Window Gang Ventures, Corp. v. Salinas

2019 NCBC 23

• Court: North Carolina Business Court
• Decided: April 2, 2019
• Docket: 18-CVS-107
• Status: Published

Opinion

Window Gang Ventures, Corp. v. Salinas, 2019 NCBC 23.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION CARTERET COUNTY 18 CVS 107

WINDOW GANG VENTURES, CORP.,

Plaintiff,

v. ORDER AND OPINION ON GABRIEL SALINAS; THE GANG DEFENDANTS’ MOTION TO DISMISS GROUP, INC.; and WINDOW NINJAS, LLC; RED WINDOW, LLC; BLUE WINDOW, LLC; and ORANGE WINDOW, LLC,

Defendants.

1. THIS MATTER is before the Court on Defendants’ Rule 12(b)(6) Motion to

Dismiss (the “Motion”) in the above-captioned action. (Defs.’ Rule 12(b)(6) Mot.

Dismiss, ECF No. 55.)

2. After reviewing the Motion, the briefs in support of and in opposition to the

Motion, the Amended Complaint, the appropriate materials attached to and

incorporated in the Amended Complaint, and the arguments of counsel at the hearing

on October 25, 2018 (the “Hearing”), the Court hereby GRANTS in part and

DENIES in part the Motion.

Bell, Davis & Pitt, P.A., by Jason B. James, Joshua B. Durham, and Derek M. Bast, for Plaintiff Window Gang Ventures, Corp.

Hodges Coxe Potter & Phillips, LLP, by C. Wes Hodges, II, Bradley A. Coxe, and Samuel B. Potter, for Defendants Gabriel Salinas, The Gang Group, Inc., Window Ninjas, LLC, Red Window, LLC, Blue Window, LLC, and Orange Window, LLC.

Bledsoe, Chief Judge. I.

FACTUAL AND PROCEDURAL BACKGROUND

3. The Court does not make findings of fact on motions to dismiss under Rule

12(b)(6) of the North Carolina Rules of Civil Procedure. See, e.g., Concrete Serv. Corp.

v. Inv’rs Grp., Inc., 79 N.C. App. 678, 681, 340 S.E.2d 755, 758 (1986). Rather, the

Court recites only the relevant allegations asserted in Plaintiff’s Amended Complaint

to determine the Motion.

4. Plaintiff Window Gang Ventures, Corp. (“Window Gang”) is a North

Carolina corporation with its principal place of business in Carteret County. (Am.

Compl. ¶ 6, ECF No. 39.) Window Gang is “engaged in the business of operating or

franchising ‘Window Gang’ locations for residential, commercial, industrial and high-

rise cleaning services including window cleaning, blind cleaning, gutter cleaning,

window tinting, chimney sweeping, dryer vent cleaning, roof washing, oil

remediation, no slips floor, and low and high pressure spray applications.” (Am.

Compl. ¶ 16.) Window Gang has locations in twenty states, and each location is

operated by a Window Gang-owned business or a franchise specifically authorized by

Window Gang to conduct business in a designated territory. (Am. Compl. ¶ 17.)

5. Defendant Gabriel Salinas (“Salinas”) is a citizen and resident of New

Hanover County and is the President and Registered Agent for Defendant The Gang

Group, Inc. (“Gang Group”). (Am. Compl. ¶¶ 7–8.) Gang Group is a North Carolina

corporation, and Defendant Window Ninjas, LLC (“Window Ninjas”) is a North

Carolina limited liability company. (Am. Compl. ¶¶ 8–9.) Both Gang Group and Window Ninjas maintain their principal places of business in New Hanover County,

North Carolina. (Am. Compl. ¶¶ 8―9.)

6. Defendants Red Window, LLC (“Red Window”), Orange Window, LLC

(“Orange Window”), and Blue Window, LLC (“Blue Window”) (together, the

“Affiliated Defendants”) are limited liability companies organized by Salinas to

operate Window Gang franchises in South Carolina, Tennessee, and Virginia,

respectively. (Am. Compl. ¶¶ 10–13.)

7. On or about July 22, 1997, Salinas entered into a franchise agreement with

Window Gang which granted him the exclusive right to operate a Window Gang

franchise in “Wilmington, NC, (New Hanover County); Brunswick County; Pender

County; and Duplin County” for ten years (the “1997 Franchise Agreement”). (Am.

Compl. ¶ 28.) The 1997 Franchise Agreement also granted Salinas a limited right to

use Window Gang’s trade secrets. (Am. Compl. ¶ 27.) On or about June 10, 2007,

Salinas, “individually and on behalf of Gang Group,” entered into a renewal franchise

agreement (the “2007 Franchise Agreement”), extending the franchise relationship

through 2017.1 (Am. Compl. ¶ 31.) The 2007 Franchise Agreement specifically

defined Salinas and Gang Group’s operating territory as the “Wilmington, NC, area.”

(2007 Franchise Agreement.)

8. Window Gang alleges that “[f]rom 1997 through December 15, 2017, Salinas

and Gang Group operated the Wilmington Territory (New Hanover, Brunswick,

1 The 2007 Franchise Agreement attached to the Amended Complaint is signed by Salinas as franchisee and identifies Window Gang and Salinas as the only contracting parties. (Am. Compl. Ex. 2, at Ex. A [hereinafter the “2007 Franchise Agreement”], ECF No. 39.2.) Duplin, and Pender Counties) Window Gang franchise,” (Am. Compl. ¶ 39), and

occasionally serviced customers outside the Wilmington Territory, (Am. Compl. ¶ 41).

During the latter portion of this period, the Affiliated Defendants operated Window

Gang franchises in other states under oral agreements with Window Gang containing

the same terms set forth in Salinas’s franchise agreements. (Am. Compl. ¶¶ 42–43.)

9. In early 2017, Window Gang provided Defendants with new franchise

agreements and began negotiating a ten-year extension of the franchise relationship

from 2017 to 2027. (Am. Compl. ¶ 45.) Soon thereafter, Salinas confirmed to Window

Gang that the agreements were under review and that “his signature was

forthcoming.” (Am. Compl. ¶ 46.) Although the 2007 Franchise Agreement expired

on June 10, 2017, Salinas, Gang Group, and the Affiliated Defendants continued to

pay monthly royalty fees to Window Gang under an “oral license” until September

2017. (Am. Compl. ¶ 49.) Salinas and Gang Group continued to operate in the

Wilmington Territory as a Window Gang franchise until December 15, 2017. (Am.

Compl. ¶ 39.)

10. Window Gang alleges that during these 2017 negotiations, Salinas “began

operating a competing window cleaning, blind cleaning, gutter cleaning and high

pressure spray application service business, [called] Window Ninjas, in the

Wilmington territory and in other” territories in which he had previously conducted

business as a Window Gang franchisee. (Am. Compl. ¶ 50.) Window Gang contends

that in launching and operating Window Ninjas, “Salinas utilized the proprietary

Window Gang system, customer lists, phone numbers, and [Window Gang’s trade secrets]” to compete with Window Gang in violation of the 2007 Franchise Agreement.

(Am. Compl. ¶ 51.)

11. Window Gang further asserts that Salinas intentionally diverted customers

and revenue from Window Gang to Window Ninjas using e-mail, social media, and

direct marketing. (Am. Compl. ¶ 52; Am. Compl. Ex. 4, ECF No. 39.4.) Window Gang

alleges that Defendants utilized Window Gang’s customer lists and other trade

secrets to falsely represent to existing and potential customers that Window Gang

had gone out of business, was no longer servicing the customers’ areas, or had

changed its name to Window Ninjas. (Am. Compl. ¶ 53; see Am. Compl. Ex. 4; Am.

Compl. Ex. 5, ECF No 39.5.) Defendants also continued to use and advertise

telephone numbers licensed and used by Window Gang in their efforts to advance

Window Ninjas’ business. (Am. Compl. ¶ 63.)

12. Window Gang filed its Complaint initiating this action on February 1, 2018,

asserting claims for: (i) breach of the covenant not to compete in the 2007 Franchise

Agreement;2 (ii) conversion; (iii) tortious interference with contract and tortious

interference with prospective economic advantage; (iv) trade secret misappropriation;

(v) trademark infringement; (vi) and violation of the Unfair and Deceptive Trade

Practices Act, N.C. Gen. Stat. § 75-1.1, et seq. (“UDTPA”). Contemporaneously with

the filing of the Complaint, Window Gang sought and obtained a temporary

2 Although Defendants have also sought the dismissal of any Window Gang claim based on

an alleged breach of the non-solicitation provision in the 2007 Franchise Agreement, Window Gang has not attempted to enforce that provision and has confirmed that “the Amended Complaint does not contend that the Franchise Agreement with Salinas contains an enforceable covenant against solicitation.” (Pl.’s Resp. Br. Opp. Defs.’ Mot. Dismiss 19 [hereinafter “Pl.’s Resp. Br.”], ECF No. 58.) restraining order (the “TRO”) from Superior Court Judge John E. Nobles, Jr. The

TRO restricted Defendants from using Window Gang’s “[m]arks, likeness, good will,

customer lists, Trade Secrets and proprietary systems and processes as defined in the

Complaint and from soliciting or interfering with Window Gang, its customers, or

contracts.” (Order Granting TRO 1, ECF No. 4.) The TRO further ordered

Defendants to immediately stop using certain phone numbers belonging to Window

Gang. (Order Granting TRO 2.)

13. The next day, on February 2, 2018, Defendants filed a Notice of Designation

seeking to designate this matter as a mandatory complex business case under N.C.

Gen. Stat. § 7A-45.4. (Notice Designation, ECF No. 5.) The case was subsequently

designated as a mandatory complex business case, (Designation Order, ECF No. 6),

and, on February 6, 2018, assigned to the undersigned, (Assignment Order, ECF No.

2).

14. On February 13, 2018, Window Gang filed a motion for preliminary

injunction, (Pl.’s Mot. Prelim. Inj., ECF No. 14), reiterating its arguments in support

of its TRO Motion and further contending that while Salinas was operating as a

Window Gang franchisee, he used an e-mail account (the “Google Account”) to store

materials belonging to Window Gang, including customer information. (Pl.’s Mem.

Law Supp. Mot. Prel. Inj. 11, ECF No. 16.)

15. After expedited briefing, the Court held a hearing on Window Gang’s

preliminary injunction motion on February 16, 2018. The Court subsequently issued

a Preliminary Injunction on February 21, 2018, requiring Defendants to return all Window Gang Protected Information,3 and prohibiting Defendants from using and

accessing the Google Account. Id. at *33–36.

