Appeal by defendant from judgment entered 6 July 1999 and
order entered 11 August 1999 by Judge Beverly T. Beal in
Mecklenburg County Superior Court. Heard in the Court of Appeals
11 January 2001.
Dozier Miller Pollard & Murphy, by Richard S. Gordon, for
plaintiff-appellee.
Rayburn Smith Cooper & Durham, P.A., by James B. Gatehouse,
for defendant-appellant.
MARTIN, Judge.
Plaintiff, Byrd's Lawn & Landscaping, Inc., a North Carolina
corporation with its principal office in Mecklenburg County,
brought this action alleging claims for relief for breach of
fiduciary duty; misappropriation of confidential business
information and a violation of G.S. § 66-152 et seq., the Trade
Secrets Protection Act; wrongful interference with contract; and
unfair and deceptive practices in violation of G.S. § 75-1.1.
Plaintiff alleged that it was engaged in providing landscape and
lawn maintenance services for commercial properties, that defendant
had been employed by plaintiff as its vice-president and general
manager, and that his duties had included marketing plaintiff's
services and developing business relationships with its customers.
Plaintiff alleged that defendant, in the course of his employment,had access to plaintiff's confidential financial information and
customer information and that while he was so employed, defendant
solicited various of plaintiff's customers to transfer their
business to him. Defendant then terminated his employment with
plaintiff and opened a competing business, using the financial
information which he had acquired from plaintiff to underbid
plaintiff for its customers' business. Plaintiff alleged that it
had sustained lost profits and sought treble damages and injunctive
relief.
Defendant filed an answer in which he denied the material
allegations of the complaint. When the case was called for trial,
plaintiff submitted to a voluntary dismissal of its claims for
breach of fiduciary duty and wrongful interference with contract;
the trial proceeded upon the claims for violation of the Trade
Secrets Protection Act and unfair and deceptive practices. At the
close of all the evidence, the parties stipulated that if the jury
found defendant had misappropriated plaintiff's trade secrets, such
conduct would constitute an unfair and deceptive practice; if the
jury found there had been no misappropriation of plaintiff's trade
secrets, defendant would be entitled to judgment on the G.S. § 75-
1.1 claim as well.
The jury answered the issues finding that plaintiff's cost
history records were a trade secret, that defendant misappropriated
the trade secret, and that his conduct in so doing proximately
caused injury to plaintiff's business in the amount of $41,000.00.
The trial court trebled the damages pursuant to G.S. § 75-16 and
entered judgment in favor of plaintiff in the amount of $123,000.00plus interest and costs. Defendant's motion for judgment
notwithstanding the verdict, and alternatively, a new trial, was
denied. Defendant appeals.
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[1]The primary issue raised by defendant's assignments of
error is whether plaintiff presented sufficient evidence to support
the jury's verdict that plaintiff's cost history records were a
trade secret and, if so, that defendant misappropriated them.
Defendant contends he was entitled to judgment as a matter of law
regarding plaintiff's misappropriation of trade secrets claim and
his dispositive motions for directed verdict and judgment
notwithstanding the verdict should have been granted.
The question presented by a defendant's motion for directed
verdict is whether the plaintiff's evidence is sufficient “to take
the case to the jury and support a verdict for the plaintiff.”
Manganello v. Permastone, Inc., 291 N.C. 666, 670, 231 S.E.2d 678,
680 (1977). The plaintiff's evidence “must be taken as true and
all the evidence must be considered in the light most favorable to
the plaintiff, giving him the benefit of every reasonable inference
to be drawn therefrom.”
Id. The motion should be denied unless it
appears, as a matter of law, that the plaintiff is not entitled to
recover under any view of the evidence.
Id. A motion for judgment
notwithstanding the verdict is essentially a renewal of an earlier
motion for directed verdict and presents the same question.
Bryant
v. Nationwide Mut. Fire Ins. Co., 313 N.C. 362, 329 S.E.2d 333
(1985). A trade secret is defined as:
business or technical information, including
but not limited to a formula, pattern,
program, device,
compilation of information,
method, technique, or process that:
a. Derives independent actual or potential
commercial value from not being generally
known or readily ascertainable through
independent development or reverse engineering
by persons who can obtain economic value from
its disclosure or use; and
b. Is the subject of efforts that are
reasonable under the circumstances to maintain
its secrecy.
