Sunbelt Rentals, Inc. v. Head & Enquist Equipment, L.L.C., 2002 NCBC 4 (N.C. Super. Ct. July 10, 2002)(Tennille)

This is a significant Business Court opinion on unfair competition. The defendants were a competitor of the plaintiff, and former employees of the plaintiff who had left to join the defendant. The first issue addressed by the Court was whether the former employees owed a fiduciary duty to their former employer. The Court found there was a question of fact whether the former employees who had served in management positions had the ability to dominate and influence their former employer, so it denied summary judgment on the issue whether those employees had fiduciary duties. Summary judgment was granted, however, as to some of the employees who the Court found had only basic management responsibilities. Authority over day to day operations, even with substantial discretion over such operations, is insufficient to make out a fiduciary duty.

On the merits of the claims, the Court noted that merely planning to work for another company or planning to start a new company is not unlawful behavior. The proper focus, the Court held, is upon the actions taken by the former employees in furtherance of a plan to compete. The Court granted summary judgment as to the employees who it had found might have had a fiduciary duty, as the only evidence before the Court of their pre-departure activities was that they had met and discussed the possibility of competing.

The Court denied summary judgment on plaintiff's claim of tortious interference with prospective economic relations.

The claim for violation of the North Carolina Trade Secrets Protection Act also survived. The Court found that business plans, marketing strategies, and customer information could constitute confidential information protected under the Act. The substantial decrease in plaintiff's business, and the simultaneous increase in defendant's business, constituted circumstantial evidence that there had been a misappropriation.

A claim for unfair and deceptive practices also survived summary judgment, as did a claim for conspiracy. The Court denied summary judgment based on the defense of laches, finding that there had not been an unreasonable delay in bringing suit and that defendant was unable to show any prejudice as a result of the alleged delay.

Full Opinion

Reply Brief in Support of Motion for Summary Judgment

(All other briefs were filed under seal)

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