Appeal by plaintiff from orders entered 3 August 1999 by Judge Abraham
Penn Jones in Superior Court, Wake County. Appeal by defendant from orders
entered 9 September 1998 and 3 August 1999 by Judge B. Craig Ellis and JudgeAbraham Penn Jones, respectively, in Superior Court, Wake Count
y. Heard in
the Court of Appeals 14 March 2001.
Maupin Taylor & Ellis, P.A., by M. Keith Kapp, Mark S. Thomas, Kevin W.
Benedict and Joanne Lambert, for plaintiff-appellant/appellee.
McConwell Law Offices, by Edward A. McConwell; and Grafstein & Walczyk,
P.L.L.C., by Lisa Grafstein, for defendant-appellant/appellee.
McGEE, Judge.
Reichhold Chemicals, Inc. (plaintiff) filed a complaint against Anil B.
Goel (defendant) on 5 February 1997 and amended the complaint on 1 August
1997. The amended complaint states claims of misappropriation of trade
secrets, breach of express confidentiality agreement, breach of fiduciary
duty, breach of employment agreement, misapplication of plaintiff's money,
fraud, and two claims of constructive fraud. Defendant filed counterclaims
of tortious interference, defamation per se, employment compensation and
expenses, and unfair and deceptive trade practices.
The trial court granted plaintiff's motion for summary judgment on
defendant's counterclaim of unfair and deceptive trade practices on 9
September 1998. Following a bench trial, the trial court entered an order on
3 August 1999 denying plaintiff's claims of trade secret misappropriation,
breach of express confidentiality agreement, breach of fiduciary duty, breach
of employment agreement, and the first claim of constructive fraud. The
trial court granted plaintiff's claims of misapplication of plaintiff's
money, fraud, and the second claim of constructive fraud. The trial court
granted defendant's counterclaims of tortious interference and employment
compensation but denied defendant's claim of defamation.
Plaintiff appeals from the trial court's 3 August 1999 orders.
Defendant appeals both the 9 September 1998 order and the 3 August 1999
orders.
The trial court found the following facts in its 3 August 1999 order.
Defendant began working for Swift Adhesives, Inc. (Swift), a division ofplaintiff, in February 1990. Defendant, a recognized expert in the
field of
moisture cured polyurethane adhesives, was hired by Swift as vice president
of research and development because of his knowledge of reactive urethanes
and their manufacture. Defendant and Swift specifically negotiated a non-
compete agreement which would permit defendant to compete in the reactive
adhesives market after leaving Swift.
In 1994, plaintiff eliminated defendant's position as vice president of
research and development for Swift and moved defendant to plaintiff's
automotive adhesives unit. From November 1994, defendant was not involved in
research and development activities for plaintiff. Plaintiff's president did
not consider plaintiff's automotive adhesives unit to be a viable business
unit. Defendant's reassignment was a demotion and an attempt by plaintiff's
president to induce defendant to leave.
Defendant, recognizing the reassignment as a demotion, decided to leave
plaintiff once he found an opportunity to work in the field of polyurethane
reactive adhesives. Beginning no later than November 1994, defendant had
discussions with Imperial Adhesives, Inc. (Imperial) about defendant's
possible employment for the purpose of developing moisture cured polyurethane
reactive adhesives for Imperial. At some point after March 1995, Imperial
decided it could not afford to hire defendant as an employee, and Imperial
and defendant discussed the possibility of a consulting agreement.
Defendant signed a consulting agreement with Imperial in March 1996
which was not to go into effect until defendant left plaintiff's employ.
Both defendant and Imperial intended to begin the consulting relationship in
January 1997. Defendant began teaching Imperial employees about the
formulation and manufacture of polyurethane reactive adhesives in the spring
of 1996. Imperial's legal counsel advised defendant that defendant's
discussions with Imperial did not violate defendant's non-compete agreement
with Swift. Defendant and Imperial specifically agreed that there would be
no transfer of confidential or trade secret information, and defendantinsisted that Imperial not target any of plaintiff's customers in mar
keting
the products they were contemplating.
The consulting agreement provided that defendant was to work for 203
days over four years at a fixed rate of pay. The agreement further provided
for defendant to receive royalties on any products he developed for Imperial
for fifteen years. Imperial compiled a product pro forma, conservatively
forecasting the first five years of its entry into the hot melt moisture
cured urethane segment of the adhesive industry, for presentation to
Imperial's publicly held parent company. Five or six accountants sitting on
the board of Imperial's parent company reviewed and approved the product pro
forma. The hot melt adhesives covered by the product pro forma were not the
only reactive urethane adhesives contemplated in the consulting agreement.