16. Window Gang alleges that on February 19, 2018—three days after the

preliminary injunction hearing but before the Court’s ruling—Brandee Pohlson

(“Pohlson”), Gang Group’s Office Manager and Window Ninjas’ Vice President of

Operations, accessed the Google Account, (Am. Compl. ¶ 90; Am. Compl. Ex. 13, at 6,

ECF No. 39.13), and “moved well over a thousand files [related to the operation of

Window Gang franchises] into the trash[,]” (Am. Compl. ¶ 91; Am. Compl. Ex. 14,

ECF No. 39.14). According to Window Gang, Pohlson now admits that she deleted

files from the Google Account on February 19 and 27, 2018, and that she was

specifically “deleting all files off the [Google Account] that contained the name or

mark for Window Gang.” (Am. Compl. ¶ 96; see Am. Compl. Ex. 16, at ¶ 8, ECF No

39.16 (emphasis omitted).) Window Gang also contends that Defendants continued

to use Window Gang’s phone numbers after entry of the Preliminary Injunction. (Am.

Compl. ¶¶ 65–67.)

17. In light of Defendants’ conduct, Window Gang filed an Amended Complaint

on April 20, 2018, which abandoned its claim for unjust enrichment and asserted new

3 The Preliminary Injunction defines “Protected Information” as “all signs, catalogues, advertising materials, forms, invoices and other materials containing the WINDOW GANG Names and Marks or otherwise relating to the Franchise,” Window Gang’s proprietary and confidential information, “including without limitation the contents of the Operations Manual and specifications, standards and operation procedures of the WINDOW GANG Franchise,” as well as “training materials, operation procedures, client lists and other data.” Window Gang Ventures, Corp. v. Salinas, 2018 NCBC LEXIS 18, at *18–19 (N.C. Super. Ct. Feb. 21, 2018). claims for trademark infringement under N.C. Gen. Stat. §§ 80-11 and 80-13, civil

obstruction of justice, and civil conspiracy to commit civil obstruction of justice.

18. Defendants filed the Motion on August 10, 2018, seeking dismissal of all of

Window Gang’s claims against all Defendants. The Motion has been fully briefed,

the Hearing has been held, and the Motion is now ripe for resolution.

II.

LEGAL STANDARD

19. In ruling on a motion to dismiss for failure to state a claim under Rule

12(b)(6), the Court’s inquiry is “whether the allegations of the complaint, if treated as

true, are sufficient to state a claim upon which relief can be granted under some legal

theory.” Corwin v. British Am. Tobacco PLC, 821 S.E.2d 729, 736 (N.C. 2018)

(quoting CommScope Credit Union v. Butler & Burke, LLP, 369 N.C. 48, 51, 790

S.E.2d 657, 659 (2016)).

20. “When documents are attached to or incorporated into a complaint,” the

Court may consider those documents without converting the motion into one for

summary judgment under Rule 56. Schlieper v. Johnson, 195 N.C. App. 257, 261,

672 S.E.2d 548, 551 (2009).

21. “It 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 . . . 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 . . . claim.’” Corwin,

821 S.E.2d at 736–37 (quoting Wood v. Guilford County, 355 N.C. 161, 166, 558, S.E.2d 490, 494 (2002)). The Court will not grant a motion to dismiss “unless it

appears to a certainty that [the] plaintiff is entitled to no relief under any state of

facts which could be proved in support of the claim.” Sutton v. Duke, 277 N.C. 94,

103, 176 S.E.2d 161, 166 (1970) (emphasis omitted).

22. The Court construes the allegations in the pleading “in the light most

favorable to the non-moving party.” Christenbury Eye Ctr., P.A. v. Medflow, Inc., 370

N.C. 1, 5, 802 S.E.2d 888, 891 (2017). The Court is not required, however, “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); see also McCrann v.

Pinehurst, LLC, 225 N.C. App. 368, 377, 737 S.E.2d 771, 777 (2013) (treating

plaintiffs’ factual allegations as true, but ignoring their legal conclusions). The Court

may also “reject allegations that are contradicted by the documents attached,

specifically referred to, or incorporated by reference in the complaint.” Laster v.

Francis, 199 N.C. App. 572, 577, 681 S.E.2d 858, 862 (2009).

III.

ANALYSIS

A. Breach of Contract: Breach of the Non-compete Provision

23. Window Gang alleges that Salinas, Gang Group, and the Affiliated

Defendants breached the 2007 Franchise Agreement by

engag[ing] in direct competition with Window Gang, disparag[ing] Window Gang, divert[ing] customers away from Window Gang to . . . Window Ninjas, transferr[ing] Window Gang telephone numbers into the name of Window Ninjas, fail[ing] to keep Window Gang’s [trade secrets], fail[ing] to return information and documents belonging to Window [Gang], and failing to pay [required] royalty payments in addition to other breaches of the written and oral agreements.

(Am. Compl. ¶ 118.)

24. Defendants seek dismissal of Window Gang’s breach of contract claim only

as it relates to the non-competition provision, contending that the provision is

unenforceable as a matter of law because it is overbroad as to territory and fails to

protect Window Gang’s legitimate business interests. (Mem. Law Supp. Defs.’ Mot.

Dismiss 4–13 [hereinafter “Defs.’ Mot. Dismiss Br.”], ECF No. 38.)

25. Covenants not to compete are “disfavored” under North Carolina law.

Howard v. Oakwood Homes, Corp., 134 N.C. App. 116, 121–22, 516 S.E.2d 879, 883

(1999). Nevertheless, a covenant not to compete is enforceable if it is (i) in writing,

(ii) made as part of the employment contract, (iii) supported by valuable

consideration, (iv) reasonable as to time and territory, and (v) designed to protect the

employer’s legitimate business interest. See Hartman v. W.H. Odell & Assocs., Inc.,

117 N.C. App. 307, 311, 450 S.E.2d 912, 916 (1994). Window Gang, as the party

seeking to enforce the covenant, has the burden to prove the covenant’s restrictions

are reasonable. Id. The reasonableness of a non-competition agreement is a matter

of law for the court. Med. Staffing Network, Inc. v. Ridgeway, 194 N.C. App. 649, 655,

670 S.E.2d 321, 327 (2009) (citing Shute v. Health, 131 N.C. 281, 282, 42 S.E. 704,

704 (1902)).

26. As an initial matter, the only written non-competition provision at issue is

in the 2007 Franchise Agreement, a document Window Gang alleges Salinas signed both in his individual capacity and on behalf of Gang Group. (See Am. Compl. ¶ 31;

2007 Franchise Agreement § 16.5.) Window Gang appropriately “concedes that it is

only pursuing its non-competition claim against Salinas, and those acting in concert

with him, arising from [the 2007 Franchise Agreement].” (Pl.’s Resp. Br. 5.) As a

result, Window Gang’s breach of contract claim against the Affiliated Defendants

shall be dismissed because it is based on the breach of an alleged non-competition

agreement that Window Gang has failed to plead was ever reduced to writing.

27. Turning then to Window Gang’s breach of contract claim against Salinas

and Gang Group, the non-competition provision in the 2007 Franchise Agreement

(the “Non-compete”) provides that, for a period of two years after the termination or

expiration of that agreement, Salinas and Gang Group will not:

have any interest as an owner (except of publicly traded securities that are traded on a stock exchange or on the over-the-counter market), partner, director, officer, employee, consultant, representative or agent, or in any other capacity, in any other business conducting residential or commercial cleaning services including window cleaning, blind cleaning, gutter cleaning and high pressure spray applications or any business which is the same, similar to or competitive with [Window Gang] and the WINDOW GANG Franchise System within a radius of 50 miles of [their] Operating Territory.

(2007 Franchise Agreement § 16.5.) As previously discussed, the 2007 Franchise

Agreement designates Salinas and Gang Group’s Operating Territory as the

“Wilmington, NC, area[,]” (2007 Franchise Agreement, at Ex. A), and Window Gang

alleges that Salinas, Gang Group, and Window Gang all understood through their

course of dealing that the “Wilmington, NC, area” encompassed New Hanover,

Brunswick, Pender, and Duplin Counties, (Am. Compl. ¶ 39; Pl.’s Resp. Br. 10). 28. When evaluating the enforceability of covenants not to compete, North

Carolina courts note a distinction between covenants relating to the sale of business

and those ancillary to employment contracts. See Outdoor Lighting Perspectives

Franchising, Inc. v. Harders, 2012 NCBC LEXIS 28, at *19 (N.C. Super. Ct. May 14,

2012), aff’d, 228 N.C. App. 613, 747 S.E.2d 256 (2013). Our appellate courts have

determined that non-competes in franchise agreements present hybrid situations in

which courts should combine the elements used to evaluate non-competes for the sale

of a business and those used to analyze non-competes in employment contracts. See

Outdoor Lighting Perspectives Franchising, Inc. v. Harders, 228 N.C. App. 613, 621–

23, 747 S.E.2d 256, 262–64 (2013). As stated by the Court of Appeals:

the ultimate issue which we must decide in resolving such disputes among franchisors and franchisees is the extent to which the non-competition provision contained in the franchise agreement is no more restrictive than is necessary to protect the legitimate interests of the franchisor, with the relevant factors to be considered in the making of this determination to include the reasonableness of the duration of the restriction, the reasonableness of the geographic scope of the restriction, and the extent to which the restriction is otherwise necessary to protect the legitimate interests of the franchisor.

Id. at 623, 747 S.E.2d at 264.

29. “In evaluating reasonableness, the time and territory restrictions must be

read in tandem[.]” Hartman, 117 N.C. App. at 311, 450 S.E.2d at 916. While “either

the time or the territory restriction, standing alone, may be reasonable, the combined

effect of the two may be unreasonable.” Farr Assocs., Inc. v. Baskin, 138 N.C. App.

276, 280, 530 S.E.2d 878, 881 (2000). 30. Courts applying North Carolina law have regularly held that a two-year

post-employment or post-sale non-competition restriction similar to that here is

reasonable. See, e.g., Kinston Med. Specialists, P.A. v. Bundle, 2015 NCBC LEXIS

48, at *7 (N.C. Super. Ct. May 7, 2015); see also Philips Elecs. N. Am. Corp. v. Hope,

631 F. Supp. 2d 705, 717 (M.D.N.C. 2009) (observing that a two-year time restriction

was “well within the range that the North Carolina courts have deemed reasonable”).

31. In determining the reasonableness of the geographic scope of a non-compete

agreement in the employment context, courts assess, among other things:

(1) the area, or scope, of the restriction, (2) the area assigned to [the] employee, (3) the area in which the employee actually worked or was subject to work, (4) the area in which the employer operated, (5) the nature of the business involved, and (6) the nature of the employee’s duty and his knowledge of the employer’s business operation.

Outdoor Lighting, 228 N.C. App. at 622, 747 S.E.2d at 263 (quoting Clyde Rudd &

Assocs., Inc. v. Taylor, 29 N.C. App. 679, 684, 225 S.E.2d 602, 605 (1976)).

“Ordinarily, a covenant’s geographic scope will be found reasonable if it encompasses

the area served by the business that the covenant protects.” Beverage Sys. of the

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

457, 461 (2016) (citing Thompson v. Turner, 245 N.C. 478, 481–82, 96 S.E.2d 263, 266

(1957)).

