NC Business Court: Motions To Amend And The Statute Of Limitations

Maybe you have the same nightmare that I do.  You have moved to amend your Complaint to add a new defendant.  The statute of limitations is about to run, but your motion to amend was made before the end of the limitations period.  The problem is that you end up getting the Order allowing your amendment after the statute has run.

Is your addition of the new defendant time barred?  You are probably worried, but you might be thinking that the principle of relation back (contained in NC Rule of Civil Procedure 15(c))  will eliminate your concern. 

Judge Bledsoe shed some light on this very dilemma last week, in his Opinion in Insight Health Corp. v. Marquis Diagnostic Imaging of North Carolina, LLC, 2015 NCBC 50.  It turns out that relation back has nothing to do with my nightmare so long as the motion to amend is filed before the expiration of the limitations period.

This wasn't a groundbreaking step by Judge Bledsoe.  He relied on a NC Court of Appeals opinion more than ten years old, which held that:

the relation back principle only applies where the complaint is amended outside the relevant statute of limitations.  It need not be considered where a pleading is amended before the statute of limitations expires.

Op. ¶14 (quoting Zenobile v. McKecuen, 144 N.C. App. 104, 108, 548 S.E.2d 756, 758, disc. rev. denied, 354 N.C. 75, 353 S.E.2d 214 (2001).

So what is the trigger date for the statute of limitations when a motion to amend is involved?  "The date of the filing of the motion [to amend the complaint to add a new claim], rather than the date the court rules on it, is the crucial date for measuring the period of limitations.  The timely filing of the motion to amend [the complaint], if later allowed, is sufficient to start the action within the period of limitations."  Op. ¶14 (quoting Mauney v. Morris, 316 N.C. 67, 71-72, 340 S.E.2d 397, 400 (1986)(emphasis added).

If you are moving to amend to add a new defendant and you are butting up on the statute of limitations, sleep better on this decision.

NC Business Court Gives Full Faith And Credit To LegalZoom's California Class Action Settlement

There are probably some of you who lie awake at night wondering whether Leagalzoom's offering of do it yourself lawyering products will be found to be the unauthorized practice of law (UPL) in North Carolina.

For those few of you, that uncertainty will continue.  At the end of last week, Judge Gale issued an opinion in Bergenstock v. Legalzoom.com, Inc., 2015 NCBC 49, dismissing a putative class action by Plaintiffs seeking to represent all North Carolina residents who purchased Legalzoom products or services.  The claims were for UPL, unjust enrichment, and violations of the North Carolina Unfair and Deceptive Trade Practices Act.  Op. ¶28.

The Judge dismissed the complaint, but he did not make a ruling as to Legalzoom's business model, nor did he address the question whether its services constitute UPL.  The resolution of that issue will have to come in the still pending case brought by LegalZoom against the NC State Bar: LegalZoom.com, Inc. v. North Carolina State Bar.  See here for my last update on that case.

The reason for the dismissal in the Bergenstock case was the full faith and credit given to the settlement of a similar class action in 2012 in California (known as the Webster case).  Webster had sued Legalzoom on behalf of a nationwide class.

The Webster Settlement

The Webster settlement covered all claims:

asserted or that could have been asserted [in that case] arising out of the LegalZoom website, any materials available on or through the LegalZoom website . . . the unauthorized practice of law, or the purchase or use of documents prepared through LegalZoom.

Op. ¶17.

In consideration for the settlement, LegalZoom agreed to provide sixty days of free enrollment in its prepaid legal services Programs.  As Judge Gale described those Programs (known as the LegalZoom Legal Advantage Plus Program [for individuals] and the Business Advantage Pro Program [for businesses]), they involve:

services provided by licensed attorneys, including telephone consultations; review and written summary of legal documents; an annual legal checkup (which would be provided to Webster class members in the free sixty-day period), including a written summary and recommendations for legal documents and strategies; a ten percent discount on all LegalZoom products; access to the LegalZoom form library; electronic document storage; and a twenty-five percent discount on legal services not included under the Programs, but provided by a participating firm.

Op. ¶18.

The challenge presented by the Bergenstock putative class was that those Programs were not available in North Carolina.  (That is true, as the NC State Bar has refused to approve the Programs.  That refusal is the subject of litigation between the State Bar and LegalZoom.  Op. ¶20).  The Settlement dealt with members who did not live in states where those Programs were available by providing them with the lesser of (i) $75.00, or (ii) half of the current base price of the document that the class member had purchased from LegalZoom.  Op. ¶19.

