Akzo Nobel Coatings Inc. v. Rogers

Akzo Nobel Coatings Inc. v. Rogers, 2011 NCBC 41.
STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
COUNTY OF GUILFORD 11 CVS 3013

AKZO NOBEL COATINGS INC.,

Plaintiff,

v.

DAVID B. ROGERS, BUDDY KEITH
ORDER ON MOTION FOR
TAYLOR, ROBERT A. PARKER,
JUDGMENT ON THE PLEADINGS
JOSEPH E. CARAVELLO, MARTIN
R. SCHONING, ATEC COATINGS,
LLC, and ATEC WIND ENERGY
PRODUCTS, LLC,

Defendants.

{1} THIS MATTER is before the Court on the Motion for Judgment on
the Pleadings (“Motion”) on Behalf of David B. Rogers (“Rogers”), Buddy
Keith Taylor (“Taylor”), Robert A. Parker (“Parker”), Joseph E. Caravello
(“Caravello”), and Martin R. Schoning (“Schoning”) (collectively, “Individual
Defendants”), pursuant to Rule 12(c) of the North Carolina Rules of Civil
Procedure (“Rule(s)”).

Nelson Mullins Riley & Scarborough, L.L.P. by Mark A. Stafford,
Donald R. Pocock, and Brian R. Anderson for Plaintiff.

Womble Carlyle Sandridge & Rice, PLLC by Ronald R. Davis and
Brent F. Powell for Defendants David B. Rogers, Buddy Keith Taylor,
Robert A. Parker, Joseph E. Caravello, and Martin R. Schoning.

Gale, Judge.

I. INTRODUCTION
{2} Plaintiff filed this action seeking injunctive and monetary relief
against the Individual Defendants and two corporate defendants. The
Individual Defendants are former employees of a company acquired by
Plaintiff, some of whom continued employment with Plaintiff. Plaintiff
alleges they have misused confidential information and misappropriated
trade secrets in violation of various non-compete and non-solicitation
agreements. The Motion attacks all of Plaintiff’s claims except one trade
secrets claim against Defendant Parker. The Motion asserts, inter alia, that
each claim depends on non-competition and non-solicitation covenants which
are overly broad and unenforceable as a matter of law. The Motion further
asserts that the tort claims and the unfair and deceptive practices claim must
fail because Plaintiff should be confined to its contract remedies.
{3} The Motion is GRANTED IN PART and DENIED IN PART.
Disputed material facts remain on at least some of the contract claims.
Plaintiff should not be allowed to pursue tort claims based on the contracts at
issue. The unfair and deceptive practice claims against defendants other
than Parker should be dismissed.

II. PROCEDURAL HISTORY
{4} Plaintiff filed this action in Guilford County on January 24, 2011.
The matter was designated a Complex Business Case and assigned to this
Court on January 27, 2011. Plaintiff asserts seven claims: 1) breach of
contract based on non-compete, non-solicitation, and confidentiality
agreements; 2) fraud, or alternatively, negligent misrepresentation (against
only Defendant Rogers); 3) unfair and deceptive trade practices under N.C.
Gen. Stat. §§ 75-1.1 et seq. (“Chapter 75”); 4) tortious interference with
contract; 5) tortious interference with prospective economic advantage; 6)
misappropriation of trade secrets; and 7) punitive damages. The Complaint
incorporates each of the Individual Defendant’s employment agreements.
{5} All Defendants answered the Complaint on March 30, 2011. The
Individual Defendants filed the Motion on May 26, 2011.
{6} The Motion has been fully briefed, the Court heard oral argument,
and the Motion is ripe for disposition.

III. STATEMENT OF FACTS
{7} The following facts are taken from the Complaint and accepted as
true for purposes of the Motion with reasonable inferences drawn in
Plaintiff’s favor without giving effect to conclusions of law unsupported by
factual allegations or inferences drawn from those facts. Branch Banking &
Trust Co. v. Lighthouse Fin. Corp., 2005 NCBC 3 ¶ 8 (N.C. Super. Ct. July
13, 2005), http://www.ncbusinesscourt.net/opinions/2005%20NCBC%203.htm.
A. The Parties
{8} Plaintiff Akzo Nobel Coatings, Inc. (“Plaintiff” or “Akzo Nobel”) is a
company existing under the laws of the State of Delaware doing business in
North Carolina. Plaintiff conducts business throughout the United States
and its affiliated companies sell industrial coatings and specialty chemicals
internationally.
{9} Defendants ATec Coatings, LLC (“ATec Coatings”) and ATec Wind
Energy Products, LLC (“ATec Wind”) (together, “ATec”) are North Carolina
limited liability companies. The Individual Defendants are former employees
of Chemcraft Holdings Corporation (“Chemcraft”) or one of its subsidiaries.
Defendant Rogers was a Chemcraft officer and shareholder. Chemcraft and
its subsidiaries merged into Akzo Nobel via a stock purchase.1 With the
exception of Rogers, each Individual Defendant continued to work for Akzo
Nobel after the merger.