32. To support their contention that the Non-compete at issue here is

unenforceable as to time and territory, Defendants rely heavily on the Court of

Appeals’ statement in Farr, that “[t]o prove that a geographic restriction in a non-

compete provision is reasonable, an employer must first show where its customers are located and that the geographic scope of the covenant is necessary to maintain

those customer relationships.” Farr Assocs., 138 N.C. App. at 281, 530 S.E.2d at 882.

Defendants contend that Window Gang’s claim necessarily fails under Farr because

Window Gang has failed to allege that it has existing customers located within New

Hanover, Brunswick, Pender, and Duplin Counties, or that Window Gang has any

customers within a 50-mile radius beyond the borders of those counties. (Defs.’ Mot.

Dismiss Br. 7–9); see also Okuma Am. Corp. v. Bowers, 181 N.C. App. 85, 89, 638

S.E.2d 617, 620 (2007) (“[T]he scope of [a] geographic restriction must not be any

wider than is necessary to protect the employer’s reasonable business interests.”).

The Court disagrees on the alleged facts.

33. Although in bare-bones fashion, Window Gang has alleged that it serviced

customers in New Hanover, Pender, and Brunswick Counties within the

“Wilmington, NC, area,” as well as customers in Bladen and Onslow Counties within

a 50-mile radius of the “Wilmington, NC, area.” (Am. Compl. ¶¶ 39–41.) Thus, the

Court cannot conclude, at the Rule 12(b)(6) stage, that the Non-compete’s geographic

scope, when considered with its two-year duration, renders the provision

unenforceable as a matter of law. See, e.g., Sandhills Home Care, LLC v. Companion

Home Care - Unimed, Inc., 2016 NCBC LEXIS 61, at *19–20 (N.C. Super. Ct. Aug. 1,

2016) (finding general allegation that plaintiff provided services in a restricted

territory within 100-mile radius of plaintiff’s location sufficient to survive Rule

12(b)(6) dismissal); Kinston, 2015 NCBC LEXIS 48, at *8–9 (finding general

allegation that a regional medical center had locations in Lenoir and Onslow Counties “minimally sufficient to survive dismissal” under Rule 12(b)(6) where the restricted

territory included those counties and four others). The Court’s conclusion on this

aspect of Defendant’s argument, however, does not end the inquiry.

34. In addition to the reasonableness of the time and territory restrictions, the

Court must also consider “the extent to which the restriction is otherwise necessary

to protect the legitimate interests of the franchisor.” Outdoor Lighting, 228 N.C. App.

at 623, 747 S.E.2d at 264. It is at this level of the analysis that Window Gang’s claim

for breach of the Non-compete fails as a matter of law.

35. In the employment context, our courts have recognized that an employer has

a legitimate interest in protecting “customer relationships and goodwill against

misappropriation by departing employees.” United Labs., Inc. v. Kuykendall, 322

N.C. 643, 651, 370 S.E.2d 375, 381 (1988). Nevertheless, the restriction “must be no

wider in scope than is necessary to protect the business of the employer.” VisionAIR,

Inc. v. James, 167 N.C. App. 504, 508, 606 S.E.2d 359, 362 (2004). Our courts

routinely hold that non-competition covenants are overbroad, and therefore

unenforceable, when they “prohibit the employee from engaging in future work that

is distinct from the duties actually performed by the employee.” Ridgeway, 194 N.C.

App. at 656, 670 S.E.2d at 327; see, e.g., Hartman, 117 N.C. App. at 317, 450 S.E.2d

at 920 (invalidating non-compete because “rather than attempting to prevent plaintiff

from competing for actuarial business, . . . [the provision] appear[ed] to prevent

plaintiff from working as a custodian for any ‘entity’ which provide[d] ‘actuarial

services’”). 36. In considering these principles in the franchise context, the Court of Appeals

has held that:

[a]lthough the specific job description of the person sought to be restrained has been deemed less relevant when courts analyze a restriction placed on a business owner, we believe that the extent to which a particular contractual provision unreasonably impairs a former franchisee’s ability to work in a related field or particular industry is relevant to the reasonableness of a non- competition restriction arising from the termination of a franchise agreement.

Outdoor Lighting, 228 N.C. App. at 622–23, 747 S.E.2d at 263.

37. When interpreting the scope of the restrictions in a covenant not to compete,

North Carolina courts follow basic rules of contract construction. “If the plain

language of a contract is clear, the intention of the parties is inferred from the words

of the contract, so that if the language is clear and only one reasonable interpretation

exists, the courts must enforce the contract as written.” Id. at 628, 747 S.E.2d at 267

(internal quotation marks omitted). “When the language in a contract is ambiguous,

we view the practical result of the restriction by ‘construing the restriction strictly

against its draftsman[.]’” Elec. S., Inc. v. Lewis, 96 N.C. App. 160, 167, 385 S.E.2d

352, 356 (1989) (quoting Manpower of Guilford Cty., Inc. v. Hedgecock, 42 N.C. App.

515, 522, 257 S.E.2d 109, 115 (1979)).

38. Here, the Non-compete precludes Salinas and Gang Group from working in

any capacity for the following:

any other business conducting residential or commercial cleaning services including window cleaning, blind cleaning, gutter cleaning and high pressure spray applications or any business which is the same, similar to or competitive with [Window Gang] and the WINDOW GANG Franchise System within a radius of 50 miles of [the] Operating Territory. (2007 Franchise Agreement § 16.5.) Thus, by the Non-compete’s own terms, the

prohibition extends to businesses that are “the same” or “similar to” Window Gang

and its system, not simply to those that are “competitive” with Window Gang. This

feature alone makes the Non-compete overbroad and unenforceable. See, e.g.,

Outdoor Lighting, 228 N.C. App. at 628, 747 S.E.2d at 267 (finding unenforceable a

non-compete restricting franchisee from having any involvement in any business

“operating in competition with an outdoor lighting business” or any business “similar”

to the franchisee’s as it went “well beyond the prohibition of activities that would put

[franchisee] in competition with [franchisor]”).

39. Furthermore, Salinas and Gang Group are restricted from working for those

prohibited businesses in any capacity whatsoever—not simply in roles which would

cause competitive harm to Window Gang or only in divisions of those businesses

which compete with Window Gang. On this basis, too, the Non-compete is overbroad

and unenforceable. See, e.g., id. at 629, 747 S.E.2d at 267 (holding non-compete

preventing franchisee from working for a competitor in an area which did not compete

with franchisor’s business impermissibly “prevent[ed] [franchisee] from engaging in

activities that [had] no tendency to adversely affect [franchisor’s] legitimate business

interests”); VisionAIR, 167 N.C. App. at 508–09, 606 S.E.2d at 362–63 (finding

covenant unenforceable because it prevented former employee from performing

“wholly unrelated work” at a similar firm); Sandhills, 2016 NCBC LEXIS 61, at *15

(granting motion to dismiss and finding covenant “overly broad because it effectively

prohibits [former employees] from obtaining employment with any other company in the home health business in any North Carolina county in which [former employer]

provides services”); Akzo Nobel Coatings, Inc. v. Rogers, 2011 NCBC LEXIS 42, at

*42–43 (N.C. Super. Ct. Nov. 3, 2011) (granting motion to dismiss and finding invalid

a provision that would have prevented employee “from working for a competitor in

the wood coatings industry in a position wholly outside the scope of his” previous

employment).4

40. Window Gang seeks to salvage its claim by urging the Court to “blue pencil”

the Non-compete to render it enforceable. (Pl.’s Resp. Br. 12.) Blue-penciling is the

process by which “a court of equity will take notice of the divisions the parties

themselves have made [in a covenant not to compete], and enforce the restrictions in

the territorial divisions deemed reasonable and refuse to enforce them in the divisions

deemed unreasonable.” Welcome Wagon Int’l, Inc. v. Pender, 255 N.C. 244, 248, 120

S.E.2d 739, 742 (1961). The blue pencil rule, however, “severely limits what the court

may do to alter the covenant.” Hartman, 117 N.C. App. at 317, 450 S.E.2d at 920. As

a general rule, “[t]he courts will not rewrite a contract if it is too broad but will simply

not enforce it.” Whittaker Gen. Med. Corp. v. Daniel, 324 N.C. 523, 528, 379 S.E.2d

4 Window Gang relies heavily on the Court of Appeals’ decision in Precision Walls, Inc. v.

Servie, 152 N.C. App. 630, 568 S.E.2d 267 (2002), to argue that the “any capacity” language found to be enforceable in that case compels the conclusion that the “any capacity” language in the Non-compete is likewise enforceable. As this Court has explained, however, “the holding of Precision Walls is narrow and confined to its unique facts.” InVue Sec. Prods. v. Stein, 2017 NCBC LEXIS 115, at *14 (N.C. Super. Ct. Dec. 18, 2017); see also Asheboro Paper & Packaging, Inc. v. Dickinson, 599 F. Supp. 2d 664, 675 (M.D.N.C. 2009) (distinguishing Precision Walls); Horner Int’l Co. v. McKoy, 232 N.C. App. 559, 566, 754 S.E.2d 852, 857 (2014) (noting that Precision Walls was “largely inapposite” to the case before it); CopyPro, Inc. v. Musgrove, 232 N.C. App. 194, 203, 754 S.E.2d 188, 194 (2014) (concluding “that Precision Walls does not control the outcome in this case”); VisionAIR, 167 N.C. App. at 509 & n.1, 606 S.E.2d at 362–63 & n.1 (distinguishing Precision Walls). 824, 828 (1989); see, e.g., Beverage Sys., 368 N.C. at 699, 784 S.E.2d at 461 (“[W]hen

an agreement not to compete is found to be unreasonable, we have held that the court

is powerless unilaterally to amend the terms of the contract.”).

41. “A court at most may choose not to enforce a distinctly separable part of a

covenant in order to render the provision reasonable. It may not otherwise revise or

rewrite the covenant.” Hartman, 117 N.C. App. at 317, 450 S.E.2d at 920. In

particular, the Court “may not resurrect, in whole cloth, a covenant not to compete

by erasing and replacing offending, but key, portions of a contract.” Prof’l Liab.

Consultants, Inc. v. Todd, 122 N.C. App. 212, 221, 468 S.E.2d 578, 584 (Smith, J.,

dissenting), dissent adopted per curiam, 345 N.C. 176, 478 S.E.2d 201 (1996).

42. At oral argument, Window Gang suggested that the Court could render the

Non-compete reasonable by striking language as follows:

will not have any interest as an owner (except of publicly traded securities that are traded on a stock exchange or on the over-the-counter market), partner, director, officer, employee, consultant, representative or agent, or in any other capacity, in any other business conducting residential or commercial cleaning services including window cleaning, blind cleaning, gutter cleaning and high pressure spray applications or any business which is the same, similar to or competitive with [Window Gang] and the WINDOW GANG Franchise System within a radius of 50 miles of Your Operating Territory.