The Bergenstock Plaintiffs said that they had not received due process in the Webster settlement because there was no counsel representing their interests and there was no named class representative who had interests in common with them.  They further argued that the California Court approving the settlement had not considered the adequacy of the alternative payment to the class members who did not have the LegalZoom payments available to them.  They asserted that the settlement was not entitled to full faith and credit as to them.

Full Faith And Credit To Class Action Settlements

The main road block faced by the Plaintiffs challenging the effect of the Webster settlement lies in a U.S. Supreme Court decision holding that:

a judgment entered in a class action, like any other judgment entered in a state judicial proceeding, is presumptively entitled to full faith and credit.

Matsushita Elec. Indus. Co. v. Epstein, 516 U.S. 367, 374 (1996), under 28 U.S.C. § 1738 (2014).

The North Carolina appellate courts have accordingly held that courts should:

apply only a “very limited” scope of review when determining whether a foreign judgment is entitled to full faith and credit, with the inquiry limited to whether jurisdictional and due process considerations were “fully and fairly litigated and finally decided” by the court rendering judgment.

Op. Par. 32 (citing Boyles v. Boyles, 308 N.C. 488, 491, 302 S.E.2d 790, 793 (1983); Moody v. Sears Roebuck & Co., 191 N.C. App. 256, 275–76, 664 S.E.2d 569, 581–82 (2008).

If the out-of-state court found  jurisdiction and due process to have been "fully and fairly litigated" and they were finally decided, a "North Carolina court extends full faith and credit without further inquiry."  Op. ¶32.

The Bergenstock Plaintiffs argued that the California court had not specifically considered the adequacy of the settlement amount paid to persons living in states where LegalZoom's programs were not offered and that they therefore had not been afforded due process.

Judge Gale refused to accept that argument, holding that:

the record does not allow for this parsing of the settlement consideration. The full settlement consideration, including the consideration provided to the Alternative Payment Plaintiffs, was before Judge Highberger [the California Judge approving the settlement] for his review. The Court cannot infer that Judge Highberger failed to consider the adequacy of representation of or the adequacy of consideration for the Alternative Payment Plaintiffs merely because he did not make express findings in that regard. He made findings that the overall settlement was fair and reasonable and that the Settlement Class had been adequately represented. The Court then must conclude that the issues Plaintiffs now seek to litigate in this Court were fully and fairly litigated and finally decided by Judge Highberger.

Op. ¶41.

Two Claims You May Not Want To Make In North Carolina

I said yesterday that there was too much in DSM Dyneema, LLC v. Thagard, 2015 NCBC 47 for just one post, so here are the rest of the key points from the case.  They involve two claims you might not want to bother to make in North Carolina -- the first one suing a former employee for violation of fiduciary duty -- and the second a claim resting on the "inevitable disclosure doctrine."

Uncertainty About The Availability Of The Inevitable Disclosure Doctrine

Beware of relying on the "inevitable disclosure doctrine."  Judge Bledsoe points out that the doctrine "has not yet been firmly adopted by the North Carolina courts."  Op. ¶20 & n.4.  I think of the inevitable disclosure argument as an end run for a client which didn't get a non-compete agreement from a departing employee but wished that it had. 

The NC Court of Appeals, although it has yet to accept the doctrine, has described it as applying:

when an employee who knows trade secrets of his employer leaves that employer for a competitor and, because of the similarity of the employee's work for the two companies, it is "inevitable" that he will use or disclose trade secrets of the first employer. See K. Roberson, South Carolina's Inevitable Adoption of the Inevitable Disclosure Doctrine: Balancing Protection of Trade Secrets with Freedom of Employment, 52 S.C.L. Rev. 895 (2001).

Op. ¶20 & n.4 (quoting Analog Devices, Inc. v. Michalski, 157 N.C. App. 462, 470, 579 S.E.2d 449, 454 (N.C. Ct. App. 2003).

Judge Bledsoe was able to avoid deciding whether the doctrine applies in NC, even though the Defendants argued on their Motion for Judgment on the Pleadings that the Plaintiff had pled little more than that its former employee had left its employment and would inevitably disclose its trade secrets to his new employer, a competitor.