1 Plaintiff alleges that Chemcraft: 1) owned a number of subsidiaries or related companies,

including Chemcraft International, Inc.; Chemcraft Coatings, Technologies, LLC; Chemcraft
Systems, LLC; Chemcraft Coatings, Inc.; and Chemcraft International Holdings, LLC
(collectively, the “Chemcraft Related Companies”); 2) through its subsidiaries or related
companies, was North America’s largest privately-owned manufacturer of industrial wood
coatings prior to the merger; and 3) conducted substantial domestic and international
business in the industrial wood coatings and other lines of businesses. Akzo Nobel’s
acquisition of Chemcraft Holdings closed on July 24, 2007. Chemcraft Holdings merged into
Akzo Nobel on December 31, 2007.
{10} Rogers, a North Carolina resident, executed a “Consulting
Agreement” with Akzo Nobel in May 2007 in connection with the sale of his
Chemcraft stock, whereby he agreed to consult and advise Akzo Nobel on the
“industrial wood coatings business of Chemcraft, and certain other services
related thereto . . . .” (Consulting Agreement (“Rogers Agreement”) ¶ 1) in
exchange for $9,500,000.00 and other consideration. (Compl. ¶ 20; Answer of
Def. David B. Rogers ¶ 20.)
{11} Defendant Taylor, a Texas resident, was the former “national
marketing manager for Chemcraft International specializing in European
high solids wood finishes . . . .” (Compl. ¶ 57.) He became Director of Sales
and Marketing for Akzo Nobel. Prior to May 2009, he had sales and
management responsibilities across all Akzo Nobel markets in the United
States. (Compl. ¶ 51.) He received $304,000.00 from Akzo Nobel as
consideration for an employment agreement dated May 17, 2007. (Compl. ¶
52; Answer of Def. Buddy Keith Taylor ¶ 52.) Plaintiff refers to Taylor as a
“founder” of ATec currently in charge of its sales and marketing. (Compl. ¶
56.)
{12} Defendant Schoning, a North Carolina resident, was Business
Development Manager for Flooring for Akzo Nobel prior to October 2009,
based in High Point, North Carolina. Plaintiff asserts he played a
substantial role in Akzo Nobel’s wood and vinyl flooring business across the
United States, and “formulated and modified coatings and obtained, through
his employment with Akzo Nobel, substantial expertise in the application of
industrial coatings.” (Compl. ¶ 69.) He received $50,000.00 to execute a
“Non-Competition and Non-Solicitation Agreement” with Chemcraft on
October 18, 2007. (Compl. ¶ 71; Answer of Def. Martin R. Schoning ¶ 71.)
Schoning resigned his employment with Akzo Nobel in October 2009.
Plaintiff refers to him as a “founder” of ATec. (Compl. ¶ 75.)
{13} Defendants Parker, an Arizona resident, and Caravello, a Texas
resident, are former Akzo Nobel Sales Service Representatives. Parker
signed a “Confidentiality Agreement and Covenant Not to Compete” with
Chemcraft International, Inc. on August 1, 2003. Caravello signed a
substantially similar “Confidentiality Agreement and Covenant Not to
Compete” with Chemcraft International, Inc. on Apri1 1, 2004. Parker
resigned his employment with Akzo Nobel in July 2009. Caravello resigned
in January 2010. Plaintiff refers to both men as “founders” of ATec. (Compl.
¶ 66.)
B. The Consulting and Employment Agreements
1. The Rogers Consulting Agreement
{14} The Rogers Agreement executed with Akzo Nobel contains, inter
alia, a choice-of-law provision, a non-competition provision, and a non-
solicitation provision. It states that the agreement “shall be governed by the
laws of the state of Delaware, without giving effect to any choice or conflict of
laws provision or rules that would cause the application of laws of any
jurisdiction other than the State of Delaware.” (Rogers Agreement ¶ 18(a).)
{15} In the section titled “Non-Competition,” the Rogers Agreement
states that for four (4) years following termination (the “Restricted Period”),
Rogers would not
directly or indirectly (including as a creditor, guarantor,
financial backer, stockholder, director, officer, consultant,
advisor, employee, member, investor, producer, or otherwise),
individually or through any Person that he controls, engage in,
participate in, or acquire an equity interest in any Person that
engages or participates in any business that competes in any
way with any Company Entity engaged in the business of wood
coatings (“Restricted Business”), other than in accordance with
the provisions of this Section 7.

(Rogers Agreement ¶ 7(a)(i).) 2

2 Section 7 allows Rogers to have equity ownership interests in competitors provided: (1) the

interests are listed or traded on a national securities exchange or on the NASDAQ Stock
market and that they constitute less than 4% of the outstanding shares; and (2) he is not
actively involved in the management of such business. (Rogers Agreement ¶ 7(a)(ii).)
{16} The Rogers Agreement also states that during the Restricted
Period, Rogers would not, without Akzo Nobel’s consent,
directly or indirectly, individually or through any Person that he
Controls:

(i) become an employee, consultant, advisor, director, officer,
producer, partner or, or [sic] joint or co-venturer with, enter into
any contract, agreement, or arrangement with, or seek to
influence (x) any Person with respect to a Restricted Business,
or (y) any Person that is a joint or co-venturer with, or partner
of, any Company Entity, or otherwise engaged in any material
on-going business relationship or discussions or negotiations
with a view to entering into such a relationship, or

(ii) interfere with or negatively impact customer and other
material business relationships of any Company Entity.

(Rogers Agreement ¶ 7(b).) The provisions of the Non-Compete section apply
without any geographic limitation.
{17} In the section titled “Return of Property, Non-Solicitation,” the
Rogers Agreement states that during the Restrictive Period, Rogers would
not
directly or indirectly, individually or through any Person he
Controls, (i) solicit for employment any employee of any
Company Entity, (ii) interfere with or seek to interfere with the
employment relationship between any employee of any
Company Entity and a Company Entity (including any such
solicitation or interference made on behalf of or as
representative of, any other Person) or (iii) except in connection
with the provision of the Consulting Services, call on or solicit
any customer or client, or prospective customer or client, of any
Company Entity, provided however, [Rogers] may hire persons
who are not engaged in Restricted Business and who respond to
a general advertisement or who directly approach [Rogers] in
connection with activities other than Restricted Business.

(Rogers Agreement ¶ 8(b).)
2. The Taylor Agreement
{18} The agreement Taylor executed with Akzo Nobel (“Taylor
Agreement”) contains, inter alia, a choice-of-law provision, a non-competition
provision, and a non-solicitation provision. It states that the “laws of the
State of Delaware, excluding the law on conflicts of law of such state, shall
govern and be applicable to any dispute under this agreement.” (Taylor
Agreement ¶ 8.)
{19} In the section titled “Noncompetition,” the Taylor Agreement
states that three (3) years after termination (the “Restricted Period”), Taylor
would not
directly or indirectly, engage in, participate in, or acquire an
equity interest in any person, firm, corporation or other entity,
which engages or participates in any business that operates any
line of business, business activity or operations that are
competitive with any line of business, business activity or
operations with wood coatings conducted by Employer or any of
its affiliates during the Restricted Period (the “Restricted
Business”) . . . . For the avoidance of doubt, Chemcraft and its
subsidiaries shall be considered affiliates of Employer at and
after the Closing Date.

