Se. Anesthesiology Consultants, PLLC v. Charlotte-Mecklenburg Hosp. Auth., 2019 NCBC 74.
STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION MECKLENBURG COUNTY 18 CVS 5899
SOUTHEAST ANESTHESIOLOGY CONSULTANTS, PLLC; AMERICAN ANESTHESIOLOGY OF THE SOUTHEAST, PLLC; MEDNAX SERVICES, INC.; and RUSSELL A. SAUDER, M.D., M.B.A.,
Plaintiffs,
v.
THE CHARLOTTE- ORDER AND OPINION ON MECKLENBURG HOSPITAL DEFENDANTS’ MOTIONS FOR AUTHORITY, d/b/a CAROLINAS JUDGMENT ON THE PLEADINGS HEALTHCARE SYSTEM and d/b/a ATRIUM HEALTH; THOMAS M. WHERRY, M.D.; TOTAL ANESTHESIA SOLUTIONS, LLC; and SCOPE ANESTHESIA OF NORTH CAROLINA, PLLC,
Defendants.
1. THIS MATTER is before the Court on: (i) Defendant The Charlotte-
Mecklenburg Hospital Authority, d/b/a Carolinas Healthcare System and d/b/a
Atrium Health’s (“Atrium”) Motion for Judgment on the Pleadings (“Atrium’s
Motion”), (ECF No. 100); and (ii) Defendants Thomas M. Wherry, M.D. (“Dr.
Wherry”), Total Anesthesia Solutions, LLC (“Total Anesthesia”), and Scope
Anesthesia of North Carolina, PLLC’s (“Scope Anesthesia”) (collectively, the “Wherry
Defendants”) Motion for Judgment on the Pleadings (the “Wherry Defendants’
Motion”), (ECF No. 113). Atrium and the Wherry Defendants are collectively referred
to herein as “Defendants.” Atrium’s Motion and the Wherry Defendants’ Motion are
collectively referred to herein as the “Motions.” 2. For the reasons set forth herein, the Court GRANTS in part and DENIES
in part the Motions.
Nelson Mullins Riley & Scarborough LLP by Mark A. Stafford, Candace S. Friel, and Noah H. Huffstetler, III, for Plaintiffs.
Robinson, Bradshaw & Hinson, P.A. by David C. Wright, III, Martin L. Brackett, Jr., Charles E. Johnson, and Jonathan C. Krisko, for Defendant The Charlotte-Mecklenburg Hospital Authority.
McGuireWoods LLP by Mark E. Anderson, Jacob D. Charles, Bradley R. Kutrow, John G. McDonald, Paul M. Navarro, and Alec C. Covington, for Defendants Thomas M. Wherry, M.D., Total Anesthesia Solutions, LLC, and Scope Anesthesia of North Carolina, PLLC.
Robinson, Judge.
I. FACTUAL BACKGROUND
3. The Court does not make findings of fact on a motion for judgment on the
pleadings pursuant to Rule 12(c), but only recites those factual allegations that are
relevant and necessary to the Court’s determination of the Motions. 1
A. The Parties
4. Southeast Anesthesiology Consultants, PLLC (“SAC”) is a professional
limited liability company organized and existing under the laws of the State of North
Carolina. (Compl. ¶ 11, ECF No. 3.) SAC is a medical practice which provides
“professional anesthesiology services” in North Carolina. (Compl. ¶ 21.)
1 Both Plaintiffs and Defendants reference materials that are not appropriate for the Court’s
review on a Rule 12(c) motion. However, when it is clear from the record and the order itself that the Court has not considered additional materials, a Rule 12(c) motion is not converted to a Rule 56 motion. Estate v. Belk v. Boise Cascade Wood Prods., L.L.C., 824 S.E.2d 180, 183 (N.C. Ct. App. Feb. 5, 2019). For the purposes of ruling on the Motions, the Court only considers the pertinent pleadings. 5. American Anesthesiology of the Southeast, PLLC (“AASE”) is a professional
limited liability company organized and existing under the laws of the State of North
Carolina. (Compl. ¶ 12.)
6. MEDNAX Services, Inc. (“MEDNAX”), a “physician practice management
company”, is a corporation organized and existing under the laws of the State of
Florida. (Compl. ¶ 13.) SAC, AASE, and MEDNAX are collectively referred to herein
as the “Provider Plaintiffs.”
