Dillon v. Stafford

2020 NCBC 97

• Court: North Carolina Business Court
• Decided: December 30, 2020
• Docket: 19-CVS-3694
• Status: Published

Opinion

Dillon v. Stafford, 2020 NCBC 97.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION GUILFORD COUNTY 19 CVS 3694

CAROLYN DILLON and FLIGHT ATTENDANT CAREER TRAINING, LLC,

Plaintiffs, ORDER AND OPINION ON v. MOTIONS FOR SUMMARY JUDGMENT WENDY STAFFORD and TRIAD AVIATION ACADEMY, LLC,

Defendants.

1. This case arises from a disagreement between Plaintiff Carolyn Dillon

(“Dillon”) and Defendant Wendy Stafford (“Stafford”) over the terms of a purchase

and sale transaction between them. Stafford claims Dillon purchased only Stafford’s

interest in Plaintiff Flight Attendant Career Training, LLC (“FACT”), a company in

which Defendant Triad Aviation Academy, LLC (“TAA”) also claims ownership, and

Dillon contends she purchased FACT in its entirety. Each party now seeks summary

judgment under Rule 56 of the North Carolina Rules of Civil Procedure (“Rule(s)”). 1

2. After considering the Motions, the briefs and related materials submitted in

support of and in opposition to the Motions, the arguments of counsel at the hearing

on the Motions, and other appropriate matters of record, the Court hereby GRANTS

the Motions in part and DENIES the Motions in part as set forth below.

1 The specific motions at issue are (i) TAA’s Motion for Summary Judgment (“TAA’s Motion”),

(ECF No. 66); (ii) Dillon and FACT’s Motion for Summary Judgment (“Plaintiffs’ Motion”), (ECF No. 68); and, (iii) Stafford’s Motion for Summary Judgment (“Stafford’s Motion”), (ECF No. 71), (collectively, the “Motions”). Sharpless McClearn Lester Duffy, PA, by Eugene E. Lester and Melanie C. Cormier, for Plaintiffs Carolyn Dillon and Flight Attendant Career Training, LLC.

Hoffman Koenig Hering PLLC, by James Hoffman, Daniel W. Koenig, and Deborah M. Mergner, for Defendant Wendy Stafford.

Brooks, Pierce, McLendon, Humphrey & Leonard LLP, by Clint S. Morse, for Defendant Triad Aviation Academy, LLC.

Bledsoe, Chief Judge.

I.

FACTUAL BACKGROUND

3. The Court does not make findings of fact in ruling on motions for summary

judgment. The following background, drawn from the evidence submitted in support

of and in opposition to the Motions, is intended only to provide context for the Court’s

analysis and ruling.

4. It is undisputed that Stafford created a flight attendant training program

while living in Florida called Flight Attendant Express or “FAE.” (Dep. Wendy

Stafford 8:6–9:14 [hereinafter “Dep. Stafford”] 2; Ex. 53 Aff. Wendy Stafford ¶¶ 2, 4

[hereinafter “Aff. Stafford”], ECF No. 72.1. 3) Stafford developed a study manual for

her program, which she copyrighted in 2002 and 2005. (Dep. Stafford 11:2–12:15;

Aff. Stafford ¶ 6; Ex. 2 2002, 2005 Copyright Registrations, ECF No. 72.1.) In 2007

and 2008, Stafford updated the manual and registered a new copyright. (Aff. Stafford

2 Excerpts from the deposition of Wendy Stafford are located at ECF Nos. 70.1 and 72.1.

3 Evidence located in ECF No. 72.1 are exhibits to Stafford’s brief in support of her Motion,

including Stafford’s affidavit. (See Def. Wendy Stafford’s Br. Supp. Mot. Summ. J., ECF No. 72.) ¶ 8; Ex. 4 2007, 2008 Copyright Registrations, ECF No. 72.1.) In September 2015,

FAE was administratively dissolved. (Aff. Stafford ¶ 8; Ex. 5 Div. Corps., ECF No.

72.1.)

5. Stafford moved to North Carolina in October 2015. (Dep. Stafford 12:16–18;

Aff. Stafford ¶ 9.) Once in North Carolina, she called TAA’s President Bruce McCall

(“McCall”), (Aff. Bruce McCall ¶ 2 [hereinafter “Aff. McCall”], ECF No. 66.6), to

discuss “the possibility of starting a flight attendant program . . . [in which Stafford]

would lead the way[,]” (Dep. Stafford 15:16–18). Stafford sent TAA a proposal

“stating what [she] could bring to the program, [her] history, what [she] would like to

be paid, [and] what [they] could charge students for the program[.]” (Dep. Stafford

16:1–5.)

6. Stafford and TAA reached an oral agreement but did not execute a written

contract. (Dep. Stafford 15:19–25; Aff. Stafford ¶ 11.) Under their oral agreement,

Stafford agreed to organize and teach the training course, and TAA agreed to provide

startup costs, marketing and administrative services, and a classroom. (Dep. Stafford

16:24–17:10; Aff. Stafford ¶ 10.) McCall also developed the name “Flight Attendant

Career Training.” (Aff. Stafford ¶ 13.) FACT’s admission form displayed the logo

“Flight Attendant Career Training, Triad Aviation Academy,” and the disclaimer

each student was required to sign was stated in terms of TAA’s liability. (Aff. Stafford

¶ 16; see Ex. 10 FACT Forms [hereinafter “FACT Forms”], ECF No. 72.1.) Stafford

chose not to make FACT an LLC because “[McCall] owned part of it . . . . [They] were

partners.” (Dep. Stafford, 18:19–23.) 7. FACT operated at a loss for several months after opening, but the profits

made thereafter were split between TAA and Stafford. (Aff. Stafford ¶ 14.) Stafford

and TAA operated FACT in Greensboro, North Carolina, (see Aff. Carolyn Dillon ¶ 26

[hereinafter “Aff. Dillon”], ECF No. 86), and “jointly” contracted with third-party

vendors for goods and services, including David Bame (“Bame”), who acted as

Admissions Coordinator/Instructor for FACT, (Aff. Stafford ¶ 12). In 2016, Stafford

caused FACT to hire Dillon, a former flight attendant, as a FACT instructor. (Dep.

Stafford 21:5–22:11; Aff. Dillon ¶ 2.)

8. Stafford again updated the copyright for her manual in May 2018. (Aff.

Stafford ¶ 15; Ex. 9 2018 Copyright Registration [hereinafter “2018 Copyright

Registration”], ECF No. 72.1.)

A. The Agreement Between Stafford and Dillon

9. Due to health concerns that began in 2017, Stafford decided in 2018 that

“[she] needed to sell [her] share of FACT as soon as possible.” (Aff. Stafford ¶ 17.)

Stafford approached McCall to inquire whether TAA would purchase FACT, but he

declined her offer. (Aff. Dillon ¶ 4.) Stafford then approached Dillon, who expressed

interest. (Aff. Stafford ¶ 18; Aff. Dillon ¶ 5.) Stafford first offered to sell “her

business” to Dillon for $300,000, which Dillon declined. (Aff. Dillon ¶ 5.) Stafford

then offered to sell “the FACT program” for $45,000, which Dillon again declined.

(Aff. Dillon ¶ 6.)

10. Dillon signed a Non-Disclosure Agreement dated May 21, 2018 stating that

she was interested in “pursuing discussions concerning the potential investment in the [FACT] program portion of [TAA].” (Ex. 12 Non-Disclosure Agreement

[hereinafter “Non-Disclosure Agreement”], ECF No. 72.1.) McCall sent Dillon a

“FACT Framework Document” on June 17, 2018 as a “first cut at a framework

document that [would] hopefully move the dialog along with [Stafford].” (Ex. 16

FACT Framework Emails [hereinafter “FACT Framework Emails”], ECF No. 72.1.)

On June 20, 2018, Dillon responded that she was “not interested in buying [Stafford’s]

LLC, only her teaching materials” and noted that Stafford “finally admitted to

[Dillon] that she [did] not own the company outright.” (FACT Framework Emails.)

On or about June 20, 2018, Stafford and Dillon agreed on a purchase price of $10,000.

(Aff. Dillon ¶ 7.)

11. On June 21, 2018, Dillon forwarded the FACT Framework Document to

Stafford and said she “would like to purchase [Stafford’s] portion of FACT.” (Ex. 15

June 21 Emails, ECF No. 72.1.) On June 26, Dillon emailed Stafford to ask “what[ ]

exactly [were her] interests in FACT” and stated that she “would like [the document]

changed that [Stafford] convey [her] interests to [Dillon]. Take out TAA because [it]

is not buying [Stafford’s] half of the business.” (Ex. 17 June 26 Email [hereinafter

June 26 Email], ECF No. 72.1.)

12. Stafford insists that she was clear that she did not own all of FACT and “[a]t

no time did [she] ever tell Dillon that [she] owned all of FACT.” (Aff. Stafford ¶ 18.)

For her part, Dillon claims that she asked Stafford about TAA’s or McCall’s ownership

interest in FACT several times during their negotiations and that Stafford replied

that she owned the manual and copyright to the manual and had the authority to sell the manual and other assets. (Aff. Dillon ¶ 10.) Dillon further avers that Stafford

told Dillon that there was nothing in writing regarding the relationship between

Stafford and TAA, that Dillon would not be bound to work with TAA, and that she

had never signed anything to transfer ownership of FACT to TAA or McCall. (Aff.

