Strata Solar, LLC v. Naftel, 2020 NCBC 79.
STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION DURHAM COUNTY 20 CVS 2893
STRATA SOLAR, LLC,
Plaintiff,
v. ORDER AND OPINION ON ALBERT JACKSON NAFTEL, IV; DEFENDANTS’ JOINT MOTION TO JOHN BLAIR SCHOOFF; BRIAN DISMISS O’HARA; and SONDER ENERGY, LLC,
Defendants.
1. THIS MATTER is before the Court on the August 10, 2020 filing of
Defendants’ Joint Motion to Dismiss (the “Motion”) brought pursuant to Rule 12(b)(6)
of the North Carolina Rules of Civil Procedure (the “Rule(s)”). (ECF No. 6.)
2. For the reasons set forth herein, the Court GRANTS in part and DENIES
in part the Motion.
Ogletree, Deakins, Nash, Smoak & Stewart, P.C. by Phillip J. Strach and Brodie D. Erwin, for Plaintiff Strata Solar, LLC.
Bell, Davis & Pitt, P.A. by Marc E. Gustafson, for Defendants Jackson Naftel, Blair Schooff, and Brian O’Hara.
Van Hoy, Reutlinger, Adams & Dunn, PLLC by C. Grainger Pierce and Bryan Adams, for Defendant Sonder Energy, LLC.
Robinson, Judge.
I. INTRODUCTION
3. This dispute arises out of the alleged wrongful taking and misappropriation
of Plaintiff Strata Solar, LLC’s (“Plaintiff”) confidential information and trade secrets by three of its former employees in an effort to establish a competing business
venture.
II. FACTUAL BACKGROUND
4. The Court does not make findings of fact on a motion to dismiss pursuant
to Rule 12(b)(6) but only recites those factual allegations that are relevant and
necessary to the Court’s determination of the Motion.
5. Plaintiff is a North Carolina limited liability company with its principal
place of business in Durham, North Carolina. (Compl. ¶ 1.)
6. Plaintiff is in the business of the “development, design, construction,
ownership and operation of photovoltaic energy . . . projects” and “the development,
design, and construction of utility-scale battery energy storage solutions (‘BESS’).”
(Compl. ¶¶ 8–9.)
7. Defendants Albert Jackson Naftel, IV (“Naftel”), John Blair Schooff
(“Schooff”), and Brian O’Hara (“O’Hara” and collectively the “Individual Defendants”)
are citizens and residents of North Carolina. (Compl. ¶¶ 2−4.) Individual Defendants
are former employees of Plaintiff. (Compl. ¶ 6.)
8. Defendant Sonder Energy, LLC (“Sonder Energy” and together with
Individual Defendants referred to as “Defendants”) is a limited liability company with
its principal place of business in Wake County, North Carolina. (Compl. ¶ 5.)
9. Plaintiff hired Naftel in 2014, and at the time of his resignation, Naftel
worked as a Director of Development. (Compl. ¶ 10.) Naftel was responsible for
executing Plaintiff’s strategy and developing the market in North Carolina and Virginia and submitting recommendations to Plaintiff’s investment committee for
investment approval. (Compl. ¶¶ 12−13.)
10. Plaintiff hired Schooff in 2011, and at the time of his resignation, Schooff
worked as the Chief Business Development Officer. (Compl. ¶ 18.) Schooff was
responsible for the development of projects and key relationships with Plaintiff’s
“critical” clients and customers. (Compl. ¶ 19.)
11. Plaintiff hired O’Hara in 2015, and at the time of his resignation, O’Hara
worked as the Senior Vice President of Strategy and Government Affairs. (Compl.
¶¶ 24–25.) O’Hara was responsible for the development of Plaintiff’s BESS strategy
and the development of certain BESS projects. (Compl. ¶ 25.)
12. By virtue of their employment with Plaintiff, Individual Defendants had
access to Plaintiff’s trade secrets and confidential information, including development
studies, transmission system analyses, substation analyses, project siting, site
analyses, land owner information, financial modeling, customer lists, pricing lists,
bidding strategies, and customer preferences. (Compl. ¶¶ 14–17, 20–23, 27–30.)