The Judge found that there was more than just the "inevitability" of disclosure since the Defendants after hiring away Thagard (Plaintiff's former chief scientist and "technical leader"), were suddenly able to pass a ballistics test for combat helmets used by the Department of Defense.  Before that hiring, the Defendants and all of the Plaintiff's other competitors, had failed that test.  Plaintiff had the only process in its industry which yielded an acceptable helmet.  There were also allegations in the Complaint that Thagard had downloaded trade secret information from his company computer before leaving the Plaintiff, and that he had disclosed that information to the Honeywell Defendants.

So, before making a claim based solely on the inevitable disclosure doctrine, take into account that North Caroline may not recognize the doctrine.

Fiduciary Duty

This second DSM Dyneema decision also contains a completely unsurprising ruling that Defendant Thagard did not owe a fiduciary duty to his former employer.

The NC Supreme Court pretty much ruled that an employee has no fiduciary duty to its employer almost fifteen years ago, in Dalton v. Camp, 353 N.C. 647, 652, 548 S.E.2d 704, 708 (2001).

Judge Bledsoe rejected the Plaintiff's argument that Thagard owed it a fiduciary duty because "he held a position of trust and confidence  at DSM as Application Manager -- Life Protection in which he. . . was the lead scientist and technical leader for DSM's helmet and body armor development and new grade development."  Op. ¶28.

It is hard to conceive of  situation where any employee -- other than one who is an officer or a director of her employer -- would owe a fiduciary duty to her employer.

 

Trade Secret Plaintiff Avoids Dismissal, Gets Discovery

One of the most interesting Business Court decisions of last year was Judge Bledsoe's opinion in DSM Dyneema, LLC v. Thagard, 2014 NCBC 50, in which he held that the Plaintiff, which was suing for misappropriation of trade secrets,was barred from pursuing discovery because it had not identified its trade secrets with "sufficient particularity."  The alleged trade secrets involved the development of ballistic-resistant fibers for enhanced combat helmets.  If you missed that case, click here.

This week, Judge Bledsoe followed up on that decision by denying the Motion for Judgment on the Pleadings of Defendants Honeywell Specialty Materials, LLC, Honeywell Advanced Composites, Inc., and Honeywell International, Inc.

There is so much worth writing about in this Opinion, DSM Dyneema, LLC v. Thagard, 2015 NCBC 47, that I've split it  into two posts.  More tomorrow.

The Honeywell Defendants argued that they were entitled to judgment on the pleadings because the Court had already ruled that the Plaintiff had not identified its alleged trade secrets with the necessary particularity.

While the Court had indeed made that ruling, it pointed out in this second ruling in the case that:

the level of specificity required of a plaintiff to survive a motion for judgment on the pleadings under Rule 12(c) is less than that required to permit discovery into an adversary's confidential and trade secret information.

Op. ¶18.

Adequately Pleading A Trade Secrets Claim

If you are hoping that this case provides a road map for an adequate trade secrets description in a case involving manufacturing/technical type trade secrets, you are bound to be disappointed.  Judge Bledsoe merely measured the allegations in the amended complaint against other cases where the trade secret description had been ruled to be insufficient, finding the Plaintiff's allegations to be "more detailed and specific, and less sweeping and conclusory, than those allegations our courts have found to fail the pleading standard of Rule 12."  Op. ¶19.

Nevertheless, the Court's citation of six Court of Appeals and Business Court decisions finding trade secret allegations to be sufficient to survive a motion to dismiss probably will provide at least some direction to those looking to avoid an early dismissal of a trade secrets claim.  Those cases (which involve mostly customer type trade secrets) are:

Horner Int'l Co. v. McKoy, 754 S.E.2d 852, 859 (N.C. Ct. App. 2014) (holding sufficient under Rule 12(b)(6) plaintiff’s identification of “various raw materials and raw material treatments; extraction, filtration, separation, and distillation techniques; and methods for compounding of flavors, packaging, and plant utility. . . used in the production of flavor materials derived from seven specifically identified substances, such as cocoa, ginseng, and chamomile”);

S. Fastening Sys., Inc. v. Grabber Constr. Products, Inc., 2015 NCBC 40 ¶¶ 23–25 (N.C. Super. Ct. Apr. 28, 2015) www.ncbusinesscourt.net/opinions/2015_NCBC_40.pdf (holding sufficient under Rule 12(b)(6) “confidential customer information such as customer contact information and customer buying preferences and history . . . confidential freight information, sales reports, prices and terms books, sales memos, sales training manuals, commission reports, and information concerning SFS’s relationship with its vendors”);