N.C. Gen. Stat. § 66-152(3) (emphasis added). In determining
whether information should be classified as a trade secret, the
following factors are properly considered:
(1) the extent to which information is known
outside the business;
(2) the extent to which it is known to
employees and others involved in the business;
(3) the extent of measures taken to guard
secrecy of the information;
(4) the value of information to business and
its competitors;
(5) the amount of effort or money expended in
developing the information; and
(6) the ease or difficulty with which the
information could properly be acquired or
duplicated by others.
Wilmington Star-News, Inc. v. New Hanover Regional Medical Center,
Inc., 125 N.C. App. 174, 180-81, 480 S.E.2d 53, 56 (1997).
Although North Carolina courts have not answered the precise
question of whether confidential cost history records qualify as a
trade secret, we find guidance in, and agree with, the language of
the Tenth U.S. Circuit Court of Appeals in
Black, Sivalls & Bryson,
Inc. v. Keystone Steel Fabrication, Inc., 584 F.2d 946, 952 (10thCir. 1978) where the Court said:
Confidential data regarding operating and
pricing policies can also qualify as trade
secrets. It is apparent that the ability to
predict a competitor's bid with reasonable
accuracy would give a distinct advantage to
the possessor of that information (citation
omitted).
In the present case, plaintiff presented sufficient evidence
to support a finding that its historical cost information was a
trade secret as defined by G.S. § 66-152. Plaintiff offered
evidence through the testimony of its president, Bobby Byrd, Sr.,
that it had maintained detailed cost records as to the materials,
labor and equipment required for each of its contracts over a
period of seventeen years. The information was kept by Mr. Byrd,
first in a notebook and then on computer. The information was
treated as confidential by Mr. Byrd, who used the information to
prepare bids for the various properties upon which plaintiff
performed services. Many of the accounts had to be rebid each
year. Mr. Byrd testified that someone with access to these records
could use the information to underbid plaintiff on any of its
contracts. Therefore, Mr. Byrd did not even share the information
with plaintiff's employees. Notwithstanding evidence offered by
defendant that similar information may have been ascertainable by
anyone in the lawn maintenance and landscape business, plaintiff's
evidence, when considered in the light most favorable to it, is
sufficient to sustain a finding by the jury that plaintiff's cost
history records were “a compilation of information, method,
technique, or process” which was treated by plaintiff as
confidential, was neither known outside plaintiff's business norshared with its employees, which had value to plaintiff and
potential value to plaintiff's competitors, and which could not be
easily acquired by others who had not performed similar services on
the same properties from which plaintiff's cost history information
was acquired.
[2]Misappropriation is defined as:
acquisition, disclosure, or
use of a trade
secret of another without express or implied
authority or consent, unless such trade secret
was arrived at by independent development,
reverse engineering, or was obtained from
another person with a right to disclose the
trade secret.
N.C. Gen. Stat. § 66-152(1) (emphasis added). Misappropriation of
a trade secret is established by introducing substantial evidence
that the person against whom relief is sought: “(1) Knows or should
have known of the trade secret; and (2) Has had a specific
opportunity to acquire it for disclosure or use or has acquired,
disclosed, or used it without the express or implied consent or
authority of the owner.” N.C. Gen. Stat. § 66-155. Such evidence
may be rebutted, however, if the person against whom relief is
sought presents substantial evidence that he acquired the
information through “independent development.”
Id.
In the present case, plaintiff offered evidence tending to
show that after defendant had been working for plaintiff for about
ten years and had become general manager, Mr. Byrd taught him how
to prepare bids using the confidential cost history information.
One of plaintiff's larger customers was Summit Properties, Inc.,
which owned fourteen properties upon which plaintiff performed
services. Defendant had participated with Mr. Byrd in preparingbids for the Summit account and had reviewed the historical cost
information relating to those properties shortly before leaving his
employment with plaintiff. Upon starting his own business in
competition with plaintiff, defendant submitted bids to Summit and
underbid plaintiff on eleven of the fourteen properties. Defendant
was awarded contracts for eight of the properties. Such evidence
is sufficient circumstantial evidence to sustain a finding that
defendant knew of the confidential information, had the opportunity
to acquire it for his own use, and did so. Although defendant
testified in rebuttal that he was able to compile his bids using
his own experience and without resort to the information contained
in plaintiff's records, plaintiff's evidence was sufficient to be
submitted to the jury on the question of whether defendant
misappropriated the confidential cost records.
[3]Defendant also contends plaintiff offered insufficient
evidence to sustain the jury's damage award. The party seeking
damages has the burden of proving them.