7. Russell A. Sauder, M.D., (“Dr. Sauder”) is a resident of Mecklenburg
County, North Carolina. (Compl. ¶ 14.) At all times relevant herein, Dr. Sauder
acted as an employee of AASE and provided anesthesiology services to Atrium.
(Compl. ¶ 14.) Dr. Sauder and the Provider Plaintiffs are collectively referred to
herein as “Plaintiffs.”
8. Atrium is a statutorily established non-profit hospital authority organized
and existing under the laws of the State of North Carolina with its principle place of
business in Mecklenburg County, North Carolina. (Compl. ¶ 15.)
9. Total Anesthesia is a limited liability company organized and existing
under the laws of the State of Maryland. (Compl. ¶ 19.)
10. Scope Anesthesia is a professional limited liability company organized and
existing under the laws of the State of North Carolina. (Compl. ¶ 20.)
11. Dr. Wherry is a member and co-founder of Total Anesthesia and is a
member and organizer of Scope Anesthesia. (Compl. ¶¶ 19–20.) B. The Agreements
12. AASE, an affiliate of SAC, employs more than 90 anesthesiologists who
have entered into employment agreements with AASE (the “Employment
Agreements”). (Compl. ¶¶ 2, 25.) SAC is an intended third-party beneficiary of the
Employment Agreements. (Compl. ¶ 25.) SAC and AASE maintained an agreement
pursuant to which the anesthesiologists employed by AASE (the “SAC Physicians”)
would provide anesthesiology services for SAC at hospitals and other medical
facilities. (Compl. ¶ 2.)
13. The Employment Agreements included a non-compete provision (the “Non-
Compete Provision”) prohibiting the SAC Physicians from practicing anesthesiology
for a period of two years following termination of their employment within
(A) Mecklenburg County, North Carolina, (B) a twenty mile radius of any health care facility at which such SAC Physician rendered anesthesia services during the year prior to termination, (C) a twenty mile radius of any health care facility at which such SAC Physician rendered medical services during the year prior to the Physician’s termination, or (D) a twenty mile radius of any facility owned, operated or controlled by Atrium or its subsidiaries of affiliates.
(Compl. ¶ 26.) Defendants, at all times relevant herein, “have been aware of the
existence” of the Non-Compete Provision. (Compl. ¶ 27.)
14. SAC and Atrium entered into an agreement, pursuant to which the SAC
Physicians acted as the exclusive provider of anesthesiology services at certain
facilities owned by Atrium in North Carolina (the “Atrium Agreement”). (Compl. ¶
21.) 15. The Atrium Agreement contains confidentiality provisions (the
“Confidentiality Provisions”) prohibiting the disclosure of the Provider Plaintiffs’
confidential information to “subcontractors, professional advisors and independent
contractors” and requiring the mentioned affiliates of Atrium to agree to be bound by
the Confidentiality Provisions if disclosure to them was required for the performance
of their obligations. (Compl. ¶ 23.)
16. Beginning in 2010, SAC contracted with MEDNAX to provide SAC with
administrative and management services including billing and collection services,
human resources, financial services, recruiting and credentialing, and contract
negotiations. (Compl. ¶ 22.)
C. Consultation with the Wherry Defendants
17. In the spring of 2017, Atrium informed the Provider Plaintiffs that Dr.
Wherry and Total Anesthesia would be acting as Atrium’s consultant to assist in
“evaluating how anesthesia care is delivered at the Atrium facilities.” (Compl. ¶ 36)
(quotation marks omitted). In reliance on representations made by Atrium, SAC
shared “large amounts of confidential, proprietary, and trade secret information”
with Atrium, Dr. Wherry, and Total Anesthesia throughout the summer and fall of
2017. (Compl. ¶ 37.)
18. Plaintiffs believed that Dr. Wherry, as a professional advisor and
independent contractor of Atrium, would adhere to the Confidentiality Provisions
consistent with the Atrium Agreement. (Compl. ¶ 38.) 19. The Atrium Agreement was set to expire on December 31, 2017. (Compl. ¶
42.) Beginning in the summer of 2017, Atrium expressed interest in negotiating for
a renewal or extension of the Atrium Agreement. (Compl. ¶ 42.) SAC agreed to a six-
month extension, extending the Atrium Agreement from January 1, 2018 until June
30, 2018, with a “no shop” provision during the first three months. (Compl. ¶ 44.)
Plaintiffs allege that Atrium’s expressed interest in negotiating an extension beyond
July 2018 was not in good faith and only made with the intention to mislead Plaintiffs
in furtherance of an alleged scheme with the Wherry Defendants to oust Plaintiffs
from the market. (Compl. ¶¶ 42, 50–51.)