43. While less restrictive, Window Gang’s proposed blue penciling does nothing

to remedy the Non-compete’s overly broad language precluding Salinas and Gang

Group from working for a business which is the “same [or] similar to,” but not

“competitive” with, Window Gang. Accordingly, for the reasons set forth above, the

Court concludes that Window Gang’s breach of contract claim against Salinas, Gang Group, and the Affiliated Defendants for breach of the Non-compete fails as a matter

of law and should be dismissed.

B. Conversion

44. Window Gang has asserted a conversion claim against all Defendants for

allegedly retaining and destroying certain Window Gang Property. (Am. Compl. ¶¶

152–55.) Defendants contend that application of the economic loss rule mandates

dismissal of Window Gang’s conversion claim. North Carolina’s economic loss

rule derives from the proposition that “[o]rdinarily, a breach of contract does not give

rise to a tort action by the promisee against the promisor.” N.C. State Ports Auth. v.

Lloyd A. Fry Roofing, Co., 294 N.C. 73, 81, 240 S.E.2d 345, 350 (1978).5 The rule

provides “limitations on the recovery in tort when a contract exists between the

5 Ports Authority recognized four exceptions to this general rule:

(1) The injury, proximately caused by the promisor’s negligent act or omission in the performance of his contract, was an injury to the person or property of someone other than the promisee.

(2) The injury, proximately caused by the promisor’s negligent, or wilful, act or omission in the performance of his contract, was to property of the promisee other than the property which was the subject of the contract, or was a personal injury to the promisee.

(3) The injury, proximately caused by the promisor’s negligent, or wilful, act or omission in the performance of his contract, was loss of or damage to the promisee’s property, which was the subject of the contract, the promisor being charged by law, as a matter of public policy, with the duty to use care in the safeguarding of the property from harm, as in the case of a common carrier, an innkeeper or other bailee.

(4) The injury so caused was a wilful injury to or a conversion of the property of the promisee, which was the subject of the contract, by the promisor.

Id. at 82, 240 S.E.2d at 350–51 (internal citations omitted). parties that defines the standard of conduct and which the courts believe should set

the measure of recovery.” Akzo Nobel Coatings, 2011 NCBC LEXIS 42, at *47–48. In

short, the economic loss rule precludes a tort action

against a party to a contract who simply fails to properly perform the terms of the contract, even if that failure to properly perform was due to the negligent or intentional conduct of that party, when the injury resulting from the breach is damage to the subject matter of the contract.

Forest2Market, Inc. v. Arcogent, Inc., 2016 NCBC LEXIS 3, at *7–8 (N.C. Super. Ct.

Jan. 5, 2016) (quoting Spillman v. Am. Homes of Mocksville, Inc., 108 N.C. App. 63,

65, 422 S.E.2d 740, 741–42 (1992)).

45. To maintain a tort claim for conduct “also alleged to be a breach of contract,”

the plaintiff must show “a duty owed by the defendant separate and distinct from any

duty owed under a contract.” Id. at *8 (quoting Akzo Nobel Coatings, 2011 NCBC

LEXIS 42, at *47–48). The tort claim “must be grounded on a violation of a duty

imposed by operation of law, and the right invaded must be one that the law provides

without regard to the contractual relationship of the parties.” Rountree v. Chowan

County, 796 S.E.2d 827, 831 (N.C. Ct. App. 2017) (quoting Asheville Contracting Co.,

Inc. v. City of Wilson, 62 N.C. App. 329, 342, 303 S.E.2d 365, 373 (1983)). Typically,

“the tortious conduct must have an aggravating element such as malice or

recklessness[.]” Strum v. Exxon Co., USA, 15 F.3d 327, 331 (4th Cir. 1994); see also

Newton v. Standard Fire Ins. Co., 291 N.C. 105, 112, 229 S.E.2d 297, 301 (1976)

(“Such aggravated conduct was early defined to include ‘fraud, malice, such a degree

of negligence as indicates a reckless indifference to consequences, oppression, insult,

rudeness, caprice, [and] willfulness[.]’”). 46. The economic loss rule does not apply to all tort claims, however. As recently

explained by the Court of Appeals in Bradley Woodcraft, Inc. v. Bodden, “while claims

for negligence are barred by the economic loss rule where a valid contract exists

between the litigants, claims for fraud are not so barred, and indeed, ‘[t]he law is, in

fact, to the contrary: a plaintiff may assert both claims[.]’” 251 N.C. App. 27, 34, 795

S.E.2d 253, 258 (2016) (quoting Jones v. Harrelson & Smith Contractors, LLC, 194

N.C. App. 203, 215, 670 S.E.2d 242, 250 (2008)). Of particular significance here,

Bradley Woodcraft did not answer whether the economic loss rule may extend to bar

intentional tort claims other than fraud.

47. While the Bradley Woodcraft court observed in dicta that “Ports Authority

and analogous cases applying the economic loss rule are limited in scope to claims for

negligence,” id. at 34, 795 S.E.2d at 259, suggesting that the rule has no application

to intentional torts generally, federal courts interpreting Bradley Woodcraft have

rejected the contention that the Court of Appeals intended to limit Ports Authority

and North Carolina’s economic loss rule to bar only negligence claims, see, e.g., Legacy

Data Access, Inc. v. Cadrillion, LLC, 889 F.3d 158, 166 (4th Cir. 2018) (interpreting

Bradley Woodcraft as “simply another application of the principle that the economic

loss rule does not bar tort claims based on an independent legal duty, which is

‘identifiable and distinct’ from the contractual duty”); Foodbuy, LLC v. Gregory

Packaging, Inc., No. 3:16-cv-00809-FDW-DCK, 2018 U.S. Dist. LEXIS 164189, at

*81–82 (W.D.N.C. Sept. 25, 2018) (relying on Legacy Data in barring claims for

tortious interference with contract and unfair and deceptive trade practices). 48. Those courts have recognized that “[i]n preventing parties from asserting

tort claims for a simple breach of contract, the economic loss rule thus ‘encourages

contracting parties to allocate risks for economic loss themselves.’” Legacy Data, 889

F.3d at 164 (quoting Lord v. Customized Consulting Specialty, Inc., 182 N.C. App.

635, 639, 643 S.E.2d 28, 30 (2007)); see also Moore v. Coachmen Indus., Inc., 129 N.C.

App. 389, 402, 499 S.E.2d 772, 780 (1998) (“To give a party a remedy in tort . . . would

permit the party to ignore and avoid the rights and remedies granted or imposed by

the parties’ contract.”). Focusing on the fact that Ports Authority involved a bailee

and that “[a] bailee has a legal duty . . . independent of any contractual duty,” the

Fourth Circuit has persuasively reconciled Bradley Woodcraft with Ports Authority

to conclude that “[w]hat matters is not whether a plaintiff has alleged a negligence

tort or an intentional tort, but whether the defendant has breached some duty other

than a contractual duty, such that the tort claim is ‘identifiable and distinct’ from the

breach of contract claim.” Legacy Data, 889 F.3d at 165–66 (noting that in Bradley

Woodcraft the defendant’s counterclaim for fraud was identifiable and distinct from

the breach of contract claim “because the plaintiff not only failed to complete work

required under the contract[,] . . . but had no intention of doing so from the very

beginning”).

49. Under North Carolina law, “[t]he tort of conversion is well 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.’” Variety Wholesalers, Inc. v. Salem Logistics Traffic Servs., LLC, 365 N.C. 520, 523, 723 S.E.2d 744, 747 (2012) (quoting 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.” Id.

50. Window Gang’s conversion claim against Defendants is based on two broad

sets of alleged misconduct: (i) Defendants’ failure to return Window Gang property,

as defined by and required under sections 16.2 and 16.3 of the 2007 Franchise

Agreement, (Am. Compl. ¶¶ 26, 152, 154),6 and (ii) Defendants’ destruction of

thousands of files in the Google Account, which Window Gang claims to own under

the 2007 Franchise Agreement and which Window Gang alleges Defendants were

either required to return under that agreement or make available to Window Gang

through discovery in this litigation, (see Am. Compl. ¶¶ 4, 78, 84). To avoid

application of the economic loss rule on the pleaded facts, Window Gang relies upon

Ports Authority’s fourth exception to the general rule that “a breach of contract does

not give rise to a tort action by the promisee against the promisor,” contending that

the alleged facts show “[t]he injury so caused was a [willful] injury to or a conversion

of the property of the promisee, which was the subject of the contract, by the

promisor.” Ports Auth., 294 N.C. at 82, 240 S.E.2d at 351.

6 Under Section 16.2 of the 2007 Franchise Agreement, Defendants agreed that upon termination of the franchise relationship, Defendants would be obligated to return Window Gang’s “Confidential Operations Manual and all copies of other Manuals, or other WINDOW GANG items.” Under Section 16.3 of that agreement, Defendants similarly agreed to “return to [Window Gang] all signs, catalogues, advertising materials, forms, invoices, and other materials containing the WINDOW GANG Names and the Marks or otherwise relating to the Franchise[.]” 51. Although at first blush the fourth exception would seem to permit Window

Gang’s conversion claim here, the cases the Supreme Court relied upon in stating the

fourth exception in Ports Authority involve bailments—relationships in which the

promisor/bailee had a legal duty independent of the parties’ contract to return the

promisee/bailor’s property. Id. (first citing Williamson v. Dickens, 27 N.C. 259 (1844)

(conversion of notes by a bailee for collection); then citing Simmons v. Sikes, 24 N.C.

98 (1841) (conversion or willful destruction of a canoe by a bailee)); see also Legacy

Data, 889 F.3d at 165–66 (recognizing that because a “bailee has a legal duty . . .

independent of any contractual duty,” “a conversion action can be brought against

him in addition to any breach of contract claim”).

52. As such, the Court does not read the fourth exception as eliminating the

requirement that “a plaintiff must allege a duty owed to him by the defendant

separate and distinct from any duty owed under a contract,” Akzo Nobel Coatings,

2011 NCBC LEXIS 42, at *48 (quoting Kelly v. Georgia Pacific LLC, 671 F. Supp. 2d

785, 791 (E.D.N.C. 2009)), to avoid the dismissal of a conversion claim under the

economic loss rule, see Legacy Data, 889 F.3d at 166 (“[W]here a defendant simply

violates a contractual provision and undertakes no independent legal duty, like that

of a bailee, the economic loss rule applies to bar tort claims such as conversion.”

(emphasis omitted)).

53. Window Gang has not alleged a duty independent of the duties owed by

Salinas, Gang Group, and the Affiliated Defendants under the 2007 Franchise

Agreement as a basis for its conversion claim against them. Rather, the Amended Complaint makes clear that the duty of those Defendants to return the property

Window Gang alleges they have converted is a duty arising and owed under the 2007

Franchise Agreement, and the agreement itself defines what is and is not Window

Gang’s property. (See Am. Compl. ¶¶ 26, 35, 78, 118; 2007 Franchise Agreement §§

11, 13.1, 16.2, 16.3, 16.4.)