Based solely on the minimum days of consulting and the product pro forma, the
trial court concluded that defendant had a reasonable expectation of earning
$2,493,585.00 under the consulting agreement.
Between November 1995 and October 1996, defendant made at least sixteen
trips to Imperial. At no time did defendant inform plaintiff of his
consulting agreement with Imperial. Defendant spent at least fourteen days
primarily engaged in meetings with Imperial while on plaintiff's payroll, a
value of not less than $6,440.00, and submitted $7,500.00 in expense
reimbursements for those trips. However, during the time he was meeting with
Imperial, defendant continued his work with plaintiff and met or exceeded his
projected goals for the automotive adhesives unit.
A secretary at Imperial contacted plaintiff in September 1996 and
indicated that she believed defendant was engaged in improper conduct. The
secretary provided confidential Imperial documents to plaintiff for review,
none of which contained information proprietary to plaintiff. Through the
secretary's attorneys, plaintiff made a report of trade secret theft to the
Federal Bureau of Investigation (FBI). The FBI interviewed both defendant
and Imperial's president on 30 October 1996 and indicated to plaintiff atthat time that the allegations of trade secret theft were not subs
tantiated.
Nonetheless, plaintiff's president had defendant escorted from the building,
telling defendant that defendant's reputation would be ruined, that defendant
would not get another job in the adhesives industry, and that Imperial would
never get into the reactive urethane adhesives business.
Plaintiff filed a complaint against Imperial on 30 October 1996,
alleging that defendant had misappropriated plaintiff's trade secrets and
other confidential and proprietary information. Imperial abandoned its
consulting agreement with defendant, feeling intimidated, threatened and
embarrassed by the allegations made by plaintiff, a much larger company than
Imperial. Plaintiff sought to coerce defendant into cooperating in its suit
against Imperial by threatening to sue defendant, then sued defendant anyway
despite his cooperation. Plaintiff's costs in obtaining the testimony of the
Imperial secretary and internal Imperial documents far exceeded its potential
loss from the alleged trade secret theft.
The trial court found that, at the time he was terminated, defendant had
seventeen days of vacation accrued in 1996 and was entitled to ten days of
accrued vacation carried over from 1995 under plaintiff's policy of allowing
vacation days to be carried over with supervisor approval. In addition,
plaintiff had a written policy entitling defendant to a prorated bonus paid
at separation unless the separation was a voluntary quit or discharge for
cause, and defendant's was neither. The trial court concluded that defendant
was entitled to those payments, and that defendant was entitled to have those
payments doubled because of plaintiff's failure to demonstrate that they were
withheld in good faith.
The trial court also found, in connection with plaintiff's trade secret
misappropriation claim, that in late 1995, a chemist working for plaintiff
developed a liquid moisture cured urethane adhesive formula labeled "2U026-
1N" after a customer requested a modified version of plaintiff's formula
22005. The chemist had never developed a moisture cured urethane adhesiveformula before. Plaintiff's 2U026-1N had three ingredients: two
Dow polyols,
in a two-to-one ratio, with one Dow solid isocyanate.
An Imperial chemist developed a moisture cured urethane adhesive
designated UL9001 in the summer of 1996. Imperial's UL9001 had two Olin
polyols and a Dow liquid isocyanate, plus a catalyst, none of which were used
in plaintiff's formula. The use of polyols in a two-to-one ratio in
urethanes had been discussed in urethane literature as early as 1961 and was
commonly known and used in the industry. The Imperial chemist's lab notes
indicated that he considered several ratios of polyol to polyol and polyol to
isocyanate before arriving at the formulation for UL9001.
The trial court found that Imperial's UL9001 was materially different
from plaintiff's 2U026-1N in formulation, manufacture and functionality. The
two were not the same formula, and each could be easily derived from
information provided by raw material suppliers such as Dow and Olin.
Imperial's UL9001 was independently developed, and Imperial was not aware of
plaintiff's 2U026-1N until its litigation with plaintiff. Defendant, a
recognized expert in the field of reactive moisture cured urethane adhesives,
would have no reason to misappropriate a formula developed by a novice in the
field.
Moreover, plaintiff's 2U026-1N was developed for a single customer and
failed to meet that customer's needs. Plaintiff had no sales or prospect of
sales since the formula was developed and plaintiff had made no effort to
market it until the present litigation was well underway. The trial court
concluded that plaintiff's 2U026-1N had no actual or potential commercial
value.
The trial court further found that information about the design and
operation of a manufacturing facility similar to the information defendant
provided to Imperial was widely known and previously published in a 1990
brochure. The trial court found that defendant had sufficient information
prior to 1990 about the manufacture of moisture cured urethane adhesives toprovide information on the process to Imperial. Also based on k
nowledge
acquired prior to 1990, defendant provided plaintiff with the information
necessary to create the manufacturing process at its facility.