Veer Right Mgmt. Grp., Inc. v. Czarnowski Display Serv., Inc., 2015 NCBC 12 ¶ 29 (N.C. Super. Ct. Feb. 4, 2015), www.ncbusinesscourt.net/opinions/2015_NCBC_12.pdf (holding sufficient under Rule 12(b)(6) “compilations of information, methods, techniques, and processes that [it uses] in planning, organizing and managing all aspects associated with identifying appropriate shows for their clients, pricing and budgeting, procuring space, setting up booths, staffing booths during the show, tracking sales leads generated by each show, tearing down booths after each show”);

Le Bleu Corp., 2014 NCBC 65 ¶ 29 (holding sufficient under Rule 12(b)(6) “customer lists, pricing information, transaction histories, key contacts, and customer leads”);

Koch Measurement Devices, Inc. v. Armke, 2013 NCBC 48 ¶ 19 (N.C. Super. Ct. Oct. 14, 2013), www.ncbusinesscourt.net/opinions/2013_NCBC_48.pdf (holding sufficient under Rule 12(b)(6) “customer lists, including names, contact persons, addresses, phone numbers . . . [customer] ordering habits, history . . . [and company] pricing and inventory management strategies”); and

TSG Finishing, LLC v. Bollinger, 767 S.E.2d 870, 877 (N.C. Ct. App. 2014)  (recognizing in directing entry of preliminary injunction that particular steps in a process may be trade secrets, not simply the process as a whole).

Op. ¶19.

If you use the descriptions from those cases as a model for your trade secrets complaint, you will stand a pretty good chance of surviving a Motion to Dismiss (at least in Judge Bledsoe's Court).

Discovery Will Go Forward In This Case

The good news in this decision for the Plaintiff -- apart from escaping the Motion to Dismiss -- is that it is now entitled to discovery of the Honeywell Defendants' own trade secrets.

You will remember that the heart of the first Dyneema decision was that the Plaintiff was not entitled to any discovery of the Defendants' confidential information without describing the trade secrets which Plaintiff claimed had been misappropriated.

That ruling caused me to wonder how a plaintiff in a technical case of this type who claims misappropriation of its trade secrets can ever know exactly which of it proprietary processes have been stolen without having the defendant reveal its own trade secrets.

Now, the Court has shown some understanding of the box in which DSM Dyneema found itself in pursuing its trade secrets claim.  Judge Bledsoe said:

the Court is persuaded that in these circumstances—where DSM reasonably contends that the finished product at issue is 'the result of a recipe or formula of numerous variables' and is not publicly available for purchase or inspection, (DSM’s Resp. Honeywell’s Mot. Prot. Order, p. 13), and where the Court finds that the nature of Defendants’ alleged misappropriation creates an inherent difficulty for DSM to identify which portions of its trade secrets have been misappropriated prior to the receipt of discovery from Defendants —the Court concludes that DSM has satisfactorily complied with the Court’s [Order in 2014 NCBC 47] and that the Honeywell Defendants should now be required to produce to DSM their relevant and responsive confidential information and trade secrets.

Op. ¶33.  The Court looked to a Georgia federal court decision recognizing the same difficulty a trade secret plaintiff may face in identifying the trade secrets it says were stolen from it.  In that case, DeRubeis v. Witten Techs., Inc., 244 F.R.D. 676 (N.D. Ga. 2007), the Court held:

[T]he trade secret plaintiff, particularly if it is a company that has hundreds of thousands of trade secrets, may have no way of knowing what trade secrets have been misappropriated until it receives discovery on how the defendant is operating.

Id. at 680.

Coming tomorrow: Whether the inevitable disclosure doctrine applies in North Carolina, and the near impossibility of making breach of fiduciary duty claims against employees.

 

 

Interpreting The Right To Specific Performance In A Shareholder Buy-Sell Agreement

I've never thought very hard about the remedy of specific performance.  That means ordering a party to a contract to perform its contractual obligations.

But the ability of the Court to order specific performance was front and center in the Business Court's decision Wednesday in Hilco Transport, Inc. v. Atkins, 2015 NCBC 44.  The Defendants, shareholders of the Plaintiff corporation, argued that the Court could not order specific performance compelling them to sell their shares to the corporation.

One of the Hilco shareholders had the right under the Buy-Sell Agreement to require the family members of his brother, upon the brother's death. to sell their shares to the corporation.

All of the shareholders were subject to the term of a Buy-Sell Agreement which said in Section 10.1 that "[t]he Stockholders and their successors and assigns shall . . . be entitled to specific performance and injunctive relief to enforce the provisions of this Agreement."