13. Naftel and Schooff signed employment agreements with Plaintiff (the
“Employment Agreements”) with identical provisions. (Compl. ¶¶ 31−32.) The
Employment Agreements contained the following confidentiality provision:
At all times during Executive’s employment and thereafter, Executive will hold all proprietary information in strictest confidence and will not, directly or indirectly, (a) disclose, communicate, or make available any Proprietary Information to any person or entity for any purpose whatsoever, except as expressly authorized by [Plaintiff], or (b) use any Proprietary Information for any purpose other than to the extent necessary for purposes of performing services for [Plaintiff]. (Compl. ¶ 35.)
14. In the Employment Agreements, Naftel and Schooff recognized that all
proprietary information they came in contact with or possessed through their
employment with Plaintiff “shall remain the sole and exclusive property of
[Plaintiff.]” (Compl. ¶ 34.) The Employment Agreements provide that, “upon the
request of [Plaintiff] at any time, or upon the termination of Executive’s employment
for any reason, Executive will promptly . . . return or provide to [Plaintiff] all
Proprietary Information and shall retain no copies or records of Proprietary
Information in any form.” (Compl. ¶ 36.)
15. Plaintiff has several policies that prohibit its employees from forwarding
Plaintiff’s information to their personal accounts or using personal devices to conduct
work for Plaintiff. (Compl. ¶ 57.) Plaintiff sends regular reminders of this policy to
all of its employees. (Compl. ¶ 57.)
16. On April 27, 2020, Individual Defendants resigned from their employment
with Plaintiff to form their own solar/storage development company in competition
with Plaintiff. (Compl. ¶ 44.) Individual Defendants were planning to start their
competing entity, Sonder Energy, several months before their resignation from
Plaintiff. (Compl. ¶¶ 45, 76.)
17. Defendants launched a website for Sonder Energy, which lists Individual
Defendants as “Founding Partners.” (Compl. ¶ 76.) Sonder Energy’s website includes
a profile for Individual Defendants, which references their time spent and experience
as Plaintiff’s employees. (Compl. ¶ 76.) 18. Plaintiff alleges that Individual Defendants retained thousands of
Plaintiff’s “documents and files that would be useful to them in a competing
enterprise.” (Compl. ¶ 45.) On March 5, 2020, while employed by Plaintiff, Schooff
forwarded a document that Plaintiff contends contains Plaintiff’s trade secrets to his
personal e-mail address. (Compl. ¶ 51.) Before Naftel’s resignation, Naftel accessed
and downloaded documents that Plaintiff contends contain Plaintiff’s trade secrets to
a flash drive. (Compl. ¶ 53.) As of May 8, 2020, Naftel still possessed the flash drive
containing Plaintiff’s trade secrets. (Compl. ¶ 60.)
19. As of May 28, 2020, two of the three Individual Defendants, Naftel and
Schooff, admitted to retaining Plaintiff’s documents and information on their
personal computer and/or storage devices. (Compl. ¶¶ 52, 60−62.)
III. PROCEDURAL BACKGROUND
20. The Court sets forth here only those portions of the procedural history
relevant to its determination of the Motion.
21. Plaintiff initiated this action with the filing of the Complaint on July 31,
2020.
22. This action was designated as a mandatory complex business case and
assigned to the undersigned on August 3, 2020. (ECF Nos. 1, 2.)
23. On August 8, 2020, Defendants filed the Motion and the Defendants’
Memorandum in Support of Their Motion to Dismiss. (Defs.’ Memo. Supp. Mot.
Dismiss, ECF No. 7 [“Memo.”].) 24. The Court held a hearing on the Motion on October 7, 2020, at which all
parties were represented by counsel. (ECF No. 26.)
25. The Motion is ripe for resolution.
IV. LEGAL STANDARD
26. In ruling on a motion to dismiss pursuant to Rule 12(b)(6), the Court
reviews the allegations in the Complaint in the light most favorable to Plaintiff. See
Christenbury Eye Ctr., P.A. v. Medflow, Inc., 370 N.C. 1, 5, 802 S.E.2d 888, 891 (2017).