20. Plaintiffs contend that Atrium’s representations made during negotiations
and representations regarding Dr. Wherry’s involvement with Atrium were false and
were made with the intent to induce Plaintiffs to continue to share confidential
information with the Defendants in furtherance of the alleged scheme between
Atrium and the Wherry Defendants. (Compl. ¶¶ 50–51.) Plaintiffs allege that
Defendants hoped to misappropriate SAC’s confidential information, use SAC’s
confidential information to form Scope Anesthesia as a competing entity to provide
professional anesthesia services, and ultimately replace SAC with Scope Anesthesia.
(Compl. ¶ 50–51, 54.)
21. On or about December 28, 2017, Atrium entered into an agreement with
Scope Anesthesia to provide the services formerly provided by SAC pursuant to the
Atrium Agreement. (Compl. ¶ 54.) Scope Anesthesia was later incorporated in North
Carolina on January 30, 2018. (Compl. ¶56.) II. PROCEDURAL BACKGROUND
22. The Court sets forth here only those portions of the procedural history
relevant to its determination of the Motion.
23. On March 26, 2018, Plaintiffs filed the Complaint. (ECF No. 3.) On April
4, 2018, this matter was designated as a mandatory complex business dispute and
assigned to the undersigned. (ECF Nos. 1, 2.)
24. On June 22, 2018, the Court denied Plaintiffs’ request for a temporary
restraining order and a preliminary injunction. (ECF No. 90.)
25. On September 14, 2018, Atrium filed its Motion for Partial Judgment on
the Pleadings and a brief in support thereof. (Atrium Health’s Br. Supp. of its Mot.
Partial J. the Pleadings ECF No. 101 [“Atrium Br.”].) The Wherry Defendants filed
their Motion for Judgment on the Pleadings and a brief in support thereof on October
9, 2018. (Wherry Defs.’ Br. Supp. of Mot. J. the Pleadings ECF No.114 [“Wherry
Defs.’ Br.”].)
26. The Motions have been fully briefed, and the Court held a hearing on the
Motions on December 19, 2018. (See ECF No. 129.)
27. On October 11, 2019, Plaintiffs voluntarily dismissed without prejudice
their claims for monopolization, attempted monopolization, and restraint of trade
brought pursuant to Chapter 75 of the North Carolina General Statutes. (ECF No.
174.)
28. The Motions are ripe for resolution. III. LEGAL STANDARD
29. “A motion for judgment on the pleadings should not be granted unless the
movant clearly establishes that no material issue of fact remains to be resolved and
that he is entitled to judgment as a matter of law.” Carpenter v. Carpenter, 189 N.C.
App. 755, 761, 659 S.E.2d 762, 767 (2008); see also Ragsdale v. Kennedy, 286 N.C. 13,
137, 209 S.E.2d 494, 499 (1974). The function of Rule 12(c) “is to dispose of baseless
claims or defenses when the formal pleadings reveal their lack of merit.” Ragsdale,
286 N.C. at 137, 209 S.E.2d at 499. “A motion for judgment on the pleadings is
allowable only where the pleading of the opposite party is so fatally deficient in
substance as to present no material issue of fact . . . .” George Shinn Sports, Inc. v.
Bahakel Sports, Inc., 99 N.C. App. 481, 486, 393 S.E.2d 580, 583 (1990).
30. “[T]he court cannot select some of the alleged facts as a basis for granting
the motion on the pleadings if other allegations, together with the selected facts,
establish material issues of fact.” J. F. Wilkerson Contracting Co. v. Rowland, 29
N.C. App. 722, 725, 225 S.E.2d 840, 842 (1976). The court must read the pleadings
in the light most favorable to the nonmoving party, and
[a]ll well pleaded factual allegations in the nonmoving party’s pleadings are taken as true and all contravening assertions in the movant’s pleadings are taken as false. All allegations in the nonmovant’s pleadings, except conclusions of law, legally impossible facts, and matters not admissible in the evidence at trial, are deemed admitted by the movant for purposes of the motion.
Ragsdale, 286 N.C. at 137, 209 S.E.2d at 499 (citations omitted). IV. ANALYSIS
31. The Wherry Defendants’ Motion seeks dismissal of Plaintiffs’ claims for: (i)
misappropriation of trade secrets; (ii) tortious interference with contract; and (iii)
common law unfair competition. Atrium’s Motion seeks dismissal of Plaintiffs’ claim
for: (i) misappropriation of trade secrets; and (ii) common law unfair competition.