I.
Plaintiff first assigns error to the trial court's conclusion that
plaintiff tortiously interfered with the consulting agreement between
defendant and Imperial.
The tort of interference with contract has five
elements: (1) a valid contract between the plaintiff and
a third person which confers upon the plaintiff a
contractual right against a third person; (2) the
defendant knows of the contract; (3) the defendant
intentionally induces the third person not to perform the
contract; (4) and in doing so acts without justification;
(5) resulting in actual damage to plaintiff.
United Laboratories, Inc. v. Kuykendall, 322 N.C. 643, 661, 370 S.E.2d 375,
387 (1988)(citing
Childress v. Abeles, 240 N.C. 667, 674, 84 S.E.2d 176, 181-
82 (1954)).
A.
Plaintiff first asserts that it acted with justification in bringing
suit against Imperial. Plaintiff presents several arguments supporting its
defense of justification.
1.
First, plaintiff encourages this Court to apply the reasoning of
Eastern
R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 5 L.
Ed. 2d 464 (1961), as applied in
Professional Real Estate Investors v.
Columbia Pictures Indus., 508 U.S. 49, 123 L. Ed. 2d 611 (1993) (
PRE), to the
present case. Under
Noerr and
PRE, the filing of a lawsuit with anti-
competitive intent does not violate the federal antitrust statutes if the
lawsuit is "objectively reasonable."
See PRE at 57, 123 L. Ed. 2d at 621.
Plaintiff argues that, under that reasoning, plaintiff is shielded from
liability for tortious interference as long as its suit against Imperial wasobjectively reasonable, regardless of plaintiff's subjective in
tent.
Defendant, in his appellee brief before this Court, asserts that
plaintiff failed to plead immunity under
Noerr as an affirmative defense and
therefore that plaintiff was prohibited from arguing the applicability of
Noerr on appeal. Plaintiff responded by filing a reply brief and a motion to
amend the record on appeal in support of plaintiff's contention that it had
properly pleaded
Noerr before the trial court. Defendant filed a motion to
strike plaintiff's reply brief and opposed plaintiff's motion to amend the
record on appeal.
[1]We first address defendant's motion to strike plaintiff's reply
brief. Plaintiff asserts that it filed its reply brief under N.C.R. App. P.
28(h)(1), which provides that, "[i]f the appellee has presented in its brief
new or additional questions as permitted by Rule 28(c), an appellant may,
within 14 days after service of such brief, file and serve a reply brief
limited to those new or additional questions." N.C.R. App. P. 28(c) provides
that,
Without having taken appeal, an appellee may present
for review, by stating them in his brief, any questions
raised by cross-assignments of error under Rule 10(d).
Without having taken appeal or made cross-assignments of
error, an appellee may present the question, by statement
and argument in his brief, whether a new trial should be
granted to the appellee rather than a judgment n.o.v.
awarded to the appellant when the latter relief is sought
on appeal by the appellant.
Defendant did not raise any cross-assignments of error under N.C.R. App. P.
10(d), and plaintiff does not seek judgment n.o.v. on appeal.
In
Newsome v. N.C. State Bd. of Elections, 105 N.C. App. 499, 415 S.E.2d
201 (1992), our Court permitted a reply brief where
appellants, in their reply brief, responded to two new
issues raised in the briefs by defendants-appellees and
intervening defendants-appellees. These issues concerned
whether the appeal was moot and whether the plaintiffs
lacked equity. Although appellees claim that they have
adopted verbatim the question presented by appellants,
the matters they argue in their brief do not arise
naturally and logically from the record and questionpresented.
Id. at 504, 415 S.E.2d at 204. Plaintiff argues that defendant's contention
on appeal that plaintiff had failed to plead
Noerr was similarly a new issue
that did not "arise naturally and logically from the record and question
presented." We disagree. Once defendant raised the question of whether
Noerr was properly pleaded, plaintiff was entitled to argue that
Noerr was
properly pleaded during oral arguments or, if there were no oral arguments,
in a reply brief under N.C.R. App. P. 28(h)(2). Because oral arguments were
heard, that was the proper place for plaintiff to challenge defendant's
contention that
Noerr had not been properly pleaded. We therefore grant
defendant's motion to strike plaintiff's reply brief.
[2]We next address plaintiff's motion to amend the record on appeal.