54. As a result, the Court concludes that Window Gang’s conversion claim

against Salinas, Gang Group, and the Affiliated Defendants should be dismissed

under the economic loss rule for failure to plead a duty independent of contract to

support that claim. See, e.g., Rountree, 796 S.E.2d at 831 (applying economic loss rule

to affirm dismissal of tort claim for failure to prove independent duty); Akzo Nobel

Coatings, 2011 NCBC LEXIS 42, at *55–59 (applying economic loss rule to dismiss

tort claims for failure to plead independent duty); see also Legacy Data, 889 F.3d at

165 (applying economic loss rule to dismiss conversion claim under North Carolina

law where claim based on failure to pay sums due under a contract); Planet Earth

TV, LLC v. Level 3 Commc’ns, LLC, No. 1:17-cv-00090-MR-DLH, 2018 U.S. Dist.

LEXIS 129920, at *5–6 (W.D.N.C. Aug. 2, 2018) (“Because the Plaintiff’s conversion

claim is coterminous with its breach of contract claim, the Court concludes that the

claim for conversion is barred by the economic loss rule.”).

55. The result is different for Window Ninjas. Because Window Ninjas never

entered a contract with Window Gang, Window Gang has “no basis for recovery in

contract” against Window Ninjas. See Lord, 182 N.C. App. at 642, 643 S.E.2d at 32.

Thus, the economic loss rule will not bar Window Gang’s conversion claim against Window Ninjas. See id. at 643, 643 S.E.2d at 33 (holding that “[b]ecause there was

no contract between [plaintiff] and [defendants] . . . the economic loss rule does not

apply” to bar plaintiff’s tort claims); see also Ellis-Don Constr., Inc. v. HKS, Inc., 353

F. Supp. 2d 603, 606 (M.D.N.C. 2004) (holding that North Carolina’s economic loss

rule “does not limit tort actions that arise in the absence of a contract”).

56. Window Ninjas also contends, for the first time in its Reply Brief, that

Window Gang’s conversion claim should be dismissed because Window Gang has

failed to allege that Window Ninjas took possession of Window Gang’s property.

(Defs.’ Reply Mem. 7, ECF No. 59.) Under North Carolina law, however, “[t]he

essence of conversion is not the acquisition of property by the wrongdoer, but a

wrongful deprivation of it to the owner[.]” Bartlett Milling Co. v. Walnut Grove

Auction & Realty Co., Inc., 192 N.C. App. 74, 86, 665 S.E.2d 478, 488

(2008) (quoting Lake Mary Ltd. P’ship v. Johnston, 145 N.C. App. 525, 532, 551 S.E.2d

546, 552 (2001)). In essence, “there is no conversion until some act is done which is

a denial or violation of the plaintiff’s dominion over or rights in the property.” Mace

v. Pyatt, 203 N.C. App. 245, 256, 691 S.E.2d 81, 90 (2010) (quoting Lake Mary Ltd.

P’ship, 145 N.C. App. at 532, 551 S.E.2d at 552).

57. Here, Window Gang has pleaded, among other things, that Window Ninjas

failed to return “signs, catalogues, advertising materials, forms, invoices and other

materials containing the WINDOW GANG names and the Marks or otherwise

relating to the Franchise,” (Am. Compl. ¶ 78), all of which Window Gang claims to

own under the 2007 Franchise Agreement. These allegations describe a wrongful deprivation of tangible property which may support a conversion claim. See, e.g., S.E.

Shelter Corp. v. BTU, Inc., 154 N.C. App. 321, 331, 572 S.E.2d 200, 207

(2002) (permitting conversion claim where defendants allegedly removed plaintiffs’

tangible property); see also Comp. Design & Integration, LLC v. Brown, 2018 NCBC

LEXIS 216, at *68 (N.C. Super. Ct. Dec. 10, 2018) (holding that tangible “customer

records, invoices, sales histories, sales forecasts, and employee records” were proper

subjects of a conversion claim).

58. Similarly, Window Gang has pleaded that Window Ninjas permanently

deleted and thus destroyed “all the files off the [Google Account] that contained the

name or mark for Window Gang,” (Am. Compl. ¶¶ 96, 99, 157), property Window

Gang also contends it owns under the parties’ contract, (Am. Compl. ¶ 86). These

allegations are likewise sufficient to sustain a conversion claim. See, e.g., Addison

Whitney, LLC v. Cashion, 2017 NCBC LEXIS 51, at *19–20 (N.C. Super. Ct. June 9,

2017) (holding that “deletion of [electronic] documents may pose a deprivation to the

owner sufficient to give rise to a conversion claim” where it is “unclear on the face of

the complaint whether and to what extent [the plaintiff] may restore its deleted

data”). For each of these reasons, the Court concludes that Window Gang’s

conversion claim against Window Ninjas should survive dismissal under Rule

12(b)(6). C. Tortious Interference Claims

59. Window Gang alleges claims for tortious interference with contract and with

prospective economic advantage against all Defendants. (See Am. Compl. ¶¶ 139–

150.) To state a claim for tortious interference with contract, a plaintiff must allege:

(1) a valid contract between the plaintiff and a third person which confers upon the plaintiff a contractual right against a third person; (2) the defendant knows of the contract; (3) the defendant intentionally induces the third person not to perform the contract; (4) and in doing so acts without justification; (5) resulting in actual damage to plaintiff.

United Labs, 322 N.C. at 661, 370 S.E.2d at 387. To allege a claim for tortious

interference with prospective economic advantage, a plaintiff “must allege facts to

show that the defendants acted without justification in ‘inducing a third party to

refrain from entering into a contract with them which contract would have ensued

but for the interference.’” Walker v. Sloan, 137 N.C. App. 387, 393, 529 S.E.2d 236,

242 (2000) (quoting Cameron v. New Hanover Mem’l Hosp., 58 N.C. App. 414, 440,

293 S.E.2d 901, 917 (1982)).

60. Defendants contend that Window Gang’s claim for tortious interference with

contract must be dismissed because Window Gang has failed to allege that

Defendants induced the breach of an existing contract, alleging instead only

unsuccessful attempts to induce a breach. (Defs.’ Mot. Dismiss Br. 22.) The Court

agrees. To support its claim, Window Gang alleges two unsuccessful customer

solicitations, (Am. Compl. ¶¶ 140–42, 143–45), and makes a general conclusory

assertion that any dealing between Defendants and a customer who previously did

business with Window Gang “involves a contract that Defendants tortiously interfered with,” (Am. Compl. ¶ 147). Nowhere, however, does Window Gang allege

that any Defendant intentionally induced the breach of a customer’s contract with

Window Gang. As such, Window Gang’s tortious interference with contract claim

must be dismissed. See, e.g., United Labs., 322 N.C. at 661, 370 S.E.2d at 387

(requiring plaintiff to allege “defendant intentionally induce[d] the third person not

to perform the contract”).

61. Defendants argue that Window Gang’s claim for tortious interference with

prospective economic advantage should also be dismissed for failure “to identify

evidence of any specific contractual opportunities lost.” (Defs.’ Reply Mem. 7); see

Beverage Sys., 368 N.C. at 701–02, 748 S.E.2d at 463 (dismissing prospective

economic advantage claim, in part, because plaintiff failed to identify “a particular

business with which it lost an economic advantage”); see also Artistic S. Inc. v. Lund,

2015 NCBC LEXIS 113, at *31–32 (N.C. Super. Ct. Dec. 9, 2015) (dismissing claim

for tortious interference with prospective economic advantage where plaintiff did not

allege interference with a “specific potential contract”). On this claim, however, the

Court disagrees on the facts alleged.

62. In particular, Window Gang alleges and attaches to its Amended Complaint

an e-mail exchange with a customer who contacted Window Ninjas in an effort to

contact Window Gang and thereafter executed a work order with Window Ninjas after

Window Ninjas advised her that Window Ninjas was “the same company, new

name[.]” (Am. Compl. ¶ 61; Am. Compl. Ex. 9, ECF No. 39.9.) The Court concludes

that Window Gang’s allegations survive scrutiny under Rule 12(b)(6) because they state facts permitting a jury to conclude that Defendants have “maliciously induc[ed]

a person not to enter into a contract with [Window Gang], which [she] would have

entered into but for [Window Ninjas’] interference,” resulting in financial loss to

Window Gang. Beverage Sys., 368 N.C. at 701, 748 S.E.2d at 463; see also Coleman

v. Whisnant, 225 N.C. 494, 506, 35 S.E.2d 647, 656 (1945) (“[U]nlawful interference

with the freedom to contract is actionable” when it maliciously “prevent[s] the making

of a contract . . . with design to injure the plaintiff, or gain[] some advantage at

[plaintiff’s] expense.”).

63. Defendants also argue that the economic loss rule requires dismissal of

Window Gang’s tortious interference claims because both claims are based on

Defendants’ alleged failure to comply with the non-solicitation provision in the 2007

Franchise Agreement, which precluded solicitation of certain Window Gang

customers. Defendants contend that Window Gang’s failure to allege a duty

“separate and distinct” from Defendants’ obligation under the 2007 Franchise

Agreement is fatal to its claim. The Court disagrees.

64. Here, Window Gang’s tortious interference claims are not only predicated

on Defendants’ alleged breach of the 2007 Franchise Agreement, but also on

allegations that Defendants “fraudulently divert[ed] payments for work performed by

Window Gang” and “caused damage to the reputation and goodwill of the company”

through that conduct. (Am. Compl. ¶ 146.) Because Window Gang’s tortious

interference claims rest upon allegations based in fraud, the Court concludes that the

economic loss rule does not bar Window Gang’s tortious interference claims as pleaded here. See, e.g., ITW Charlotte, LLC v. ITW Commercial Constr., N. Am., No.

3:17-cv-00473-FDW-DCK, 2017 U.S. Dist. LEXIS 173712, at *11 (W.D.N.C. Oct. 20,

2017) (finding economic loss rule did not require dismissal of tortious interference

claims under North Carolina law where “no breach claim simultaneously

encompass[ed] the conduct underlying [plaintiff’s] tort claims” and defendant’s

“willful conduct” harmed plaintiff’s contract with a third party); BioSignia, Inc. v. Life

Line Screening of Am., Ltd., No. 1:12CV1129, 2014 U.S. Dist. LEXIS 89678, at *25

(M.D.N.C. June 30, 2014) (finding economic loss rule inapplicable to tortious

interference claims under North Carolina law where plaintiff “allege[d] damages for

the tort claim which are distinct from the damages sought for breach of contract”).

65. Accordingly, for the reasons set forth above, the Court concludes that

Defendants’ Motion should be granted as to Window Gang’s claim for tortious

interference with contract but denied as to Window Gang’s claim for tortious

interference with prospective economic advantage.

D. Misappropriation of Trade Secrets

66. Window Gang alleges trade secret misappropriation against all Defendants

under the North Carolina Trade Secrets Protection Act (“NCTSPA”), N.C. Gen. Stat.