Dillon ¶¶ 10–11.) Based on these conversations, Dillon asserts that she was

“confident” that Stafford owned all of FACT and that she and TAA had only agreed

to “split the income stream[.]” (Aff. Dillon ¶ 11.)

13. Stafford and Dillon signed the FACT Framework Document on June 29,

2018 and July 2, 2018, respectively, stating that “[TAA] and [Dillon] desire to take

over [FACT] entirely[,]” that Stafford was to receive “a total of $10,000 for her interest

in FACT[,]” and that Stafford would “convey all of her interests in FACT (intellectual

rights and ongoing business income stream) to Dillon effective August 1, 2018.” (Ex.

13 FACT Framework Doc. [hereinafter “FACT Framework Doc.”], ECF No. 72.1.) As

part of the contemplated transaction, Dillon would “become[ ] the Executive Director

of the FACT program August 1, 2018 and assume[ ] all duties and responsibilities

previously performed by Stafford.” (FACT Framework Doc.). The FACT Framework

Document further set forth “bullet points [to] serve as a beginning framework” to

meet the parties’ objectives, but did not purport to convey any interest in FACT.

(FACT Framework Doc.) Instead, it provided for a series of actions and agreements

regarding the sale to be performed or accomplished in the future. (See FACT

Framework Doc.) 14. On July 31, 2018, Stafford sent Dillon the language she planned to send to

airline contacts concerning FACT’s ownership change: “as of August 1, 2018 I will no

longer be in the role of Executive Director of [FACT] at [TAA]. I am selling my share

of the program to . . . Dillon, who has been functioning the past 2½ years as my Senior

Flight Attendant Instructor.” (Ex. 25 July 31 Email Dillon, ECF No. 72.1.) Stafford

sent the proposed language to airline contacts later that day, (Ex. 26 July 31 Email

Contacts [hereinafter “July 31 Email Contacts”], ECF No. 72.1), and informed Bame

that she was “transferring everything over to [Dillon,]” (Ex. 28 July 31 Email Bame,

ECF No. 72.1). In August 2018, Stafford sent Dillon electronic copies of the manual

and all forms used in the FACT program. (See Ex. 31 Aug. 2 Email, ECF No. 72.1;

Aug. 24 Email, Ex. 32, ECF No. 72.1.) Dillon replaced Stafford as Executive Director

of FACT in August 2018, during and after which time they continued to negotiate the

sale. (Aff. Dillon ¶ 15.)

15. On August 15, 2018, Dillon emailed Stafford a letter that she had sent to

McCall in which she advised McCall that “in May, [Stafford] offered to sell me her

company—FACT. She expalained [sic] her relationship to me as follows: She owns

FACT and contracts to TAA for 1/2 of the profits. Then you tell me you own half of

FACT and I am basically buying her income stream.” (Ex. 36 Aug. 15 Emails

[hereinafter “Aug. 15 Emails”], ECF No. 72.1.) Dillon also told McCall that she had

“no intention of severing the ties with you or TAA. My intention is to continue

business as usual, while growing the revenue for both parties.” (Aug. 15 Emails.)

Dillon continued, “I would like to buy FACT—the comapny [sic] or the program from [Stafford] (as it has been presented as both by [Stafford]) and I would like to contract

with TAA for a negotiated amount and negotiated duties.” (Aug. 15 Emails.) Stafford

did not dispute Dillon’s assertions to McCall, responding, “Good letter . . . . Let’s hope

for the best.” (Aug. 15 Emails.)

16. On August 16, 2018, McCall sent Dillon and Stafford a proposed purchase

and sale contract, stating that he believed he “captured the relevant items from the

framework document previously signed.” (Ex. 22 FACT Sales Agreement Emails,

ECF No. 72.1.) Over the next few months, the parties prepared and discussed several

versions of the agreement. (See Ex. 37 Aug. 21 Stafford Email & FACT Framework

Doc. [hereinafter “Aug. 21 Stafford Email & FACT Framework Doc.”], ECF No. 72.1;

Ex. 38 Aug. 30 Stafford Email & FACT Framework Doc., ECF No. 72.1; Dep. Stafford

49:8–10.) During this time, Dillon expressed her desire that the contract be solely

between her and Stafford without TAA’s involvement. (See Aug. 21 Stafford Email &

FACT Framework Doc. (stating that Stafford “basically just took [TAA] out of [the

FACT Framework Document]”); Ex. 39 2018 Text Messages, ECF No. 72.1

(containing Dillon’s reminder to “keep TAA out of it” and Stafford’s assurance that

“[t]he contract won’t reference [McCall]”).)

17. On November 8, 2018, Dillon and Stafford signed five documents: (i) a

purchase and sale agreement (“November 8 Contract” or the “Contract”), (Ex. 40

Agreement [hereinafter “Nov. 8 Contract”], ECF No. 72.1); (ii) a bill of sale for “that

interest and ownership [Stafford] has in [FACT], list of past students, contacts for

airlines, all used in business” (“Bill of Sale I”), (Ex. 41 Bill Sale [hereinafter “Bill Sale I”], ECF No. 72.1); (iii) a bill of sale for the training manual copyright (“Bill of Sale

II”), (Ex. 42 Bill Sale [hereinafter “Bill Sale II”], ECF No. 72.1); (iv) a promissory note

under which Dillon agreed to pay Stafford a total of $10,000 in monthly installments

(“Promissory Note”), (Ex. 43 Promissory Note [hereinafter “Promissory Note”], ECF

No. 72.1); and (v) a non-compete agreement (“Non-Compete” or “Non-Compete

Agreement”) providing that Stafford could not provide the same or similar services

as FACT anywhere in the United States without Dillon’s written consent for a term

of five years (Nov. 8, 2018 to Nov. 8, 2023), (Ex. 44 Non-Compete Agreement

[hereinafter “Non-Compete”], ECF No. 72.1), (collectively, the “Contract

Documents”).

18. The November 8 Contract contains several handwritten provisions, initialed

by both Dillon and Stafford, including that “Seller and Buyer have agreed on terms

to sell the business [FACT] and the assets of the Business, [FACT], by the Seller to

the Buyer[.]” (Nov. 8 Contract (emphasis added to handwritten language).) The

November 8 Contract lists “[t]he assets of the Business to be sold” and includes

“Schedule ‘A’ Assets[,]” goodwill, “[a]ssignment of all rights to contracts for services

in the future[,]” and “all trademarks and trade names which are necessary to use or

operate the [a]ssets in the ordinary course of business[.]” (Nov. 8 Contract ¶¶ 1, 8.)

Under the Contract, Stafford agreed to transfer rights to the items covered by the

Bills of Sale upon full payment of $10,000 from Dillon. (Nov. 8 Contract ¶ 10.) B. Events After Entering into the Contract Documents

19. According to Dillon, FACT did not have online payment processing at the

time the Contract Documents were executed. (Aff. Dillon ¶ 18.) On January 11, 2019,

Dillon met with McCall to discuss setting up an online processing system, a topic they

had discussed in August of the previous year. (Aff. Dillon ¶ 18.) Dillon also informed

McCall that she wanted to establish a merchant account and a separate business

account for FACT. (Aff. Dillon ¶ 18.) McCall told her that he “understood where [she]

was coming from and wanted to figure out a plan for [her] to ‘handle the books.’ ” (Aff.

Dillon ¶ 18.)

20. On January 16, 2019, Dillon emailed Bame and McCall and indicated that

she was forming an LLC and setting up a bank account to “get everything over to

FACT.” (Ex. 46 Jan. 16 Email, ECF No. 72.1.)

21. On January 21, 2019, a FACT student was incorrectly overcharged for the

program, something that had occurred on several prior occasions. (Dep. David Bame

118:4–20:4 [hereinafter “Dep. Bame”] 4; Aff. Dillon ¶ 18.) Dillon avers that she

informed McCall of the incident and told him that she had set up an online payment

processing system for FACT. (Aff. Dillon ¶ 18.)

22. According to Stafford, she learned at the end of January 2019 that Dillon

“had taken TAA Money and had created a bank account outside TAA’s control.” (Aff.

Stafford ¶ 29.) As a result, Stafford refused to accept further payments from Dillon

and on February 5, 2019 returned two payments, either one of which would have

4 Excerpts from the deposition of David Bame are located at ECF Nos. 70.8 and 72.1. constituted Dillon’s final payment under the Promissory Note. (Aff. Stafford ¶ 30;

Ex. 49 Account Statements [hereinafter “Account Statements”], ECF No. 72.1; Aff.

Dillon ¶ 16.)

23. On February 4, 2019, Dillon emailed McCall, stating that she was not trying

to “push [him] out[,]” that the payments in the FACT account were for February

students, and that “[i]t really doesn’t matter which account their money is in, it will

be paid to us the same way.” (Ex. 47 Feb. 4 Email, ECF No. 72.1.) TAA ended its

relationship with Dillon the following day. (Aff. Dillon ¶ 21.)

24. Dillon subsequently formed an LLC on February 8, 2019 to operate FACT,

(Ex. 48 Articles Incorporation, ECF No. 72.1), and began operating FACT in

Charlotte, North Carolina soon thereafter, (Dep. Bame 215:1–9; Aff. Dillon ¶ 25).

According to Dillon, she taught the February FACT class, but only “[t]o prevent

damaging the reputation of McCall, TAA, and the FACT program[.]” (Aff. Dillon

¶ 22.)