Plaintiff moves to amend the record to include: (1) plaintiff's brief in
support of partial summary judgment on defendant's claim of unfair and
deceptive trade practices; (2) defendant's brief in opposition to partial
summary judgment; and (3) plaintiff's trial brief. N.C.R. App. P. 9(b)(5)
provides that, "[o]n motion of any party or on its own initiative, the
appellate court may order additional portions of a trial court record or
transcript sent up and added to the record on appeal." Plaintiff argues that
its proposed amendment supports plaintiff's contention that
Noerr was
properly pleaded before the trial court and explains the material's absence
from the record on appeal as due to plaintiff's failure to anticipate
defendant's contention to the contrary. We have held that, "while the
failure to plead an affirmative defense ordinarily results in a waiver of the
defense, the issue may still be raised by express or implied consent."
Miller v. Talton, 112 N.C. App. 484, 487, 435 S.E.2d 793, 796 (1993).
Plaintiff's proposed amendment supports plaintiff's contention that
Noerr was
argued before the trial court by the consent of both parties. We therefore
grant plaintiff's motion to amend the record on appeal.
[3]However, without addressing whether
Noerr was pro
perly pleaded and
thus is properly before us on appeal, we decline to apply the reasoning of
Noerr to defendant's claim of tortious interference. The U.S. Supreme Court
based its decision in
Noerr both on the First Amendment right to petition and
on a statutory interpretation of federal antitrust law.
Noerr, 365 U.S. at
137-38, 5 L. Ed. 2d at 471. In
California Motor Transport Co. v. Trucking
Unlimited, 404 U.S. 508, 510, 30 L. Ed. 2d 642, 646 (1972), the U.S. Supreme
Court indicated that the right to petition, and therefore the reasoning of
Noerr, extended to the filing of a lawsuit. However, in
Bill Johnson's
Restaurants, Inc. v. NLRB, 461 U.S. 731, 76 L. Ed. 2d 277 (1983), the U.S.
Supreme Court held that, while the right to petition entitled a plaintiff to
file an objectively reasonable lawsuit despite malicious intent,
see id. at
743, 76 L. Ed. 2d at 289, the bringing of such a lawsuit with malicious
intent could be penalized as an unfair labor practice after the suit had
concluded.
See id. at 747, 76 L. Ed. 2d at 291-92. It follows that, because
the present case does not seek to interfere with plaintiff's suit against
Imperial, plaintiff's right to petition is not implicated.
Plaintiff therefore relies solely on the U.S. Supreme Court's statutory
interpretation of federal antitrust law for its contention that, given an
objectively reasonable lawsuit, it should not be liable for the state tort of
tortious interference. Because we see no relation between the tort of
tortious interference and the legislative intent behind federal antitrust
law, we decline to attempt to conform the reasoning of
Noerr to the present
case. We therefore hold that, even if plaintiff's suit against Imperial was
objectively reasonable, plaintiff could still be liable for tortious
interference.
Cf. Section VIII,
infra.
2.
Plaintiff next argues that the trial court erred in its interpretationof the law of tortious interference in North
Carolina, insofar as the trial
court concluded that plaintiff could be held liable for tortious interference
through the malicious filing of a lawsuit, regardless of the objective
reasonableness of the lawsuit.
Our Supreme Court has stated that "legal malice" demonstrates a lack of
justification in an action for tortious interference and has distinguished
"legal malice" from "actual malice":
There are frequent expressions in judicial opinions
to the effect that malice is requisite to liability in an
action for inducing a breach of contract. . . . The term
"malice" is used in this connection in its legal sense,
and denotes the intentional doing of the harmful act
without legal justification. Indeed, actual malice and
freedom from liability for this tort may coexist. If the
outsider has a sufficient lawful reason for inducing the
breach of contract, he is exempt from liability for so
doing, no matter how malicious in actuality his conduct
may be. . . . For this reason, actual malice is
ordinarily material in an action for inducing a breach of
contract only on the issue of whether punitive damages
should be awarded. Notwithstanding it is not an element
of the cause of action, actual malice may negative the
existence of justification in a particular case. This is
true because the outsider is never justified in inducing
a breach of contract solely for the purpose of visiting
his personal hatred, ill will, or spite upon the
plaintiff.
Childress, 240 N.C. at 675, 84 S.E.2d at 182 (citations omitted).
See also,
Robinson, Bradshaw, & Hinson v. Smith, 129 N.C. App. 305, 318, 498 S.E.2d
841, 851 (1998). Thus, plaintiff was justified in bringing suit against
Imperial only if plaintiff acted with sufficient lawful reason.
"The privilege [to interfere with a contractual
relationship] is conditional or qualified; that is, it is
lost if exercised for a wrong purpose. In general, a
wrong purpose exists where the act is done other than as
a reasonable and
bona fide attempt to protect the
interest of the defendant which is involved."