32. In part, Defendants rely upon the analysis in the Court’s June 22, 2018
Order on Plaintiffs’ Motion for Temporary Restraining Order and/or Preliminary
Injunction in their arguments. At the outset, the Court notes that a motion for
injunctive relief pursuant to Rule 65 is governed by a different standard than a
motion pursuant to Rule 12(c), and the Court’s ruling denying preliminary injunctive
relief is not outcome dispositive on the Motions. See A.E.P. Indus., Inc. v. McClure,
308 N.C. 393, 401, 302 S.E.2d 754, 759–60 (1983) (“[A preliminary injunction] will be
issued only (1) if a plaintiff is able to show likelihood of success on the merits. . . and
(2) if a plaintiff is likely to sustain irreparable loss unless the injunction is issued[.]”)
(citation omitted); see, e.g., DSM Dyneema, LLC v. Thagard, 2015 NCBC LEXIS 50,
at *13 (N.C. Super. Ct. May 12, 2015).
A. Misappropriation of Trade Secrets
33. “The threshold question in any misappropriation of trade secrets case is
whether the information obtained constitutes a trade secret[.]” Combs & Assocs. v. Kennedy, 147 N.C. App. 362, 369, 555 S.E.2d 634, 639 (2001). The North Carolina
Trade Secrets Protection Act (“TSPA”) defines a trade secret as:
Business 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.
N.C.G.S. § 66-152(3).
34. “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 or is threatened to occur.” Krawiec v. Manly, 370 N.C. 602, 609, 811 S.E.2d 542,
547–48 (2018) (quoting Washburn v. Yadkin Valley Bank & Tr. Co., 190 N.C. App.
315, 326, 660 S.E.2d 577, 585 (2008)).
35. Plaintiffs describe their trade secrets as “SAC’s coverage and staffing
model, scheduling templates, subspecialty scheduling planning data, . . . methods for
implementation of Enhanced Recovery After Surgery (“ERAS”) protocols, details of
physician compensation[,] confidential terms of employment agreements and
structures” (collectively the “Confidential Information”). (Compl. ¶ 37.) Plaintiffs
further describe the ERAS as “multi-modal perioperative care pathways designed to
achieve early recovery after surgical procedures by maintaining pre-operative organ function and reducing the profound stress response that occurs following surgery.”
(Compl. ¶ 59.) The Confidential Information comprises the Provider Plaintiffs’
methods by which they achieve “efficient and effective scheduling, coverage, and
patient care for more than 30,000 patients annually in the region.” (Compl. ¶ 37.)
36. The Court concludes, and Defendants do not contend otherwise, that
Plaintiffs have identified the allegedly misappropriated trade secrets with sufficient
particularity for the purposes of Rule 12(c). See Med. Staffing Network, Inc. v.
Ridgeway, 194 N.C. App. 649, 658–59, 670 S.E.2d 321, 328–29 (2009) (showing that
information related to the pay rates and shift and facility preferences of the staffing
agency’s nurses can constitute a trade secret); Sunbelt Rentals, Inc. v. Head &
Engquist Equip., L.L.C., 174 N.C. App. 49, 53–56, 620 S.E.2d 222, 226–28 (2005)
(concluding that salary and personnel information constituted a trade secret);
Encompass Servs., PLLC v. Maser Consulting, P.A., 2019 NCBC LEXIS 67, at *14–
15 (N.C Super. Ct. Nov. 5, 2019) (concluding that “rate tables,” “design files,” and “a
plat template, multiple deed plat tracking spreadsheets, survey plats, and project
progress information” coupled with other more general allegations was sufficient to
describe the alleged trade secret); Window Gang Ventures, Corp. v. Salinas, 2019
NCBC LEXIS 24, at *42–43 (N.C. Super. Ct. Apr. 2, 2019) (determining that “step-
by-step service manual; its employee manual; its operations manual and guidelines
and recommendations for operating a successful franchise” was sufficient to identify
a trade secret pursuant to Rule 12(b)(6)); Comput. Design & Integration, LLC v.
Brown, 2018 NCBC LEXIS 216, at *44 (N.C. Super. Ct. Dec. 10, 2018) (concluding that the plaintiff’s compilation of information which included its employees’ “hours,
earnings, and reimbursements & other payments” could be a protectable trade
secret).