The Court’s inquiry is “whether, as a matter of law, the allegations of the complaint
. . . are sufficient to state a claim upon which relief may be granted under some legal
theory[.]” Harris v. NCNB Nat’l Bank, 85 N.C. App. 669, 670, 355 S.E.2d 838, 840
(1987). The Court accepts all well-pleaded factual allegations in the relevant
pleading as true. See Krawiec v. Manly, 370 N.C. 602, 606, 811 S.E.2d 542, 546
(2018). The Court is therefore not required “to accept as true allegations that are
merely conclusory, unwarranted deductions of fact, or unreasonable inferences.”
Good Hope Hosp., Inc. v. N.C. Dep’t of Health & Human Servs., 174 N.C. App. 266,
274, 620 S.E.2d 873, 880 (2005) (citation omitted).
27. Our Supreme Court has noted that “[i]t is well-established that dismissal
pursuant to Rule 12(b)(6) is proper when ‘(1) the complaint on its face reveals that no
law supports the plaintiff’s claim; (2) the complaint on its face reveals the absence of
facts sufficient to make a good claim; or (3) the complaint discloses some fact that
necessarily defeats the plaintiff’s claim.’ ” Corwin v. British Am. Tobacco PLC, 371
N.C. 605, 615, 821 S.E.2d 729, 736−37 (2018) (quoting Wood v. Guilford Cty., 355 N.C. 161, 166, 558 S.E.2d 490, 494 (2002)). This standard of review for Rule 12(b)(6) is the
standard our Supreme Court “uses routinely . . . in assessing the sufficiency of
complaints in the context of complex commercial litigation.” Id. at 615, 821 S.E.2d at
737 n.7 (citations omitted).
V. ANALYSIS
28. Plaintiff asserts three causes of action against Defendants:
(1) misappropriation of trade secrets in violation of N.C.G.S. § 66-152 et seq.;
(2) conversion of Plaintiff’s trade secrets and other confidential or proprietary
business information; and (3) unfair and deceptive trade practices in violation of
N.C.G.S. § 75-1.1. (Compl. ¶¶ 81−98.) The Court addresses each claim in turn.
29. As an initial matter, the Court finds it important to emphasize that the
Court’s analysis of these claims is limited to the allegations made in the Complaint.
Counsel for the parties asked the Court to consider matters raised outside the
Complaint; however, the Court declines to do so, which would convert the Motion to
one for summary judgment pursuant to Rule 56. Holton v. Holton, 258 N.C. App. 408,
414, 813 S.E.2d 649, 654 (2018) (“Rule 12 requires that Rule 56 standards apply to a
Rule 12(b)(6) motion for failure to state a claim when the trial court considers matters
outside the pleading.”).
A. Trade Secret Misappropriation
30. Plaintiff contends that Defendants have obtained Plaintiff’s trade secrets,
and because Defendants have formed a competing business, Sonder Energy, it is
“inevitable that Defendants have shared or disclosed” Plaintiff’s trade secrets in violation of N.C.G.S. § 66-152 et seq. (Compl. ¶¶ 86–88.) “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, 370 N.C. at 609, 811 S.E.2d at 547–48 (quoting Washburn v. Yadkin Valley
Bank & Tr. Co., 190 N.C. App. 315, 326, 660 S.E.2d 577, 585 (2008)).
31. Defendants contend that Plaintiff has failed to adequately allege that
Defendants’ acquisition of Plaintiff’s trade secrets was unauthorized, in other words,
that Defendants misappropriated Plaintiff’s trade secrets. (See Defs.’ Reply Supp.
Their Joint Mot. Dismiss 2–3, ECF No. 25.) Accordingly, the Court limits its analysis
to whether Plaintiff adequately alleged misappropriation.
32. Misappropriation is defined as the “acquisition, disclosure, or use of a trade
secret of another without express or implied authority or consent, unless such trade
secret was arrived at by independent development, reverse engineering, or was
obtained from another person with a right to disclose the trade secret.” N.C.G.S. §
66-152(1). A complaint must contain allegations, identifying with specificity, “the
acts by which the alleged misappropriations were accomplished.” Washburn, 190
N.C. App. at 327, 660 S.E.2d at 586.
33. Analyzing whether a plaintiff properly pled misappropriation to support a
trade secret misappropriation claim, this Court in Wells Fargo Ins. Servs. USA v.