Smith v. Ford Motor Co., 289 N.C. 71, 91, 221 S.E.2d 282, 294 (1976)
(emphasis in original) (citation omitted). Moreover, a subjective belief
that interference is permissible is insufficient to defeat a claim of
tortious interference if legal malice is present.
See United Laboratories,322 N.C. at 663, 370 S.E.2d at 388 ("[W]e rejec
t defendant's argument that a
good faith belief that the covenants are unenforceable automatically
justifies contractual interference.").
We conclude that a showing of legal malice will defeat plaintiff's
defense of justification in filing suit against Imperial, and that insofar as
legal malice relates to intent, the "objective reasonableness" of the suit is
irrelevant. We therefore find no error in the trial court's application of
the law of tortious interference.
3.
[4]Plaintiff challenges the trial court's conclusion that plaintiff
exhibited legal malice sufficient to defeat its defense of justification in
interfering with the consulting agreement between defendant and Imperial.
Plaintiff first asserts that the trial court found only actual malice, not
legal malice, and therefore that, under
Childress, plaintiff's defense of
justification was not defeated. However, in addition to holding that
plaintiff demonstrated actual malice sufficient to support a grant of
punitive damages, the trial court held that plaintiff's suit against Imperial
was brought solely for anti-competitive, and therefore not legitimate,
purposes. The trial court thus found that plaintiff acted with legal malice.
Plaintiff also contends that the trial court's conclusion of legal
malice is unsupported by its findings of fact, insofar as the trial court
found that plaintiff's suit against Imperial "stated in good faith" that
defendant had misappropriated plaintiff's trade secrets. However, a good
faith belief that trade secrets were misappropriated in no way necessitates
that a suit alleging such misappropriation was brought without legally
malicious intent. We conclude that the trial court's conclusion of legal
malice, in the form of anti-competitive purpose, is well supported by its
findings of fact.
4.
[5]Finally, plaintiff asserts that it was justified in bringing itssuit against Imperial because, under N.C. Gen.
Stat. § 66-152, it was
required to file suit to protect its trade secret rights. However, had the
trial court found that plaintiff brought its suit against Imperial to protect
plaintiff's legal rights, the trial court would not have found that plaintiff
acted with legal malice in bringing suit. Plaintiff is liable, not for
bringing suit, but for plaintiff's anti-competitive purposes in bringing
suit.
B.
[6]Plaintiff's next challenge to defendant's claim of tortious
interference in the present case is that plaintiff cannot be held to have
tortiously interfered with the consulting agreement between defendant and
Imperial because it had no actual knowledge of the agreement.
See United
Laboratories, 322 N.C.
at 661, 370 S.E.2d at 387. However, while the trial
court made no specific finding that plaintiff knew of the consulting
agreement before filing suit, plaintiff does not challenge the trial court's
finding that plaintiff knew of the business relationship between defendant
and Imperial.
The outsider has knowledge of the contract within
the meaning of the second element of the tort if he knows
the facts which give rise to the plaintiff's contractual
right against the third person. "If he knows those
facts, he is subject to liability even though he is
mistaken as to their legal significance and believes that
there is no contract or that the contract means something
other than what it is judicially held to mean."
Childress, 240 N.C. at 674, 84 S.E.2d at 182 (citation omitted). We conclude
that, insofar as plaintiff sought to disrupt the relationship between
defendant and Imperial, plaintiff's knowledge of that relationship satisfies
the knowledge requirement of tortious interference. Inducing a person not to
enter into a contract is as much a tort as interference with an established
contract.
See Equipment Co. v. Equipment Co., 263 N.C. 549, 559, 140 S.E.2d
3, 11 (1965). The fact that plaintiff may not have known, at the time it
filed suit against Imperial, that defendant had already signed the consultingagreement with Imperial cannot shield plaintiff from liability
.
C.
[7]Plaintiff asserts that adoption by this Court of the trial court's
reasoning on defendant's claim of tortious interference will have a
"chilling" effect on future efforts by trade secret owners to protect against
misappropriation. Plaintiff suggests that unless this Court adopts the
reasoning of
Noerr and prohibits liability for tortious interference in any
objectively reasonable lawsuit, owners of trade secrets will hesitate in
acting to protect their interests for fear of such liability. We disagree.
Under the reasoning of the trial court, as adopted by this Court, a trade
secret owner will not be liable for tortious interference in a suit
legitimately brought to protect its legal rights. Liability for tortious
interference will only lie where such a suit is brought with
no sufficient
lawful reason.
D.