37. Defendants argue that the pleadings reveal that Plaintiffs failed to take
reasonable efforts to maintain the secrecy of any purported trade secrets because
Plaintiffs disclosed the Confidential Information to an entity subject to the Public
Records Act without designating the information as confidential. (Atrium Br. 15–16;
Wherry Defs.’ Br. 4.)
38. It is well-established that Atrium is subject to the Public Records Act. See
Jackson v. Charlotte Mecklenburg Hosp. Auth., 238 N.C. App. 351, 352, 768 S.E.2d
23, 24 (2014); see also N.C.G.S. § 131E-16(14) (defining “hospital authority” as “a
public body and a body corporate and politic”). The Public Records Act generally
provides the public with “liberal access to public records.” Knight Publ’g Co. v.
Charlotte-Mecklenburg Hosp. Auth., 172 N.C. App. 486, 489, 616 S.E.2d 602, 605
(2005).
39. “[Absent] clear statutory exemption or exception the documents falling
within the definition of ‘public records’ in the Public Records Law must be made
available for public inspection.” News & Observer Publ’g Co. v. Poole, 330 N.C. 465,
486, 412 S.E.2d 7, 19 (1992). “Exceptions and exemptions to the Public Records Act must be construed narrowly.” Carter-Hubbard Publ’g Co. v. WRMC Hosp. Operating
Corp., 178 N.C. App. 621, 624, 633 S.E.2d 682, 684 (2006).
40. Disclosing a trade secret to an entity subject to the Public Records Act does
not necessarily defeat a misappropriation of trade secrets claim. There are two
exemptions from public records disclosure that might be applicable here.
41. First, trade secrets provided to an entity otherwise subject to the Public
Records Act are nonetheless exempt from public disclosure when the information:
a. Constitutes a trade secret as defined in G.S. 66-152(3).
b. Is the property of a private person as defined in G.S. 66-152(2).
c. Is disclosed or furnished to the public agency in connection with the owner’s performance of a public contract or in connection with a bid, application, proposal, industry development project, or in compliance with laws, regulations, rules, or ordinances of the United States, the State, or political subdivisions of the State.
d. Is designated or indicated as confidential or as a trade secret at the time of its initial disclosure to the public agency.
N.C.G.S. § 132-1.2 (quotation marks omitted).
42. Second, “competitive health care information” as defined by N.C.G.S. §
131E-97.3(a), is confidential information not subject to public disclosure pursuant to
the Public Records Act. Id. § 131E-97.3(a). Under N.C.G.S. 131E-97.3(a),
“[i]nformation relating to competitive health care activities by or on behalf of
hospitals and public hospital authorities” is considered competitive health care
information. N.C.G.S. § 131E-97.3(a).
43. Defendants contend that Plaintiffs failed to designate the Confidential
Information as “confidential” or as a trade secret; therefore, any information provided by Plaintiffs to Defendants does not qualify for the exception in N.C.G.S. § 132-1.2.
(Atrium Br. 17–18; Wherry Defs.’ Br. 4.) Plaintiffs contend that, even if they failed
to designate the Confidential Information as confidential at the time it was provided
to Defendants, the Confidential Information is not subject to disclosure under the
public records act because it qualifies as competitive health care information as
defined by N.C.G.S. § 131E-97.3.
44. The Confidential Information is not before the Court as a part of the record
properly considered on the Motions. Taking into consideration all of the factual
allegations made by Plaintiffs, failure to specifically allege an exception to the Public
Records Act is not fatal to Plaintiffs’ claim. Whether the Confidential Information
was marked as confidential or designated as a trade secret or whether the
Confidential Information is competitive healthcare information should be determined
on a more fully developed record. Therefore, the Court must determine whether
Plaintiffs otherwise sufficiently allege in the Complaint efforts they took to maintain
the secrecy of the Confidential Information.
45. Plaintiffs allege that Atrium signed the Confidentiality Provisions, which
required Atrium and all of its professional advisors and independent contractors to
agree to be bound to the Confidentiality Provisions. (Compl. ¶ 23.) Plaintiffs further
allege that SAC Physicians signed confidentiality agreements as part of the
Employment Agreements. (Compl. ¶ 94.) While Plaintiffs’ allegations regarding
their efforts to maintain secrecy are minimal, at this stage of the proceeding, the
Court concludes that the allegations are sufficient to survive the Motions. See Window Gang Ventures, Corp., 2019 NCBC LEXIS 24, at *45 (concluding that, in
consideration of the parties relationship, the allegations regarding a signed
confidentiality agreement were sufficient pleading of the plaintiff’s efforts to
maintain secrecy of an alleged trade secret for the purposes of Rule 12); Bldg. Ctr.,
Inc., v. Carter Lumber, Inc., 2016 NCBC LEXIS 79, at *14 (N.C. Super. Ct. Oct. 21,
2016) (“Generally, only where efforts to maintain [the] secrecy of the allegedly
misappropriated trade secrets were completely absent have North Carolina courts
dismissed claims at the 12(b)(6) stage.”); see also Static Control Components, Inc v.