[Taylor] hereby acknowledges and agrees that the Restricted
Businesses engaged in by Employer and its affiliates extends
throughout North America (the “Restricted Territory”) and that
Employer and its affiliates may be harmed by competitive
conduct anywhere in the Restricted Territory. [Taylor] therefore
agrees that the covenants contained in the provisions under
[this heading] shall be applicable in and throughout the
Restricted Territory, as well as throughout other areas of the
world in which Employer and its affiliates may be (or have
prepared written plans to be) doing business from time to time .
...

(Taylor Agreement ¶ 5.)
{20} The section titled “Nonsolicitation” states
[Taylor] further agrees that while [he] is employed by Employer
or any of its affiliates and during the Restricted Period, [he] will
not hire or attempt to hire any employee of Employer or any of
its affiliates, assist in hiring such a person, encourage any such
employee to terminate or diminish his or her relationship with
Employer or any of its affiliates, or solicit or encourage any
customer or vender of Employer or any of its affiliates to
terminate its relationship with them or, in the case of a
customer, to conduct with any person any business or activity
which such customer conducts or could conduct with Employer
or its affiliates.

(Taylor Agreement ¶ 6.)
3. The Schoning Agreement
{21} The agreement Schoning executed with Chemcraft (“Schoning
Agreement”) contains, inter alia, a non-competition provision and a non-
solicitation provision. The non-competition provision provides that for one
year after termination of employment with “any Company Entity,” Schoning
would not
directly or indirectly, engage in, participate in, or acquire an
equity interest in any person, firm, corporation or other entity,
which engages or participates in any business that operates any
line of business, business activity or operations that are
competitive with any line of business, business activity or
operations with the wood coatings business conducted by any
Company Entity during the Restricted Period.

(Schoning Agreement ¶ 1(a).) The Schoning Agreement further provides that
the Restricted Business engaged in by the Company Entities
extends throughout North America (the “Restricted Territory”)
and that Company Entities may be harmed by competitive
conduct anywhere in the Restricted Territory. Employee
therefore agrees that the covenants contained in the provisions
under the heading “Noncompetition” shall be applicable in and
throughout the Restricted Territory, as well as throughout other
areas of the world in which the Company Entities may be (or
have prepared written plans to be) doing business from time to
time.

(Schoning Agreement ¶ 1(b).)
{22} In the section entitled “Nonsolicitation,” Schoning agreed that
during his employment and the Restricted Period he would
not hire or attempt to hire any employee of any Company
Entity, assist in hiring such a person, encourage any such
employee to terminate or diminish his or her relationship with
any Company Entity, or solicit or encourage any customer or
vendor to any Company Entity to terminate its relationship with
them or, in the case of a customer, to conduct with any person
any business or activity which such customer conducts or could
conduct with any Company Entity.

(Schoning Agreement ¶ 2.)
4. Parker and Caravello Agreements
{23} The Parker and Caravello Agreements, executed with
Chemcraft, 3 contain, inter alia, a non-competition provision and a
confidentiality provision.
{24} In the section entitled “Covenant not to Compete and Non-
Inducement Agreement,” the agreements provide that for a period of twenty-
four (24) months after termination, Parker and Caravello would not
in any of the territories listed on Exhibit A, as an owner,
manager, operator, employee or consultant, directly or indirectly
contact any of the Companies’ customers with whom the
Company did business during the three (3) years preceding
Employee’s termination for the purpose of selling, purchasing,
developing, manufacturing or distributing industrial liquid
coatings.

(Parker & Caravello Agreements ¶ 4.1.) The agreements further provide that
during the same twenty-four (24) month period, Parker and Caravello would
not
directly or indirectly, solicit or induce any customer, supplier,
vendor or other business relation of the Company to reduce the
amount of business it does with Company. During this time,
Employee also agrees not to directly or indirectly solicit or
induce any other Employee of the Company to leave employment
with the Company.

3 Parker and Chemcraft executed a Confidentiality Agreement and Covenant not to Compete

on August 1, 2003. Caravello and Chemcraft executed a Confidentiality Agreement and
Covenant Not to Compete on April 1, 2004. Although Parker and Caravello executed their
respective agreements at different times, the relevant confidentiality and non-compete
provisions are nearly identical.
(Parker & Caravello Agreements ¶ 4.2.)
{25} Exhibit A describes the territory to which the Parker and
Caravello Agreements relate. The territory includes the “broadest of the
following geographic areas:”
1. All portions of the North American continent.

2. All portions of the United States of America.

3. All states in which the employee conducted business or
contacted current or potential customers during the year
preceding the termination of Employee’s Employment with
the Company.

4. Within two hundred miles of all home offices to which the
Employee was assigned for a period of at least one week
during the year preceding the termination of Employee’s
employment with the Company.

(Parker & Caravello Agreements Ex. A.)
{26} The section titled “Confidential Information,” provides that
Parker and Caravello shall not, either during their employment, or any time
thereafter:
directly or indirectly, use or disclose to any person any
Confidential Information obtained by him/her during the course
of his/her employment, save as may be required in connection
with his/her said employment in accordance with the terms
thereof. . . .

without limiting the generality of the foregoing, the Employee
shall deliver to the Company on demand, without retaining any
copies thereof, all notes, records, plans, extracts, photographs
and documents relating, directly or indirectly, to the
Confidential Information, which may be in the possession or
under the control of the Employee. For greater certainly and
without limiting the generality of the foregoing, it is specifically
agreed that the Confidential Information referred to in this
Agreement includes the Confidential Information and trade
secrets of the Company’s clients.
(Parker & Caravello Agreements ¶¶ 2.1, 2.2.)
C. Additional Factual Allegations
{27} Plaintiff repeatedly alleges that the Individual Defendants are
“overtly trading on the Chemcraft name, [their] association with Chemcraft,
and the experience in the wood coatings industry gained through [their]
employment with Chemcraft.” (Compl. ¶¶ 43, 57, 67, 76.) Plaintiff further
asserts that the Individual Defendants
intentionally violated the promises made in [their]
Agreement[s], including, through [themselves] and in concert
with the other Defendants, soliciting and attempting to solicit
customers away from Akzo Nobel, making improper use of
confidential and proprietary information and trade secrets of
Akzo Nobel, and, upon information and belief, soliciting and
attempting to solicit employees away from Akzo Nobel.