[8]Finally, plaintiff asserts that the trial court erred in considering
evidence of the FBI investigation of defendant's and Imperial's activities in
finding tortious interference. Plaintiff argues that the FBI investigators'
statements to plaintiff that there was no protectable trade secret interest
in the information that plaintiff claimed was a trade secret was incompetent
and irrelevant evidence as to the basis of plaintiff's suit against Imperial,
both because the criminal standard of proof differs from the civil standard
and because the FBI investigators were not trained experts in the field of
chemistry.
However, the trial court's conclusion was that plaintiff "knew or
should have known, prior to filing suit against Imperial, that it had
insufficient information to determine whether Imperial or [defendant] were
misappropriating its trade secrets" (emphasis added). Thus the FBI
investigators' statements did not act to support an inference of noprotectable trade secret interest, but instead
failed to support
an inference
that there
was a protectable trade secret interest. The trial court did not
give any weight to what the FBI investigators said; instead, it merely noted
what they did not say. We conclude that, insofar as a statement by the FBI
that trade secret theft had occurred might have acted to justify plaintiff's
suit against Imperial, the trial court did not err in finding as fact that
the FBI made no such statement.
II.
[9]Plaintiff next assigns error to the trial court's award of
compensatory and punitive damages to defendant on defendant's claim of
tortious interference. Plaintiff asserts that the trial court erred in
awarding compensatory damages for future royalty payments on a line of
products never created based solely on the projections of Imperial's product
pro forma. Plaintiff argues that defendant failed to meet its burden in
proving those damages, insofar as "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."
Olivetti
Corp. v. Ames Business Systems, Inc., 319 N.C. 534, 547-48, 356 S.E.2d 578,
586 (1987) (citation omitted).
However, while it may be difficult to calculate and prove future profits
for a new business, North Carolina has declined to adopt a
per se rule
against the award of such damages.
See id. at 546, 356 S.E.2d at 585. The
product pro forma used by the trial court in the present case was prepared
well before trial as a conservative business projection of one planned line
of products and was approved by Imperial's publicly held parent company.
Moreover, defendant is a recognized expert in the field of developing and
manufacturing such products. We conclude that the trial court did not err in
holding that the product pro forma's conservative revenue projections
produced a reasonably certain estimate of defendant's damages. Plaintiff challenges the punitive damages awarded to
defendant solely on
the grounds of plaintiff's contention that the trial court improperly found
plaintiff liable for tortious interference. Because we have upheld
plaintiff's liability for tortious interference, we find no error in the
trial court's award to defendant of punitive damages on that claim.
III.
Plaintiff assigns error to the trial court's holding that defendant did
not breach the terms of the non-compete agreement defendant signed with
Swift. The trial court held, and the parties do not challenge, that the
agreement is governed by the law of Illinois.
A.
[10]Plaintiff first challenges the trial court's interpretation under
Illinois law of the first paragraph of the non-competition section of the
non-compete agreement:
Employee agrees that, while employed by the Company,
Employee will undertake no planning for or organization
of any business activity competitive with the work
Employee performs, or with the business Employee works
in, as an employee of the Company.
The trial court held that, given the Illinois courts' position that "private
covenants restraining trade are disfavored in the law and will be carefully
scrutinized to ensure that they are reasonable and not contrary to public
policy[,]"
Peterson-Jorwic Group v. Pecora, 586 N.E.2d 676, 677 (Ill. App.
Ct. 1st Dist. 1991) (citation omitted), the above paragraph should be read to
encompass only defendant's work as a sales and marketing manager for
plaintiff's automotive adhesives unit. The trial court concluded that,
because Imperial had no intention of competing with plaintiff's automotive
adhesives business, defendant did not breach his non-compete agreement.
Plaintiff argues that the paragraph should not be construed so narrowly.
However, we note that the non-compete agreement was drafted by defendant's
employer, and ambiguities in written instruments are to be strictly construed
against the drafting party.
See Camp v. Leonard, 133 N.C. App. 554, 562, 515S.E.2d 909, 914 (1999). Moreover, insofar as defendant
signed the non-
compete agreement with Swift and then moved to the automotive adhesives unit
of Swift's much larger parent company, it could be unreasonable to extend the
meaning of the agreement to cover the entirety of the parent company. We
hold that, because the language of the paragraph specifically limits its
application to the business the employee performs, not the employer as a
whole, the trial court did not err in applying the non-compete agreement
under Illinois law.
[11]Plaintiff also argues that defendant was in fact involved in
developing hot-melt adhesive products for plaintiff's automotive adhesives
business, and therefore that the trial court erred in concluding that
defendant was not involved in research and development activities for
plaintiff. However, defendant's responsibilities were the marketing and
sales of automobile adhesives, and defendant was involved in the development
of new adhesives only in the limited capacity of seeing that the needs of
particular automotive customers were met. We hold that the trial court's
finding that defendant was not involved in research and development
activities is supported by competent evidence.