25. Dillon asserts that she did not receive compensation for her services as

Executive Director or for teaching the January and February 2019 classes. (Aff.

Dillon ¶ 23.) According to Dillon, Stafford and TAA continue to operate a flight

attendant training program in Greensboro, North Carolina using the copyrighted

manual and related training materials Dillon contends she purchased from Stafford.

(Aff. Dillon ¶ 26.) It appears undisputed that Dillon tendered the $10,000 payment

price and that Stafford retained only $5,500 of the funds tendered. (Aff. Stafford ¶ 30;

Aff. Dillon ¶ 16; Account Statements.) II.

PROCEDURAL HISTORY

26. Dillon filed her Complaint against Stafford on February 26, 2019. (Compl.,

ECF No. 3.)

27. On April 4, 2019, TAA moved to intervene, (Mot. Intervene & Br. Supp.

Same, ECF No. 6), which the Court allowed on April 24, 2019, (Order Granting Mot.

Intervene & Mot. Extension Time, Staying Disc., & Requiring Mediation, ECF No.

13).

28. Stafford filed her Amended Answer and Counterclaims on May 3, 2019.

(First Am. Answer & Countercls. [hereinafter “Stafford’s Countercls.”], ECF No. 15.)

Dillon subsequently filed her Amended Complaint on July 11, 2019, which added

FACT as a plaintiff and asserted claims against TAA, (Am. Compl., ECF No. 39), and

TAA answered on July 22, 2019, (Answer Am. Compl. Countercls. [hereinafter “TAA’s

Countercls.”], ECF No. 43).

29. Through their Amended Complaint, Dillon and FACT assert claims against

(i) Stafford for breach of contract, breach of competition/non-solicitation agreement,

copyright infringement, and indemnity/attorneys’ fees; (ii) TAA for tortious

interference with contract, and (iii) both Stafford and TAA for unfair and deceptive

trade practices under N.C.G.S. § 75-1.1, conversion, common law unfair

competition/business conversion, trademark infringement under 15 U.S.C. § 1125(a),

false advertising, and defamation, for which she seeks monetary damages and

injunctive relief. (Am. Compl.) 30. In response, Stafford asserts counterclaims against Dillon and FACT for

fraud/constructive fraud, conversion, breach of contract, declaratory

judgment/injunction, and misappropriation of copyright and unfair competition, for

which she seeks an accounting, attorneys’ fees, monetary damages, and injunctive

relief. (Stafford’s Countercls.) TAA asserts counterclaims against Dillon and FACT

for false advertising under 15 U.S.C. § 1125, false designation of origin/trademark

infringement under 15 U.S.C. § 1125(a), common law unfair competition, breach of

fiduciary duty, common law unfair competition/business conversion, conversion,

defamation, breach of the FACT Framework Document, unfair and deceptive trade

practices under N.C.G.S. § 75-1.1, fraud, and declaratory judgment, for which it

likewise seeks monetary damages and injunctive relief. TAA also asserts a

counterclaim against Plaintiffs and a crossclaim against Stafford for voidable

transfer of the FACT business. (TAA’s Countercls.)

31. After the completion of discovery, the parties filed their Motions for

Summary Judgment on January 3, 2020. (ECF Nos. 66, 68, 71.) Each party seeks

the dismissal of most or all claims asserted against that party. 5 In addition, Plaintiffs

seek summary judgment against Stafford and TAA on all of Plaintiffs’ claims against

them, Stafford seeks summary judgment against Plaintiffs on Stafford’s claims for

breach of contract, fraud/constructive fraud, and misappropriation of copyright/unfair

5 Although Stafford states in her motion and brief that all of Plaintiffs’ claims against her

should be dismissed, Stafford does not offer argument concerning Plaintiffs’ claims against her for false advertising, defamation, unfair and deceptive trade practices, conversion, and common law unfair competition/business conversion. (See Def. Wendy Stafford’s Br. Supp. Mot. Summ. J. 34–37.) competition, 6 and TAA seeks summary judgment only on its counterclaim against

Plaintiffs for declaratory judgment and voidable transfer, or alternatively, on

Plaintiffs’ claims against it for tortious interference with contract and for damages.

32. The Motions have been fully briefed, and the Court heard arguments on the

Motions at a hearing held via videoconference on July 9, 2020, at which all parties

were represented by counsel.

33. The Motions are now ripe for resolution.

III.

LEGAL STANDARD

34. “Summary judgment is proper ‘if the pleadings, depositions, answers to

interrogatories, and admissions on file, together with the affidavits, if any, show that

there is no genuine issue as to any material fact and that any party is entitled to a

judgment as a matter of law.’ ” Morrell v. Hardin Creek, Inc., 371 N.C. 672, 680, 821

S.E.2d 360, 366 (2018) (quoting N.C. R. Civ. P. 56(c)). “[T]he party moving for

summary judgment ultimately has the burden of establishing the lack of any triable

issue of fact.” Pembee Mfg. Corp. v. Cape Fear Constr. Co., 313 N.C. 488, 491, 329

S.E.2d 350, 353 (1985).

35. The party moving for summary judgment may satisfy its burden by proving

that “an essential element of the opposing party’s claim does not exist, cannot be

proven at trial, or would be barred by an affirmative defense, or by showing through

6 Stafford does not seek summary judgment on her claims against Plaintiffs for conversion,

declaratory relief, injunctive relief, an accounting, and attorneys’ fees. (See Def. Wendy Stafford’s Br. Supp. Mot. Summ. J. 4.) discovery that the opposing party cannot produce evidence to support an essential

element of [the] claim.” Dobson v. Harris, 352 N.C. 77, 83, 530 S.E.2d 829, 835 (2000)

(citations omitted). “If the moving party satisfies its burden of proof, then the burden

shifts to the non-moving party to ‘set forth specific facts showing that there is a

genuine issue for trial.’ ” Lowe v. Bradford, 305 N.C. 366, 369–70, 289 S.E.2d 363,

366 (1982) (emphasis omitted) (quoting N.C. R. Civ. P. 56(e)). A genuine issue is “one

which can be maintained by substantial evidence.” Kessing v. Nat’l Mortg. Corp., 278

N.C. 523, 534, 180 S.E.2d 823, 830 (1971). If the nonmoving party does not satisfy

its burden, then “summary judgment, if appropriate, shall be entered against [the

nonmovant].” United Cmty. Bank (Ga.) v. Wolfe, 369 N.C. 555, 558, 799 S.E.2d 269,

271 (2017) (quoting N.C. R. Civ. P. 56(e)).

36. In determining whether the nonmoving party has satisfied its burden, the

Court “asks whether reasonable jurors could find by a preponderance of the evidence

that the [nonmovant] is entitled to a verdict[.]” Sloan v. Miller Bldg. Corp., 119 N.C.

App. 162, 165–66, 458 S.E.2d 30, 32 (1995) (emphasis and citation omitted). In

making this determination, “[t]he evidence must be considered ‘in a light most

favorable to the non-moving party.’ ” McCutchen v. McCutchen, 360 N.C. 280, 286,

624 S.E.2d 620, 625 (2006) (quoting Howerton v. Arai Helmet, Ltd., 358 N.C. 440, 470,

597 S.E.2d 674, 693 (2004)). IV.

ANALYSIS

37. Collectively, the parties seek summary judgment on over thirty claims they

have asserted against one another in this litigation. The Court addresses the parties’

competing and overlapping arguments below.

A. Claims Based on a Particular Party’s Ownership of FACT

38. The parties argue that the undisputed facts of record require one of three

disputed conclusions as a matter of law: (i) that, as Dillon contends, Stafford owned

FACT and all of its assets as a sole proprietor and contracted with TAA to perform

certain services, (ii) that, as TAA contends, TAA owned all of FACT’s assets, except

for certain copyrights owned by Stafford, or (iii) that, as Stafford (and, in the

alternative, TAA) contends, Stafford and TAA owned FACT jointly in a general

partnership, excluding Stafford’s copyrights. 7 Based on its review of the evidence of

record under the standard of Rule 56, however, the Court concludes that a genuine

issue of material fact exists as to the ownership of FACT, thus precluding the entry

of summary judgment on the numerous claims that depend upon a determination of

FACT’s ownership as a matter of law.

39. The parties’ competing claims and contentions concerning FACT’s

ownership begin with the November 8 Contract, one of the five documents Dillon and

7 A general partnership is “an association of two or more persons to carry on as co-owners a

business for profit” in which the partnership has not filed the required documents for legal status as a limited partnership. N.C.G.S. § 59-36; cf. N.C.G.S. § 59-201 (providing for formation of a limited partnership). Stafford executed in connection with their purchase and sale transaction. That

document initially stated in typewritten font that Stafford had agreed to “sell the

assets of the Business” for $10,000 and was amended in handwriting at closing to

state that Stafford had agreed to sell to Dillon “the business [FACT] and the assets

of the Business, [FACT]” for $10,000. (See Nov. 8 Contract.) While the Contract

reflects Stafford’s representation that she owns the FACT assets which she has

agreed to convey, there is no representation in the Contract that Stafford owns the

entirety of the “Business, [FACT.]” Dillon argues that this document is unambiguous

and definitively establishes that Stafford sold all of FACT to Dillon. Dillon also points

to the Promissory Note that Dillon executed in favor of Stafford “for payment for

purchase of [FACT]” as further evidence that Stafford sold, and Dillon purchased, all

of FACT. (Promissory Note.) Dillon argues that consideration of extrinsic evidence

is therefore unnecessary and improper. (Pls.’ Reply Def. Wendy Stafford’s Resp. Pls.’

