Palles v. Hatteras Investment Partners LLC, July 27, 2009 (Tennille)(unpublished)

The managing member and president of an LLC could not be liable for tortious interference with contract for firing the Plaintff. "A party to a contract, including the party's managing agent, cannot be liable for wrongful interference of the contract." The defendant was not an outsider to the contract, and therefore could not be liable for wrongful interference for firing the Plaintiff

The Court dismissed Plaintiff's unfair and deceptive practices claim, ruling that it was outside the scope of the statute because it involved securities claims and employer-employee relations.

Full Opinion

Brief in Support of Motion to Dismiss

Brief in Opposition to Motion to Dismiss

Reply Brief in Support of Motion to Dismiss

 

Crowder Construction Co. v. City of Charlotte, March 11, 2009 (Diaz)(unpublished)

North Carolina does not recognize the "cardinal change doctrine" in government contract cases.

The Court also dismissed a claim for tortious interference with contract against a consultant who had advised the owner not to pay the Plaintiff for its work on a construction project.  The Court found the alleged interference to be justified, even though the Plaintiff alleged it was not. Judge Diaz ruled that Plaintiff's allegation as to the lack of justification was "a legal conclusion the Court need not accept," and that Plaintiff's allegations on this point were self-defeating.  

The Court determined that the consultant had a proper motive -- the performance of its own duties under its own contract with the owner -- in how it had dealt with the Plaintiff.  Thus, the Court concluded, the consultant's actions were "reasonably related to the protection of a legitimate business interest."

Full Opinion

Brief in Support of Motion to Dismiss (Cardinal Change Issue)

Brief in Support of Motion to Dismiss (Tortious Interference Issue)

Brief in Opposition to Motion to Dismiss (Tortious Interference Issue)

Reply Brief in Support of Motion to Dismiss (Cardinal Change Issue)

Gateway Management Services, Ltd. v. Advanced Lubrication Technology, Inc., June 19, 2008 (Tennille)(unpublished)

There was no tortious interference contract claim against a defendant who sold product to plaintiff's competitor.  This was a legitimate exercise of the defendant's rights.

There was no claim for negligence, or negligent misrepresentation, against the defendant because the plaintiff'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).

A trade secrets claim, which asserted that defendant had improperly given plaintiff's customer list to a competitor of plaintiff, 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.

Full Opinion

Brief in Support of Motion to Dismiss

Brief in Opposition to Motion to Dismiss

Reply Brief in Support of Motion to Dismiss

Webb v. Royal American Company, LLC, March 17, 2008 (unpublished)

Claims against the lender which had financed an acquisition gone awry were barred by the exculpatory provisions of a subordination agreement.  Georgia law applied, and Georgia law permits one contracting party to waive all recourse in the event of breach by the other.  The exculpatory provision was valid and an absolute defense to plaintiffs' claims, and the Court granted the Defendant's Motion to Dismiss.

Plaintiffs did not have a claims for the breach of the duty of good faith and fair dealing, because the assertion of valid rights under an enforceable agreement does not give rise to such a claim just because the assertion of those rights adversely impacts the parties against whom the rights are asserted. 

The tortious interference with contract claim made the the Plaintiffs was also dismissed.  Although Plaintiffs had plead all of the elements of that claim, the face of the complaint demonstrated that there was a valid business justification for the Defendant's actions.  A lender exercising its rights to collateral under a standard commercial financing arrangement ordinarily has justification for its actions, and the plaintiff make something more than conclusory allegations about justification. 

The Court also rejected a facilitation of fraud claim, holding "[t]o the extent Plaintiffs’ theory is that a commercial lender would agree to defraud a seller of a business by making a loan to the purchaser which the lender agreed in advance would be put in default and that the purchasers of the business would pledge their own assets and provide personal guarantees of the loan knowing it was going into default, such a theory is simply not sustainable."

Plaintiff were also not entitled to proceed on their claim for marshalling of assets, because such a claim is inapplicable where a superior creditor has a right to certain assets.

There was no fiduciary duty under the loan agreement.  The lender had not stepped into the shoes of the majority shareholders by exercising its rights under the loan agreement. 