The Buy-Sell Agreement did not specifically give the right of specific performance to the corporation.

When the Defendant shareholders received written notice from the corporation stating that it was exercising its option to purchase their shares, they  refused to allow the redemption.  The corporation sued, demanding specific performance.

The Defendants moved to dismiss, relying on the Latin phrase expressio unius est exclusion alterius.  If your fluency in Latin is fading, that means "the expression of one thing is the exclusion of another," (Order Par. 22).  Given that Section 10.1 of the Buy-Sell Agreement gave the right of specific performance to the shareholders, without mentioning the corporation, the shareholders contended that the corporation did not have that right.

Judge Gale didn't buy that argument.  He looked at the opening sentence to the paragraph giving the surviving brother the right to buy his deceased brother's family's Hilco shares.  The Judge found the language "[n]otwithstanding anything contained in this Agreement to the contrary . . . ." to be significant.

I don't know if I would have viewed that clause as being determinative, but this observation by Judge Gale about the "special rules" for "interpreting stockholder agreements that limit share transfers" is instructive:

'restrictions on alienation or transfer of stock are not favored and consequently are strictly construed.'  Averitt v. Ledbetter Roofing & Heating Co. v. Phillips, 85 N.C. App. 248, 251, 354 S.E.2d 321, 323 (1987).  However, such agreements can be upheld where the language is clear, because '[w]hile both option contracts and restrictions on the alienation of property interests are strictly construed, the clear intent of the parties as expressed on the face of the contract controls.  Lee v. Scarborough, 164 N.C. App. 357, 360, 595 S.E.2d 729, 732 (2004).

Op. ¶19.

If you think that this ruling means that the Defendants have to tender their shares to the corporation, you are wrong.  There are at least a couple of issues yet to be resolved.  The Defendants are challenging the valuation of their shares, which the Buy-Sell Agreement said was to be the stock's fair market value as determined by a specified accountant.  There is also a challenge to the validity and enforceability of the Buy-Sell Agreement.

Can You Sue Only One Conspirator After Dismissing Its Co-Conspirators?

Can you sue an alleged conspirator without suing the other parties to the alleged conspiracy?  That was one of the questions addressed by Judge Gale in the decision last week in  Loftin v. QA Investments LLC, 2015 NCBC 41.

Loftin had invested in an alleged tax shelter product which resulted in a $27 million capital loss deduction which was disallowed by the IRS.  He sued the accounting firm and the law firm which had developed the alleged tax shelter, as well as Defendant QA Investments, the investment advisor which had made the investments in the alleged tax shelter on his behalf.

The accounting firm and the law firm were voluntarily dismissed by Loftin from the case in November 2013.

Motion To Dismiss Conspiracy Claims

QA argued that the civil conspiracy claim against it should be dismissed because its alleged co-conspirators -- the accountants and the law firm -- were no longer parties to the case.  Judge Gale found whether a case can proceed against only one alleged conspirator to be an interesting question of law.  He said that he had "struggled to find any case law directly address[ing]" the issue.  He denied the Motion "in absence of clear precedent dictating otherwise."  Op. ¶32.

Motion To Dismiss Fiduciary Duty Claims

QA disputed that it owed any fiduciary duty to Loftin, but the Court found Loftin's allegations of a fiduciary relationship to be "minimally adequate" to survive the Motion to Dismiss.  Op. ¶44.  Judge Gale said that "[m]uch greater specificity would be required by a Rule 56 standard."  Id.

Those "minimally adequate" allegations were that QA had represented that "it would serve as advisor and guardian over his interests with respect to the [alleged tax shelter] transactions, and that QA represented to Loftin that their relationship was a confidential one."  Id.

Motion To Dismiss Unfair And Deceptive Practices Claim

QA prevailed on its Motion to Dismiss the UDPA claim, on the basis that securities transactions are outside the scope of Chapter 75.  That's pretty well accepted law.  See, e.g, Skinner v. E.F. Hutton & Co., 314 N.C. 267, 274-75, 333 S.E.2d 236, 241 (1985).

The Court rejected, however, QA's argument that it was engaged in a learned profession and therefore protected from Chapter 75 liability per the statutory language of G.S. §75-1.1(b).  The statute does not extend to "professional services rendered by a member of a learned profession."

Lawyers are acknowledged to be members of a "learned profession" and therefore not subject to Chapter 75 claims (Sharp v. Gailor, 132 N.C. App. 213, 510 S.E.2d 702 (1999).  Given that most of the readers of this blog are lawyers you may bristle at the thought of having "investment advisors" as members of our exclusive club.