(Compl. ¶¶ 49, 58, 68, 77.)
{28} In support of these sweeping general allegations, Plaintiff offers
three specific instances of conduct which it contends violate the Individual
Defendants’ agreements.
{29} First, with respect to Rogers, Akzo Nobel alleges that in June
2009, Rogers formed an association with a European coatings company called
Bergolin and an affiliate company called Bergolin USA, LLC. 4 (Compl. ¶
25−28.) Upon learning of Rogers’ association with Bergolin and Bergolin
USA, LLC, Akzo Nobel sent Rogers a letter, dated August 17, 2009,
reminding him of his obligations under the Rogers Agreement. (Compl. ¶ 30.)
In his response letter dated August 25, 2009, Rogers affirmatively
represented that he was “not in violation of [his] agreement[;]” that he was
“not an employee or sales representative of . . . Bergolin of Germany[;]” that
the only “purpose of Bergolin USA is to sell coatings to windmill blade
manufacturers[;]” that ”Bergolin USA is not engaged in the industrial wood
coatings business in the US[;]” that he “did not retain any confidential

4 Akzo Nobel alleges that Bergolin USA, LLC later became known as ATec Wind (Compl. ¶¶

28, 37) and that Rogers formed Bergolin North America, LLC in June 2009. (Compl. ¶ 37.)
documents upon [his] resignation from Chemcraft in July 2007[;]” and that he
had “no intention of violating the agreement.” (Compl. ¶ 31−36.) Also in
June 2009, Rogers organized Bergolin North America, LLC without
informing Akzo Nobel. (Compl. ¶ 37−38.) Plaintiff alleges these acts and
omissions were both breaches of contract and misrepresentations. It believes
that as of August 25, 2009, “Rogers was in fact competing or intending to
compete with Akzo Nobel, was in fact soliciting or intending to solicit Akzo
Nobel employees or customers, and/or was assisting Bergolin in doing so.”
(Compl. ¶ 39.)
{30} Second, Plaintiff specifically alleges that “Rogers has caused, or
conspired with other Defendants, to successfully solicit away customers of
Akzo Nobel . . . For example, Rogers, through ATec and in concert with other
Individual Defendants, has stolen from Akzo Nobel an Arizona-based metal-
buildings coating customer.” 5 (Compl. ¶ 50.)
{31} Third, with respect to Parker, Plaintiff alleges that “[s]hortly
before leaving his employment with Akzo Nobel, Parker . . . obtained
technical materials for Akzo Nobel products wholly unrelated to his work for
the company, including his removal from the Akzo Nobel premises formulas
and technical information concerning Akzo Nobel’s fiberglass door coating
products.” (Compl. ¶ 111.) While each Individual Defendant is alleged to be
jointly responsible for the trade secrets misappropriations by Parker there
are no other allegations identifying specific trade secrets, confidential
information, or proprietary information misappropriated by the Individual
Defendants other than Parker.

5 Akzo Nobel does not identify the “Arizona-based metal-buildings coating customer” by name

but alleges that the unidentified “customer has provided it with sales in excess of
$11,000,000.00 (as much as $2,800,000.00 annually) over the past seven (7) years.” (Compl.
¶ 50.) Akzo Nobel does not identify any other customers allegedly solicited by the Individual
Defendants.
IV. STANDARD OF REVIEW
{32} The standard of review for a Rule 12(c) motion is the same as for
a motion to dismiss under Rule 12(b)(6). A-1 Pavement Marking, LLC v.
APMI Corp., 2008 NCBC 13 ¶ 35 (N.C. Super. Ct. Aug. 4, 2008),
http://www.ncbusinesscourt.net/opinions/2008_NCBC_13.pdf. “All well-
pleaded facts in the complaint must be accepted as true and the plaintiff is
entitled to all permissible inferences to be drawn from those facts.” Praxair,
Inc. v. Airgas, Inc., 1999 NCBC 5 ¶ 5 (N.C. Super. Ct. May 26, 1999),
http://www.ncbusinesscourt.net/opinions/1999%20NCBC%205.htm. In
deciding the motion, the Court can consider documents referred to in or
attached to the pleadings. Reese v. Mecklenburg County, 200 N.C. App. 491,
497, 685 S.E.2d 34, 38 (2009). “The rule’s function is to dispose of baseless
claims or defenses when the formal pleadings reveal their lack of merit.”
Ragsdale v. Kennedy, 286 N.C. 130, 137, 209 S.E.2d 494, 499 (1974). The
motion should be denied “unless it is clear that plaintiff is not entitled to any
relief under any statement of the facts.” Praxair, 1999 NCBC 5 ¶ 5. Where
“the Court also can construe the plain and unambiguous language of a
contract to determine if it has been breached, judgment on the pleadings may
be appropriate.” Id.