The trial court further held that, insofar as the non-compete agreement
permitted defendant to compete with plaintiff in the field of polyurethane
reactive adhesives after leaving plaintiff's employ, and insofar as
defendant's meetings with Imperial were not competition but merely
preparatory to the activation of the consulting agreement, plaintiff had no
legitimate business interest in interfering with defendant's efforts to work
for Imperial. There is no indication that the trial court believed the non-
compete agreement explicitly allowed defendant to compete with plaintiff
while employed for plaintiff, despite plaintiff's contention to the contrary.
B.
[12]Plaintiff next challenges the trial court's conclusion that
defendant did not violate the confidentiality provision of the non-competeagreement. In particular, plaintiff suggests that, insofar as de
fendant and
Imperial agreed that Imperial would not target any of plaintiff's customers,
defendant must have disclosed to Imperial information about plaintiff's
product lines and who plaintiff's customers were. However, the
confidentiality provision does not apply to information in the public domain,
and there is no evidence to suggest that defendant and Imperial discussed
anything more than those product lines and customers of plaintiff's that were
publicly known. The trial court's holding that plaintiff failed to meet its
burden in proving defendant breached the confidentiality provision of the
non-compete agreement is supported by the trial court's findings of fact and
by competent evidence.
IV.
[13]Plaintiff assigns error to the trial court's failure to determine
that defendant breached a fiduciary duty owed to plaintiff. However, our
Supreme Court has recently indicated that a fiduciary relationship will
generally not be found in the workplace.
See Dalton v. Camp, 353 N.C. 647,
548 S.E.2d 704 (2001). A managerial position alone does not demonstrate the
requisite "'domination and influence on the other'" required to create a
fiduciary obligation.
Id. at 652, 548 S.E.2d at 708 (citation omitted). We
conclude that defendant owed no fiduciary duty to plaintiff, and therefore
that the trial court did not err in finding no breach of such a duty.
V.
[14]Plaintiff next assigns error to the trial court's determination
that plaintiff's formula 2U026-1N and information about its manufacturing
process were not trade secrets under North Carolina law.
See N.C.G.S. § 66-
152(3). In particular, plaintiff argues that the trial court's conclusion
that information about the composition and manufacture of plaintiff's 2U026-
1N was commonly known and used in the industry is unsupported by the industry
publications submitted by defendant to the trial court. However, plaintiffdoes not contest that defendant's witnesses testified that the i
nformation
was commonly known. We hold that the trial court's conclusion that
plaintiff's information was not a trade secret is supported by competent
evidence, and thus find no error in the trial court's conclusion that
defendant did not misappropriate plaintiff's trade secrets.
VI.
[15]Plaintiff assigns error to the trial court's award to defendant of
vacation and bonus pay after defendant left plaintiff's employ, as well as
the doubling of that award for lack of good faith. Although plaintiff
asserts on appeal that it acted in good faith in withholding payments from
defendant, we find the trial court's conclusion to the contrary to be
supported by its uncontested findings of fact.
Plaintiff asserts that, while vacation days can be carried over from one
year to the next with supervisor approval, the trial court made no express
finding of fact that such supervisor approval was received. However, the
parties stipulated before trial that defendant had received the required
authorization. Plaintiff also asserts that defendant is not entitled to a
prorated bonus because he resigned voluntarily. However, we hold that the
trial court's finding that defendant did not resign voluntarily is supported
by competent evidence. We therefore find no error in the trial court's
awards of vacation and bonus pay to defendant.
VII.
Finally, plaintiff assigns error to the trial court's failure to
consider plaintiff's claims of fraud and constructive fraud in connection
with expense reimbursements submitted to plaintiff for trips to visit
Imperial. However, those claims were considered and addressed together with
plaintiff's claim for misapplication of plaintiff's money. We therefore hold
that the trial court did not fail to consider plaintiff's fraud and
constructive fraud claims.
VIII.
[16]In his first assignment of error, defendant asserts that the trial
court erred in granting summary judgment on defendant's claim of unfair and
deceptive trade practices. Defendant argues that plaintiff's tortious
interference with the consulting agreement between defendant and Imperial
constitutes an unfair trade practice under N.C. Gen. Stat. § 75-1.1.
See,
e.g.,
McDonald v. Scarboro, 91 N.C. App. 13, 370 S.E.2d 680 (1988).
Defendant further contends that, under
Sara Lee Corp. v. Carter, 351 NC 27,
34, 519 S.E.2d 308, 312 (1999), the employment relationship between plaintiff
and defendant does not protect plaintiff from liability for unfair and
deceptive trade practices.