The Court granted leave to the Plaintiffs, however to make derivative claims against the lender.  It permitted Plaintiffs to assert these claims because a receiver had been appointed for the corporation and he had stated that he would not pursue claims for economic reasons.

Full Opinion

Brief in Support of Motion to Dismiss

Brief in Opposition to Motion to Dismiss

Reply Brief in Support of Motion to Dismiss

Webb Builders, LLC v. Jones, January 24, 2002 (Tennille)(unpublished)

The Court granted a Motion to Dismiss a claim for slander, ruling that plaintiff had failed to plead the allegedly defamatory statement with sufficient particularity. It held that, although plaintiff was not required to plead the words verbatim, it was required to plead them either substantially as they were said or at least with sufficient particularity to determine whether the statement was defamatory. The Court held that "it would be unduly harsh to require defendants to venture a response to weighty allegations of slander couched only in the most general of terms."

The Court let stand, however, plaintiff's claim for tortious interference with contract against the defendant, who was dissatisfied with the plaintiff homebuilder's work for him. Plaintiff had expressed his displeasure to others for whom the plaintiff was working, which resulted in them terminating their contracts with the plaintiff.

In reaching this conclusion, the Court considered the factors set out in the Restatement (Second) of Torts §767, which include "(a) the nature of the actor's conduct, (b) the actor's motive, (c) the interests of the other with which the actor's conduct interferes, (d) the interests sought to be advanced by the actor, (e) the social interests in protecting the freedom of the actor and the contractual interests of the other, (f) the proximity or remoteness of the actor's conduct to the interference, and (g) the relations between the parties." The Court held that this tort does not require the element of force, or threat, or intimidation, and also that it does not require independently tortious conduct.

Full Opinion

 

Epes v. Healthsouth Corp, February 8, 2008 (Tennille)(unpublished)

The issue was whether a letter formed an enforceable contract. After a thorough discussion of the elements of a valid contract, the Court found that the letter lacked mutual assent as to material elements necessary to create an enforceable contract, including the price to be paid, identification of the parties, and the subject matter of the contract. The letter merely expressed the intent and desires of the parties, rather than their agreement.

Plaintiff therefore could not state a claim for tortious interference with contract.

Nor could plaintiff proceed on its promissory estoppel claim, as North Carolina recognizes that doctrine only in limited, defensive situations.

Full Opinion

Brief in Opposition to Motion to Dismiss

Reply Brief in Support of Motion to Dismiss

CNC/Access, Inc. v. Scruggs, 2006 NCBC 20 (N.C. Super. Ct. Nov. 15, 2006)(Tennille)

Plaintiff sued a departed employee, alleging that she had violated her confidentiality agreement and her non-competition agreement. The Court found defendant's new employer had not tortiously interfered with her contract. It found the provision on which plaintiff relied, restricting its employees from providing services to any of its clients for 180 days following the termination of employment, to be invalid, because it attempted to restrict defendant from providing services to any client of her former employer, even those with whom she had no contact during her employment.

The Court found the non-compete to be invalid for other reasons as well. It found the three-year restriction on employment to be overly long. It found the geographic restriction -- which extended to the entire state of North Carolina -- to be overly broad, as defendant had only worked in four counties. It also found the covenant, which purported to prevent the defendant from competing "directly or indirectly, individually or as an employee, partner, officer, director or stockholder or in any other capacity whatsoever of any person, firm, partnership or corporation" to be unnecessarily restrictive.

Also, given that individual defendant was in the business of providing medical care to patients, the Court found that there were policy issues counselling against the enforcement of the covenant.

The Court did allow the plaintiff to proceed on a claim for unfair and deceptive practices against defendant's new employer. It found that defendant had copied some of plaintiff's human resources documents without its knowledge or consent. It held that even though defendant had not obtained a competitive advantage as a result, the misuse was an unfair and deceptive practice.

The defendants had counterclaimed. On their claim for defamation, the Court found that plaintiffs were not entitled to an absolute privilege simply because some of the allegedly defamatory statements had been made to governmental agencies. The Court found that the absolute privilege applied only to agencies exercising a judicial or quasi-judicial function. Although plaintiff might have been entitled to a qualified privilege, the Court found that there was an issue of fact whether the statements had been made with actual malice.