Mot. Summ. J. 11, ECF No. 103.)

40. Stafford also executed Bill of Sale I, however, in connection with the

November 8 transaction. That document states that Stafford “transfer[red] and

deliver[ed]” to Dillon “that interest and ownership [Stafford] has in [FACT], list of

past students, contacts for airlines, all used in business” and includes Stafford’s

representation that she owns this transferred “[p]roperty.” (Bill Sale I.) In addition,

Stafford executed Bill of Sale II by which she transferred and delivered to Dillon “that

copyright of ‘Airline Training Manual.’ ” (Bill Sale II.) Stafford argues that these

documents show that she sold to Dillon only her interest in FACT, not all of FACT, which she argues she could not do because she owned FACT jointly with TAA.

(Stafford’s Resp. Dillon’s Mot. Summ. J. 2, ECF No. 78.)

41. TAA agrees with Stafford that she could not sell to Dillon what she did not

own and offers undisputed evidence showing that, while Stafford owned the copyright

in the training manual, (i) Stafford approached TAA with a proposal to start a flight

attendant training program, (Dep. Stafford 15:16–18); (ii) McCall created the FACT

name, (Aff. Stafford ¶ 13); (iii) FACT forms displayed TAA’s logo and sought to limit

TAA’s liability, (FACT Forms); (iv) TAA and Stafford split profits earned through

FACT, (Aff. Stafford ¶ 14 ); (v) Stafford chose not to make FACT an LLC because

Stafford and TAA were “partners[,]” (Dep. Stafford, 18:19–23); (vi) TAA and Stafford

jointly contracted with third party vendors, (Aff. Stafford ¶ 12); and (vii) TAA and

Stafford performed separate duties for FACT, (Aff. Stafford ¶ 10; see TAA’s Br. Supp.

Mot. Summ. J. 3–4, ECF No. 67). Based on this evidence, TAA argues that TAA

owned FACT (excluding Stafford’s training manual) and, at the very least, owned

FACT jointly with Stafford.

42. The Court’s legal analysis first focuses on the Contract Documents from

November 2018. The Court determines that these documents—in particular, the

November 8 Contract, the Promissory Note, and the two Bills of Sale—are ambiguous

and potentially inconsistent concerning what Stafford owned and sold to Dillon. See,

e.g., Morrell, 371 N.C. at 680, 821 S.E.2d at 366 (noting that “whether the language

of a contract is ambiguous is a question of law”); Register v. White, 358 N.C. 691, 695,

599 S.E.2d 549, 553 (2004) (“An ambiguity exists in a contract when either the meaning of words or the effect of provisions is uncertain or capable of several

reasonable interpretations.”).

43. While the November 8 Contract and the Promissory Note, standing alone or

considered together, would appear to transfer the “Business[ ] [FACT],” suggesting

Stafford owned and transferred all of FACT as Dillon contends, the Bills of Sale

reasonably permit a different conclusion. First, Bill of Sale I reflects Stafford’s

transfer of “that interest and ownership [Stafford] has in [FACT],” permitting a

reasonable conclusion that her ownership in FACT was less than 100% and that she

transferred less than all of FACT to Dillon. (Bill Sale I.) This reading of the parties’

language is supported by Bill of Sale II’s transfer of Stafford’s copyright in her

training manual—a copyright all parties agree she owned entirely. In Bill of Sale II,

Stafford stated that she transferred “that copyright”—not that she transferred her

“interest and ownership” in that copyright, the formulation used in Bill of Sale I. (Bill

Sale II.) The parties’ choice of language, therefore, supports a reasonable conclusion

that the parties used “interest and ownership” to reflect a transfer of less than

100%—and thus, that Stafford did not transfer to Dillon the entirety of FACT.

44. Having thus concluded that the Contract Documents are ambiguous, the

Court may consider extrinsic evidence to ascertain the parties’ intent. Where, as

here, however, “an agreement is ambiguous and the intention of the parties is

unclear, . . . interpretation of the contract is for the jury.” Schenkel & Shultz, Inc. v.

Hermon F. Fox & Assocs., P.C., 362 N.C. 269, 273, 658 S.E.2d 918, 921 (2008). 45. That said, consideration of the extrinsic evidence offered by the parties

further establishes that there is a genuine issue of material fact concerning the

ownership of FACT and what Stafford could and did sell to Dillon. For example,

Dillon offers evidence that Stafford owned all of FACT, including McCall’s December

30, 2016 email to Stafford that FACT “is your company and you are in charge[,]” and

“you make all the decisions[,]” (Attachment J Ex. 16 Dec. 20, 2016 Email, ECF No.

70.9), Stafford’s written statements to the United States Copyright Office in July

2018 that she was “selling [FACT] and the copyright and trademark[,]” (Attachment

B Ex. 6 July 23, 2018 Email, ECF No. 70.2), and Stafford’s various statements that

she owned all of FACT’s assets, (see, e.g., Nov. 8 Contract ¶ 6).

46. In the same timeframe, however, Stafford sent her July 31, 2018 letter to

the airlines, which Dillon approved, stating that Stafford was “selling my share of

[FACT] to . . . Dillon,” permitting a factfinder to conclude both that Stafford did not

own all of FACT and that Dillon knew that Stafford did not own all of FACT. (July

31 Email Contacts.) And furthering the factual confusion over FACT ownership are

the following documents, each of which suggests that the FACT business was not

entirely Stafford’s to convey: (i) Dillon’s May 21, 2018 Non-Disclosure Agreement

with TAA (identifying FACT as a “portion of [TAA]”), (Non-Disclosure Agreement);

(ii) the executed FACT Framework Document (referencing both Dillon’s desire to

“take over [FACT] entirely[,]” Dillon’s anticipated payment for Stafford’s “interest in

FACT,” and Stafford’s contemplated conveyance to Dillon of “all [Stafford’s] interests

in FACT (intellectual rights and ongoing business income stream)[,]” (FACT Framework Doc.); and (iii) the August 2018 draft Bill of Sale and Assignment and

Assumption Agreement reflecting Stafford and TAA as 50% owners of FACT, (Ex. 22

Bill Sale & Assignment & Assumption Agreement, ECF No. 72.1.)

47. Based on the foregoing, therefore, the Court concludes that any summary

judgment motion requiring the Court to determine FACT’s ownership must be denied

under Rule 56. These motions include:

a. TAA’s Motion on its counterclaim against Plaintiffs for a declaratory

judgment that TAA owns FACT in its entirety;

b. Plaintiffs’ and Stafford’s Motions seeking to dismiss each other’s breach

of contract claim, except to the extent those claims are based on Dillon’s

alleged breach of Section 8 of the November 8 Contract, because an issue

of fact remains as to what Stafford agreed to sell to Dillon, and thus

whether any party breached the Contract Documents on which these

competing claims are based 8;

c. Plaintiffs’ and TAA’s Motions on Plaintiffs’ claim for tortious

interference with contract 9 because an issue of fact remains concerning

8 The Court’s ruling on this claim is limited to Plaintiffs’ contention that Stafford breached

the November 8 Contract by using the copyrighted manual and assets after the sale to Dillon, (Br. Supp. Pls.’ Mot. Summ. J. 25, ECF No. 69), and Stafford’s contentions that because Dillon did not purchase all of FACT, Dillon breached the November 8 Contract by exerting 100% ownership and control over FACT, and that Dillon anticipatorily repudiated the November 8 Contract by taking actions to set up a competing business in Charlotte, (Def. Wendy Stafford’s Br. Supp. Mot. Summ. J. 23–29). Stafford also contends that Dillon breached Section 8 of the November 8 Contract, which the Court considers infra.

9 Plaintiffs allege that TAA tortiously interfered with the November 8 Contract by inducing

Stafford to breach the agreement and work with TAA using the assets Dillon purchased from Stafford. (Br. Supp. Pl.’s Mot. Summ. J. 27–28.) whether Stafford, by taking actions consistent with holding an

ownership interest in FACT, breached a contract obligation to Dillon

and whether TAA’s conduct, in allegedly inducing that conduct, was in

furtherance of TAA’s legitimate business interest, see, e.g., United Labs.,

Inc. v. Kuykendall, 322 N.C. 643, 661, 370 S.E.2d 375, 387 (1988) (noting

elements of a tortious interference claim include “a valid contract

between the plaintiff and a third person which confers upon the plaintiff

a contractual right against a third person” and “the defendant . . . acts

without justification”); Sellers v. Morton, 191 N.C. App. 75, 82, 661

S.E.2d 915, 921 (2008) (“Interference is without justification if a

defendant’s motive is not reasonably related to the protection of a

legitimate business interest.” (internal quotation marks omitted)) 10;

d. Plaintiffs’ Motion on TAA’s counterclaim for breach of fiduciary duty

because an issue of fact remains concerning whether Dillon was TAA’s

agent, and by taking actions consistent with holding ownership of FACT,

breached a fiduciary duty by using FACT assets for her business;