But have no worries.  Judge Gale wasted no ink in rejecting this argument, holding that he had:

found no support for QA's contention that a general 'investment services' role constitutes a 'learned profession' under Chapter 76.  The Court does not believe that it needs to address that argument any further.

Op. ¶64.

That part of the ruling reminds me of Groucho Marx's famous letter resigning from the Friars' Club, when he said "I don't want to belong to any club that would accept me as one of its members."

 

 

An Interesting Trade Secrets Case From The Business Court

If you were unsure whether customer information held by your client -- like customer contact information, sales reports, prices and terms books, sales memos, sales training manuals, commission reports, and vendor information -- can be considered a "trade secret", the Business Court's opinion this week in Southern Fastening Systems, Inc. v. Grabber Construction Products, Inc., 2015 NC 40 should resolve your uncertainty.

The Parties And The Claimed Trade Secrets

Defendant Farrell had been a sales representative for the Plaintiff Southern.  He left Southern to work for Defendant Grabber, a competitor in the business of selling construction supplies.

Farrell had not signed a non-competition agreement, but he had signed a Non-Disclosure Agreement during his employment with Southern.  The NDA said that Farrell would "not directly or indirectly disclose or use for any reason whatsoever any Confidential Information obtained by" him due to his employment.  Op. 6.

"Confidential Information" was defined under the NDA to include:

customer lists containing customer names and addresses; customer sales records and reports containing product preferences and usual prices charged; price lists containing product sales prices and their cost; sales invoices, packing lists, routing books, customer files, personnel files, computer records, financial records and marketing plans containing tactics and strategies.

Op. 7.  The NDA contained an acknowledgment that Southern's "Confidential Information constitutes Trade Secrets."  Op. 8.

Southern filed suit against Grabber and Farrell alleging a substantial loss of business after Farrell began working for Grabber.  The Defendants moved to dismiss, asserting that Southern had not adequately identified the alleged trade secrets, that the information in question was "readily available . . . from customers and potential customers," and that Southern had not identified any steps that it took to keep its claimed trade secrets a secret.  Op. 22.

Judge Bledsoe disagreed.  On the point of whether the trade secrets were adequately identified, he cited six court decisions, four from the North Carolina Court of Appeals, recognizing that this type of description of customer information is sufficient to plead a trade secret.  Op. 23.  He also cited and called "persuasive" an unpublished decision from Judge McGuire of the Business Court finding a similar description by the same Plaintiff to be adequate.  (I missed that case -- Southern Fastening Systems, Inc. v. Duo-Fast Carolina, Inc. (February 9, 2015) -- and I really try hard not to miss much of interest in the Business Court.  Sorry about that.)

The Court rejected the other defenses given the Plaintiff's allegations in its Complaint that its trade secrets involved "non-public information" that it did not disseminate to its employees unless they first executed an NDA.

The Validity Of The NDA

This decision represents the first time I can remember seeing a Defendant argue that the validity of an NDA should be determined based upon the standard applied to a covenant not to compete.  The Defendant argued that the practical effect of the NDA was to keep Farrell from working for the Plaintiff's competitor so it therefore needed to be supported by consideration and be reasonable as to time and to territory.

Judge Bledsoe ruled that the NDA only restricted Farrell from disclosing Southern's Confidential Information and required him to return that information upon the termination of his employment.  He said that the NDA "permits Farrell to work for any person or entity provided he does not disclose [the Plaintiff's] Confidential Information."  Op. 33.  The NDA was therefore not a restrictive covenant subject to the requirements of G.S. §75-4.

Even after deciding that this NDA did not need to be evaluated under covenant not to compete principles,  the Court went on to consider the issues of consideration and time and territory.

On the point of consideration the Court did not need to resolve the question whether continued employment by Farrell was sufficient consideration for the NDA since Farrell had been provided with Confidential Information in exchange for signing the NDA.

The question whether the lack of limitation as to time and territory rendered the NDA invalid had already been resolved by the NC Court of Appeals in Chemimetals Processing v. McEneny, 124 N.C. App. 194, 476 S.E.2d 374 (1996).  There, the COA held that such an agreement can be valid "even when the agreement is unlimited as to time and area upon a showing that it protects a legitimate business interest" of the employer.  Id. at 197, 476 S.E.2d at 377.  Judge Bledsoe ruled that protecting customer relationships and goodwill was a legitimate business interest of the Plaintiff.

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