’ ”). “If the defendant's only
motive is a malicious wish to injure the plaintiff, his actions are not justified.” Hooks,
322 N.C. at 221, 367 S.E.2d at 650.1 The Court of Appeals has held that in order to
survive dismissal, a complaint alleging tortious interference “must admit of no
motive for interference other than malice.” Pinewood Homes, Inc. v. Harris, 184 N.C.
App. 597, 605, 646 S.E.2d 826, 832–33 (2007); Filmar Racing, Inc. v. Stewart, 141
N.C. App. 668, 674, 541 S.E.2d 733, 738 (2001) (“[W]e have held that the complaint
must admit of no motive for interference other than malice”); Privette v. Univ. of N.C.,
96 N.C. App. 124, 134–35, 385 S.E.2d 185, 191 (1989) (plaintiff’s claim for tortious
1 The malice required to overcome a justification of business competition is legal malice,
and not actual malice. Childress, 240 N.C. at 675–76, 84 S.E.2d at182 (“It is not necessary, however, to allege and prove actual malice in the sense of personal hatred, ill will, or spite in order to make out a case for the recovery of compensatory damages against the outsider for tortiously inducing the breach of the third person’s contract with the plaintiff. The term ‘malice’ is used in this connection in its legal sense, and denotes the intentional doing of the harmful act without legal justification.”); Murphy v. McIntyre, 69 N.C. App. 323, 328–29, 317 S.E.2d 397, 401 (1984) (noting that legal malice “means intentionally doing a wrongful act or exceeding one's legal right or authority in order to prevent the making of a contract between two parties” and the act “must be taken with the design of injuring one of the parties to the contract or of gaining some advantage at the expense of a party”); Robinson, Bradshaw, & Hinson, P.A. v. Smith, 129 N.C. App. 305, 318, 498 S.E.2d 841, 851 (1998) (“A person acts with legal malice if he does a wrongful act or exceeds his legal right or authority in order to prevent the continuation of the contract between the parties.”). interference dismissed where complaint alleged that university employees who
terminated the plaintiff “had a legitimate professional interest in the plaintiff's
performance of his duties”); Sides, 74 N.C. App. at 346, 328 S.E.2d at 829 (1985)
(“[T]he complaint in an action for malicious interference with contract must clearly
allege that the actions of the defendant were the cause of the plaintiff's damages and
that the complaint admits of no other motive for those actions than malice.”).
28. The Complaint in this case alleges that Plaintiff and Defendants were
business competitors, and that “Carter Lumber desired to expand business operations
in the Charlotte and Rock Hill areas.” (Am. Compl. ¶¶ 7–9.) Plaintiff alleges, however,
that Defendants were not motivated by legitimate business competition in hiring
Plaintiff’s employees and soliciting its customers, but instead intended to “crippl[e]
[Plaintiff]’s ability to do business and compete with Carter Lumber” and that
Defendants “used anti-competitive business tactics designed to restrain [Plaintiff]’s
ability to compete for both retention of its employees and the business of its
customers.” (Id. ¶¶ 59, 60.) Plaintiff claims that Defendants “target[ed]” Plaintiff’s
best and “most critical employees” in order to “pirate” those employees and their
customers. (Id. ¶¶ 25, 27, 29.) Plaintiff alleges Carter Lumber paid Hurd a $5,000
bonus for each of Plaintiff’s employees he hired, and paid Plaintiff’s employees
“increased compensation . . . significantly above the market rate” that was “not
sustainable on a long-term or permanent basis.” (Id. ¶¶ 26, 37.) A former Carter
Lumber Manager claims that Carter Lumber “instructed him to target [Plaintiff]’s
Rock Hill office, shut it down, and take its business ‘without paying for it.’” (Id. ¶ 30.) Finally, Plaintiff alleges that “since hiring [Plaintiff’s] employees, Carter Lumber and
Mr. Hurd have misappropriated [Plaintiff]’s Trade Secrets and confidential
information to acquire several of [Plaintiff]’s most important and critical customers,
devastated [Plaintiff’s] ability to compete, and allowed Carter Lumber to immediately
establish an expanded and more prominent presence in the Carolinas . . . .” (Id. ¶ 41.)
