December 2014

I have remarked before how hard the Business Court has been on Plaintiffs making trade secrets claims.   You can look here and here for example of these prior posts.  The Court has often dismissed trade secrets claims on a 12(b)(6) Motion because the trade secrets were not described with sufficient particularity.

This week, in Le Bleu Corp. v. B. Kelley Enterprises, Inc., 2014 NCBC 65, Judge Gale stopped short of granting a Motion to Dismiss a trade secrets claim, but nevertheless ordered the Plaintiffs to provide a more definite statement describing their alleged trade secrets in their customer information.

The parties in the case are engaged in the manufacture, sale, and distribution of bottled water in the Southeastern United States.  The trade secrets claimed were Plaintiffs’ "customer lists, pricing information, transaction histories, key contacts, and customer leads."  First Amended Complaint ¶30. 

That would seem to be enough of a description of customer information to make out a trade secrets claim.  The NC Court of Appeals had held, just last year, that allegations of misappropriation of "pricing information, customer proposals, historical costs, and sales data" is a sufficient identification of alleged trade secrets. GE Betz, Inc. v. Conrad, __ N.C. App. __, 752 S.E.2d 634, 648-49 (2013). Also, the Business Court had held, in one of its early opinions, that customer information "including the identity, contacts and requirements" of customers can constitute a trade secret.  Sunbelt Rentals, Inc. v. Head & Engquist Equip., LLC, 2002 NCBC 2 at *38, 41-42.

But notwithstanding that authority, Judge Gale was not satisfied that the Plaintiffs’ description of their claimed trade secrets was sufficient to support their claim.  He ruled that:

whether ‘pricing information, transaction histories, key contacts, and customer leads,’ actually constitute trade secrets depends upon the contents of the materials at issue. A price list may constitute a trade secret where it contains pricing information, market forecasts, and feasibility studies, but may not if it consists of raw information without any methodology.

Op. ¶26.

He directed, with regard to the two lists which the Plaintiffs claimed were the trade secrets that had been misappropriated, that they  provide, within twenty days, a more definite statement "that specifically describes the contents of both lists and why the information is entitled to trade secret protection."  Order ¶33.

 

What is the difference between a "proper" party and a "necessary" party"?  Judge McGuire spelled out the difference early this week in Cape Hatteras Electric Membership Corp. v. Stevenson, 2014 NCBC 62.

Why should you care about the distinction?  Because Rule 19 of the North Carolina Rules of Civil Procedure says that all "who are united in interest must be joined as plaintiffs or defendants."  In the absence of the joinder of a "necessary" party a valid judgment cannot be rendered.

But, as Judge McGuire held:

[a] party is not a necessary party simply because a pending action might have some impact on the party’s rights, or otherwise affect the party.

Op. ¶10.

Instead, a person whose interests "may be affected by a decree, but whose presence is not essential in order for the court to adjudicate the rights of others is a ‘proper’ party, but not a necessary party."  Op. ¶10.

By now you are looking for some context.  The Defendants in the case before Judge McGuire were members of the Plaintiff corporation, an electric membership corporation per G.S. Chapter 117.  The corporation’s Bylaws required its members to consent to the relocation of electrical transmission lines running over their property.  The Defendants had agreed, as a condition of their membership, to be bound by the Bylaws of the corporation.  So had all of the other hundreds of members of the corporation.

When the Defendants refused to allow the relocation of a transmission line running over their property, they were sued by the corporation.  The Defendants, in their Motion for dismissal per NC Rule of Civil Procedure 12(b)(7) (for failure to join a "necessary party"), argued that all of the corporation’s hundreds of members were necessary parties to the action, because the Court’s ruling interpreting the Bylaws would affect all of the members.

Judge McGuire didn’t buy that argument.  Although he said that a judgment in the case before him could "in some sense" affect the rights of the members who hadn’t been joined, it would "not deprive them of any rights."  Op. ¶14.  Moreover, he observed that there was no existing controversy with the other members, and that joining them as parties might put the Court in the impermissible position of issuing an advisory opinion.  Op. ¶14 & n.7.

Judge McGuire, after denying the Motion to Dismiss, said that the other members of the corporation could intervene in the case, subject to his discretion.  Op. Par. 14.

 

 

 

When there is a change in the Business Court Judge handling your case, there is probably a natural reaction to try to get the new Judge to revisit rulings by the previous Judge which were unfavorable to your client.  That effort is most likely to come to naught, as illustrated by Judge Bledsoe’s decision last week in DeGorter v. Capitol Bancorp Ltd., 2014 NCBC 62.

DeGorter had been on the losing end of a summary judgment ruling by Judge Murphy, in June 2014, before Judge Murphy’s retirement.  After Judge Bledsoe succeeded to what was remaining of the case, DeGorter moved for reconsideration of the summary judgment ruling.

Of course, DeGorter immediately ran into the buzz saw of the principle that:

‘[o]ne superior court judge may only modify, overrule, or change the order of another superior court judge where the original order was (1) interlocutory, (2) discretionary, and (3) there has been a substantial change of circumstances since the entry of the prior order.’

Op. ¶33 (quoting Taidoc Tech Corp. v. OK Biotech Co., Ltd., 2014 NCBC 48 at ¶11)

So what was the "substantial change in circumstances" offered by DeGorter in support of his Motion for Reconsideration?  It was pretty skimpy.  He said that a new Judge had been appointed and that he had filed a Motion for Reconsideration before the new Judge.  Judge Bledsoe said that accepting those things as a basis for changing Judge Murphy’s previous order was insufficient because it would "open the floodgates’ and invite reconsideration of numerous matters decided in the months preceding [his] appointment."  Order ¶35.

Judge Bledsoe refused to tamper with Judge Murphy’s Order.

So if you are thinking of taking a stab at having one of Judge Murphy’s rulings changed or overruled by the Judge taking over his case, you probably shouldn’t bother.  Your chances of getting a Business Court Judge to do that are pretty slim.

Also, making a post-judgment Motion to Amend your Complaint is unlikely to be successful.  DeGorter sought to add by amendment a new claim for conspiracy, which would have rested on the claims of constructive fraud and negligent misrepresentation on which summary judgment had been granted.  The  Judge ruled that although a Motion to Amend following summary judgment was not necessarily prohibited (Op. ¶46), the allowance of this Motion would, in effect, result in an overruling of Judge Murphy because the dismissed claims would need to be the basis for the conspiracy claim. Op. ¶48.

But bit as probably fatal to the effort to add a conspiracy claim when, as Judge Bledsoe observed: "in North Carolina ‘there is no such thing as a civil action for conspiracy." Op. ¶50 (quoting Reid v. Holden, 242 N.C. 408, 414, 88 S.E.2d 125, 130 (1955)).

Don’t like a now-retired Business Court Judge’s ruling?  You are probably stuck with it.