10 It appears that TAA may seek summary judgment on the separate ground that Stafford’s

Non-Compete with Dillon is unenforceable as a matter of law. (TAA’s Br. Supp. Mot. Summ. J. 11–15.) It further appears, however, that Plaintiffs base their claim on TAA’s alleged interference with “Dillon’s purchase of the FACT program and the copyright to the [manual,]” (Am. Compl. ¶ 56), not with the Non-Compete, (TAA’s Br. Supp. Mot. Summ. J. 11). Nevertheless, to the extent Plaintiffs seek to base their tortious interference claim on TAA’s alleged interference with the Non-Compete, the Court agrees with TAA that the claim should be dismissed because, as explained infra, the Non-Compete is unenforceable as a matter of law. e. Plaintiffs’, Stafford’s, and TAA’s Motions on Plaintiffs’ conversion claim

against Stafford and TAA, and Plaintiffs’ Motion on TAA’s and Stafford’s

conversion claims against Plaintiffs, because the parties’ competing

conversion claims necessarily depend upon establishing “ownership in

the [moving party,]” which requires the determination of disputed

material facts, see, e.g., Variety Wholesalers, Inc. v. Salem Logistics

Traffic Servs., LLC, 365 N.C. 520, 523, 723 S.E.2d 744, 747 (2012);

f. Plaintiffs’ Motion on their claims for unfair and deceptive trade

practices under N.C.G.S. § 75-1.1 and unfair competition/business

conversion and TAA’s counterclaims for common law unfair competition

and unfair and deceptive trade practices under section 75-1.1; TAA’s,

and Stafford’s Motions on Plaintiffs’ claim under section 75-1.1; and

TAA’s Motion on Plaintiffs’ claim for unfair competition/business

conversion, because each challenged claim is based on the opposing

party’s conduct as a purported owner of FACT and the determination of

FACT’s ownership involves disputed material facts which cannot be

decided on summary judgment 11; and

11 “Courts recognize that a claim for common law unfair competition is analyzed the same

way as a claim for unfair or deceptive trade practices under [N.C.]G.S. § 75-1.1.” Global Textile All., Inc. v. TDI Worldwide, LLC, 2018 NCBC LEXIS 159, at *33 (N.C. Super. Ct. Nov. 29, 2018) (citing BellSouth Corp. v. White Directory Publishers, Inc., 42 F. Supp. 2d 598, 615 (M.D.N.C. 1999)). “The key distinction between the claims is that common law unfair competition claims are limited to claims between business competitors, whereas a [section 75-1.1] claim may be maintained by a consumer or a business competitor.” Gateway Mgmt. Servs. v. Carrbridge Berkshire Grp., Inc., 2018 NCBC LEXIS 45, at *18 (N.C. Super. Ct. May 9, 2018) (citing Henderson v. U.S. Fid. & Guar. Co., 124 N.C. App. 103, 108, 476 S.E.2d 459, 462 (1996)). g. Plaintiffs’ and Stafford’s Motions on Plaintiffs’ claim for indemnity and

attorney’s fees, and Plaintiffs’ Motion on Stafford’s declaratory

judgment counterclaim, because an issue of fact remains concerning

what Stafford sold, and what Dillon purchased, under the Contract

Documents, which precludes a determination on summary judgment of

indemnity and attorneys’ fees under the November 8 Contract.

B. TAA’s Motion on TAA’s Voidable Transfer Counterclaim

48. TAA seeks summary judgment on its counterclaim for voidable transfer

establishing as a matter of law that Stafford’s transfer of her interest to Dillon was a

voidable transaction under the Uniform Voidable Transactions Act (“UVTA”). While

acknowledging that “untangling the true ownership of FACT assets is a difficult

proposition,” (TAA Reply Supp. Mot. Summ. J. 2, ECF No. 105), TAA argues that

even if Stafford owned a transferrable interest in FACT, summary judgment for TAA

is proper dismissing Plaintiffs’ claims because the undisputed evidence shows that

Stafford’s purported transfer to Dillon was for less than reasonably equivalent value,

after which Stafford’s remaining assets were unreasonably small and left her

insolvent, all as required for a voidable transfer under sections 39-23.4(a)(2)(a) and

39-23.5 of the UVTA, (TAA’s Br. Supp. Mot. Summ. J. 9). Plaintiff contends that the

transfer was not voidable because value and consideration were given in exchange

for the copyright and the materials. (Br. Supp. Pls.’ Mot. Summ. J. 17.) Stafford does

not move for summary judgment on this counterclaim. 49. The Court concludes based on its review of the record evidence that issues

of fact remain as to the value of the assets Stafford purportedly transferred to Dillon,

the amount of Stafford’s remaining assets after transfer, and whether Stafford was

insolvent after transfer, precluding summary judgment. TAA’s Motion on this ground

shall therefore be denied.

C. Plaintiffs’ and Stafford’s Motions on Dillon’s Alleged Breach of Section 8 of the November 8 Contract

50. Stafford contends that Dillon breached Section 8 of the November 8 Contract

by taking certain actions to discontinue FACT’s relationship with TAA in January

2019. (Def. Wendy Stafford’s Br. Supp. Mot. Summ. J. 26–27.) Section 8 provides as

follows:

The Assets include all trademark and trade names which are necessary to use or operate the Assets in the ordinary course of business (with Seller’s current use of the Assets as a reference); all such trademarks, service marks, logos and trade names are valid, in good standing and free and clear of all liens and encumbrances of any nature whatsoever, and have not been (i) challenged in any way or (ii) involved in any interference claim or proceeding. Use or operation of the Assets in the ordinary course of business (with Seller’s current use of the Assets as a reference) will not involve infringement or claimed infringement of any issued or applied for United States, North Carolina, or local trademark, or trade names.

(Nov. 8 Contract ¶ 8.)

51. Stafford contends that the provision’s twin reference to the “use or

operat[ion] of the Assets in the ordinary course of business (with [Stafford’s] current

use of the Assets as a reference)” required Dillon to maintain FACT’s relationship with

TAA. (Def. Wendy Stafford’s Br. Supp. Mot. Summ. J. 27.) Plaintiffs disagree and

argue that the provision is instead “a warranty and promise of good title of the trademarks” conveyed. (Pls.’ Br. Opp’n Wendy Stafford’s Mot. Summ. J. 14, ECF No.

85.)

52. The Court agrees with Plaintiffs. Rather than impose an ongoing obligation,

the plain and unambiguous language of Section 8 creates instead an express

warranty that Stafford had good title to transfer all the trademarks and trade names

that were used to operate the FACT program and a promise that if Dillon used those

trademarks and trade names in the same way Stafford had, her use would not

infringe any issued or applied-for trademarks or trade names anywhere in the United

States. Accordingly, Plaintiffs’ Motion shall be granted, Stafford’s Motion shall be

denied, and Stafford’s breach of contract claim premised on Section 8 shall be

dismissed.

D. Plaintiffs’ Motion on Plaintiffs’ Trademark Infringement Claim and TAA’s Trademark Infringement Counterclaim

53. Plaintiffs assert a trademark infringement claim under 15 U.S.C. § 1125(a)

(the “Lanham Act”) against TAA and Stafford, arguing that after Stafford sold FACT

to Dillon, TAA and Stafford continued to use the FACT name and mark and claim

that they were the original FACT program in a manner that was misleading to

students. (Am. Compl. ¶¶ 88–98.) TAA also asserts a claim of false

designation/trademark infringement under 15 U.S.C. § 1125(a) based on Dillon’s use

of the terms “FACT,” “Triad Aviation Academy,” and “TAA.” (TAA’s Countercls. ¶¶ 70–82.) Plaintiffs move for summary judgment on their claim and for dismissal of

TAA’s claim. (Br. Supp. Mot. Summ. J. 8, 28.)

54. As an initial matter, the Court notes that, contrary to Plaintiffs’ contention,

federal trademark claims are not subject to the exclusive jurisdiction of the federal

courts. See 28 U.S.C. § 1338(a)–(b). Indeed, state and federal courts have concurrent

jurisdiction over such claims, including those asserted by the parties here. See, e.g.,

Dunlap v. G&L Holding Grp., Inc., 381 F.3d 1285, 1292 n.11 (11th Cir. 2004) (“State

and federal courts are expressly given concurrent jurisdiction over claims involving

infringement of a federally registered trademark.”); Bd. of Regents v. Phx. Int’l

Software, Inc., 653 F.3d 448, 465 (7th Cir. 2011) (“A party alleging a trademark

violation under the [Lanham Act] may litigate in state court if it so chooses.”); Deats

v. Joseph Swantak, Inc., 619 F. Supp. 973, 977 (N.D.N.Y. 1985) (“The federal courts’

jurisdiction in matters of trademark is concurrent with that of the state courts.”).

Accordingly, Plaintiffs’ jurisdictional challenge to TAA’s trademark claims is without

merit.

55. Moving on, this Court has observed that “[t]rademark infringement occurs

under the Lanham Act when the claimant owns a valid trademark and the defending

party’s use of a similar mark is likely to cause confusion.” HCW Ret. & Fin. Servs.,

LLC v. HCW Emp. Benefit Servs., LLC, 2015 NCBC LEXIS 73, at *32 (N.C. Super.

Ct. July 14, 2015) (citing 15 U.S.C. § 1125(a)). The factual disputes surrounding the

ownership of FACT preclude a determination as a matter of law that either TAA or

Dillon owned a valid trademark in “FACT.” Accordingly, Plaintiffs’ Motion for judgment on their claim, and Plaintiffs’ Motion to the extent it seeks dismissal of

TAA’s trademark infringement claim based on Dillon’s use of “FACT,” shall be denied.