Olivetti Corp. v. Ames
Business Systems, Inc., 319 N.C. 534, 547, 356 S.E.2d 578, 586,
reh'g denied, 320 N.C. 639, 360 S.E.2d 92 (1987). “As part of its
burden, the party seeking damages must show that the amount of
damages is based upon a standard that will allow the finder of fact
to calculate the amount of damages with reasonable certainty.”
Id.
at 547-48, 356 S.E.2d at 586 (citation omitted).
With respect to damages for lost profits, our courts have
refused to permit recovery based upon speculative forecasts,
requiring proof that absent the wrong, profits would have beenrealized in an amount provable with “reasonable certainty.” For
example, in
Keith v. Day, 81 N.C. App. 185, 343 S.E.2d 562 (1986),
this Court addressed the difficulty in calculating damages for lost
profits in the context of the breach of a non-compete agreement:
“The indefiniteness consequent upon this difficulty does not,
however, by itself preclude relief . . . . 'What the law does
require in cases of this character is that the evidence shall with
a fair degree of probability establish a basis for the assessment
of damages.'”
Id. at 196, 343 S.E.2d at 569 (citation omitted).
Moreover, there is no bright-line rule in determining what amount
of evidence is sufficient to establish lost profits:
[W]e have chosen to evaluate the quality of
evidence of lost profits on an individual
case-by-case basis in light of certain
criteria to determine whether damages have
been proven with 'reasonable certainty.'
Iron Steamer, Ltd. v. Trinity Restaurant, Inc., 110 N.C. App. 843,
847-48, 431 S.E.2d 767, 770 (1993). We think those principles are
applicable here as well.
In the present case, in addition to the evidence with respect
to the previous business relationship between plaintiff and Summit,
plaintiff offered evidence to show the gross revenues which would
have been realized upon the maintenance contracts for each of the
eight Summit properties for which defendant subsequently obtained
maintenance contracts, and the profit margins which plaintiff would
have realized on those revenues. We hold this evidence established
a sufficient basis to support a jury finding that, absent
defendant's appropriation and use of plaintiff's confidential costinformation, plaintiff would have realized profits, and for the
jury to calculate the amount of those profits with reasonable
certainty.
[4]In a related argument, however, defendant contends the
trial court erred in permitting Mr. Byrd to testify as to the
percentage of profits realized on plaintiff's gross revenues, and
as to plaintiff's lost profits due to defendant's use of the cost
history records in securing the eight Summit contracts, because Mr.
Byrd had not been qualified as an expert and his testimony was not
based on sufficient factual support. We reject his argument. G.S.
§ 8C-1, Rule 701 permits a lay witness to testify as to opinions
based on the witness's own perception. Mr. Byrd testified that his
opinion was based on his recollection of the revenues realized by
plaintiff on the eight Summit contracts and his knowledge, based on
experience, of plaintiff's percentage of profit on gross sales.
This assignment of error is overruled.
[5]Finally, defendant assigns error to the trial court's
refusal to give jury instructions, verbally requested by
defendant's counsel, with respect to the proof required for a
finding of lost profits. Our review of the transcript reveals that
counsel orally inquired of the trial court as to whether there
would be “a special instruction on the lost profit [sic]
specifically talking about proving it to a reasonable degree of
certainty.” Counsel acknowledged that she had no written request,
nor did she provide the court with any language for the requested
instruction. G.S. § 1A-1, Rule 51(b) requires that a request for
special instructions be in writing, signed by counsel, andsubmitted to the court before the court instructs the jury.
Because defendant did not comply with the requirements of Rule
51(b), the trial court acted properly within its discretion in
denying the request.
Hord v. Atkinson, 68 N.C. App. 346, 315
S.E.2d 339 (1984). Even so, the trial court's instructions
included the following:
The plaintiff's damages are to be
reasonably determined from the evidence
presented in the case. The plaintiff is not
required to prove with mathematical certainty
the extent of the injury to his business in
order to recover damages. Thus, the plaintiff
should not be denied damages simply because
they cannot be calculate [sic] with exactness
or a high degree of mathematical certainty.
An award of damages must be based on evidence
which shows the amount of the plaintiff's
damages with reasonable certainty. However,
you may not award any damages based upon mere
speculation or conjecture (emphasis added).
This assignment of error is overruled.
No error.
Judges TIMMONS-GOODSON and THOMAS concur.
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