Link, 2018 NCBC LEXIS 42, at *40–42 (N.C. Super. Ct. May 8, 2018), aff’d per curiam
827 S.E.2d 458 (N.C. 2019), provided that allegations that the defendant had access to the plaintiff’s trade secrets by way of the defendant’s employment with the
plaintiff, the defendant became employed by a competitor, some of the plaintiff’s
customers for whom the defendant was responsible for while employed by the plaintiff
transferred their business to the competitor, and the defendant used the plaintiff’s
trade secrets to solicit the plaintiff’s customers required a “significant inferential
leap” to conclude that the defendant misappropriated a trade secret; however, the
allegations were sufficient at the pleading stage to survive a Rule 12(b)(6) motion.
The Wells Fargo Court reached the conclusion that the plaintiff’s allegations were
sufficient notwithstanding the fact that it failed to allege that the defendant (1) ever
accessed the plaintiff’s trade secrets without authorization; (2) downloaded, copied,
or otherwise removed the plaintiff’s trade secret information; and (3) disclosed the
trade secrets. Wells Fargo Ins. Servs. USA, 2018 NCBC LEXIS 42, at *40–41.
34. As to Naftel and Schooff, Plaintiff alleges that (1) Individual Defendants
planned a competing business venture several months prior to their resignations;
(2) Naftel and Schooff obtained Plaintiff’s trade secrets on their personal devices in
violation of Plaintiff’s policies; and (3) Defendants have disclosed or will disclose
Plaintiff’s trade secrets in Defendants’ competing venture. (Compl. ¶¶ 45, 51–54, 57,
60–61, 77.) The Court concludes that Plaintiff has adequately pled that Naftel and
Schooff acquired Plaintiff’s trade secrets without authorization, therefore
misappropriating Plaintiff’s trade secrets. As such, the Motion should be DENIED
to the extent that it requests that the Court dismiss the misappropriation of trade
secrets claim against Naftel and Schooff. 35. As to O’Hara and Sonder Energy, Plaintiff’s allegations of their
misappropriation are limited to “[b]ecause Defendants have formed a competing
business enterprise together as ‘Founding Partners,’ it is inevitable that Defendants
have shared or disclosed Strata’s confidential information and/or trade secrets to each
other.” (Compl. ¶¶ 77, 87.) The Court is not required to accept Plaintiff’s conclusory
allegations regarding O’Hara’s and Sonder Energy’s alleged misappropriation of
Plaintiff’s trade secrets. See Washburn, 190 N.C. App. at 327, 660 S.E.2d at 585–86.
36. Plaintiff does not allege any specific acts by O’Hara or Sonder Energy to
show that they accessed, disclosed, or used Plaintiff’s trade secrets without Plaintiff’s
authorization. See Wells Fargo Ins. Servs. USA, 2018 NCBC LEXIS 42, at *38–39
(dismissing a trade secret misappropriation claim where the plaintiff failed to allege
that defendant accessed or acquired trade secrets when the defendant was not
authorized to do so or that the defendant disclosed or used the plaintiff’s trade
secrets). Accordingly, the Court GRANTS the Motion as to O’Hara and Sonder
Energy and dismisses without prejudice 1 the trade secret misappropriation claim
asserted against them. 2
1 Notwithstanding the Court’s conclusion that this claim should be dismissed in part, “[t]he
decision to dismiss an action with or without prejudice is in the discretion of the trial court[.]” First Fed. Bank v. Aldridge, 230 N.C. App. 187, 191, 749 S.E.2d 289, 292 (2013). The Court concludes, in the exercise of its discretion, that dismissal of the trade secret misappropriation claim against O’Hara and Sonder Energy should be without prejudice to Plaintiff’s reassertion of such claim through proper factual allegations by way of a motion to amend.