56. The Court further concludes that Plaintiffs’ Motion for summary judgment

on their claim, and for dismissal of TAA’s claim, based on Dillon’s use of “TAA” and

“Triad Aviation Academy” must also be denied, although for different reasons. TAA

offers evidence that Dillon intentionally copied “TAA” and “Triad Aviation Academy”

on student receipts, Dillon’s social media sites, and on reviews left by members of the

public. (TAA’s Resp. Interrog. Nos. 19–20, ECF No. 77.1); see also Osem Food Indus.

v. Sherwood Foods, Inc., 917 F.2d 161, 165 (4th Cir. 1990) (“[F]rom such intentional

copying arises a presumption . . . that there is a likelihood of confusion.”). Although

Plaintiffs argue that the reviewers’ use of the marks cannot be imputed to Dillon as

a matter of law and further that “any confusion is based on the similarities between

all airline training programs,” (Br. Supp. Pls.’ Mot. Summ. J. 10), the Court concludes

that, viewing the evidence in the light most favorable to TAA, a reasonable factfinder

could conclude that Plaintiffs used “TAA” and “Triad Aviation Academy” in

circumstances that could cause a likelihood of confusion. Plaintiffs’ Motion for

summary judgment on their claim and for dismissal of TAA’s claim based on

Plaintiffs’ use of “TAA” and “Triad Aviation Academy” shall therefore be denied.

E. Plaintiffs’ and TAA’s Motions on Plaintiffs’ False Advertising Claim and Plaintiffs’ Motion on TAA’s False Advertising Counterclaim

57. Plaintiffs and TAA also move for summary judgment on Plaintiffs’ false

advertising claim under the Lanham Act against Stafford and TAA based on their

advertisements stating that they were continuing FACT, that Dillon was fired, and that Dillon’s program was operating elsewhere. (Am. Compl. ¶ 100; see Br. Supp.

Pls.’ Mot. Summ. J. 28; TAA’s Br. Supp. Mot. Summ. J. 1.) Plaintiffs separately move

for summary judgment on TAA’s false advertising counterclaim against Plaintiffs

based on Dillon’s advertisement that FACT had expanded to Charlotte and was “The

Highest Student Rated Flight Attendant training class in the US.” (TAA’s

Countercls. ¶ 59; see Br. Supp. Pls.’ Mot. Summ. J. 8.)

58. A party asserting a claim for false advertising under the Lanham Act must

establish that (i) the defendant made a “false or misleading statement of fact about a

product[,]” (ii) the “statement either deceived, or had the capacity to deceive a

substantial segment of potential consumers[,]” (iii) “[t]he deception is material, in

that it is likely to influence the consumer’s purchasing decision[,]” (iv) “[t]he product

is in interstate commerce[,]” and (v) the claimant “has been or is likely to be injured

as result of the statement at issue.” Pizza Hut, Inc. v. Papa John’s Int’l, Inc., 227

F.3d 489, 495 (5th Cir. 2000), cert. denied, 532 U.S. 920 (2001); see also 15 U.S.C.

§ 1125(a)(1)(B). A claimant must prove “either that an advertisement is false on its

face or that the advertisement is literally true or ambiguous but likely to mislead and

confuse consumers.” Clorox Co. P.R. v. P&G Comm. Co., 228 F.3d 24, 33 (1st Cir.

2000).

59. Although Plaintiffs and TAA separately contend that the undisputed

evidence requires judgment in their favor, the Court finds that the evidence of record

discloses material facts in conflict, including the ownership of FACT, foreclosing summary judgment for either side. Accordingly, Plaintiffs’ and TAA’s Motions

concerning each other’s false advertising claims shall therefore be denied.

F. Plaintiffs’ Motion on TAA’s Declaratory Judgment Counterclaim For A Non- Exclusive License

60. TAA’s counterclaim for a declaratory judgment seeks a judicial

determination that TAA has an ongoing non-exclusive license to use Stafford’s

copyrighted material under 17 U.S.C. § 205(e). (TAA’s Countercls. ¶¶ 147–53; TAA’s

Resp. Opp’n Mot. Summ. J. 13, ECF No. 77.) That statute provides for the priority of

a non-exclusive license over conflicting copyright ownership if it is “evidenced by a

written instrument signed by the owner . . . or such owner’s duly authorized agent[.]”

61. Plaintiffs move for summary judgment dismissing TAA’s claim, contending

that TAA has failed to offer evidence of the required written instrument. (Br. Supp.

Pls.’ Mot. Summ. J. 23.) TAA argues to the contrary, contending that Stafford’s

unsigned admission in her answer to TAA’s counterclaims that “Stafford gave TAA a

license to use the copyright” satisfies the statutory standard. (TAA’s Resp. Opp’n

Mot. Summ. J. 14; see Def.’s Answer Intervenors Countercls. ¶ 13, ECF No. 60.)

62. Although an issue of fact exists concerning whether the materials in which

Stafford claims a copyright have been transferred to Dillon, the Court concludes that,

even assuming Stafford was the copyright owner, Stafford’s unsigned litigation

admission, made seven months after the alleged transfer, does not constitute an

effective “written instrument” as contemplated by 17 U.S.C. § 205(e). See, e.g., Scott

v. Worldstarhiphop, Inc., No. 10 Civ. 9538 (PKC)(RLE), 2012 U.S. Dist. LEXIS 64202,

at *5 (S.D.N.Y. May 3, 2012) (holding that there is no written instrument when there is no indication that “the purported nonexclusive license was reduced to writing”). As

a result, the Court concludes that Plaintiffs’ Motion should be granted and that TAA’s

declaratory judgment claim on this issue should therefore be dismissed.

G. Plaintiffs’ and Stafford’s Motions on Plaintiffs’ Claim for Breach of Non- Compete Agreement

63. Plaintiffs and Stafford each move for summary judgment on Plaintiffs’ claim

against Stafford for breach of the Non-Compete. (Br. Supp. Pl.’s Mot. Summ. J. 28;

Def. Wendy Stafford’s Br. Supp. Mot. Summ. J. 34.) The Non-Compete provides that

Stafford shall not:

[p]rovide the same or similar industry products, services, or engage in any other way represent [sic] any business of a similar nature to [FACT] . . . without written consent. Nor shall [Stafford] solicit any client of [FACT] for the benefit of a third party that is engaged in a similar business to that of [FACT,] [e]ngage in business activity, whether paid or non-paid, with a competitor of the company that provides a similar product or service. Hire, work alongside, or partner with any current employee or contractors, sales staff, or former employees or contractors of [FACT].

This agreement runs from 11/8/2018 to 11/8/2023 and covers the United States.

(Non-Compete.)

64. A covenant not to compete made in connection with the sale of a business

will be enforced “(1) if it is reasonably necessary to protect the legitimate interest of

the purchaser; (2) if it is reasonable with respect to both time and territory; and (3) if

it does not interfere with the interest of the public.” Jewel Box Stores Corp. v.

Morrow, 272 N.C. 659, 662–63, 158 S.E.2d 840, 843 (1968). A non-compete’s time and

geographic scope are “not independent and unrelated aspects of the restraint”; rather, “[e]ach must be considered in determining the reasonableness of the other.” Id. at

665, 158 S.E.2d at 844. In making that determination, our Supreme Court has held

that a geographic scope is reasonable “if it encompasses the area served by the

business that the covenant protects, or, more specifically, if the protected business

had clientele in the area covered by the covenant[.]” Beverage Sys. of the Carolinas,

LLC v. Associated Beverage Repair, LLC, 368 N.C. 693, 698, 784 S.E.2d 457, 461

(2016) (citations omitted).

65. The Non-Compete here covers all of the United States and extends for a

period of five years. (Non-Compete.) Plaintiffs, however, offer no evidence that FACT

conducted business in all areas of the United States; indeed, the most the proffered

evidence suggests is that FACT operated in Greensboro, North Carolina. While our

courts accord “[g]reater latitude” to enforce “covenants given by the seller in

connection with the sale of a business than in covenants ancillary to an employment

contract[,]” Seaboard Indus., Inc. v. Blair, 10 N.C. App. 323, 333, 178 S.E.2d 781, 787

(1971), the undisputed evidence here shows that the Non-Compete’s geographic scope

is far broader than necessary to protect Plaintiffs’ legitimate business interests,

particularly when considered in combination with the Non-Compete’s five-year term,

and thus is unreasonable as a matter of law. Accordingly, Stafford’s Motion shall be

granted, Plaintiffs Motion shall be denied, and Plaintiffs’ breach of contract claim

based on the Non-Compete shall be dismissed. H. Plaintiffs’ Motion on TAA’s Counterclaim for Breach of the FACT Framework Document

66. Plaintiffs also move for summary judgment on TAA’s counterclaim against

Plaintiffs for breach of the FACT Framework Document, contending that the FACT

Framework Document constituted an unenforceable agreement to agree rather than

a valid and enforceable contract. (Pls.’ Reply Intervenor TAA’s Resp. Pls.’ Mot.

Summ. J. 11, ECF No. 104.)

