BRUNING & FEDERLE MFG. CO.,
Plaintiff
v
.
Iredell County
No. 02 CVS 2239
RICKY D. MILLS and ASSOCIATED
METAL WORKS, INC.,
Defendants
Eisele, Ashburn, Greene & Chapman, P.A., by Douglas G. Eisele,
for plaintiff-appellant.
Pope, McMillan, Kutteh, Simon & Privette, P.A., by William P.
Pope, Charles A. Schieck, and J. Patrick Stutts, for
defendant-appellee, Ricky D. Mills.
Mayer, Brown, Rowe, & Maw, L.L.P., by Robert B. Cordle, for
defendant-appellee, Associated Metal Works, Inc.
CALABRIA, Judge.
Bruning & Federle Mfg. Co. (“B&F”) appeals the trial court's
order granting summary judgment to Ricky D. Mills (“Mills”) and
Associated Metal Works, Inc. (“Associated”) (collectively
“defendants”) with respect to its claims against defendants for
violations of the North Carolina Trade Secrets Protection Act, N.C.
Gen. Stat. §§ 66-152 to -164, and the North Carolina Unfair and
Deceptive Trade Practices Act (“UDTPA”), N.C. Gen. Stat. § 75-1 to-38, and against Mills for breach of a fiduciary duty to B&F. We
affirm.
B&F is a company in the business of designing, fabricating,
installing, and selling dust removal systems for use in the
woodworking industry and related industries. Associated was formed
by two former B&F employees in 1997 and is a competitor of B&F.
For over thirty years as of December 2001, Mills had been vice-
president of B&F, a shareholder in the company, and an employee.
As vice-president of B&F, Mills was responsible for the
marketing, sales, and design of B&F's dust removal systems. In
late 2000 and early 2001, Mills discussed the installation of a
dust removal system for their Mississippi factory (the “Armstrong
project” or the “project”) with Armstrong Wood Products, Inc.
(“Armstrong”). Mills prepared B&F's bid of $588,004 and submitted
it to Armstrong on 14 February 2001. In early 2001, B&F requested
from each sales person a schedule of projects that the sales person
anticipated would result in a contract with B&F in 2001 or 2002.
Mills submitted a schedule that included the Armstrong project
along with all the designs and quotes for the project. For
financial reasons, Armstrong postponed the project until early
2002. On 26 December 2001, Mills resigned his position with B&F
and sold his B&F stock back to B&F under a stock purchase agreement
entered into between the shareholders in 1992. Approximately a
week later, on 2 January 2002, Mills started his new employment
with Associated performing many of the same duties he had performed
at B&F. Shortly after arriving at Associated in early 2002, Mills
contacted Armstrong to inquire about submitting a bid on the
Armstrong project from Associated. After traveling to the
Mississippi factory and producing a design based on Armstrong's
specifications, Mills prepared a bid of $564,024 and submitted it
to Armstrong on 25 March 2002. On 10 April 2002, Armstrong awarded
the project to Associated. B&F representatives attempted to call
Armstrong after Mills resigned but were unable to contact
Armstrong's representative and subsequently did not update B&F's
bid for the Armstrong project prior to the 10 April 2002 award.
On 13 September 2002, B&F filed suit alleging Associated, with
Mills' aid, used B&F's proprietary designs, proposals, and bid
procedures to bid upon and receive a contract for the Armstrong
project. B&F further alleged Mills conversed with an officer or
agent of Armstrong prior to resigning from B&F about awarding a
contract for the Armstrong project to Associated. Based on these
allegations, B&F claimed (1) defendants misappropriated its trade
secrets; (2) defendants committed unfair and deceptive trade
practices; (3) Mills breached his fiduciary duty to B&F; and (4)
damages were sustained due to defendants' actions. On 12 April
2004, the trial court entered summary judgment for defendants on
all claims. B&F appeals.
B&F asserts the trial court erred in granting summary judgment
to defendants. A grant of summary judgment is reviewed de novo.
Falk Integrated Techs., Inc. v. Stack, 132 N.C. App. 807, 809, 513
S.E.2d 572, 574 (1999). Summary judgment is properly grantedwhere, taking the evidence in the light most favorable to the non-
moving party, “the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any
material fact and that any party is entitled to a judgment as a
matter of law.” N.C. Gen. Stat. § 1A-1, Rule 56(c) (2003);
Bruce-Terminix Co. v. Zurich Ins. Co., 130 N.C. App. 729, 733, 504
S.E.2d 574, 577 (1998).
Summary judgment is appropriate for the
defending party when (1) an essential element
of the other party's claim or defense is non-
existent; (2) the other party cannot produce
evidence to support an essential element of
its claim or defense; or (3) the other party
cannot overcome an affirmative defense which
would bar the claim.
Caswell Realty Assocs. I, L.P. v. Andrews Co., 128 N.C. App. 716,
720, 496 S.E.2d 607, 611 (1998).
