North Carolina Business Litigation Report

Tortious Interference And Negligent Misrepresentation Claims Dismissed

The Business Court today granted in part, and denied in part, a Motion to Dismiss in Gateway Management Services, Ltd. v. Advanced Lubrication Technology, Inc. Judge Tennille ruled on claims of tortious interference with prospective economic advantage, negligent misrepresentation, and misappropriation of trade secrets, among others.

Plaintiff (Gateway) alleged that the Defendant (ALT) sold it faulty lubricant which was used by automobile and truck dealers to which Plaintiff sold warranties.  The lubricant allegedly turned out to be defective, and Gateway claims it was called upon to pay substantial warranty claims.  

The parties stopped doing business with one another, and ALT then began selling the same lubricant, under a different name, to Gateway's competitor.  According to Gateway, ALT gave the competitor a list of Gateway's customers which it used to solicit business.

The Motion to Dismiss was granted as to the tortious interference claim, which asserted that Gateway had lost business as a result of ALT's sale of lubricant to the competitor.  The Court held that:

ALT sold product to a competitor of Gateway. It had the right to do so. Competition does not in and of itself represent tortious interference; rather it is a legitimate justification for seeking business from common customers. Here it is even one step removed since ALT sold product to Gateway’s competitor.

It is . . . clear that the complaint does not adequately allege interference with prospective economic advantage. To do so the complaint must allege interference with a trade or business by maliciously inducing a person not to enter into a contract with a third person, which he would have entered into but for the interference. A legitimate exercise on a person’s rights cannot support a claim for interference with prospective economic advantage.

The negligent misrepresentation claim was dismissed because Gateway's claims were for breach of warranty and covered by the UCC, and also because of the economic loss rule.  Judge Tennille held:

This is a breach of warranty case. The complaint alleges any statements were made in the course of the contractual representation. It fails to establish any independent duty running from ALT to Gateway. To substitute negligent misrepresentation for breach of warranty under the circumstances of this case would eviscerate the pertinent sections of the UCC. Both the negligent misrepresentation claim and the negligence claim in Count VI are barred by the economic loss rule. Both are based upon a breach of contract or warranty and the recovery is limited to the contract or warranty claim. Our Court of Appeals has held that: “a tort action does not lie against a party to a contract who simply fails to properly perform the terms of the contract.” Spillman v. Am. Homes of Mocksville, Inc., 108 N.C. App. 63, 65, 422 S.E.2d 740, 741 (1992).

Finally, the trade secrets claim survived the Motion to Dismiss. The Court held that "[c]ustomer lists may or may not be trade secrets depending on the circumstances and the use made of them," and held that discovery on this claim would be necessary.

Brief in Support of Motion to Dismiss

Brief in Opposition to Motion to Dismiss

Reply Brief in Support of Motion to Dismiss

 

 

 

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Mack Sperling
Brooks Pierce, LLP
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