North Carolina Business Litigation Lawyer & Attorney : Mack Sperling : Brooks Pierce Law Firm : Greensboro, Raleigh, Winston-Salem, Charlotte

Today, in its Order and Opinion in Bolick v. Sipe, the North Carolina Business Court rejected a novel argument regarding the validity of post-employment consideration for a covenant not to compete.  It also dealt with the issue of the validity of a summons issued in the wrong name.

On the non-compete side, Plaintiff signed the non-compete with the cleaning company for which she had worked three years after she began employment.  Defendant argued that it had held off from firing the Plaintiff in exchange for her execution of the agreement, and that this was valid consideration.

Judge Tennille disagreed, holding:

"The Court is not aware of any prior decisions holding that a decision not to fire someone is adequate consideration for a non-compete. Instead, this state has found that '[w]hen the relationship of employer and employee is established before the covenant not to compete is signed there must be consideration for the covenant such as a raise in pay or a new job assignment.' Whittaker Gen. Med. Corp. v. Daniel, 324 N.C. 523, 527, 379 S.E.2d 824, 827 (1989) (citing Chemical Corp. v. Freeman, 261 N.C. 780, 136 S.E.2d 118 (1964)). That consideration can NOT be the continuation of employment. Mach. Co. v. Miholen, 27 N.C. App. 678, 686–87, 220 S.E.2d 190, 196 (1975). Indeed, under Defendants’ theory, every employer could offer an employee the option of being fired or signing a non-competition agreement and argue that 'consideration' had been paid. That is not the law in North Carolina. The restrictive covenant in this case was invalid."

The issue involving the validity of the summons arose because Plaintiff had sued a company called Molly Mops, LLC, but had meant to sue a different company, Molly Mops Cleaning Service, LLC.  Plaintiff discovered the error promptly, and amended her complaint before any responsive pleading was filed, but never had a new summons issued.

Plaintiff sought leave to amend the original summons to properly name Molly Mops Cleaning Service, LLC.  Judge Tennille denied the Motion, even though the right party had notice of the lawsuit, holding:

This is not a case of misnomer. The wrong entity was named in the summons which was never amended. There is no doubt that MMCS had notice; however, that does not cure the defect. It may well be that plaintiff intended to sue MMCS and was confused; however, that does not cure the defect. Plaintiff did file an amended complaint; however, that did not cure the defect. A proper summons was never served on MMCS and thus no action has been commenced against it.

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In this case, Plaintiff made a substantive mistake and sued the wrong entity. That mistake was fatal. The court does not have jurisdiction over MMCS because no valid summons was issued and served on MMCS.

Brief in Support of Motion for Summary Judgment

Brief in Opposition to Motion for Summary Judgment

Brief in Support of Motion to Amend Summons

Brief in Opposition to Motion to Amend Summons

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The North Carolina Wage and Hour Act does not apply to out-of-state employees working for North Carolina companies even if their employment agreements provides that the law of North Carolina applies, per the ruling of the North Carolina Court of Appeals today in Sawyer v. Market America, Inc.

Sawyer, a resident of Oregon, worked for Market America, a North Carolina based company, under an independent contractor agreement.  All of Sawyer's work was done outside of North Carolina.

The Agreement between Sawyer and Market America provided that it should be "governed and construed under the laws of the State of North Carolina." 

When Sawyer sued, he made claims under the North Carolina Wage and Hour Act.  He argued that since the parties had agreed to the application of North Carolina law, there was no reason for the Court to reach the issue whether the Act has extraterritorial effect.

The Court of Appeals rejected this argument, relying on venerable North Carolina Supreme Court precedent that "every statute is confined in its operation to the persons, property, rights, or contracts, which are within the territorial jurisdiction of the legislature which enacted it. The presumption is always against any intention to attempt giving to the act an extraterritorial operation and effect.”

The conclusion of the Court of Appeals was that summary judgment had been properly entered by the trial court, because "the North Carolina Wage and Hour Act does not apply to the wage payment claims of a nonresident who neither lives nor works in North Carolina." 

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Today, in Eglinton v. Blue Ridge Bone & Joint Clinic, P.A., the Business Court dismissed Plaintiff's claim that he had been dismissed from his employment in violation of the public policy of North Carolina. 

Plaintiff, a doctor who had been employed by the Defendant medical practice, alleged that he had been forced to resign his employment while he was disabled and seeking medical treatment.  He asserted that the Defendant's "conduct in demanding an unnecessary resignation agreement of a disabled employee while he was in a vulnerable state . . . offends the public policy of the State of North Carolina."

Judge Diaz disagreed and granted Defendant's Motion to Dismiss.  He held:

While Plaintiff’s original and amended pleadings assert that he was disabled and seeking medical treatment at the time he was purportedly coerced by BRBJ into resigning from employment, Plaintiff does not allege facts sufficient to show that he met the criteria for disability under any relevant statute, nor does he allege that BRBJ discriminated against him on the basis of any such disability. Cf. Baucom v. Cabarrus Eye Ctr., P.A., No. 1:06CV00209, 2007 U.S. Dist. LEXIS 25101, at *19–22 (M.D.N.C. Apr. 4, 2007) (dismissing claim alleging wrongful termination where Plaintiff failed to allege facts sufficient to demonstrate disability under state or federal law or that Defendant discriminated against plaintiff on the basis of any such disability). 

Defendant's Brief In Support Of Motion To Dismiss

Plaintiff's Brief In Opposition To Motion To Dismiss

Defendant's Reply Brief In Support Of Motion To Dismiss

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Warren v. Eli Research, Inc., April 28, 2008 (Diaz)(unpublished)

Inconsistent allegations in the Complaint doomed the claim for fraudulent inducement by one of the Plaintiffs in this case. 

That Plaintiff, Hittle, alleged that the Defendant had promised her an annual salary of $150,000, guaranteed for 12 months, but that it had no intention of fulfilling this promise when made.  The Defendant booted Hittle only a few months after she began employment.

What led to the granting of Defendant's Motion to Dismiss were Hittle's allegations in the Complaint that she had begun her employment, worked for three months, been paid for that work, and that she was terminated for "financial reasons."

The Court held "it is patently inconsistent for Hittle to allege, on the one hand, that Defendant never intended to pay the wages promised, and on the other, that Defendant in fact performed in part and that it failed to complete performance for reasons unrelated to its intent."  The Court held that partial performance of a contract demonstrates a party's intention to fulfill the promise at the time it was made, undermining Hittle's claim on its face.

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