2 In part, Defendants argue that because “Plaintiff’s misappropriation of trade secrets claim
relies entirely upon its assertion that Defendants will inevitably disclose [Plaintiff’s] purported trade secrets[,]” and the doctrine of inevitable disclosure has not been adopted by North Carolina courts, Plaintiff’s trade secret misappropriation claim should fail. (Memo. 3.) It is true that this Court has declined to adopt the doctrine of inevitable disclosure. See RCR Enters., LLC v. McCall, 2014 NCBC LEXIS 69, at *17 (N.C. Super. Ct. Dec. 19, 2014); see B. Conversion
37. Plaintiff alleges that “Defendants’ conduct . . . constitutes a conversion of
[Plaintiff’s] trade secrets and other confidential or proprietary business information.”
(Compl. ¶ 96.)
38. Conversion is defined as “an unauthorized assumption and exercise of the
right of ownership over goods or personal chattels belonging to another, to the
alteration of their condition or the exclusion of an owner’s rights.” Peed v. Burleson’s,
Inc., 244 N.C. 437, 439, 94 S.E.2d 351, 353 (1956). “There are, in effect, two essential
elements of a conversion claim: ownership in the plaintiff and wrongful possession or
conversion by the defendant.” Variety Wholesalers, Inc. v. Salem Logistics Traffic
Servs., LLC, 365 N.C. 520, 523, 723 S.E.2d 744, 747 (2012). “The essence of
conversion is not acquisition of property by the wrongdoer, but a wrongful deprivation
of it to the owner.” Bartlett Milling Co. v. Walnut Grove Auction & Realty Co., 192
N.C. App. 74, 86, 665 S.E.2d 478, 488 (2008).
39. Further, “[i]n North Carolina, only goods and personal property are
properly the subject of a claim for conversion.” Norman v. Nash Johnson & Sons’
Farms, Inc., 140 N.C. App. 390, 414, 537 S.E.2d 248, 264 (2000). “[A]n intangible
interest cannot provide the basis for a conversion claim.” Window World of N.
also Se. Anesthesiology Consultants, PLLC v. Charlotte-Mecklenburg Hosp. Auth., 2018 NCBC LEXIS 137, at *56–59 (N.C. Super. Ct. June 22, 2018); DSM Dyneema, LLC v. Thagard, 2015 NCBC LEXIS 50, at *fn. 4 (N.C. Super. Ct. May 12, 2015). However, the Court’s dismissal of the trade secret misappropriation claim against O’Hara and Sonder Energy is for the limited reason that Plaintiff fails to allege the unauthorized access, disclosure, or use of Plaintiff’s trade secrets by O’Hara and Sonder Energy. Atlanta, Inc. v. Window World, Inc., 2018 NCBC LEXIS 111, at *8−9 (N.C. Super. Ct.
Oct. 22, 2018).
40. Plaintiff does not allege, or argue, that Defendants deprived Plaintiff of a
tangible form of its trade secrets, either in a printed “hard copy” or Plaintiff’s only
copy of the information in its electronic form. Plaintiff argues that it “has been
deprived of possession of its trade secrets by the Individual Defendants[,]” and
“Defendants have likely destroyed its trade secrets by taking them without
authorization, thus depriving [Plaintiff] of the ownership of its trade secret[s].” (Pl.’s
Resp. Defs.’ Mot. Dismiss, 5, 7 (emphasis in original), ECF No. 20 [“Resp.”].)
41. Plaintiff’s argument fails for two reasons. First, Plaintiff attempts to assert
a conversion claim based on intangible information. See Global Textile All., Inc. v.
TDI Worldwide, LLC, 2018 NCBC LEXIS 159, at *33–34 (N.C. Super. Ct. Nov. 29,
2018). Second, Plaintiff fails to allege deprivation of the use of its trade secret
information. See id.
42. Furthermore, this issue was addressed in Addison Whitney, LLC v.
Cashion, 2017 NCBC LEXIS 51, at *17–18 (N.C. Super. Ct. June 9, 2017), when the
plaintiff contended that deprivation “of the sole and exclusive dominion and control
over its trade secrets and confidential information” supported a conversion claim.
The plaintiff in part relied on a federal court decision, which provided that the copying
of an electronic document containing proprietary information constitutes conversion
when it deprives its owner “of the sole and exclusive dominion and control over the
proprietary information[,]” Bridgetree, Inc. v. Red F Mktg., LLC, 2013 U.S. Dist. LEXIS 15372, at *49–51 (W.D.N.C. Feb. 5, 2013), and this Court rejected this
approach, Addison Whitney, LLC, 2017 NCBC LEXIS 51, at *17–18.