V. ANALYSIS
A. Choice of Law Determination
{33} The Court must first determine whether to give effect to the
Delaware choice-of-law provision in the Rogers and Taylor Agreements.
Defendants argue that the application of Delaware law is contrary to North
Carolina’s “blue pencil” rule which restricts the courts’ power to alter
restrictive covenants because it is based on public policy, and Delaware’s
allowing courts to rewrite covenants in order to make them reasonable
violates that policy. See Hartman v. W.H. Odell & Assocs., Inc., 117 N.C.
App. 307, 317, 450 S.E.2d 912, 920 (1994) (discussing North Carolina’s “blue
pencil rule” and indicating that “a court at most may choose not to enforce a
distinctly separable part of a covenant in order to render the provision
enforceable”); See Knowles-Zeswitz Music, Inc. v. Clara, 260 A.2d 171, 175
(Del. Ch. 1969) (indicating that Delaware law allows courts to modify or re-
write a covenant not to compete in order to make it enforceable). Plaintiff
argues that no such public policy exception exists in North Carolina and that
the choice-of-law provisions should be honored.
{34} As a general rule, “North Carolina will give effect to a contractual
provision agreeing to a different jurisdiction’s substantive law.” Covenant
Equip. Corp. v. Forklift Pro, Inc., 2008 NCBC 10 ¶ 39 (N.C. Super. Ct. May 1,
2008), http://www.ncbusinesscourt.net/opinions/2008%20NCBC %2010.pdf
(citing Tanglewood Land Co. v. Byrd, 299 N.C. 260, 262, 261 S.E.2d 655, 656
(1980)). The rule has been applied in the context of covenants not to compete.
See Bueltel v. Lumber Mut. Ins. Co., 134 N.C. App. 626, 631, 518 S.E.2d 205,
209 (1999). Under certain circumstances, however, “North Carolina courts
will not honor a choice of law provision.” Cable Tel. Servs., Inc. v. Overland
Contr’g, Inc., 154 N.C. App. 639, 642, 574 S.E.2d 31, 33 (2002).
The law of the state chosen by the parties to govern their
contractual rights and duties will be applied . . . unless either (a)
the chosen state has no substantial relationship to the parties or
the transaction and there is no other reasonable basis for the
parties’ choice, or (b) application of the law of the chosen state
would be contrary to a fundamental policy of a state which has a
materially greater interest than the chosen state in the
determination of a particular issue and which, under the rule of
§ 188 [of the Restatement (Second) of Conflict of Laws], would be
the state of applicable law in the absence of an effective choice of
law by the parties.

Id. at 643, 574 S.E.2d at 33−34. 6

6 In Tanglewood Land Co., the North Carolina Supreme Court held that unless the parties to
a contract agree to apply another jurisdiction’s substantive law, “the interpretation of a
contract is governed by the law of the place where the contract is made.” 299 N.C. at 262,
{35} There is no question that Delaware has a substantial relationship
to the transactions involving Rogers and Taylor. Akzo Nobel is a Delaware
corporation, and both the Rogers and Taylor Agreements are made with Akzo
Nobel. For the choice-of-law provisions to be unenforceable, their application
must violate North Carolina public policy.
{36} The North Carolina Supreme Court recognizes that “at the time of
entering . . . contracts containing covenants not to compete both parties
apparently regard[] the restrictions as reasonable and desirable. Essentially,
by enforcing the restrictions, [a] court is only requiring the defendants to do
what they agreed to do.” United Labs., Inc. v. Kuykendall, 322 N.C. 643, 649,
370 S.E.2d 375, 380 (1988) (internal citations and quotations omitted).
Choice-of-law clauses likewise are consensual contractual provisions
apparently desired by each party and are not inherently different than other
restrictions.
{37} This Court noted in CNC/Access v. Scruggs that courts must be
cautious when addressing arguments based on “public policy.” 2006 NCBC
20 ¶ 52 (N.C. Super. Ct. Nov. 15, 2006), http://www.ncbusinesscourt.net/
opinions/ 2006%20NCBC%2020.htm. Defendants acknowledge that there is
no binding authority directly supporting their public policy argument.
Nevertheless, they maintain that North Carolina’s restrictive blue pencil rule
is an entrenched public policy tenet that voids a choice-of-law clause naming
a state with a less restrictive remedy. 7 Defendants rely on one North
Carolina appellate case and one opinion from a sister state as indirect

261 S.E.2d at 656. Here, the parties agree that North Carolina law applies to the agreement
if the choice-of-law provision is unenforceable.