67. “To constitute a valid contract, the parties must assent to the same thing in

the same sense, and their minds must meet as to all the terms.” Boyce v. McMahan,

285 N.C. 730, 734, 208 S.E.2d 692, 695 (1974) (citation and internal quotation marks

omitted). “If any portion of the proposed terms is not settled, or no mode agreed on

by which they may be settled, there is no agreement.” Id. (citation omitted). For this

reason, agreements to agree are not enforceable. See, e.g., Northington v. Michelotti,

121 N.C. App. 180, 184, 464 S.E.2d 711, 714 (1995) (“Where the parties agree to make

a document or contract which is to contain any material term that is not already

agreed on, no contract has been made; a so-called ‘contract to make a contract’ is not

a contract at all.” (citation and internal quotation marks omitted)).

68. Here, the FACT Framework Document contains on its face a list of “bullet

points [to] serve as a beginning framework” for the parties’ continued discussions.

(FACT Framework Doc.) Thus, as in Boyce, “the writing itself shows its

incompleteness by emphasizing its preliminary character.” 285 N.C. at 734, 208

S.E.2d at 695. Moreover, although TAA characterizes the document as “the

prototypical agreement to negotiate in good faith[,]” (TAA’s Resp. Opp’n Mot. Summ. J. 12), the document does not contain any obligation to negotiate or to negotiate in

good faith, imposes no current and enforceable obligations, and while contemplating

the parties’ future negotiations and agreement, simply forecasts that the parties “will

have developed and executed an agreement” by a specific identified date, (Fact

Framework Doc. ¶ 8). Again as in Boyce, the document “expresses the desires of the

parties but not the agreement of both.” 285 N.C. at 734, 208 S.E.2d at 695. As a

result, the Court concludes that the FACT Framework Document is not an

enforceable contract under North Carolina law. Therefore, Plaintiffs’ Motion shall be

granted and TAA’s breach of contract claim based on that document shall be

I. Plaintiffs’ and Stafford’s Motions on Plaintiffs’ Claim for Copyright Infringement

69. Plaintiffs and Stafford separately move for summary judgment on Plaintiffs’

copyright infringement claim against Stafford, which is based on Stafford’s alleged

use of the copyright-registered training manual after Stafford’s sale of the manual to

Dillon. (See 2018 Copyright Registration; Am. Compl. ¶¶ 80–87; Br. Supp. Pls.’ Mot.

Summ. J. 28; Def. Wendy Stafford’s Br. Supp. Mot. Summ. J. 36.) The federal courts,

however, have exclusive jurisdiction over claims of copyright infringement. 28 U.S.C.

§ 1338(a) (“No State court shall have jurisdiction over any claim for relief arising

under any Act of Congress relating to patents, plant variety protection, or

copyrights.”). The Court therefore lacks jurisdiction to hear Plaintiffs’ copyright

infringement claim. As a result, Stafford’s Motion shall be granted, Plaintiffs’ Motion shall be denied, and Plaintiffs’ copyright infringement claim shall be dismissed

without prejudice.

J. Plaintiffs’ and Stafford’s Motions on Stafford’s Claim for Misappropriation of Copyright/Unfair Competition

70. Plaintiffs and Stafford separately seek summary judgment on Stafford’s

claim for misappropriation/unfair competition, which Stafford bases on Dillon’s

possession and use of Stafford’s copyrighted materials. 12 (Br. Supp. Pls.’ Mot. Summ.

J. 1; Def. Wendy Stafford’s Br. Supp. Mot. Summ. J. 33; see also Stafford’s Countercls.

¶ 97.) Because this claim seeks relief for alleged misappropriation and use of

copyrighted materials and sounds in copyright infringement, the Court concludes

that it too falls within the exclusive jurisdiction of the federal courts as provided in

28 U.S.C. § 1338. As a result, Plaintiffs’ Motion shall be granted, Stafford’s Motion

shall be denied, and Stafford’s counterclaim shall be dismissed without prejudice. 13

K. Plaintiffs’ and TAA’s Motions on Plaintiffs’ Claim and TAA’s Counterclaim for Defamation

71. Plaintiffs and TAA separately move for summary judgment on Plaintiffs’

defamation claim against Stafford and TAA for their alleged “false and defamatory

12 Stafford’s misappropriation of copyright claim overlaps with her breach of contract claim

to the extent the latter is based on Dillon’s alleged use of Stafford’s training manual without payment. The disputed evidence concerning Dillon’s use of the training manual and as explained above, the factual dispute over FACT ownership and the terms of sale preclude summary judgment for either party on this aspect of Stafford’s claim. 13 Stafford argues that the decision of the North Carolina Court of Appeals in Liberty/UA,

Inc. v. E. Tape Corp., 11 N.C. App. 20, 180 S.E.2d 414 (1971), permits the assertion of her state law claim for unfair competition based in copyright, (Stafford’s Resp. Dillon’s Mot. Summ. J. 8). The Court disagrees. In Liberty, the plaintiff did not claim “statutory or common law copyrights in its recordings” and thus “the principal question presented [was] whether the defendants’ conduct in appropriating the performances recorded by plaintiff and selling them in competition with plaintiff amount[ed] to unfair competition[.]” Id. at 21, 180 statements about Dillon in an attempt to discredit Dillon in her professional capacity

with FAA to potential students and other FACT employees and independent

contractors.” (Am. Compl. ¶ 107.) Plaintiffs do not address their defamation claim

in their Motion or brief and have offered no evidence that supports the allegations in

their Complaint. Summary judgment is therefore proper in favor of TAA, and

Plaintiffs’ defamation claim shall be dismissed.

72. Plaintiffs also move for summary judgment on TAA’s defamation claim

against Plaintiffs, which asserts that “at least one agent of [FACT] has made false

statements concerning TAA’s honesty[.]” (TAA’s Countercls. ¶ 109; Br. Supp. Pls.’

Mot. Summ. J. 19.) To support its claim, TAA points to evidence that Bame, an

independent contractor, told a student that “TAA was ‘dishonest[,]’ ” and that Dillon’s

website falsely stated that FACT had expanded to Charlotte, North Carolina. (TAA’s

Resp. Opp’n Mot. Summ. J. 12; TAA’s Resp. Interrog. No. 20.)

73. TAA’s evidence does not create a triable issue of fact. First, North Carolina

law is clear that the defamatory statement by Bame, an independent contractor, may

not be imputed to Plaintiffs as a matter of law. See, e.g., Market Am., Inc. v.

Christman-Orth, 135 N.C. App. 143, 152, 520 S.E.2d 570, 577 (1999) (refusing to

impute an independent contractor’s defamation to the employer because “the rule is

well settled in North Carolina that an employer is not vicariously liable for the torts

of an independent contractor”). Moreover, Dillon’s statement that FACT had moved

S.E.2d at 415. In contrast, Stafford’s unfair competition claim here is based on the improper use of copyrighted materials, a claim over which Congress has granted the federal courts exclusive jurisdiction. to Charlotte is not defamatory as a matter of law because it does not bear on TAA’s

“reputation, office, trade, business, or means of livelihood.” Beane v. Weiman Co., 5

N.C. App. 276, 277, 168 S.E.2d 236, 237 (1969). As a result, Plaintiffs’ Motion shall

be granted, and TAA’s counterclaim for defamation shall be dismissed.

L. Plaintiffs’ Motion on TAA’s Counterclaim for Fraud

74. TAA’s counterclaim for fraud is based on Dillon’s allegedly false statements

that she “ha[d] no intention of severing the ties with [McCall] or TAA” and that her

“intention [was] to continue business as usual, while growing the revenue for both

parties” when she had no intention to continue her business relationship with TAA.

(TAA’s Countercls. ¶¶ 122–29; see also Br. Supp. Pl.’s Mot. Summ. J. 13; Aug. 15

Emails.) Plaintiffs move for summary judgment, contending that TAA has failed to

offer evidence that Dillon knew her statements were false when made.

75. “As a general rule, a mere promissory representation will not be sufficient

to support an action for fraud.” Leftwich v. Gaines, 134 N.C. App. 502, 508, 521 S.E.2d

717, 723 (1999) (citation omitted). However, a promissory representation may be

actionable “when it is made with intent to deceive the promisee, and the promisor, at

the time of making it, has no intent to comply.” Id. (citation omitted).

76. Although Dillon avers that she never had any intention to sever ties with

TAA, (Aff. Dillon ¶ 21), TAA points to sufficient evidence of record to permit that

inference and thus for its fraud claim to survive dismissal under Rule 56. That

evidence includes (i) a June 26, 2018 email in which Dillon instructed Stafford to

“[t]ake out TAA” from the purchase and sale agreement, (June 26 Email); (ii) an August 21, 2018 email in which Dillon stated that she “basically took [TAA] out of

[the proposed agreement,]” (Aug. 21 Stafford Email & FACT Framework Doc.), which

she sent six days after writing to TAA that she “ha[d] no intention of severing the ties

with . . . TAA[,]” (Aug. 15 Emails); (iii) a September 2018 text message in which

Dillon advised Stafford “to keep TAA out of [the contract],” (2018 Text Messages); and

(iv) Dillon’s entry into the Contract Documents with Stafford without notifying TAA.

Plaintiffs’ Motion shall therefore be denied.

M. Plaintiffs’ and Stafford’s Motions on Stafford’s Counterclaim for Fraud/Constructive Fraud

77. Stafford has asserted counterclaims against Dillon for fraud and

constructive fraud, broadly contending that Dillon abused her position of trust and

confidence to compete against Stafford using Stafford’s copyrighted materials.

Plaintiffs and Stafford each move for summary judgment on these claims. (Br. Supp.