43. The Court in Addison Whitney, LLC dismissed the conversion claim and
reiterated North Carolina courts’ approach that deprivation to the owner is “the
essence of a conversion claim[.]” Addison Whitney, LLC, 2017 NCBC LEXIS 51, at
*18. This Court emphasizes today that “[i]n the absence of further guidance from the
North Carolina Supreme Court or Court of Appeals, the Court declines to construe
the law of conversion more broadly.” Id.
44. Accordingly, the Court determines that the Motion should be GRANTED
and Plaintiff’s conversion claim should be dismissed without prejudice.
C. Chapter 75
45. To state a claim for unfair and deceptive trade practices pursuant to
N.C.G.S. § 75-1.1 (“UDTPA”), Plaintiff must allege “(1) [D]efendant[s] committed an
unfair and deceptive act or practice, (2) in or affecting commerce, and (3) [P]laintiff
was injured as a result.” McKee v. James, 2013 NCBC LEXIS 33, at *31 (N.C. Super.
Ct. July 24, 2013).
46. Plaintiff’s basis for its UDTPA claim is “Defendants misappropriated and
unlawfully utilized [Plaintiff’s] trade secret and confidential information.” (Compl.
¶ 92.) Plaintiff’s argument is limited to a single paragraph in its responsive brief
providing that Plaintiff “pled a valid [UDTPA] claim by virtue of adequately alleging
facts sufficient to support its trade secret claim.” (Resp. 4.) 47. Therefore, because the Court at this stage of the proceeding declines to
dismiss the trade secret misappropriation claims brought against Naftel and Schooff,
the Court DENIES the Motion to the extent it requests that the Court dismiss the
UDTPA claim against Naftel and Schooff. See SCR-Tech, LLC v. Evonik Energy
Servs., LLC, 2011 NCBC LEXIS 27, at *87 (N.C. Super. Ct. July 22, 2011) (declining
to dismiss a UDTPA claim that was dependent on a claim for trade secret
misappropriation that survived a Rule 56 motion); see also Med. Staffing Network,
Inc. v. Ridgeway, 194 N.C. App. 649, 659, 670 S.E.2d 321, 329 (2009) (“A violation of
the Trade Secrets Protection Act constitutes an unfair act or practice under [N.C.G.S.]
§ 75-1.1.”).
48. However, because the Court dismisses both the trade secret
misappropriation claim and conversion claim against O’Hara and Sonder Energy, the
Court GRANTS the Motion and dismisses the UDTPA claim brought against O’Hara
and Sonder Energy without prejudice. See Krawiec, 370 N.C. at 612–13, 811 S.E.2d
at 550 (“Because we determined that plaintiffs failed to state a valid claim for tortious
interference with contract or misappropriation of trade secrets, we necessarily must
conclude that plaintiffs also failed to adequately allege [a UDTPA claim.]”).
VI. CONCLUSION
49. For the foregoing reasons, the Court hereby GRANTS in part and DENIES
in part the Motion as follows: A. The Court DENIES the Motion to the extent it requests the Court
dismiss Plaintiff’s trade secret misappropriation claim against Naftel
and Schooff;
B. The Court GRANTS the Motion to the extent it requests the Court
dismiss Plaintiff’s trade secret misappropriation claim against O’Hara
and Sonder Energy and DISMISSES the trade secret misappropriation
claim asserted against O’Hara and Sonder Energy without prejudice;
C. The Court GRANTS the Motion to dismiss the conversion claim and
DISMISSES the conversion claim without prejudice;
D. The Court DENIES the Motion to the extent it requests the Court
dismiss Plaintiff’s UDTPA claim against Naftel and Schooff; and
E. The Court GRANTS the Motion to the extent it requests the Court
dismiss Plaintiff’s UDTPA claim against O’Hara and Sonder Energy and
DISMISSES the UDTPA claim asserted against O’Hara and Sonder
Energy without prejudice.
SO ORDERED, this the 29th day of October, 2020.
/s/ Michael L. Robinson Michael L. Robinson Special Superior Court Judge for Complex Business Cases