7 In one federal case, the trial court found that because Florida law allows courts to modify
non-competes when it finds them unreasonable, the differences between North Carolina and
Florida’s blue penciling philosophies is great enough to conclude that North Carolina public
policy would be violated if Florida law were applied to the agreement. Broadway & Seymour,
Inc. v. Wyatt, 1991 U.S. App. LEXIS 33801 *13–17 (4th Cir. Sept. 13, 1991) (unpublished).
The Fourth Circuit reversed on the basis that the agreement was valid under both North
Carolina and Florida law. Id.
support of their position, but the Court finds neither of them persuasive. See
Cox v. Dine-A-Mate, Inc., 129 N.C. App. 773, 501 S.E.2d 353 (1998);
Stonhard, Inc. v. Carolina Flooring Specialists, Inc., 366 S.C. 156, 159, 621
S.E.2d 352, 353 (2005) (on certification from the United States District Court
for the District of South Carolina). These cases stand for the proposition that
a court can refuse to give effect to a choice-of-law provision under certain
circumstances; however, the Court is not persuaded that either compels such
a refusal in this case. The decision in Cox does not go as far as to disclaim
choice-of-law provisions in covenants not to compete where the necessary
remedy to assure its reasonable application requires re-writing contractual
provisions; it merely allows a public policy exception to preclude using a
choice-of-law provision in a non-compete agreement to validate a covenant
that fails other essential requirements, such as consideration. In Stonhard,
the South Carolina Supreme Court did not refuse to apply New Jersey law
when the non-compete agreement at issue called for its application, rather, it
determined that even under New Jersey law, a court could not add a
provision to the non-compete agreement that never previously existed.
{38} The Court also approaches its choice of law recognizing that the
Rogers and Taylor restrictions were negotiated in the context of a larger,
significant commercial transaction and are then not necessarily
representative of more typical restrictive covenants made a part of standard
terms in an initial employment agreement.
{39} As an officer and shareholder of Chemcraft, Rogers was in a
position to bargain for the terms of his Consulting Agreement. He was paid
$9,500,000.00 for the purchase of his Chemcraft stock, and Plaintiff alleges
that he was to receive $2000.00 per day for his consulting services. In
exchange, he agreed, inter alia, that the Agreement “shall be governed by the
laws of the State of Delaware . . . .” (Rogers Agreement ¶ 17.)
{40} With respect to Taylor, Plaintiff alleges he was a national
marketing manager and a sales director who received $304,000.00 from Akzo
Nobel in exchange for his execution of an employment agreement. His
Agreement unambiguously states that the “laws of the State of Delaware,
excluding the law on conflicts of law of such state, shall govern and be
applicable to any dispute under this agreement.” (Taylor Agreement ¶ 8.)
{41} The Court concludes that the choice of law provision in the Rogers
and Taylor Agreements were bargained for and should be honored. Doing so
does not violate public policy.
{42} The Court is not called upon to decide whether application of
Delaware’s liberal “blue pencil” might rule violate North Carolina public
policy in other cases, and the Court does not decide whether a public policy
exception exists when, as in Stonhard, an unsophisticated employee signs a
non-compete as part of an initial employment agreement.
B. General Legal Principles
{43} The Individual Defendants’ agreements invoke several strands of
North Carolina precedent regarding employment agreements. They argue
that the Complaint fails to state claims for breach of contract because each of
the restrictive covenants is facially overbroad, and, thus unenforceable. They
contend that the agreements restrict more conduct than necessary to protect
Akzo Nobel’s legitimate business interests and that they contain
unreasonable time restrictions. Plaintiff counters that the Complaint
complies with requisite notice pleading requirements and that Defendants’
Motion is premature because the review of the reasonableness of the
contracts is inherently factual. Plaintiff urges that it should be allowed to
present evidence of “Defendants’ job responsibilities and experience, customer
contacts, and the locations of same before they resigned from Akzo Nobel, as
well as the breadth of the marketplace in which Defendants now operate”
before the Court can decide whether the time, scope, and territory
restrictions contained in the agreements are overly restraining. (Pl’s. Br. in
Opp’n to the Individual Defs.’ Mot. for J. on the Pleadings (“Pl’s. Br. in
Opp’n”) 6.) In other words, Plaintiff contends that the Court must apply a
balancing test that depends on a developed evidentiary record.
{44} To be enforceable under North Carolina law, restrictive covenants
between an employer and employee must be: “(1) in writing; (2) made part of
a contract of employment; (3) based on valuable consideration; (4) reasonable
both as to time and territory; and (5) not against public policy.” Kuykendall,
322 N.C. at 649−50, 370 S.E.2d at 380. “When the relationship of employer
and employee is already established without a restrictive covenant, any
agreement thereafter not to compete must be in the nature of a new contract
based on a new consideration.” James C. Greene Co. v. Kelley, 261 N.C. 166,
168, 134 S.E.2d 166, 169 (1964). “Covenants not to compete . . . are not
viewed favorably in modern law.” Farr Assocs., Inc. v. Baskin, 138 N.C. App.
276, 282, 530 S.E.2d 878, 881 (2000). To be valid, non-competition clauses
must “be designed to protect a legitimate business interest of the employer.”
Hartman, 117 N.C. App. at 311, 450 S.E.2d at 916; see also Farr Assocs., Inc.,
138 N.C. App. at 282, 530 S.E.2d at 881. Where a covenant is too broad to
constitute a reasonable protection of the employer’s business, it will not be
enforced. Whittaker Gen. Med. Corp. v. Daniel, 324 N.C. 523, 528, 379
S.E.2d 824, 828 (1989). The reasonableness of a non-compete agreement is a
matter of law for the court to decide. Hartman, 117 N.C. App. at 311, 450
S.E.2d at 916.
{45} When analyzing such restrictive covenants, the judiciary balances
the employer’s interest “in a workable employer-employee relationship” with
the public’s interest in “individual economic freedom, free dissemination of
ideas, and reallocation or [sic] labor to areas of greatest productivity.”
Scruggs, 2006 NCBC 20 ¶ 42 (citing 2 E. ALLAN FARNSWORTH, FARNSWORTH
ON CONTRACTS § 5.3 (2d ed. 1998)). “While the law frowns upon unreasonable

restrictions, it favors the enforcement of contracts intended to protect
legitimate interests. It is as much a matter of public concern to see that valid
covenants are observed as it is to frustrate oppressive ones.” Kuykendall, 322
N.C. at 649, 370 S.E.2d at 380 (internal quotations, brackets, and citations
omitted). Non-compete covenants which accompany the sale of a business
generally are afforded more latitude than covenants ancillary to employment
contracts. See Jewel Box Stores Corp. v. Morrow, 272 N.C. 659, 663−64, 158
S.E.2d 840, 843−44 (1968).
Among reasons often given for the greater acceptability of ‘sale
of business covenants’ are that covenants not to compete enable
the seller of a business to sell his goodwill and thereby receive a
higher price; and they also furnish a material inducement to the
purchaser who purchases a business with the hope of retaining
its customers.