Darkprint Imaging, Inc., 200 F. Supp. 2d 541, 546 (M.D.N.C. 2002) (“[C]onfidentiality
agreements are one method used to protect confidential information[.]”); Safety Test
& Equip. Co. v. Am. Safety Util. Corp., 2015 NCBC LEXIS 40, at *27 (N.C. Super. Ct.
Apr. 23, 2015) (“The inquiry [of whether a plaintiff took reasonable efforts to maintain
the secrecy of a trade secret] must be as to specific facts which vary from case to
case”).
46. The Complaint is not so deficient that it warrants dismissal on a Rule 12(c)
motion. See George Shinn Sports, Inc., 99 N.C. App. at 486, 393 S.E.2d at 583. At
this stage in the proceeding, without the benefit of a fully developed record,
Defendants’ Motions as to SAC, AASE, and MEDNAX’s trade secret misappropriation
claims should be DENIED.
47. Seemingly, only SAC, AASE, and MEDNAX intend to assert a
misappropriation of trade secrets claim against Defendants. Any alleged trade secret
is owned by the “Provider and Manager Plaintiffs” as defined in the Complaint as SAC, AASE, and MEDNAX. (See Compl. ¶¶ 92–101.) Plaintiffs fail to allege any
trade secret owned by Dr. Sauder. See Cty. of Wayne Const. Managers of Goldsboro
v. Amory, 2019 NCBC LEXIS 32, at *21 (N.C. Super. Ct. May 17, 2019) (“The TSPA
grants only the owner of a trade secret the remedy of a civil action for
misappropriation of a trade secret.”). Therefore, Defendants’ Motions should be
GRANTED as to any attempted claim for misappropriation of trade secrets brought
by Dr. Sauder.
B. Tortious Interference with Contract
48. Plaintiffs only assert a tortious interference with contract claim against the
Wherry Defendants. (Compl. 33.) Plaintiffs contend that the Wherry Defendants
tortiously interfered with both the Atrium Agreement and the Employment
Agreements. (Compl. ¶ 103.)
49. To sustain a claim for tortious interference with contract, the pleading must
allege that:
(1) a valid contract [exists] between the [claimant] and a third person which confers upon the [claimant] a contractual right against a third person; (2) the [opposing party] knows of the contract; (3) the [opposing party] intentionally induces the third person not to perform the contract; (4) and in doing so acts without justification; (5) resulting in actual damage to [claimant].
United Labs., Inc. v. Kuykendall, 322 N.C. 643, 661, 370 S.E.2d 375, 387 (1988). “The
pleading standards for a tortious interference with contract claim are strict.” Kerry
Bodenhamer Farms, LLC v. Nature’s Pearl Corp., 2017 NCBC LEXIS 27, at *16 (N.C.
Super. Ct. Mar. 27, 2017). 50. The Wherry Defendants argue that Plaintiffs’ pleading is defective in two
ways. First, they contend Plaintiffs fail to allege inducement of Atrium by the Wherry
Defendants to breach the Atrium Agreement. Second, with respect to their alleged
interference with the Employment Agreements, the Wherry Defendants contend that
Plaintiffs failed to plead actual damages. The Court agrees. Plaintiffs’ failure to
plead inducement and actual damages is fatal to their claim for tortious interference
with contract.
1. Inducement
51. To sufficiently plead inducement, there must be allegations of “purposeful
conduct”, “active persuasion, request, or petition.” KRG New Hill Place, LLC v.
Springs Inv’rs, LLC, 2015 NCBC LEXIS 20, at *14–16 (N.C. Super. Ct. Feb. 27, 2015)
(quoting Inland Am. Winston Hotels, Inc. v. Crockett, 212 N.C. App. 349, 354, 712
S.E.2d 366, 369–70 (2011)). A plaintiff must allege that a defendant did more than
cause a third party to breach an agreement with the plaintiff. KRG New Hill Place,
LLC, 2015 NCBC LEXIS 20, at *16.