The Court recognizes that these types of allegations, made for the most part “upon
information and belief” and using inflammatory language, are easily concocted,
particularly in the immediate aftermath of a competitor’s soliciting away Plaintiff’s
key employees and customers. The allegations also appear to be intended to mirror
those in Sunbelt Rentals, Inc. v. Head & Engquist Equipment, LLC, 2003 NCBC
LEXIS 6 (N.C. Super. Ct. 2003), aff'd, 174 N.C. App. 49, 620 S.E.2d 222 (2005).2
Nevertheless, viewed in the light most favorable to Plaintiff, the allegations could
support the notion that Carter Lumber hired Plaintiff’s employees for the purpose of
injuring Plaintiff or rendering it unable to compete with Carter Lumber, and not
simply for legitimate reasons of competition. On these allegations, the Court cannot
conclude that Plaintiff is precluded from proving “any set of facts . . . which would
entitle him to relief.” Commscope Credit Union v. Butler & Burke, LLP, 237 N.C.
App. 101, 103, 764 S.E.2d 642, 646 (2014). Accordingly, Defendants’ Motion regarding
Plaintiff’s claim for tortious interference with contract (Count Two) should be
DENIED.
2 As Chief Judge James L. Gale of this Court recently recognized, “[t]he invocation of
Sunbelt Rentals has become a frequent event, although that case depended upon unusual facts that are not often repeated.” RoundPoint Mortg. Co. v. Florez, 2016 NCBC LEXIS 18, *61 (N.C. Super. Ct. 2016). c. Tortious Interference with Prospective Economic Advantage
29. Plaintiff’s claim for tortious interference with prospective economic
advantage appears to be premised on the loss of potential additional business from
its existing customers to Defendants. (Am. Compl. ¶¶ 76–82; Count Three.) Plaintiff
alleges that Defendants “induced [Plaintiff]’s customers to cease its (sic) business
relationship with [Plaintiff] and to conduct business instead with Carter Lumber,”
and that “[Plaintiff] reasonably expected that, but for [Defendants’] conduct, its
business relationships with its customers would have continued and grown . . . .” (Id.
¶¶ 77, 79.) Plaintiff does not identify any specific potential contract with which
Defendants interfered, nor any particular customer which ceased doing business with
Plaintiff because of Defendants’ actions.
30. “In order to state a claim for wrongful interference with prospective
advantage, the plaintiffs must allege facts to show that the defendants acted without
justification in inducing a third party to refrain from entering into a contract with
them which would have ensued but for the interference.” Radcliffe, 2016 N.C. App.
LEXIS 824 at *46, 789 S.E.2d 893 (citing Walker v. Sloan, 137 N.C. App. 387, 393,
529 S.E.2d 236, 242 (2000); Gupton v. Son-Lan Dev. Co., 205 N.C. App. 133, 142–43,
695 S.E.2d 763, 770 (2010) (same). Defendants argue that the Complaint does not
state a claim for tortious interference with prospective economic advantage because
“Plaintiff identifies no particular customer nor any particular opportunity it claims
to have lost,” and refers only to “unnamed customers it ‘reasonably expected’ would
have ‘continued and grown.’ ” (Defs.’ Br. Supp. Mot. Dismiss 7.) Defendants also argue that Plaintiff has not alleged that Defendants acted without justification on the same
grounds underlying their argument regarding the claim for tortious interference with
contract. (Id. at 7–8.) For the same reasons that Plaintiff’s allegations could support
a lack of justification in the claim for interference with contract, the Court concludes
that Plaintiff has sufficiently alleged a lack of justification for tortious interference
with prospective economic advantage, and Defendants’ argument fails at this stage
of the case.
31. Here, Plaintiff inarguably knows the identities of the customers who
Defendants solicited to cease doing business with Plaintiff, but does not allege these
customers with particularity. Even more significantly, however, Plaintiff does not
allege that that Defendants interfered in the formation of a contract at all.