The Court also found there to be questions of fact with regard to defendants' counterclaim for tortious interference with prospective economic advantage.

Full Opinion

Brief in Support of Plaintiff's Motion for Summary Judgment

Brief in Opposition to Plaintiff's Motion for Summary Judgment

Reply Brief in Support of Plaintiff's Motion for Summary Judgment

Brief in Support of Defendant's Motion for Summary Judgment

Brief in Opposition to Defendant's Motion for Summary Judgment

Reply Brief in Support of Defendant's Motion for Summary Judgment

Sports Quest, Inc. v. Dale Earnhardt, Inc., 2004 NCBC 4 (N.C. Super. Ct. Mar. 12, 2004)(Tennille)

The Court granted summary judgment on plaintiff's claim for interference with prospective economic advantage. The Court found that there was a "high standard" for such a claim, and that plaintiff was required to show, with specificity, the future contracts that plaintiff would have obtained but for the alleged interference.

Plaintiff's claim for interference with its existing contracts also failed, because the alleged contracts were simply purchase orders from customers for goods. The mere acknowledgment or receipt of a purchase order does not create a contractual obligation.

Furthermore, the allegedly breaching party had acted in order to protect its legitimate business interests. Those included eliminating the plaintiff as a middleman for the sale of its goods, and controlling the sub-licensing of its intellectual property.

Full Opinion

Sports Quest, Inc. v. Dale Earnhardt, Inc., 2004 NCBC 3 (N.C. Super. Ct. Feb. 12, 2004)(Tennille)

The plaintiff claimed that the defendant caused its business to fail. The defendant asserted plaintiff's business had failed because he used illegal drugs, had extramarital affairs, and because he "had a propensity to sleep and fish during the day."

When the defendant sought to question the owner of the plaintiff about these matters at his deposition, he took the Fifth Amendment. The defendant claimed it was entitled to a complete dismissal of plaintiff's claims as a result, but the Court determined that dismissal was not the appropriate remedy. Instead, the Court prohibited the plaintiff from presenting testimony about these matters at trial, and indicated that it would instruct the jury that it was entitled to draw an adverse inference from plaintiff's refusal to testify.

In a companion case, the plaintiff asserted that the defendant had tortiously interfered with a contract which it had to distribute die-cast race cars by the defendant selling those cars directly to plaintiff's customer. The Court held that interference with contract is justified if motivated by a legitimate business purpose, as when the parties are competitors.

The Court also dismissed plaintiff's conspiracy claim  There had been no illegal act, because "suppliers are free to contract with whomever they please and structure the distribution chain accordingly." Nor was there any claim for unfair and deceptive trade practices. The Court held that the defendant "merely took measures to protect its own business interests that happened to be detrimental to [the plaintiff's financial condition. Every business transaction impacts a party either through its participation in or through its exclusion from the deal. Absent the presence of an act that violates moral, ethical, or legal standards, the courts cannot punish a business solely because a transaction financially harms another entity. That is competition. An unfair trade practice requires more than a negative impact on a party."

Full Opinion

Sunbelt Rentals, Inc. v. Head & Enquist Equipment, L.L.C., 2003 NCBC 4 (N.C. Super. Ct. May 2, 2003)(Tennille)

The Court found that the actions of the defendants in pirating away employees and accounts of the plaintiff exceeded the bounds of fair and ethical competition and therefore constitute unfair and deceptive practices.

The Court referred to defendants' conduct as "surreptitious and intentional," and undertaken while the employees solicited were still employed by the plaintiff. This activity had enabled the plaintiff to build competitive operations in a matter of days, through its "orchestrated, en masse, secret recruitment."

On the trade secret claim, the Court found that the plaintiffs' "compilation of information, including its special pricing information, customer information (identity, contacts and requirements of its rental customers), personnel and salary information, organizational structure, financial projections and forecasts, utilization rates, fleet mix by market, capital and branch budget information, and cost information, when taken together constitutes trade secrets."

The Court also found sufficient evidence to make out a claim for conspiracy.