Seaboard Indus., Inc. v. Blair, 10 N.C. App. 323, 333, 178 S.E.2d 781, 787
(1971) (interpreting a non-compete agreement under Georgia law).
{46} The elements are the same for non-competition and non-
solicitation clauses, but the latter are more easily enforced, as their
restraints on employees are generally more tailored and less onerous on
employees’ ability to earn a living. See Aeroflow Inc. v. Arias, 2011 NCBC 20
n.8 (N.C. Super. Ct. July 5, 2011), http://www.ncbusinesscourt.net/opinions/
2011_ NCBC_20.pdf.
{47} Under North Carolina law, “protection of customer relationships
and goodwill against misappropriation by departing employees is well
recognized as a legitimate interest of an employer.” Kuykendall, 322 N.C. at
651, 370 S.E.2d at 381. “The greater the employee’s opportunity to engage in
personal contact with the employer’s customer, the greater the need for the
employer to protect these customer relationships.” Id. The Court of Appeals
noted that in extreme cases when an employee would feel pressure to disclose
competitive information to a competitor, the former employer may have a
legitimate business interest in prohibiting employment of any kind by
defendant. See Precision Walls, Inc. v. Servie, 152 N.C. App. 630, 639, 568
S.E.2d 267, 273 (2002).
{48} However, North Carolina courts have refused to enforce non-
competition clauses using the terms “directly or indirectly.” See VisionAIR,
Inc. v. James, 167 N.C. App. 504, 508, 606 S.E.2d 359, 362 (2004) (affirming
trial court’s ruling that plaintiff-employer could not show a likelihood of
success on the merits for a preliminary injunction when the non-compete
provision stated that the employee could not “own, manage, be employed or
otherwise participate in, directly or indirectly, any business similar to
Employer’s”) (emphasis added); see also Schruggs, 2006 NCBC 20 ¶ 51
(holding that provision restricting employee from competing “directly or
indirectly” was greater than necessary to protect a legitimate business
interest of the employer). These same terms may be looked upon more
favorably when included in non-solicitation clauses which are by definition
narrower in scope than non-compete provisions. Triangle Leasing Co. v.
McMahon, 327 N.C. 224, 228, 393 S.E.2d 854, 857 (1990) (finding a non-
solicitation clause valid when it prohibited the employee from “directly or
indirectly solicit[ing] or attempt[ing] to procure the customers, accounts, or
business of a Company, or directly or indirectly mak[ing] or attempt[ing] to
make car or truck-van rental sales to the customers of Company” in any state
or territory in which the company conducts business).
{49} North Carolina courts have also refused to enforce restrictive
covenants that seek to prevent a former employee from competing with
employers for whom they have never worked because such covenants would
“put the employee in the situation of being under a restrictive covenant he
did not agree to, one that may impose restrictions he in fact never would have
agreed to in his initial employment agreement. To impose wider or different
restrictions is unfair to the employee.” Better Bus. Forms & Prods., Inc. v.
Craver, 2007 NCBC 34 ¶ 33 (N.C. Super. Ct. Nov. 1, 2007), http://www.
ncbusinesscourt.net/opinions/110107%20Order%20Motion%20to%20Dismiss
%20webpage.pdf.
{50} That same logic applies to client-based restrictions. Farr Assocs.,
Inc., 138 N.C. App. at 281, 530 S.E.2d at 883. Generally, covenants which
seek to restrict a former employee from competing with future or prospective
customers with whom they had no personal contact during employment fail
as unnecessary to protect the legitimate business interests of the employer.
Digital Recorders, Inc. v. McFarland, 2007 NCBC 23 ¶¶ 25, 60, 71 (N.C.
Super. Ct. June 29, 2007), http://www.ncbusinesscourt.net/
opinions/2007%20NCBC%2023.pdf. The Court of Appeals, however, has
upheld a client-based restriction that precluded the defendant from
contacting prospective customers who the defendant had contacted during his
employment with plaintiff-employer. See Wade S. Dunbar Ins. Agency, Inc.
v. Barber, 147 N.C. App. 463, 469, 556 S.E.2d 331, 335 (2001).
{51} Courts generally evaluate time and territory restrictions in
tandem under North Carolina law. See Farr Assocs., Inc., 138 N.C. App. at
280, 530 S.E.2d at 881. “Although either the time or the territory restriction,
standing alone, may be reasonable, the combined effect of the two may be
unreasonable. A longer period of time is acceptable where the geographic
restriction is relatively small, and vice versa.” Id. Additionally, the North
Carolina Supreme Court “has recognized the validity of geographic
restrictions that are limited not by area, but by a client-based restriction.”
Id. (citing Kuykendall, 322 N.C. 463, 370 S.E.2d 375).
{52} With respect to time, North Carolina courts have set a five-year
time restriction as the “outer boundary” of reasonableness for non-competes
that are ancillary to employment, “and even so, five-year restrictions are not
favored.” Id. When the restriction on competition results from the sale of a
business, courts have upheld restrictive covenants containing limitations of
ten, fifteen, and twenty years, as well as limitations for the life of one of the
parties. Jewel Box Stores Corp., 272 N.C. at 663, 158 S.E.2d at 843. At least
for employment agreements not incidental to the sale of a business, “when a
non-compete agreement reaches back to include clients of the employer
during some period in the past, that look back period must be added to the
restrictive period to determine the real scope of the time limitation,” unless
the look back provision captures only clients with whom the employee worked
during the look-back period. Farr Assocs., Inc., 138 N.C. App. at 280, 530
S.E.2d at 881 (citing Prof’l Liab. Consultants, Inc. v. Todd, 345 N.C. 176, 478
S.E.2d 201 (1996)); see also Wachovia Ins. Servs., Inc. v. McGuirt, 2006
NCBC 23 ¶¶ 80−82 (N.C. Super. Ct. Dec. 19, 2006), http://www.ncbusiness
court.net/opinions/2006%20NCBC%2023.pdf (tacking on look back provision
restricting former employee from servicing or soliciting clients to whom he
had been assigned during last two (2) years of employment).
{53} The six-part test used to determine whether the geographic scope
of a covenant not to compete is reasonable is also applicable to assess a client-
based restriction. Farr Assocs., Inc., 138 N.C. App. at 281−82, 530 S.E.2d at
882.
The six factors are: (1) the area or scope of the restriction; (2) the
area assigned to the employee; (3) the area where the employee
actually worked; (4) the area in which the employer operated; (5)
the nature of the business involved; and (6) the nature of the
employee’s duty and his knowledge of the employer’s business
operation.