Nevertheless, Plaintiff argues that it need only point to “evidence that a defendant
interfered with a trade or business by maliciously inducing a person not to enter into
a contract with a third person, which he would have entered into but for the
interference.” (Pl.’s Br. Opp. Mot. Dismiss 11.)
32. North Carolina law on the question of whether a plaintiff must identify
specific contracts or business opportunities to support a claim for tortious
interference with economic advantage is not crystal clear. There is Supreme Court
precedent supporting the position that a plaintiff needs only to allege that it had a
reasonable expectation of a continued business relationship with its customer and
that the defendant wrongfully interfered with the relationship. Owens v. Pepsi Cola
Bottling Co., 330 N.C. 666, 680, 412 S.E.2d 636, 644–45 (1992) (holding that the evidence was sufficient to support a claim for tortious interference with prospective
economic advantage where it showed the plaintiff “had a valid business relationship
with several customers,” “had a reasonable expectation of continuing to do business
with these customers,” and “that defendant was aware of these relationships and
intervened to destroy them”). There also is precedent supporting the position that a
plaintiff must identify a specific lost contract or opportunity to support such a claim.
Dalton v. Camp, 353 N.C. 647, 655, 548 S.E.2d 704, 710 (2001) (holding that trial
court properly granted summary judgment where evidence showed that despite the
fact that plaintiff had “an expectation of a continuing business relationship with [the
customer], at least in the short term, he offers no evidence showing that but for [the
defendant]'s alleged interference a contract would have ensued”).
33. This Court’s holdings on the issue of whether identification of specific
contracts is required for a claim of interference with prospective advantage also are
split. Compare Velocity Solutions, Inc. v. BSG Fin., 2016 NCBC LEXIS 19, *13 (N.C.
Super. Ct. 2016) (“the North Carolina Supreme Court has rejected the notion that a
claim for tortious interference with prospective economic advantage requires
evidence of a specific contractual opportunity . . . .”) (citing Owens, 330 N.C. at 680–
81, 412 S.E.2d at 644–45), with Artistic S. Inc. v. Lund, 2015 NCBC LEXIS 113, *31–
32 (N.C. Super. Ct. 2015) (“Here, Plaintiff has not identified a specific potential
contract that the Vision Defendants intentionally induced a third party not to enter
with Plaintiff. As a result, the Court concludes that Plaintiff's claim for tortious
interference with prospective economic advantage should be dismissed.”); Aecom Tech. Corp. v. Keating, 2012 NCBC LEXIS 9, *13–14 (N.C. Super. Ct. 2012)
(“Plaintiffs fail to allege that Defendants actually interfered with existing or
prospective contracts, and Plaintiffs do not identify any specific contracts or
customers that were lost. Without such allegations in the Complaint, Plaintiffs
have failed to state a valid claim for tortious interference.”); Sports Quest, Inc. v. Dale
Earnhardt, Inc., 2004 NCBC LEXIS 10, *14 (N.C. Super. Ct. 2004) (“Plaintiff,
however, fails to identify future contracts with any specificity. Sports Quest's
expectation of future contracts with current customers does not suffice to maintain a
tortious interference with prospective advantage claim.”).
34. The Supreme Court’s recent decision in Bev. Sys. of the Carolinas, LLC
v. Associated Bev. Repair, LLC, 368 N.C. 693, 701–02, 784 S.E.2d 457, 463 (2016)
provides additional guidance on this question. In Beverage Systems, the trial court
granted summary judgment to the defendant on the plaintiff’s claim for tortious
interference with prospective economic advantage. The Court of Appeals reversed the
grant of summary judgment, finding that “plaintiff alleged that third-party
customers switched their business to defendants instead of continuing their business
relationships with plaintiff” and that “there is a genuine issue of fact whether
customers refrained from entering into contracts or continuing previous implied
contracts with plaintiff but for defendants' unjustified interference.” Bev. Sys. of the
Carolinas, LLC v. Associated Bev. Repair, LLC, 235 N.C. App. 438, 450, 762 S.E.2d
316, 324 (2014), rev’d in part, 368 N.C. 693, 784 S.E.2d 457 (2016). The Supreme
Court reversed the Court of Appeals, however, concluding that although “defendants . . . ‘purposely and intentionally interfered with the contracts and
agreements of Beverage Systems with the intent to steal the customers away from
Beverage Systems’ … plaintiff has not demonstrated that any contract would have
ensued but for defendants' conduct, nor has plaintiff identified a particular business
with which it lost an economic advantage.” 368 N.C. at 701, 784 S.E.2d at 463. The
Court held that “an expectation” of a continued customer relationship was
“insufficient to support a claim for either tortious interference with contract or
tortious interference with prospective economic advantage.” Id. at 701–02, 784 S.E.2d
at 463 (citing Dalton, 353 N.C. at 655, 548 S.E.2d at 710).
