Sec. Nat'l Invs., Inc. v. Rice

792 S.E.2d 585, 250 N.C. App. 508, 2016 WL 6695829
CourtCourt of Appeals of North Carolina
DecidedNovember 15, 2016
DocketNo. COA16–215
StatusPublished
Cited by4 cases

This text of 792 S.E.2d 585 (Sec. Nat'l Invs., Inc. v. Rice) is published on Counsel Stack Legal Research, covering Court of Appeals of North Carolina primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Sec. Nat'l Invs., Inc. v. Rice, 792 S.E.2d 585, 250 N.C. App. 508, 2016 WL 6695829 (N.C. Ct. App. 2016).

Opinion

BRYANT, Judge.

Where a covenant not to compete is valid and enforceable and there remain issues of material fact to be resolved, we reverse the order of the trial court granting summary judgment in favor of defendant.

Plaintiff Security National Investments, Inc., operates the Renaissance European Day Spa, a full service salon, in Fayetteville, North Carolina. Plaintiff offers typical salon services including hair styling, nail services, skin care, a juice bar, and a gym fitness facility. In September 2004, defendant Dorian S. Rice entered into an employment contract with plaintiff, initially to be employed as a nail technician. Under paragraph 14 of the contract, the initial term of employment was to be for one year, at which point the contract would automatically renew for an additional year. Thereafter, the contract would automatically renew on a month-to-month basis until terminated by either party.

On or about 14 September 2004, defendant entered into an Employment Agreement with plaintiff, which included certain restrictive covenants related to competition.1 The relevant portion of the Employment Agreement contained the following non-compete restriction:

12. Covenant Not to Compete: It is the intention of the parties that the Employee shall be reasonably restricted for the time limitation and within the area herein set forth from competing in any manner with the Company through the use of skills, information and knowledge gained as a result of the training and employment of the Employee by the Company.
The Employee agrees that for a period of two (2) years after the Employee ceases to work for the Company, whether voluntarily or involuntarily, and within seven (7) miles of the place of business of the Company, the Employee will not, directly or indirectly, either for himself or in behalf of any other person, firm, or corporation, engage in any activity in competition with all or any portion of the type of business of the Company. This is to include doctor offices, chiropractic offices, fitness centers or any place of business offering services similar to those of the Renaissance European Day Spa .

(Emphasis added). The Employment Agreement also included certain restrictive covenants related to solicitation, which were labeled "Trade Secrets" and included the following language, in pertinent part:

During and after his employment, the Employee will not call upon or contact any clients of the Company for the purpose of soliciting or selling to these clients any services or products in competition with the Company in any manner, without the written consent of the Company, which consent may be arbitrarily withheld.

During the course of her employment with plaintiff, defendant became a hairstylist after completing an apprenticeship through Mitchelle's/Montgomer's Hair School. Later, on 19 April 2013, defendant filed the Articles of Incorporation for Roots Hair Salon, Inc. Thereafter, in a letter dated 22 April 2013, defendant resigned her position as hairstylist, effective two weeks from the date of the letter, on 8 May 2013. On 26 April 2013, defendant filed the Articles of Organization for DSR Properties, LLC. Three days later, a North Carolina Warranty Deed was recorded with the Cumberland County Register of Deeds on 29 April 2013, indicating DSR Properties, LLC was the grantee of certain property situated at 654 Hay Street, Fayetteville, North Carolina. On or about 2 May 2013, defendant had an exit interview with plaintiff's representative Bob McPheters and, during this interview, plaintiff reviewed the terms of the employment contract defendant signed, including the non-compete provision, and signed an Exit Interview/Information Sheet. From May 2013 until 8 September 2013, defendant worked as an independent contractor hair stylist at Cassie's Beauty Salon, which was located outside the restricted geographic area described in the non-compete.

On 18 September 2013, defendant opened Roots Hair Salon, Inc. ("Roots") for business at 654 Hay Street. While defendant owns Roots, she also rents a booth there and works as an independent contractor hairstylist. Roots is located within a seven-mile radius of plaintiff's business and provides hair styling and waxing services.

On 8 December 2014, plaintiff commenced this action in a verified complaint against defendant for breach of contract, injunctive relief, and misappropriation and misuse of trade secrets, with all three claims arising from defendant's employment contract with plaintiff. Plaintiff's verified complaint also contained a motion for a temporary restraining order and a motion for preliminary injunction. On 12 January 2014, plaintiff filed an amended complaint, and defendant filed a motion to dismiss, answer, and counterclaim. Plaintiff filed a motion to dismiss and reply to the counterclaim.

Plaintiff's motion for preliminary injunction, deriving from the non-compete provision in the employment contract, was heard by the Honorable C. Winston Gilchrist on 15 April 2015 in Cumberland County Superior Court, and was denied by order filed 6 May 2015. The trial court found that plaintiff had made no showing of irreparable harm, loss, injury, or damage if the preliminary injunction did not issue. On 5 November 2014, defendant filed a motion for summary judgment, which was heard by the Honorable Mary Ann Tally on 18 November 2014, and Judge Tally subsequently filed an order granting summary judgment to defendant on plaintiff's first and second claims for relief, but denying defendant's motion as to plaintiff's third claim, misappropriation and misuse of trade secrets. Plaintiff filed a motion to amend the judgment, and Judge Tally signed an amended order which was filed on 16 December 2015. Plaintiff filed notice of appeal.

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On appeal, plaintiff contends the trial court erred in entering summary judgment for defendant on plaintiff's claim for breach of contract. Specifically, plaintiff contends the covenant not to compete is valid as a matter of law and that there are still remaining issues of material fact regarding whether defendant breached her contract by opening Roots Hair Salon in order to directly compete with plaintiff's business. We agree.

"Our standard of review of an appeal from summary judgment is de novo; such judgment is appropriate only when the record shows 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.' " In re Will of Jones , 362 N.C. 569, 573, 669 S.E.2d 572, 576 (2008) (quoting Forbis v. Neal , 361 N.C. 519, 523-24, 649 S.E.2d 382, 385 (2007) ).

"Formation of a valid contract requires an offer, acceptance and consideration." Kinesis Adver., Inc. v. Hill , 187 N.C. App. 1, 11,

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792 S.E.2d 585, 250 N.C. App. 508, 2016 WL 6695829, Counsel Stack Legal Research, https://law.counselstack.com/opinion/sec-natl-invs-inc-v-rice-ncctapp-2016.