§ 66-152, et. seq. (See Am. Compl. ¶¶ 121–29.) Under the NCTSPA, an “owner of a

trade secret shall have remedy by civil action for misappropriation of his trade

secret.” N.C. Gen. Stat. § 66-153. “Misappropriation” for these purposes is 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.” Id. § 66-152(1).

67. A “trade secret” under the NCTSPA consists of “business or technical

information” 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.

Id. § 66-152(3).

68. As to burden of proof, the NCTSPA provides as follows:

Misappropriation of a trade secret is prima facie established by the introduction of substantial evidence that the person against whom relief is sought both: (1) Knows or should have known of the trade secret; and (2) Has had a specific opportunity to acquire it for disclosure or use or has acquired, disclosed, or used it without the express or implied consent or authority of the owner.

Id. § 66-155.

69. Window Gang alleges that it has developed trade secrets “through over

thirty years of market and customer development, research, effort, and significant

financial investment.” (Am. Compl. ¶¶ 20, 122.) Window Gang specifically avers that

its trade secrets include, but are not limited to:

its pricing and estimation methods; its step-by-step service manual; its employee manual; its operations manual and guidelines and recommendations for operating a successful franchise; compiled customer information, including the identity of potential customers and specifications provided by customers to Window Gang; and information regarding its proprietary equipment and chemical cleaning solutions. (Am. Compl. ¶ 21.)7

70. Defendants first contend that Window Gang has not alleged its trade secret

claim with the particularity required under North Carolina law. (Defs.’ Mot. Dismiss

Br. 15.) The Court agrees as to some, but not all, of Window Gang’s allegations.

71. Our Supreme Court recently noted that “[t]o 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)).

More broadly, “a complaint that makes general allegations in sweeping and

conclusory statements, without specifically identifying the trade secrets allegedly

misappropriated, is ‘insufficient to state a claim for misappropriation of trade

secrets.’” Washburn, 190 N.C. App. at 327, 660 S.E.2d at 585–86 (quoting VisionAIR,

167 N.C. App. at 511, 606 S.E.2d at 364).

72. Applying these standards here, and recognizing that a different standard

will be applied under Rule 56, the Court concludes that Window Gang has failed to

7 Window Gang originally claimed trade secret protection for its “System,” which it defined

as its:

distinctive system for the operation, marketing, promoting, advertising and management of a cleaning services business including distinguishing characteristics using proprietary knowledge, procedures, specifications for equipment, systems forms, printed material, applications, specifications, standards and techniques.

(Am. Compl. ¶ 21.) Window Gang subsequently abandoned this contention at the Hearing. satisfy its pleading burden as to some of its alleged trade secrets but satisfactorily,

albeit minimally, pleaded its misappropriation claim as to others under Rule 12(b)(6).

73. To begin with, all but one of Window Gang’s “specific” trade secrets set forth

at paragraph 21 of the Amended Complaint meets Krawiec’s particularity

requirements.

74. First, “compiled customer information, including the identity of potential

customers and specifications provided by customers to Window Gang” is the sort of

non-public information,8 described with the sort of particularity, that our appellate

courts have found sufficient to withstand scrutiny under Rule 12(b)(6). See, e.g.,

Krawiec, 370 N.C. at 610, 811 S.E.2d at 548 (“[W]e agree with the determination of

the Court of Appeals that ‘information regarding customer lists . . . can qualify as a

trade secret under [section] 66-152(3).’” (quoting Area Landscaping, LLC. v. Glaxo-

Wellcome, Inc., 160 N.C. App. 520, 525, 586 S.E.2d 507, 511 (2003))); see also Sunbelt

Rentals, Inc. v. Head & Engquist Equip., LLC, 174 N.C. App. 49, 56, 620 S.E.2d 222,

228 (2005) (concluding that a compilation of business information, including

plaintiff’s “customer information (identity, contacts and requirements of its rental

customers),” constituted a trade secret); S. Fastening Sys., Inc. v. Grabber Constr.

8 As pleaded, the Court cannot agree with Defendants that the compiled customer information is basic information readily ascertainable from public sources as a matter of law. See, e.g., NovaCare Orthotics & Prosthetics E., Inc. v. Speelman, 137 N.C. App. 471, 478, 528 S.E.2d 918, 922 (2000) (rejecting trade secret status for customer list and customer data compilation because “any information used to contact the clients would have been easily accessible to defendant through a local telephone book”); Bldg. Ctr., Inc. v. Carter Lumber of the N., Inc., 2017 NCBC LEXIS 85, at *20 (N.C. Super. Ct. Sept. 21, 2017) (noting that North Carolina law “does not consider a customer list containing only information that is easily accessible through a telephone book or other readily available sources to be a trade secret”). Prods., Inc., 2015 NCBC LEXIS 42, at *11 (N.C. Super. Ct. Apr. 28, 2015) (recognizing

that “confidential customer information” such as customer contact information and

“customer buying preferences and history” may constitute trade secrets); Koch

Measurement Devices, Inc. v. Armke, 2013 NCBC LEXIS 45, at *8 (N.C. Super. Ct.

Oct. 14, 2013) (holding “customer lists including names, contact persons, addresses

and phone number[s and] the ordering habits, history, and needs of . . . customers”

may constitute trade secrets).

75. The same is true at the Rule 12(b)(6) stage for Window Gang’s “pricing and

estimation methods.” See, e.g., Krawiec, 370 N.C. at 610, 811 S.E.2d at 548 (holding

“information regarding . . . pricing formulas and bidding formulas can qualify as a

trade secret”); GE Betz, Inc. v. Conrad, 231 N.C. App. 214, 234, 752 S.E.2d 634, 649

(2013) (finding “pricing information, customer proposals, historical costs, and sales

data” to constitute trade secrets); Byrd’s Lawn & Landscaping, Inc. v. Smith, 142

N.C. App. 371, 375, 542 S.E.2d 689, 692 (2001) (“Confidential data regarding

operating and pricing policies can also qualify as trade secrets.”).

76. Window Gang’s allegations regarding its step-by-step service manual,

employee manual, and operations manual, guidelines, and recommendations for

operating a successful franchise are likewise sufficient. Although in relatively

meager fashion, the Court concludes that, for purposes of Rule 12(b)(6), Window Gang

has identified and described these discrete trade secrets with “sufficient particularity

so as to enable [Defendants] to delineate that which [they are] accused of

misappropriating and [this Court] to determine whether misappropriation has or is threatened to occur.” Krawiec, 370 N.C. at 609, 811 S.E.2d at 547–48; see also, e.g.,

S. Fastening Sys., 2015 NCBC LEXIS 42, at *11 (training manuals may constitute a

trade secret); Koch, 2013 NCBC LEXIS 45, at *8–10 (business methods and

opportunities may be trade secrets); Sunbelt Rentals, Inc. v. Head & Engquist Equip.,

LLC, 2002 NCBC LEXIS 2, at *41–42 (N.C. Super. Ct. July 10, 2002) (“Business

plans, marketing strategies, and customer information represent the type of

information that, when accumulated over time, can be extremely valuable to

competitors [and can qualify as trade secrets].”).

77. In contrast, however, the Court cannot conclude that Window Gang’s

purported trade secret consisting of “[i]nformation regarding its proprietary

equipment and chemical cleaning solutions,” (Am. Compl. ¶ 21), is identified with

sufficient particularity to satisfy Window Gang’s pleading obligation under Krawiec.

This description is vague, imprecise, and as nonspecific as the “original ideas and

concepts for dance productions” found deficient in Krawiec. See Krawiec, 370 N.C. at

611, 811 S.E.2d at 549. While certain “chemical formulations” may constitute a trade

secret, see, e.g., GE Betz, 231 N.C. App. at 234, 752 S.E.2d at 649, Window Gang’s

identification here is so general that it leaves Defendants entirely in the dark as to

what information about what proprietary equipment and what chemical cleaning

solutions they are alleged to have misappropriated. As such, this aspect of Window

Gang’s misappropriation claim must be dismissed.

78. The Court turns next to whether Window Gang has alleged that it has taken

reasonable steps to keep its trade secrets confidential. Our courts have held that the reasonableness of a plaintiff’s efforts to maintain secrecy are “necessarily fact

dependent” and that a trial court must “closely examine the circumstances

surrounding the trade secret.” See Koch, 2015 NCBC LEXIS 45, at *15.

79. Here, the 2007 Franchise Agreement contains a confidentiality provision

stating that the franchisee and anyone who works in connection with the franchise

shall keep confidential the contents of “the [Operations] Manual, specifications,

techniques, training materials, operation procedures, tape and films, computer

software, client lists and other data[.]” (2007 Franchise Agreement § 12.1.) The 2007

Franchise Agreement further requires the franchisee to require anyone operating in

a “managerial or supervisory position” to sign a confidentiality agreement. (See 2007

Franchise Agreement § 12.2.)

80. While these measures to protect the secrecy of Window Gang’s alleged trade

secrets are not extensive, the Court concludes they are sufficient to survive

Defendants’ Motion under the circumstances of the franchise relationship at issue

here. See, e.g., Static Control Components, Inc. v. Darkprint Imaging, Inc., 200 F.

Supp. 2d 541, 546 (M.D.N.C. 2002) (recognizing that under North Carolina law

“confidentiality agreements are one method used to protect confidential

information”); Daniel Grp., Inc. v. Am. Sales & Mktg., Inc., 2016 NCBC LEXIS 112,

at *28 (N.C. Super. Ct. Dec. 15, 2016) (dismissing trade secrets claim for failure to

plead reasonable efforts to maintain secrecy where only effort involved plaintiff‘s

requirement that sales representatives generally, but not defendants in particular,

sign confidentiality agreements). 81. Defendants also contend that Window Gang has not identified how

Defendants misappropriated its alleged trade secrets. (Defs.’ Mot. Dismiss Br. 17.)

Window Gang alleges, however, that Defendants failed to return the trade secret

information provided to them under the 2007 Franchise Agreement, including the

operations and step-by-step service manuals, after the expiration of the 2007

Franchise Agreement, (see Am. Compl. ¶¶ 24, 26–27, 111), and also that Defendants

have disclosed and used Window Gang’s customer and pricing information in the

conduct of the Window Ninjas business, (see Am. Compl. ¶ 75). These allegations are

sufficient to satisfy Rule 12(b)(6). See N.C. Gen. Stat. § 66-152(1) (defining

misappropriation as the “acquisition, disclosure, or use of the trade secret of another

without express or implied authority or consent”).

82. Based on the above, the Court concludes that Defendants’ Motion should be

granted as to Window Gang’s misappropriation claim against all Defendants

concerning Window Gang’s “[i]nformation regarding its proprietary equipment and

chemical cleaning solutions.” (Am. Compl. ¶ 21.) Otherwise, as to this claim, the

Motion should be denied.

