Quality Merchandising Group v Sides, (02-791) 07/01/2003

Appeal by plaintiffs from judgment entered 13 March 2002 by Judge Jesse B. Caldwell, III in Catawba County Superior Court. Heard in the Court of Appeals 25 March 2003.

Nelson, Mullins, Riley & Scarborough, L.L.P., by Paul J. Osowski, for the plaintiff appellants.

Tate, Young, Morphis, Bach & Taylor, L.L.P., by Paul E. Culpepper for the defendant appellees.

    ELMORE, Judge.

    Defendant employee (Sides) worked for the predecessors of the plaintiff and the plaintiffs from February 1998 until January 2002. When Par Service, Inc. purchased the business on or about December 2000 and became Sides's employer, Sides's salary did not change nor did his position with the company. Quality Merchandising Group, Inc. (QMG) later acquired Par Service, Inc. and changed its name to Quality Sets and Services, Inc. (QSS).     Sides was not informed at that time that he would be required to sign a non-solicitation and non-competition agreement which accompanied an employment agreement. In February or March of 2001, Sides was informed of the agreement but did not sign at that time. In June of 2001 Sides was transferred from South Carolina to a North Carolina office. Some time after the transfer, Sides was again presented with the non-competition agreement and told that if he did not sign it he could not be given certain confidential information that would be necessary to do his job. Sides took this to mean that if he did not sign he would lose his job, and subsequently he signed the agreement. The following January, Sides tendered his resignation, intending to fulfill his obligation to stay thirty days after the notice of resignation was given. Within one week after he resigned, Sides was terminated. Sides had become a stockholder in Professional Remerchandising Organization, Inc. (PRO), a competitor of QMG, and subsequently began employment with PRO.
    Plaintiffs brought suit against Sides and PRO, alleging breach of the non-solicitation and non-competition agreement, tortious interference with contract, and misappropriation of trade secrets under both the common law and the General Statutes. Plaintiffs requested a temporary restraining order and a preliminary injunction. They were granted a temporary restraining order in the Superior Court, which was later dissolved when the requested preliminary injunction was denied in the Superior Court. The courtheld that success on the merits was unlikely because the agreement was not given for valid consideration.
    Plaintiffs now appeal the denial of the injunction, arguing that there was valid consideration in the form of a change in employment status and a job re-location to support the non- solicitation and non-competition agreement.
    We first note that a preliminary injunction is a non- appealable interlocutory order. Corpening Ins. Ctr., Inc. v. Haaff, 154 N.C. App. 190, 192, 573 S.E.2d 164, 165 (2002); Rug Doctor, L.P. v. Prate, 143 N.C. App. 343, 345, 545 S.E.2d 766, 767 (2001). No appeal lies from a trial court's denial of a preliminary injunction unless the appellant would be deprived of a substantial right that he would lose absent review prior to final determination. Id.; see also N.C. Gen. Stat. § 7A-27(d)(1) (2001). An order is interlocutory if it is made during the pendency of an action and does not dispose of the case but requires further action by the trial court in order to finally determine the rights of all the parties involved in the controversy. Generally, there is no right to appeal from an interlocutory order. N.C. Gen. Stat. § 1A-1, Rule 54(b) (2001); Flitt v. Flitt, 149 N.C. App. 475, 477, 561 S.E.2d 511, 513 (2002) (citations omitted). See generally, Veazey v. Durham, 231 N.C. 357, 57 S.E.2d 377, reh'g denied, 232 N.C. 744, 59 S.E.2d 429 (1950). An immediate appeal from an interlocutory order will only lie where (1) the order or judgment is final as to some but not all of the claims or parties, and the trial court certifies the case for appeal pursuant to N.C. Gen.Stat. § 1A-1, Rule 54(b); or (2) when the challenged order affects a substantial right that may be lost without immediate review. N.C. Gen. Stat. § 1-277(a); McConnell v. McConnell, 151 N.C. App. 622, 624, 566 S.E.2d 801, 803 (2002).
    Although neither party addressed the appealability of the preliminary injunction in their briefs, we recognize that in cases involving an alleged breach of a non-competition agreement and an agreement prohibiting disclosure of confidential information, our appellate courts have routinely reviewed interlocutory orders both granting and denying preliminary injunctions, holding that substantial rights have been affected. See, e.g., Iredell Digestive Disease Clinic v. Petrozza, 92 N.C. App. 21, 373 S.E.2d 449 (1988), aff'd per curiam, 324 N.C. 327, 377 S.E.2d 750 (1989); A.E.P. Industries v. McClure, 308 N.C. 393, 302 S.E.2d 754 (1983); QSP, Inc. v. Hair, 152 N.C. App. 174, 566 S.E.2d 851 (2002); Cox v. Dine-A-Mate, Inc., 129 N.C. App. 773, 501 S.E.2d 353, disc. review denied, 349 N.C. 355, 525 S.E.2d 449 (1998); Masterclean of North Carolina v. Guy, 82 N.C. App. 45, 345 S.E.2d 692 (1986).
    We note, however, that in a case such as the one now before us, the parties generally should proceed to a determination on the merits in the interest of time. In this case, part of the covenant not to compete is valid for two years, and over a year will have passed in appealing this interlocutory order. Our Supreme Court has stated that “where time is of the essence, the appellate process is not the procedural mechanism best suited for resolving the dispute. The parties would be better advised to seek a finaldetermination on the merits at the earliest possible time.” A.E.P. Industries, 308 N.C. at 401, 302 S.E.2d at 759.
    The standard of review for denial of a preliminary injunction is de novo. An appellate court is not bound by the findings, but may review and weigh the evidence and find facts for itself. Wade S. Dunbar Ins. Agency, Inc. v. Barber, 147 N.C. App. 463, 467, 556 S.E.2d 331, 334 (2001); A.E.P. Industries, 308 N.C. at 402, 302 S.E.2d at 760. There is a presumption, however, that the trial court was correct and the burden is on the appellant to show that the trial court erred in granting the preliminary injunction. See Conference v. Creech, 256 N.C. 128, 140, 123 S.E.2d 619, 627 (1962).
    A preliminary injunction is denied or granted pursuant to N.C. Gen. Stat. § 1-485. That section states:

     A preliminary injunction may be issued by order in accordance with the provisions of this Article. The order may be made by any judge of the superior court or any judge of the district court authorized to hear in-chambers matters in the following cases, and shall be issued by the clerk of the court in which the action is required to be tried:

     (1) When it appears by the complaint that the plaintiff is entitled to the relief demanded, and this relief, or any part thereof, consists in restraining the commission or continuance of some act the commission or continuance of which, during the litigation, would produce injury to the plaintiff; or,

     (2) When, during the litigation, it appears by affidavit that a party thereto is doing or threatens or is about to do, or is procuring or suffering some act to be done in violation of the rights of another party to the litigation respecting the subject of the action, and tending to render the judgment ineffectual; or,
     (3) When, during the pendency of an action, it appears by affidavit of any person that the defendant threatens or is about to remove or dispose of his property, with intent to defraud the plaintiff.

N.C. Gen. Stat. § 1-485 (2001).
    In this case, the lower court determined that a preliminary injunction was not appropriate because the plaintiffs did not demonstrate a likelihood that they would succeed on the merits. The court found as a matter of law that the defendant remained an employee at will, and thus the contract was not enforceable against him because he received no new consideration. Plaintiffs argue on appeal that there was valid consideration in the form of a change in employment status and a job re-location to support the non- solicitation and non-competition agreement.
    When the relationship of employer and employee is already established without a restrictive covenant, any new agreement not to compete must be in the nature of a new contract based upon a new consideration. Engineering Associates v. Pankow, 268 N.C. 137, 139, 150 S.E.2d 56, 58 (1966); Kadis v. Britt, 224 N.C. 154, 162- 63, 29 S.E. 2d 543, 548 (1944). Plaintiff cites two possible forms of consideration given to the defendant: (1) a change in status from “employee at will” to “contract employee”; and (2) an office transfer nearer to the plaintiff's client. In weighing the evidence brought before the lower court and the relevant case law, we hold this consideration to be illusory, and therefore the contract to be unenforceable.
    The employment agreement which the defendant signed contemporaneously with the non-competition agreement provided insection 2: “the term shall be for a period of two years from the date hereof, subject, however, to prior termination as provided for in this Agreement.” The agreement authorizes termination with or without cause with thirty days notice. In effect, the defendant's employment remained “at will”, and the supposed change in status of employment is illusory.
    Likewise the relocation of the defendant was for the employer's convenience and conferred no benefit to the defendant. In addition, the defendant had already been working and transferred months before the agreement was signed. Therefore, we can discern no valuable consideration for the agreement.
    Without valuable consideration the agreement is void and the plaintiffs cannot demonstrate a likelihood of success on the merits. The preliminary injunction was therefore properly denied, as the potential damage to the defendant, who would presumably not be able to work for the contract period, would not be justified in anticipation that the contract would fail on the merits.
    We therefore uphold the lower court ruling denying the preliminary injunction.
    Affirmed.
    Judges MARTIN and HUDSON concur.
    Report per Rule 30(e).

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