52. It is Plaintiffs’ position that representations made regarding Atrium’s
desire to negotiate in good faith towards a new agreement with SAC were false and
Atrium created “an illusion” that it was not breaching the Atrium Agreement.
(Compl. ¶¶ 50, 52.) Plaintiffs allege that Atrium worked with Dr. Wherry in order to
cover up any purported breach of the Atrium Agreement and used the Wherry
Defendants to “cut Plaintiffs out of the marketplace.” (Compl. ¶¶ 52, 78.) Plaintiffs also allege that the Wherry Defendants hoped to “cause Atrium to terminate the
Atrium Agreement[.]” (Compl. ¶ 105.)
53. The pleadings lack any allegations that show any “purposeful conduct” or
“active, persuasion [or] request” by the Wherry Defendants in an effort to induce
Atrium to breach the Atrium Agreement. See id. at *14–16. At best, Plaintiffs allege
that Defendants could have caused them to breach or terminate the Atrium
Agreement, and such allegations, without more, cannot support a claim for tortious
interference with contract. See Se. Anesthesiology Consultants, PLLC v. Rose, 2019
NCBC LEXIS 52, at * 29 (N.C. Super. Ct. Aug. 20, 2019).
54. Therefore, the Wherry Defendants’ Motion should be GRANTED and
Plaintiffs’ claim for tortious interference with the Atrium Agreement should be
DISMISSED without prejudice. 2
2. Actual Damage
55. “[M]onetary damages or ‘actual pecuniary harm’ to plaintiffs . . . is a
required element of tortious interference with contract.” Burgess v. Busby, 142 N.C.
App. 393, 404, 544 S.E.2d 4, 10 (2001); Am. Air Filter Co. v. Price, 2017 NCBC LEXIS
55, at *17 (N.C. Super. Ct. June 26, 2017). The North Carolina appellate courts have
also “suggested that such damages must be connected to a contract right.” See
SiteLink Software, LLC v. Red Nova Labs, Inc., 2018 NCBC LEXIS 90, at *49 (N.C.
Super. Ct. Aug. 20, 2018).
2 The decision to dismiss an action with or without prejudice is in the discretion of the trial
court. First Fed. Bank v. Aldridge, 230 N.C. App. 187, 191, 749 S.E.2d 289, 292 (2013). The Court concludes, in the exercise of its discretion, that dismissal of the tortious interference with contract claim pertaining to the Atrium Agreement should be without prejudice. 56. Plaintiffs allege that Defendants “plotted to potentially steal their
anesthesiologists to establish Dr. Wherry and his companies as SAC’s replacement.”
(Compl. ¶ 35.) Missing from the Complaint is any allegation that Defendants actually
interfered with, or the SAC Physicians breached, the Employment Agreements.
Plaintiffs only allege that Defendants have created a situation where the SAC
Physicians might violate the Employment Agreements or the Non-Compete
Provisions therein or become employed in another region. (Compl. ¶ 63.) Plaintiffs
fail to allege any actual harm that has occurred based on any purported interference
with the Employment Agreements.
57. For the foregoing reasons, Plaintiffs’ claim for tortious interference with
contract is deficient and the Wherry Defendants’ Motion as to the claim for tortious
interference with contract should be GRANTED and Plaintiffs’ claim for tortious
interference with the Employment Agreements should be DISMISSED with
prejudice.
C. Common Law Unfair Competition
58. Plaintiffs previously brought claims pursuant to N.C.G.S. §§ 75-1, 75-2, and
75-2.1 for monopolization, attempted monopolization, and restraint of trade, which
they voluntarily dismissed without prejudice on October 11, 2019. (Compl. 37–42.)
Plaintiffs never sought relief pursuant to the unfair and deceptive trade practices act
(“UDTPA”) of N.C.G.S. § 75-1.1 but assert a claim for common law unfair
competition. 3
3 Defendants raise the issue of whether a claim pursuant to UDTPA is intended to be broader
than a common law claim for unfair competition. (Atrium Br. 14–15; Wherry Defs.’ Br. 4.) 59. “The gravamen of unfair competition is the protection of a business from
misappropriation of its commercial advantage earned through organization, skill,
labor, and money.” Henderson v. U.S. Fid. & Guar. Co., 346 N.C. 741, 749, 488 S.E.2d
234, 239–40 (1997). “The standard which a plaintiff must meet to recover on an
unfair competition claim under the common law is not appreciably different from a
claim for unfair or deceptive trade practices [pursuant to Chapter 75].” Global Textile
Alliance, Inc. v. TDI Worldwide, LLC, 2018 NCBC LEXIS 104, at *23 (N.C. Super.