Plaintiff argues that a reasonably objective lawsuit can never be an
unfair trade practice, under the reasoning of
Noerr and
PRE.
See Section
I.A.1,
supra.
Noerr was based on a statutory interpretation of federal
antitrust law.
See Noerr, 365 U.S. at 137-38, 5 L. Ed. 2d at 471. This
Court has noted that Chapter 75 of the North Carolina General Statutes was
modeled after that federal antitrust law, and that federal decisions may
"provide guidance in determining the scope and meaning of chapter 75."
DKH
Corp. v. Rankin-Patterson Oil Co., 131 N.C. App. 126, 128-29, 506 S.E.2d 256,
258 (1998) (citations omitted). We therefore hold that the reasoning of
Noerr and
PRE apply to N.C.G.S. § 75-1.1. We note that both plaintiff and
defendant argued
Noerr in their briefs supporting and opposing plaintiff's
motion for summary judgment of defendant's trade secret claim.
Under
PRE, a plaintiff may not be held liable under federal antitrust
law for bringing an objectively reasonable lawsuit, regardless of the
plaintiff's subjective intent in bringing the suit.
See PRE, 508 U.S. at 57,
123 L. Ed. 2d at 621. A lawsuit is objectively reasonable if "an objective
litigant could conclude that the suit is reasonably calculated to elicit a
favorable outcome[.]"
Id. at 60, 123 L. Ed. 2d at 624. We agree with thetrial court's conclusion in the present case that, th
ough filed for no
legitimate purpose, plaintiff's trade secret suit against Imperial was not
utterly baseless.
See Section I.A.3,
supra. We therefore hold that
plaintiff's suit against Imperial was objectively reasonable, and thus that
the suit did not constitute an unfair trade practice under N.C.G.S. § 75-1.1.
Defendant suggests that plaintiff's activities preceding the filing of
its suit against Imperial, including acquiring confidential Imperial
documents and filing a complaint with the FBI, constitute an unfair trade
practice independent of the suit against Imperial. However, there is no
indication that plaintiff undertook those acts for any trade related purpose
other than preparation for the suit against Imperial. We hold that those
actions alone are insufficient to qualify as unfair trade practices under
N.C.G.S. § 75-1.1.
We therefore find no error in the trial court's order granting plaintiff
summary judgment on defendant's unfair and deceptive trade practices claim.
IX.
[17]In his second assignment of error, defendant asserts that the trial
court erred in awarding plaintiff a reimbursement for salary paid to
defendant while defendant was visiting Imperial. Defendant asserts that, as
a salaried executive, defendant was entitled to adjust his schedule to meet
his personal needs. Defendant argues that, as long as he fulfilled his
employment duties with plaintiff, he was entitled to his full salary.
Plaintiff counters that even executives have a limited number of vacation
days per year, and that defendant's freedom to be compensated while taking
time away from his employment is limited. We agree with plaintiff that,
insofar as defendant was compensated by plaintiff for vacation days not
taken, plaintiff should be compensated for days defendant did not spend
working for plaintiff. We also agree with plaintiff that plaintiff's
pleadings and the statement of issues in the pre-trial order are broad enough
to support plaintiff's recovery of those wages. We find no error in thetrial court's award.
X.
[18]In his third and final assignment of error, defendant asserts that
the trial court erred in failing to award attorneys' fees to defendant under
N.C. Gen. Stat. § 66-154(d), which provides that, "[i]f a claim of
misappropriation is made in bad faith or if willful and malicious
misappropriation exists, the court may award reasonable attorneys' fees to
the prevailing party." In denying attorneys' fees to defendant under
N.C.G.S. § 66-154(d), the trial court found, in a separate 3 August 1999
order, that plaintiff did not bring its trade secret misappropriation claim
against defendant in bad faith. However, the trial court also stated in the
separate order denying attorneys' fees that, in the event of an inconsistency
between the findings in that order and the findings in what the trial court
referred to as its final judgment, the findings in the final judgment would
prevail. Defendant argues that the trial court's findings that plaintiff
acted with legal malice are inconsistent with a finding that plaintiff did
not bring its trade misappropriation claim in bad faith.
However, as discussed in Section I.A.3,
supra, the fact that a suit was
brought with malicious intent does not exclude the possibility of a good
faith belief that the suit has legitimate basis.
See also,
United
Laboratories, 322 N.C. at 663, 370 S.E.2d at 388. We conclude that the
findings of the trial court's final judgment are not inconsistent with the
trial court's finding that plaintiff did not bring its trade misappropriation
claim against defendant in bad faith.
In summary, we affirm the trial court's orders.
Affirmed.
Judges WYNN and THOMAS concur.
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