E. Trademark Infringement

83. Window Gang alleges a claim for trademark infringement against Salinas,

Gang Group, and Window Ninjas (the “Infringement Defendants”) under two sections

of the North Carolina Trademark Registration Act (the “NCTRA”), N.C. Gen. Stat. §§

80-11 and 80-13. (See Am. Compl. ¶¶ 130–38). 84. To establish a claim for trademark infringement under section 80-11, a

plaintiff must allege two elements: “(1) ‘that it has a valid, [protectable] trademark’;

and (2) ‘that the defendant’s use of a colorable imitation of the trademark is likely to

cause confusion among consumers.’” Windsor Jewelers, Inc. v. Windsor Fine Jewelers,

LLC, 2009 NCBC LEXIS 19, at *14 (N.C. Super. Ct. Feb. 16, 2009) (quoting Lone Star

Steakhouse & Saloon, Inc. v. Alpha of Va., Inc., 43 F.3d 922, 930 (4th Cir. 1995)).9

Section 80-13, on the other hand, does not authorize a statutory cause of action and

simply provides, in its entirety, that the NCTRA shall not “adversely affect the rights

or the enforcement of rights in marks acquired in good faith at any time at common

law.” The Court’s analysis therefore addresses Window Gang’s claim under section

80-11.

85. For purposes of the NCTRA, a trademark is “any word, name, symbol, or

device or any combination thereof adopted and used by a person to identify goods

made, sold, or distributed by him and to distinguish them from goods made, sold, or

distributed by others.” N.C. Gen. Stat. § 80-1(f). “Use” of a trademark is defined as:

the bona fide use of a mark in the State of North Carolina in the ordinary course of trade, and not merely the reservation of a right to a mark. . . . [A] mark shall be deemed to be “used” in this State . . . on services when it is used or displayed in the sale or advertising of services and the services are currently being rendered in this State, or are being offered and are available to be rendered in this State.

9 The purpose of the NCTRA “is to provide a system of State trademark registration and

protection substantially consistent with the federal system of trademark registration and protection under . . . 15 U.S.C. § 1051[.] The construction given the federal act should be examined as persuasive authority for interpreting and construing [the NCTRA].” N.C. Gen. Stat. § 80-1.1; see, e.g., Ray Lackey Enters. v. Vill. Inn Lakeside, Inc., 2015 NCBC LEXIS 35, at *9 (N.C. Super. Ct. Apr. 2, 2015) (citing Windsor Jewelers and Lone Star for the elements of a section 80-11 claim). Id. § 80-1(g).

86. Window Gang has sufficiently alleged a valid, protectable trademark (the

“Mark”). Not only has Window Gang alleged that it has a protectable interest in its

Mark bearing North Carolina Registration Number 010399, but Window Gang has

attached to the Amended Complaint the Secretary of State’s Certificate of

Registration, which describes the Mark as “Window Gang and Design of the Head of

a Man with Sunglasses On, Hat and Trench Coat.” (Am. Compl. ¶ 31; Am. Compl.

Ex. 1, ECF No. 39.1.)10 Window Gang has also pleaded that it has not abandoned the

Mark. (Am. Compl. ¶ 134.)

87. The Infringement Defendants do not challenge the validity of Window

Gang’s Mark but instead contend that Window Gang’s infringement claim should be

dismissed because (i) “there is only one specific allegation of the use of [Window

Gang’s] mark,” which merely constitutes “de minimis” infringement, (ii) Window

Gang has not pleaded actual confusion by any consumer, and (iii) Window Gang’s

allegations fall outside the scope of section 80-11 because the alleged infringement

did not occur in connection with the sale or advertising of Defendants’ services. (Defs.’

Notice & Suppl. Mem. Law 3–5 [hereinafter “Defs.’ Suppl. Br.”], ECF No. 56.) The

Court disagrees with each of these contentions.

88. First, the number of specific instances of trademark infringement alleged is

not determinative of an infringement claim’s survival under Rule 12(b)(6). Indeed,

10 The NCTRA provides that “[a]ny certificate of registration issued by the Secretary under

the provisions hereof or a copy thereof duly certified by the Secretary shall be admissible in evidence as competent and sufficient proof of the registration of the mark in any action or judicial proceedings in any court of this State.” Id. § 80-4. the NCTRA does not impose a minimum number of infringement violations before an

infringement claim may be brought. To the contrary, section 80-11 is written in the

singular and provides that liability shall extend to “any person who shall . . . [u]se [a]

copy . . . of a mark registered under this Article” or “any person [who] shall . . .

[r]eproduce . . . any such mark and apply such reproduction . . . to labels[.]” N.C. Gen.

Stat. § 80–11. The Court concludes that Window Gang’s allegations of infringement

are sufficient under Rule 12(b)(6) on this point.

89. Next, contrary to the Infringement Defendants’ contention, Window Gang

must plead only the likelihood of confusion, rather than actual confusion, to sustain

its infringement claim. See Windsor Jewelers, 2009 NCBC LEXIS 19, at *14 (stating

that section 80-11 requires that a “defendant’s use of a colorable imitation of

the trademark is likely to cause confusion among consumers”); Shells Seafood Rests.,

Inc. v. Atari, No. 1:96cv276-C, 1997 U.S. Dist. LEXIS 11157, at *7 (W.D.N.C. Feb. 4,

1997) (stating that for infringement claims, “[i]t is well settled that evidence of actual

confusion is not necessary to the finding of a likelihood of confusion”); see also Clear

Defense, LLC v. Cleardefense Pest Control of Greensboro, LLC, No. 1:17-cv-01139,

2018 U.S. Dist. LEXIS 182065, at *7 (M.D.N.C. Oct. 23, 2018) (noting with regard to

infringement claims, “in the mine run of cases, a complaint will not be dismissed

pursuant to Rule 12(b)(6) on the basis of an insufficient likelihood of confusion”). The

Court concludes that Window Gang has satisfactorily pleaded likelihood of confusion

for Rule 12(b)(6) purposes here. (See Am. Compl. ¶¶ 73, 135, 136; Am. Compl. Ex. 12,

ECF No. 39.12.) 90. Finally, that the alleged misconduct involved an invoice bearing Window

Gang’s trademark tendered after the work at issue was completed, (see Am. Compl.

¶ 73; Am. Compl. Ex. 12), is of no consequence on the facts pleaded. Section 80-11

requires that the alleged improper use of a plaintiff’s mark occur “in connection with

the sale . . . of goods or services.” N.C. Gen. Stat. § 80-11(1). The preparation and

tendering of an invoice and the payment of the same is a common feature of the sales

process. Window Gang alleges that the Infringement Defendants billed customers

for services the Infringement Defendants did not perform by sending invoices bearing

Window Gang’s name and Mark. (Am. Comp. ¶¶ 72–73.) Thus, the Infringement

Defendants’ contention that the use of Window Gang’s Mark on Defendants’ invoices

falls outside the scope of section 80-11 is without merit.

91. Defendants also make a single statement in their supplemental brief,

without referencing the economic loss rule, that “any purported infringement would

be covered by [Window Gang’s] existing claim for breach of contract.” (Defs.’ Supp.

Br. 4). To the extent Defendants intend this reference to advance the economic loss

rule as a ground for dismissal of Window Gang’s infringement claim, the Court denies

Defendants’ Motion. Window Gang’s ownership of its Mark does not arise from the

2007 Franchise Agreement, and its infringement claim is based on the legal duty of

all persons, including Defendants, to respect Window Gang’s Mark as required under

section 80-11.

92. Thus, rather than advance an infringement claim to enforce rights and

duties created and existing under contract, Window Gang rests its claim on a statutory duty that exists independent of any contract duty Defendants may have

under the 2007 Franchise Agreement. See Rountree, 796 S.E.2d at 831 (requiring

tort action to “be grounded on a violation of a duty imposed by operation of law, and

the right invaded [to] be one that the law provides without regard to the contractual

relationship of the parties”); see also Legacy Data, 889 F.3d at 167 (applying economic

loss rule to bar conversion claim where defendant “breached a duty it assumed only

as a result of [the parties’] contract”).

93. Accordingly, Window Gang’s infringement claim shall survive Defendants’

Motion.

F. Unfair or Deceptive Trade Practices

94. Window Gang asserts a claim against all Defendants under the UDTPA.

(See Am. Compl. ¶¶ 169–173.) To state a claim under the UDTPA, a plaintiff must

allege: “(1) [that the] 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). “A practice is unfair when it offends established public policy as well as

when the practice is immoral, unethical, oppressive, unscrupulous, or substantially

injurious to consumers,” Johnson v. Phoenix Mut. Life Ins. Co., 300 N.C. 247, 263,

266 S.E.2d 610, 621 (1980), overruled on other grounds, Myers & Chapman, Inc. v.

Thomas G. Evans, Inc., 323 N.C. 559, 374 S.E.2d 385 (1988), and is deceptive when

it has the capacity or tendency to deceive, RD&J Props. v. Lauralea-Dilton Enters.,

LLC, 165 N.C. App. 737, 748, 600 S.E.2d 492, 501 (2004). Whether an act is unfair or deceptive is a question of law for the court. See Winston Realty Co. v. G.H.G., Inc.,

314 N.C. 90, 96, 331 S.E.2d 677, 681 (1985).

95. Defendants seek dismissal on the ground that Window Gang’s UDTPA claim

alleges nothing more than breach of contract and, in particular, fails to allege the

“egregious or aggravating circumstances” our courts have required for a contract

breach to constitute an unfair or deceptive trade practice under the UDTPA. See,

e.g., Harty v. Underhill, 211 N.C. App. 546, 552, 710 S.E.2d 327, 332 (2011) (“[A] mere

breach of contract does not constitute an unfair or deceptive act. Egregious or

aggravating circumstances must be alleged before the provisions of the [UDTPA] may

take effect.”); Eastover Ridge, LLC v. Metric Constructors, Inc., 139 N.C. App. 360,

367–68, 533 S.E.2d 827, 832–33 (2000) (“[I]t is well recognized . . . that actions for

unfair or deceptive trade practices are distinct from actions for breach of contract,

and that mere breach of contract, even if intentional, is not sufficiently unfair or

deceptive to sustain an action under [N.C. Gen. Stat.] § 75-1.1.”). Defendants,

however, have construed Window Gang’s allegations too narrowly.

96. First, Window Gang pleads that Defendants violated the 2007 Franchise

Agreement in various ways, including through the destruction of documents

Defendants were obligated to return, (Am. Compl. ¶¶ 90–95), and by concealing their

breach by making false statements to Window Gang, (Am. Compl. ¶¶ 89, 110–11).

97. Contrary to Defendants’ contention, this is the sort of egregious and

aggravating conduct attendant to a contract breach that courts have found will

sustain a claim under section 75-1.1. See, e.g., N.C. Mut. Life Ins. Co. v. McKinley Fin. Servs., Inc., No. 1:03CV00911, 2005 U.S. Dist. LEXIS 36308, at *39 (M.D.N.C.

Dec. 22, 2005) (finding “intentional destruction of relevant documents” could

constitute “intentional action to mislead or deceive” under the UDTPA); Garlock v.

