Business Court Grants Summary Judgment In Trade Secrets Case

The Business Court granted summary judgment on Plaintiff's trade secrets claim yesterday in Edgewater Services, Inc. v. Epic Logistics, Inc., 2009 NCBC 20 (N.C. Super. Ct. August 11, 2009). It also dismissed Plaintiff's claim for punitive damages.

Plaintiff Edgewater and Defendant Epic are third party logistics companies, arranging for transportation of freight for their customers. Epic handled less than truckload (LTL) shipping. Edgewater's specialty was truckload (TL) freight.

The two companies had an oral agreement for Epic to refer TL shipments to Edgewater, and for Edgewater to refer LTL shipments to Epic. In 2004, an Edgewater employee named Osgood decided to leave Edgewater and join Epic, and Epic then began to move into the TL side of the business.

Edgewater sued, contending that Epic had misappropriated its trade secrets, which it said consisted of information regarding the carriers it used, the rates charged for TL and LTL shipments, and its customer files. Edgewater's president later conceded at her deposition that only the rate information could be considered a trade secret.

Judge Jolly granted summary judgment to Epic on the trade secrets claim, ruling that:

The rate information was not a trade secret, because rates changed as variables like the cost of fuel and insurance changed.

The rate information didn't constitute trade secrets because there was no evidence that Edgewater expended any significant amount of effort or money in developing the information outside of its cost of doing business.

Edgewater didn't take reasonable steps to maintain the secrecy of the information: its customers and carriers weren't required to keep the information confidential; and the information on rates was kept in an unlocked file room accessible to anyone.

On the punitive damages claim, G.S. §1D-15(a) required Plaintiff to show malice and willful or wanton conduct. Its evidence consisted only of its president's "feeling" that the Defendants "were greedy and trying to get something that they didn't have to pay for." Judge Jolly ruled this was insufficient to meet the statutory requirement that evidence supporting punitive damages be "clear and convincing."

There were two earlier rulings in this case: a May 2007 ruling involved the discoverability of  psychiatric records, and an October 2007 ruling involved the enforceability of a covenant not to compete.

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