Pls.’ Mot. Summ. J. 12; Def. Wendy Stafford’s Br. Supp. Mot. Summ. J. 29.)

78. Stafford argues that she is entitled to judgment on her claim against Dillon

for fraud, contending that the undisputed evidence shows that Dillon “concealed from

Stafford Dillon’s intent to claim she bought all of FACT” and “to take TAA FACT

assets and use them in a manner inconsistent with Stafford’s use at TAA[.]” (Def.

Wendy Stafford’s Br. Supp. Mot. Summ. J. 30.) Plaintiffs argue in opposition that

Stafford has failed to support her claim with substantial evidence. (Pls.’ Br. Opp’n

Wendy Stafford’s Mot. Summ. J. 20.)

79. As noted above, promissory representations such as those Stafford alleges

here require Stafford, as the promisee, to offer evidence that Dillon, as the promisor, had no intention to comply with her promise at the time the promise was made. See

Leftwich, 134 N.C. App. at 508, 521 S.E.2d at 723. To support her claim, Stafford

points to the evidence cited above reflecting Dillon’s intention to purchase Stafford’s

interest in FACT and Stafford’s testimony that “It never crossed my mind that

[Dillon] would go off on her own. Never occurred to me,” (Dep. Stafford 99:19–23), 14

to show that Dillon did not intend to comply with her August 15, 2018 email

statement to McCall, forwarded to Stafford, that Dillon had “no intention of severing

ties with [McCall] or TAA[,]” (Def. Wendy Stafford’s Br. Supp. Mot. Summ. J. 30–31).

80. The Court finds Stafford’s evidence insufficient to survive scrutiny under

Rule 56. First, Dillon’s August 15, 2018 statement is one of current intention rather

than a promise of future action, and Stafford’s evidence does not permit a reasonable

factfinder to conclude that Dillon’s statement was false when made. This is

particularly true when the Court considers that Stafford did not include in the

Contract Documents any provision that bound Dillon to continue working with TAA.

81. In addition, Stafford’s execution of the handwritten amendments to the

November 8 Contract and her receipt of multiple emails reflecting Dillon’s express

intention not to contract with TAA for the purchase of FACT’s assets put Stafford on

notice that Dillon intended to claim she bought the entirety of FACT from Stafford.

On this record, Stafford cannot show that she reasonably relied on any of Dillon’s

alleged statements to the contrary, a further basis on which her fraud claim must be

14 It does not appear to the Court that this specific testimony is contained in the voluminous

evidentiary record presented by the parties. As noted, however, the Court’s consideration of this alleged testimony does not salvage Stafford’s claim. dismissed. See, e.g., Cobb v. Pa. Life Ins. Co., 215 N.C. App. 268, 277, 715 S.E.2d 541,

549 (2011) (for fraud claims, “any reliance on alleged false representations must be

reasonable”); see also, e.g., Biesecker v. Biesecker, 62 N.C. App. 282, 285, 302 S.E.2d

826, 828–29 (1983) (holding that “[a] person signing a written instrument . . . . may

[not] predicate an action for fraud on his ignorance of the legal effect of its terms.”)

(citations omitted)). As a result, Plaintiffs’ Motion shall be granted, Stafford’s Motion

shall be denied, and Stafford’s counterclaim for fraud shall be dismissed.

82. Stafford’s counterclaim for constructive fraud fares no better. A claim for

constructive fraud requires the claimant to establish facts and circumstances “(1)

which created [a] relation of trust and confidence, and (2) led up to and surrounded

the consummation of the transaction in which defendant is alleged to have taken

advantage of his position of trust to the hurt of plaintiff.” Head v. Gould Killian CPA

Grp., P.A., 371 N.C. 2, 9, 812 S.E.2d 831, 837 (2018) (quoting Rhodes v. Jones, 232

N.C. 547, 549, 61 S.E.2d 725, 726 (1950)).

83. The undisputed evidence here, however, shows that at all times Dillon and

Stafford were engaged in arm’s length negotiations leading up to their entry into the

Contract Documents and were never in a relationship of trust and confidence in which

Dillon “figuratively h[eld] all of the cards[,]” S.N.R. Mgmt. Corp. v. Danube Partners

141, LLC, 189 N.C. App. 601, 613, 659 S.E.2d 442, 451 (2008) (citation omitted), or

which otherwise created a duty on which a claim for constructive fraud is properly

premised, see, e.g., Se. Air Charter, Inc. v. Stroud, 2015 NCBC LEXIS 82, at *16–17

(N.C. Super. Ct. Aug. 17, 2015) (“Absent extraordinary circumstances of special relationships of trust and confidence leading to dominion and control, employees who

are not also officers and directors should not be put to the burden of defending

fiduciary duty claims.”). 15 Contrary to Stafford’s contention, the Court finds no

evidence, aside from impermissible speculation, from which a reasonable jury could

conclude that Dillon’s ascension to FACT’s Executive Directorship, including at a

time when Stafford and/or TAA owned FACT, created a relationship of trust and

confidence in which Dillon ran roughshod over Stafford. As a result, Plaintiffs’

Motion shall be granted, Stafford’s Motion shall be denied, and Stafford’s

counterclaim for constructive fraud shall be dismissed.

N. TAA’s Motion on Plaintiffs’ Damages Claims

84. TAA seeks dismissal of Plaintiffs’ claims for damages, contending that the

damages Plaintiffs seek are unduly speculative or subject to offset, or are not the

result of TAA’s conduct. (TAA’s Br. Supp. Mot. Summ. J. 15.) Plaintiffs offer evidence

and argument in opposition that the Court concludes is sufficient to survive TAA’s

motion under Rule 56 based on the record evidence at this time. The Court, however,

will permit TAA to advance its same contentions should it wish to do so when the

Court considers the parties’ motions in limine in anticipation of the trial of this action.

15 Although Stafford complains that Dillon knew she was ill and took advantage of her in the

transaction, (Def. Wendy Stafford’s Br. Supp. Mot. Summ. J. 33), Stafford offers no evidence that would permit a reasonable factfinder to reach this conclusion. Indeed, Stafford’s regular and numerous communications with Dillon during the months leading up to their entry into the Contract Documents in November 2018 do not reveal Stafford’s mental or emotional infirmity, and Dillon has not offered any evidence, medical or otherwise, that suggests the contrary. V.

CONCLUSION

85. WHEREFORE, based on the foregoing, the Motions are hereby GRANTED

in part and DISMISSED in part as follows:

a. Stafford’s Motion for summary judgment on Plaintiffs’ claim for breach

of the Non-Compete Agreement is GRANTED, Plaintiffs’ Motion is

DENIED, and that claim is hereby DISMISSED with prejudice;

b. Stafford’s Motion for summary judgment on Plaintiffs’ claim for

copyright infringement is GRANTED, Plaintiffs’ Motion is DENIED,

and that claim is hereby DISMISSED without prejudice;

c. TAA’s Motion for summary judgment on Plaintiffs’ claim for defamation

is GRANTED, Plaintiffs Motion is DENIED, and that claim is hereby

DISMISSED with prejudice;

d. Plaintiffs’ Motion for summary judgment on TAA’s counterclaims for

breach of the FACT Framework Document, defamation, and for

declaratory judgment based on a purported non-exclusive license are

GRANTED, TAA’s Motion on its counterclaim for declaratory judgment

based on a purported non-exclusive license is DENIED, and the above-

referenced counterclaims are hereby DISMISSED with prejudice;

e. Plaintiffs’ Motion for summary judgment on Stafford’s claims for

fraud/constructive fraud, and breach of contract based on Section 8 of the November 8 Contract, is GRANTED, Stafford’s Motion is DENIED,

and those claims are hereby DISMISSED with prejudice;

f. Plaintiffs’ Motion for summary judgment on Stafford’s Claim for

Misappropriation of Copyright/Unfair Competition is GRANTED,

Stafford’s Motion is DENIED, and that claim is hereby DISMISSED

without prejudice;

g. Summary judgment is DENIED on the Motions seeking entry of

judgment or dismissal on the following claims, and those claims shall

proceed to trial:

i. Plaintiffs’ claims for breach of contract, indemnity, and attorneys’

fees against Stafford, tortious interference with contract against

TAA, and unfair and deceptive trade practices, conversion,

common law unfair competition and business conversion,

trademark infringement, and false advertising against both TAA

and Stafford;

ii. TAA’s counterclaims for declaratory judgment to the extent those

claims are based on the ownership of FACT, false advertising,

false designation/trademark infringement, common law unfair

competition, breach of fiduciary duty, common law unfair

competition/business conversion, conversion, fraud, and unfair

and deceptive trade practices against Plaintiffs, and voidable

transfer against Plaintiffs and Stafford; and, iii. Stafford’s counterclaims for conversion, breach of contract based

on ownership of FACT, declaratory judgment, injunctive relief,

accounting, and attorneys’ fees against Plaintiffs.

86. TAA will be permitted to advance its contentions regarding Plaintiffs

damages should it wish to do so when the Court considers the parties’ motions in

limine in anticipation of the trial of this action.

87. The Court shall set this matter for trial by separate order after consultation

with counsel for the parties, consistent with the Guilford County Jury Trial

Resumption Plan as implemented in the North Carolina Business Court.

SO ORDERED, this the 30th day of December, 2020.

/s/ Louis A. Bledsoe, III Louis A. Bledsoe, III Chief Business Court Judge