Henson, 112 N.C. App. 243, 246, 435 S.E.2d 114, 115 (1993) (holding defendant’s

forgery to deceive plaintiff was “sufficiently aggravating” to sustain 75-1.1 violation);

Lendingtree, LLC v. Intercont’l Capital Grp., Inc., 2017 NCBC LEXIS 54, at *8 (N.C.

Super. Ct. June 23, 2017) (noting that “substantial aggravating circumstances

attending the breach . . . generally involve forged documents, lies, and fraudulent

inducements”); Sparrow Sys., Inc. v. Private Diagnostic Clinic, PLLC, 2014 NCBC

LEXIS 70, at *44–45 (N.C. Super. Ct. Dec. 24, 2014) (stating that “deceitful conduct

in order to effectuate and conceal [a defendant’s] breaches” combined with acts to

“deter further investigation” may constitute aggravating circumstances under the

UDTPA).

98. Second, in addition to alleging that Defendants breached the 2007 Franchise

Agreement, Window Gang further contends that Defendants made misleading

statements and representations concerning Window Ninjas’ status as the same as, a

successor to, or a continuation of Window Gang, which deceived Window Gang’s

customers while benefiting Defendants at Window Gang’s expense. (Am. Compl. ¶¶

52–57, 59–61, 63, 72, 73; Am, Compl. Exs. 4–9, 11, 12.) Window Gang alleges that,

in so doing, Defendants fraudulently induced at least one customer to retain Window

Ninjas rather than Window Gang. (Am. Compl. ¶ 61.) 99. Such conduct may constitute unfair or deceptive acts under the UDTPA. See

Sunbelt Rentals, 174 N.C. App. at 59, 620 S.E.2d at 230 (finding UDTPA violation

where “defendants told customers [plaintiff’s] name had changed to” that of the

corporate defendant, “used [plaintiff’s] lease contracts and pricing information,

inserting their company name on the documents,” and deleted plaintiff’s job

information); Comp. Design & Integration, LLC v. Brown, 2017 NCBC LEXIS 8, at

*34 (N.C. Super. Ct. Jan. 27, 2017) (finding likelihood of success on UDTPA claim

based on defendants’ “false statements concerning [corporate defendant’s] status as

a successor to, or a continuation of, [the corporate plaintiff] in an effort to advantage

[d]efendants in their trade and business at [p]laintiff’s expense with intended and

resulting harm to [p]laintiffs”).

100. In addition, Window Gang’s allegations in support of its surviving claims for

trademark infringement and misappropriation of trade secrets likewise support the

denial of Defendants’ Motion to dismiss Window Gang’s UDTPA claim. See N.C. Gen.

Stat. § 80-12 (“A violation of [N.C. Gen. Stat. §] 80-10 or [N.C. Gen. Stat. §] 80-11

constitutes a violation of [N.C. Gen. Stat. §] 75-1.1.”); Drouillard v. Keister Williams

Newspaper Servs., Inc., 108 N.C. App. 169, 172–73, 423 S.E.2d 324, 326–27 (1992); S.

Fastening Sys., 2015 NCBC LEXIS 42, at *28–29 (recognizing that trade secret

misappropriation claim may form the basis for a UDTPA claim). Therefore, Window

Gang’s UDTPA claim shall not be dismissed on Defendants’ Motion. G. Civil Obstruction of Justice and Civil Conspiracy

101. Window Gang asserts claims against Defendants for civil obstruction of

justice and civil conspiracy to commit obstruction based on Window Gang’s

allegations that Defendants caused Window Gang injury by engaging in a “mass

deletion and destruction of files in the [Google] Account during the course of this

litigation,” (Am. Compl. ¶¶ 91–104, 162), and by “making . . . false statements to

Window Gang and the Court regarding Defendants’ use of the [Google] Account,” (Am.

Compl. ¶¶ 105–11, 162). Window Gang alleges that Defendants’ conduct has

“prevent[ed], obstruct[ed], impede[d], and hinder[ed] public justice because the

destroyed files were discoverable evidence” in this action, (Am. Compl. ¶ 165), the

absence of which has “precluded Window Gang from being able to fully investigate

and prosecute its claims against Defendants,” (Am. Compl. ¶ 166), and “obtain the

full legal remedies afforded by the Court’s [injunctive relief],” (Am. Compl. ¶ 167).

102. Defendants seek dismissal on the ground that common law claims for civil

obstruction of justice and civil conspiracy based on that obstruction cannot be

maintained for conduct occurring within the litigation in which the claim is brought.

(Defs.’ Supp. Br. 6.) Rather, Defendants contend that in-suit conduct is appropriately

policed through sanctions relief and limiting instructions rather than through

separate causes of action for civil obstruction and civil conspiracy. (Defs.’ Supp. Br.

6.) The Court agrees.

103. The Supreme Court of North Carolina first recognized a civil claim for

obstruction of justice in Henry v. Deen, 310 N.C. 75, 310 S.E. 326 (1984). In that case, the Supreme Court recognized obstruction of justice as an underlying wrongful act to

support a civil conspiracy claim where defendant doctors were alleged to have

falsified, destroyed, and concealed a decedent’s medical records in an effort to hide

their negligent conduct from the plaintiff. Id. at 87, 310 S.E.2d at at 334 (“Such acts

by the defendants, if found to have occurred, would be acts which obstruct, impede,

or hinder public or legal justice and would amount to the common law offense of

obstructing public justice.”); cf. State v. Wright, 206 N.C. App. 239, 241, 696 S.E.2d

832, 834–35 (2010) (“At common law it is an offense to do any act which prevents,

obstructs, impedes or hinders public or legal justice.”).

104. Our appellate courts have subsequently followed Henry and observed that

“acts which obstruct, impede, or hinder public or legal justice . . . amount to the

common law offense of obstructing justice, so that a complaint alleging that the

defendants engaged in such activities states a claim for relief.” Blackburn v. Carbone,

208 N.C. App. 519, 526, 703 S.E.2d 788, 794 (2010) (internal quotation marks

omitted). “To create civil liability for conspiracy there must have been a wrongful act

resulting in injury to another committed by one or more of the conspirators pursuant

to the common scheme and in furtherance of the objective.” Henry, 310 N.C. at 86–

87, 310 S.E.2d at 334 (noting that a charge of conspiracy itself “does no more than

associate the defendants together and perhaps liberalize the rules of evidence to the

extent that under the proper circumstances the acts of one may be admissible against

all”). 105. The North Carolina appellate courts do not appear to have considered the

precise issue raised by Defendants’ Motion—i.e., whether a claim for obstruction of

justice may be asserted for conduct occurring in the lawsuit in which the obstruction

claim is brought. Indeed, the Court’s research has not discovered any North Carolina

decision in which a civil obstruction claim has been successfully maintained in such

circumstances.

106. To the contrary, on the relatively infrequent occasions a common law

obstruction claim has been advanced, the claim has been asserted against a party for

pre-suit conduct or against a non-party, such as an expert witness or a juror, for

conduct occurring in connection with a separate legal action. See Grant v. High Point

Reg’l Health Sys., 184 N.C. App. 250, 255–56, 645 S.E.2d 851, 855 (2007) (recognizing

civil obstruction claim where defendant hospital destroyed decedent’s medical

records, precluding Rule 9(j) certification and thus medical malpractice action); Jones

v. City of Durham, 183 N.C. App. 57, 59, 643 S.E.2d 631, 633 (2007) (recognizing civil

obstruction claim where defendant destroyed evidence prior to commencement of

litigation); Burgess v. Busby, 142 N.C. App. 393, 409, 544 S.E.2d 4, 13 (2001)

(recognizing civil obstruction claim where jurors in medical malpractice action sued

doctor in separate lawsuit for conduct occurring in connection with the prior

malpractice action).

107. The Court is not prepared to recognize a civil obstruction claim beyond the

contexts in which our appellate courts have found such a claim to exist and thus will

not extend the claim to circumstances, such as those here, where the alleged conduct giving rise to the claim occurred in the very lawsuit in which the obstruction claim is

asserted. The conduct Window Gang alleges in support of its claims, if proven,

constitutes litigation misconduct that is fully redressible by the Court’s sanction and

contempt powers, including through jury instructions at trial.11 Given that, in Henry,

the Supreme Court found it significant in recognizing a civil obstruction claim that

“at the time of the alleged conspiracy no court had jurisdiction [over] the defendants,”

Henry, 310 N.C. at 89–90, 310 S.E.2d at 335–36, this Court, which has jurisdiction

over Defendants, is not prepared to afford relief through a civil obstruction cause of

action. In light of the Court’s conclusion as to the predicate civil obstruction claim,

Window Gang’s civil conspiracy claim necessarily fails. Window Gang’s civil

obstruction and civil conspiracy claims shall therefore be dismissed.

IV. CONCLUSION

108. WHEREFORE, for the foregoing reasons, the Court hereby GRANTS in

part and DENIES in part Defendants’ Motion to Dismiss as follows:

a. The Court GRANTS Defendants’ Motion as to Window Gang’s claim

against Salinas, Gang Group, and the Affiliated Defendants for breach

of the Non-compete and dismisses that claim with prejudice.

b. The Court DENIES Defendants’ Motion as to Window Gang’s claim for

conversion against Window Ninjas. The Court GRANTS Defendants’

11 North Carolina recognizes a criminal statutory claim, which defines obstruction of justice

as willfully disobeying or violating “any injunction, restraining order, or any order lawfully issued by any court” but noting that the statute “shall not in any manner affect the court’s power to punish for contempt.” N.C. Gen. Stat. § 14-226.1. Motion as to Window Gang’s claim for conversion against Salinas, Gang

Group, and the Affiliated Defendants and dismisses that claim with

prejudice.

c. The Court GRANTS Defendants’ Motion as to Window Gang’s claim for

tortious interference with contract against all Defendants and dismisses

that claim with prejudice.

d. The Court DENIES Defendants’ Motion as to Window Gang’s claim for

tortious interference with prospective economic advantage against all

e. The Court GRANTS Defendants’ Motion as to Window Gang’s claim for

misappropriation of trade secrets against all Defendants to the extent it

is based on “[i]nformation regarding [Window Gang’s] proprietary

equipment and chemical cleaning solutions,” and dismisses that claim

with prejudice. The Court otherwise DENIES Defendants’ Motion as to

Window Gang’s claim for misappropriation of trade secrets.

f. The Court DENIES Defendants’ Motion as to Window Gang’s claim for

trademark infringement under N.C. Gen. Stat. § 80-11 against Salinas,

Gang Group, and Window Ninjas.

g. The Court DENIES Defendants’ Motion as to Window Gang’s claim for

unfair or deceptive trade practices under N.C. Gen. Stat. § 75-1.1

against all Defendants. h. The Court GRANTS Defendants’ Motion as to Window Gang’s claims

for civil obstruction and civil conspiracy against all Defendants and

dismisses those claims with prejudice.

IT IS SO ORDERED, this the 2nd day of April, 2019.

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