35. Although the pleading burden on a plaintiff is a light one, the Court
must conclude that Plaintiff here has failed to allege sufficient facts to support its
claim for tortious interference with prospective economic advantage. Plaintiff alleges
only that it “reasonably expected that, but for [Defendants’] conduct, its business
relationships with its customers would have continued and grown.” The Complaint
does not identify any particular prospective contracts with which Defendants
interfered, nor does it expressly allege that any contract would have ensued. Plaintiff
also does not identify any of the specific customers with whom Defendants allegedly
have interfered, the nature or length of Plaintiff’s relationships with such customers,
nor other facts supporting the grounds for its expectation of a continuing relationship
with the customer. Nevertheless, the Court acknowledges that the pleading burden
regarding the identification of specific contracts or business opportunities is less than
clear, and believes that Plaintiff should be given the opportunity to attempt to plead additional, more specific, facts in support of the claim if it so chooses. Accordingly,
Defendants’ Motion regarding Plaintiff’s claim for tortious interference with
prospective economic advantage (Count Three) should be GRANTED, and the claim
dismissed WITHOUT PREJUDICE.
d. Unfair and Deceptive Trade Practices Claim (against Carter Lumber)
36. To state a valid UDTP claim, a plaintiff must allege: “(1) an unfair or
deceptive act or practice, or unfair method of competition, (2) in or affecting
commerce, and (3) which proximately caused actual injury to the plaintiff or his
business.” Combs & Assocs. v. Kennedy, 147 N.C. App. 362, 373–74, 555 S.E.2d 634,
642 (2001). North Carolina courts “have long recognized that claims for
misappropriation of trade secrets and tortious interference with contract may form
the basis of a UDTP claim . . . .” S. Fastening, 2015 NCBC LEXIS 42 at *28 (N.C.
Super. Ct. 2015) (citing Drouillard v. Keister Williams Newspaper Servs., Inc., 108
N.C. App. 169, 172–73, 423 S.E.2d 324, 326–27; Kuykendall, 322 N.C. at 665, 370
S.E.2d at 389). Having found that Plaintiff’s misappropriation and tortious
interference claims should survive Defendants’ Motion, the Court believes that
Plaintiff has alleged sufficient facts for its UDTP claim to survive Defendants’ Motion
as well. Veer Right Mgmt. Group, Inc. v. Czarnowski Display Serv., 2015 NCBC
LEXIS 13, *17–18 (2015). Therefore, Defendants’ Motion regarding Plaintiff’s claim
for unfair and deceptive trade practices in violation of G.S. § 75-1.1 (Count Four)
should be DENIED.
THEREFORE, IT IS ORDERED that: 37. Defendants’ Motion as to Plaintiff’s claims for misappropriation of trade
secrets in violation of the TSPA (Count One) is DENIED.
38. Defendants’ Motion as to Plaintiff’s claim for tortious interference with
contract (Count Two) is DENIED.
39. Defendants’ Motion as to Plaintiff’s claim for tortious interference with
prospective economic advantage (Count Three) is GRANTED, and the claim is
40. Defendants’ Motion as to Plaintiff’s claim for unfair and deceptive trade
practices in violation of G.S. § 75-1.1 (Count Four) is DENIED.
This the 21st day of October, 2016
/s/ Gregory P. McGuire Gregory P. McGuire Special Superior Court Judge for Complex Business Cases