B&F first argues the law and the evidence support its claim
that defendants misappropriated its trade secrets. “The owner of
a trade secret shall have remedy by action for misappropriation of
his trade secret.” N.C. Gen. Stat. § 66-153 (2003). Pursuant to
N.C. Gen. Stat. § 66-152 (2003),
(1) "Misappropriation" means 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.
. . .
(3) "Trade secret" means business or technical
information, including but not limited to a
formula, pattern, program, device, compilationof 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.
Whether the information obtained constitutes a trade secret under
N.C. Gen. Stat. § 66-152(3) is the threshold question in any
misappropriation of trade secrets case. Combs & Assocs., Inc. v.
Kennedy, 147 N.C. App. 362, 369, 555 S.E.2d 634, 639 (2001). Six
factors are considered when determining whether information is a
trade secret:
(1) the extent to which the 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.
State ex rel. Utilities Comm'n v. MCI, 132 N.C. App. 625, 634, 514
S.E.2d 276, 282 (1999).
Here, B&F contends its design process, cost and pricing
information, bidding formulae, suppliers list, and customer list
constitute trade secrets. However, B&F stated that prior to this
suit it never marked any of its records as trade secrets, did not
have any written policy identifying any subject, item or asset asa trade secret, and did not have any written policy dealing in any
manner with the security of trade secrets. Furthermore, B&F did
not patent, copyright, or trademark any of its designs, proposals,
price lists, customer lists, or bid procedures and had not applied
for any such protections. Moreover, B&F made its cost and pricing
information, bidding process, suppliers list, and customer list
readily available to its marketing and sales personnel, and B&F
stated it did not have non-compete agreements or confidentiality
agreements between itself and any of its officers, employees, or
stockholders, including Mills. Rather, B&F stated that it “relied
on the loyalty of its employees to maintain the privacy of the
[company's] data.” Additionally, B&F produced a public brochure
containing a list of its major customers, including Armstrong, and
B&F's bids did not include confidentiality clauses nor did B&F have
any agreements with its customers to keep its bids confidential.
B&F also contends that its schematic drawing for the Armstrong
project is a trade secret because it states the drawing and all
information contained in it is exclusively the property of B&F.
However, the information needed to produce a similar design is
readily available to the public in a 544 page publication by the
American Conference of Governmental Industrial Hygienists,
“Industrial Ventilation: A Manual of Recommended Practice,” which
provides data and information on the design, installation, and
maintenance of industrial ventilation systems. Furthermore,
because Armstrong had specific requirements concerning placement of
the major components of the dust removal system it wished toinstall, Associated's schematic for the system would by necessity
have to be substantially similar to B&F's. In comparing B&F and
Associated's schematics, we note Associated's design is
substantially similar to B&F's but is not identical. Accordingly,
we hold the items and information alleged by B&F to have been
misappropriated by defendants were not trade secrets under the
Trade Secrets Protection Act, and the trial court properly granted
summary judgment to defendants on B&F's claim for misappropriation
of trade secrets.
B&F next argues the trial court erred by granting defendants'
motion for summary judgment on its claim for unfair and deceptive
trade practices. Under the UDTPA, “[u]nfair methods of competition
in or affecting commerce, and unfair or deceptive acts or practices
in or affecting commerce, are declared unlawful.” N.C. Gen. Stat.
§ 75-1.1(a) (2003).
“To prevail on a claim of unfair and deceptive trade practice
a plaintiff must show (1) an unfair or deceptive act or practice,
or an unfair method of competition, (2) in or affecting commerce,
(3) which proximately caused actual injury to the plaintiff or to
his business.” Spartan Leasing, Inc. v. Pollard, 101 N.C. App.
450, 460-61, 400 S.E.2d 476, 482 (1991). “An act is unfair if it
is unethical or unscrupulous, and it is deceptive if it has a
tendency to deceive.” Di Frega v. Pugliese, 164 N.C. App. 499,
507, 596 S.E.2d 456, 462 (2004). Under N.C. Gen. Stat. § 75-1.1(b)
(2003), “'commerce' includes all business activities, however
denominated, but does not include professional services rendered bya member of a learned profession.” “Whether the practice is unfair
or deceptive usually depends upon the facts of each case and the
impact the practice has in the marketplace,” Spartan Leasing,
Inc., 101 N.C. App. at 461, 400 S.E.2d at 482, and “is a question
of law for the court.” Gray v. N.C. Ins. Underwriting Ass'n, 352
N.C. 61, 68, 529 S.E.2d 676, 681 (2000).
The UDTPA “was intended to benefit consumers, but its
protections extend to businesses in appropriate situations.”