The Court rejected defendants' claim that the claims were barred by laches. It also rejected defendants' counterclaim that the lawsuit was a sham and brought to hurt its business. The Court found that the lawsuit had been brought with a realistic expectation of success and that it was immunized under the Noerr-Pennington doctrine.

Finally, the Court drew an adverse inference from the failure of some of the defendants to testify.

Full Opinion

Durham Coca-Cola Bottling Co. v. Coca-Cola Bottling Co., 2003 NCBC 3 (N.C. Super. Ct. Apr. 28, 2003)(Tennille)

The issue was whether plaintiff, which had presented a letter of intent to purchase the a non-party bottling company, had a valid and enforceable agreement. The Court found that the letter of intent was an agreement to agree at a future date which was subject to a future, more complete acquisition agreement, and it therefore was not enforceable. The Court further found that the letter of intent contained conditions precedent which had not been met.

Plaintiff's claims for tortious interference with contract were rejected because the Court found that there was no contract, although the Court observed that summary judgment would have been appropriate in any event on the basis of justification. The defendant, a competitor of plaintiff, was competing with plaintiff for the purchase of the bottling company and plaintiff could not show that it was acting with bad faith or malice so as to justify its tortious interference claim.

Full Opinion

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)

Staton v. Brame, 2001 NCBC 5 (N.C. Super. Ct. May 31, 2001)(Tennille)

A myriad of claims were at issue in this case, which involved claims of misuse of funds in trust. Some of plaintiff's claims were barred by a settlement agreement it had entered into with other entities. Others were dismissed because the court determined that a trustee had repudiated his fiduciary relationship, and could not be held liable for breach of fiduciary duty. Also considered were claims for fraud, tortious interference with contract, negligent misrepresentation. constructive fraud, the statute of limitations, and breach of contract.

Full Opinion

Praxair, Inc. v. Airgas, 1999 NCBC 9 (N.C. Super. Ct. Oct. 20, 1999)(Tennille)

This case involved the question whether a joint venture agreement, by which the defendant acquired 47% of the stock of a non-party, violated the plaintiff's right of first refusal under an agreement with the non-party.

The Court held that a restraint on the transfer of ownership must be strictly construed, particularly where the restraint may also have the capacity to limit competition in the marketplace.

The Court found that a party acting for a legitimate business purpose could not be liabile for tortious interference with contract.

Full Opinion

Praxair, Inc. v. Airgas, Inc., 1999 NCBC 5 (N.C. Super. Ct. May 26, 1999)(Tennille)

The claim here involved a Right of First Refusal. Plaintiff alleged that the defendants had engaged in a sham transaction designed to deprive it of its rights under the RFR, by effectively selling a controlling interest in the company in which plaintiff had the RFR through a Joint Venture Agreement.

The defendant sellers had been careful not to sell a majority interest to the buyer. The JVA gave the sellers various options to sell their remaining shares to the buyer after the expiration of the RFR, but buyer had no right to obtain those shares.

The Court held that the JVA did not violate plaintiff's first refusal rights, though it noted that "it is apparent from the Joint Venture Agreement that it was carefully and artfully drafted in an effort to avoid or negate any claims that the written agreement itself violated the RFR."

The Court, however, allowed the plaintiff to proceed on the theory that there was an oral agreement to convey the remaining shares, an agreement which the Court found would have violated the RFR.

The plaintiff was also permitted to proceed on its claim against the buyer for tortious interference with contract, though the Court dismissed the claim for tortious interference with prospective economic advantage, since the buyer had a lawful justification for competing with plaintiff to purchase the company. Since tortious interference is an unfair and deceptive practice, the motion to dismiss was denied as to that claim as well. It was also denied as to plaintiff's claim of civil conspiracy.

Full Opinion

Reeve and Assocs., Inc. v. UCB, 1997 NCBC 2 (N.C. Super. Ct. Oct. 6, 1997)(Tennille)

A senior lienholder had no fiduciary duty to a junior lienholder. The mere fact that the senior lienholder took action to cause its debt to be paid down did not establish domination and control of the debtor's business so as to give rise to a fiduciary duty. The senior lienholder's efforts to collect its debt did not constitute tortious interference with contract.

Full Opinion