Ct. Oct. 9, 2018) (alteration in original) (citing BellSouth Corp. v. White Directory
Publishers, Inc., 42 F. Supp. 2d 598, 615 (M.D.N.C. 1999). Pleading a violation of the
UDTPA requires allegations showing that “(1) defendant committed an unfair or
deceptive act or practice, (2) the action in question was in or affecting commerce, and
(3) the act proximately caused injury to the plaintiff.” Dalton v. Camp, 353 N.C. 647,
656, 548 S.E.2d 704, 711 (2001).
60. A common law unfair competition claim may encompass “interference with
a competitor’s contractual relations, disparagement of a competitor’s product or
business methods, and misappropriation of a competitor’s intangible property rights
Defendants fail to bring to the Court’s attention any law supportive of the general premise that if a party cannot sustain a UDTPA claim, because, for example, the Defendants’ conduct is exempt from liability under the learned profession exception, then the party cannot sustain a common law unfair competition claim. The North Carolina Court of Appeals’ decisions in Sperry Corp. v. Patterson, 73 N.C. App. 123, 125, 325 S.E.2d 642, 644–45 (1985) and Badin Shores Resort Owners Ass’n v. Handy Sanitary Dist., 257 N.C. App. 542, 811 S.E.2d 198 (2018), and this Court’s analysis thereof in DiCesare v. Charlotte-Mecklenburg Hosp. Auth., 2019 NCBC LEXIS 14 (N.C. Super. Ct. Feb. 27, 2019), preclude Plaintiffs from pursuing claims against Atrium pursuant to Chapter 75 due to the express language of the statute. However, Plaintiffs no longer seek recovery pursuant to Chapter 75, and the Court does not find it necessary to apply its analysis of these cases to a claim for common law unfair competition. such as advertising devices or business systems.” Stearns v. Genrad, Inc., 564 F.
Supp. 1309, 1320 (M.D.N.C. 1983).
61. The Court has already determined that SAC, AASE, and MEDNAX’s claim
for trade secret misappropriation survives the Motions. Plaintiffs also assert a claim
of fraud, which is not subject to dismissal pursuant to the Motions. (Compl. 35.) The
underlying conduct for both claims of trade secret misappropriation and fraud may
support Plaintiffs’ claim for common law unfair competition for the purposes of Rule
12(c). See Global Textile Alliance, Inc., 2018 NCBC LEXIS 104, at *20–24 (concluding
that fraudulent conduct may serve as the basis of a common law unfair competition
claim); NFH, Inc. v. Troutman, 2019 NCBC LEXIS 66, at * 64 (N.C. Super. Ct. Oct.
29, 2019) (“Under well-settled North Carolina law, a violation of [the TSPA] may
support liability under N.C.G.S. § 75-1.1.”). The Court concludes that Plaintiffs have
adequately alleged conduct that would support a claim for common law unfair
competition, at least at this stage of the proceeding. Therefore, Defendants’ Motion
should be DENIED as to Plaintiffs’ claim for common law unfair competition.
V. CONCLUSION
62. For the foregoing reasons, the Court hereby GRANTS in part and DENIES
A. The Motions are DENIED as MOOT as to Plaintiffs’ former
claims of monopolization/attempted monopolization and restraint
of trade; B. Defendants’ Motions seeking dismissal of SAC, AASE, and
MEDNAX’s misappropriation of trade secrets claim is DENIED;
C. Defendants’ Motions seeking dismissal of Dr. Sauder’s
misappropriation of trade secrets claim is GRANTED and his
claim is DISMISSED WITH PREJUDICE;
D. The Wherry Defendants’ Motion seeking dismissal of Plaintiffs’
tortious interference with contract claim as it relates to the
Atrium Agreement is GRANTED and the claim is DISMISSED
WITHOUT PREJUDICE;
E. The Wherry Defendants’ Motion seeking dismissal of Plaintiffs’
tortious interference with contract claim as it relates to the
Employment Agreements is GRANTED and the claim is
DISMISSED WITH PREJUDICE.
F. Defendants’ Motions seeking dismissal of Plaintiffs’ common law
unfair competition claim is DENIED.
SO ORDERED, this the 13th day of December, 2019.
/s/ Michael L. Robinson Michael L. Robinson Special Superior Court Judge for Complex Business Cases