Dalton v. Camp, 353 N.C. 647, 656, 548 S.E.2d 704, 710-11 (2001)
(citations omitted). Pertinent to the instant appeal, an employer
may successfully seek damages against an employee “under the Act
when [the] employee's conduct: (1) involved egregious activities
outside the scope of his assigned employment duties, and (2)
otherwise qualified as unfair or deceptive practices that were in
or affecting commerce.” Id., 353 N.C. at 656, 548 S.E.2d at 710.
Therefore, in a suit by an employer against an employee “'some type
of egregious or aggravating circumstances must be alleged and
proved before the [Act's] provisions may [take effect].'” Id., 353
N.C. at 657, 548 S.E.2d at 711 (quoting Allied Distribs., Inc. v.
Latrobe Brewing Co., 847 F. Supp. 376, 379 (E.D.N.C. 1993))
(emphasis in original). To the extent B&F's unfair and deceptive
trade practices claim is predicated on the allegations that items
and information constituting trade secrets were misappropriated by
defendants, we hold the trial court properly granted summary
judgment. However, we separately address that portion of B&F'sunfair and deceptive trade practices claim from the allegations of
misappropriation of trade secrets.
B&F contends the following facts constitute evidence of unfair
and deceptive trade practices: (1) Mills, an officer and
stockholder of B&F, produced a $588,004 bid on the Armstrong
project for B&F in February 2001; (2) he resigned “effective
immediately” on 26 December 2001, triggering B&F's obligation to
redeem his stock for $672,384; (3) on 2 January 2002, he began
employment with a B&F competitor; (4) shortly thereafter he worked
on a bid on the Armstrong project for his new employer; and (5) in
April 2002 his new employer was awarded a contract for the project
at a price approximately four percent lower than B&F's bid. We
disagree.
Mills' resignation and exercise of his stock redemption was
wholly within his contractual rights as an employee and stockholder
of B&F. Moreover, as noted above, B&F did not have a non-compete
agreement or confidentiality agreement with Mills. Therefore,
Mills was free to accept employment with Associated and pursue
business contracts on Associated's behalf. On these facts, we
reject the proposition that it constitutes an unfair and deceptive
trade practice for (1) a former employee to accept employment with
a competing company and diligently work on behalf of that company
or (2) a competing company to hire a former employee of its
competitor and request that he diligently work on its behalf.
Accordingly, B&F failed to forecast evidence indicating conduct byMills or Associated in acquiring the contract for the Armstrong
project that constituted an unfair and deceptive trade practice.
Finally, B&F argues it forecast sufficient evidence that Mills
breached his fiduciary duty to the company. “For a breach of
fiduciary duty to exist, there must first be a fiduciary
relationship between the parties.” Dalton, 353 N.C. at 651, 548
S.E.2d at 707 (2001). A fiduciary relationship
has been broadly defined . . . as one in which
“there has been a special confidence reposed
in one who in equity and good conscience is
bound to act in good faith and with due regard
to the interests of the one reposing
confidence . . . [and] it extends to any
possible case in which a fiduciary
relationship exists in fact, and in which
there is confidence reposed on one side, and
resulting domination and influence on the
other.”
Id., 353 N.C. at 651, 548 S.E.2d at 708-09 (quoting Abbitt v.
Gregory, 201 N.C. 577, 598, 160 S.E. 896, 906 (1931)).
As vice-president of B&F, Mills had a fiduciary duty to the
company in that B&F reposed a special confidence in him and he had
influence over the company's affairs. See Pierce Concrete, Inc. v.
Cannon Realty & Constr. Co., 77 N.C. App. 411, 413-14, 335 S.E.2d
30, 32 (1985) (stating, in North Carolina, the fiduciary duty of a
corporate officer to a corporation “is a high one”). However, B&F
failed to forecast evidence to support its allegation that Mills
contacted Armstrong on behalf of Associated or took any action to
undermine B&F's bid for the Armstrong project while he was employed
by B&F. Indeed, Armstrong's representative stated in his affidavit
that Mills did not contact Armstrong on behalf of Associated untilearly 2002, after Mills started employment with Associated. Mills
acted against B&F's interests only after resigning his position
with B&F and redeeming his B&F stock, at which time the fiduciary
relationship between Mills and B&F had already ceased. B&F could
no longer repose meaningful confidence in Mills. Moreover, in the
absence of a non-compete or confidentiality agreement, B&F could
not reasonably expect Mills to refrain from continuing in his
chosen trade and contacting customers with whom he had business
relationships while working for B&F. Accordingly, we hold the
trial court properly granted Mills summary judgment on B&F's claim
of breach of fiduciary duty.
For the foregoing reasons, we hold the trial court properly
granted summary judgment to defendants on B&F's claims for
misappropriation of trade secrets, unfair and deceptive trade
practices, and breach of fiduciary duty. Having so held, we need
not address B&F's remaining arguments.
Affirmed.
Judges TIMMONS-GOODSON and GEER concur.
Report per Rule 30(e).
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