Id. at 281, 530 S.E.2d at 882. Depending on the case, these factors may
require factual inquiry based on a developed record.
{54} Under Delaware law, covenants not to compete first must meet
general contract law requirements. McCann Surveyors, Inc. v. Evans, 611
A.2d 1, 3 (Del. Ch. 1987); see also Res. & Trading Corp. v. Pfuhl, 1992 WL
345465 at * 6 (Del. Ch. Nov. 18, 1992) (unpublished). To be enforced, they
must be determined as well to be reasonably limited temporally and
geographically, and their purpose and operation must “foster a legitimate
economic interest of the plaintiff.” McCann Surveyors, Inc., 611 A.2d at 3;
see also Res. & Trading Corp., 1992 WL 345465 at * 6. The effect of the
agreement must be to protect an employer from sustaining damages which an
employee’s subsequent competition may cause . . . .” Faw, Casson & Co. v.
Cranson, 375 A.2d 463, 465 (Del. Ch. 1977).
Because the specific enforcement of such covenants involve
important interests of commercial enterprises and of individuals
seeking to support themselves and their families financially, and
because, in that setting, the court is asked to exercise its
distinctly equitable powers, each such case requires a careful
evaluation of the specific facts and circumstances presented.
Covenants not to compete when contained in employment
agreements are not mechanically enforced.

McCann Surveyors, Inc., 611 A.2d at 3.
{55} As in North Carolina, covenants not to compete in Delaware “are
subject to somewhat greater scrutiny when contained in an employment
contract as opposed to contracts for the sale of a business.” Id.; see also
Knowles-Zeswitz Music, Inc., 260 A.2d at 175.
{56} The Court has analyzed the agreements in this case according to
these general principles.
C. The Claims Related to the Separate Agreements
1. The Rogers Agreement
{57} The Motion asserts that the Rogers Agreement is facially
overbroad because (1) it seeks to restrict Rogers from competing against his
former employer and soliciting its employees and former customers “directly
or indirectly;” (2) it seeks to restrict competition with companies for whom
Rogers has never worked; (3) the non-solicitation clause seeks to prevent
Rogers from contacting prospective customers and Akzo Nobel customers
with whom he has no prior relationship; and (4) the four-year restrictive
period is greater than necessary to protect Akzo Nobel’s legitimate business
interests.
{58} The Court has determined that the Delaware choice of law
provision should be applied.
{59} The non-compete provision of the Rogers Agreement seeks to
prevent him from competing “directly or indirectly” with Akzo Nobel or “any
Company Entity engaged in the business of wood coatings,” but contains a
carve-out which allows him to hold certain equity ownership interests. (See
Rogers Agreement ¶ 7(a).)
{60} There is no dispute that the Agreement is based on the sale of a
business and subject to less judicial scrutiny. See Faw, Casson & Co., 375
A.2d at 465; Knowles-Zeswitz Music, Inc., 260 A.2d at 175; see also Jewel Box
Stores Corp., 272 N.C. at 663−64, 158 S.E.2d at 843−44.
{61} Delaware law requires “careful evaluation of the specific facts and
circumstances presented” and allows the Court to alter a restrictive covenant
to make it reasonable. The Court cannot rule at this time that the
prohibition against “direct or indirect” competition is overbroad under
Delaware law. McCann Surveyors, Inc., 611 A.2d at 3. The inquiry may be
revisited on a more fully developed record.
{62} Even under North Carolina law, the fact that Rogers is prohibited
from “direct or indirect” participation in ownership of a competitor would not
necessarily render the provision unenforceable under VisionAIR and
Schruggs because Rogers is allowed to invest in competing firms under terms
that are more narrowly drawn to protect Akzo Nobel’s interests.
{63} The Rogers Agreement prohibits Rogers’ solicitation of “any
customer or client, or prospective customer or client, of any Company Entity,”
except through his provision of Consulting Services. (Rogers Agreement ¶
8(b)(iii).)
{64} Based on Rogers’ position as an officer and equity interest holder
in Chemcraft, an initial reasonable inference can be drawn that Rogers had
significant opportunity to develop relationships within the overall industry,
such that Akzo Nobel’s relationships with prospective customers could be
significantly affected by Rogers’ competitive efforts and that this broad
restriction is both necessary and represented in the substantial consideration
paid to Rogers. See Kuykendall, 322 N.C. at 651, 370 S.E.2d at 381.
{65} Rogers also contends that paragraph 8(b) is overly broad because
it seeks to restrict him from soliciting “customers or clients, or prospective
customer or client of any Company Entity.” Whether the affiliates at issue
are part of Akzo Nobel’s legitimate business interest is a factual question
which should not be decided by this Motion.
{66} The Rogers Agreement contains a four-year Restricted Period.
(Rogers Agreement ¶¶ 7(a)(i), 8(b).) This time restriction is coupled with a
client-based restriction, which is international in scope. (See Compl. ¶¶ 2−3.)
{67} Though the scope of Rogers’ client-based restriction is extensive,
so are his alleged job responsibilities and alleged knowledge of Akzo Nobel’s
business practices. (See Compl. ¶¶ 12−21.) As noted above, the Court is less
discerning of an agreement’s scope when the non-compete accompanies the
sale of a business. These factors lead the Court to conclude that the four-year
time restriction, when coupled with the client-based restriction, does not
necessarily fail as a matter of law.
{68} Defendants’ Motion with respect to the Rogers Agreement is
DENIED.
2. The Taylor Agreement
{69} In addition to the same grounds asserted to invalidate the Rogers
Agreement, the Motion highlights particular language of the Taylor
Agreement prohibiting him from “solicit[ing] or encourag[ing] any customer
of or vendor to any Company Entity to terminate its relationship with them
or, in the case of a customer, to conduct with any person any business or
activity which such customer conducts or could conduct with any Employer or
any of its affiliates.” (Taylor Agreement ¶ 6.)
{70} As the Court reads this language, it does not prohibit the
solicitation of future customers; it seeks to prohibit any present or future
business activity with current customers. If Plaintiff argues it extends to
prospective customers, the covenant is nevertheless better reviewed at
summary judgment.
{71} The Motion with respect to the Taylor Agreement is DENIED.
3. The Schoning Agreement
{72} The Motion asserts that the Schoning Agreement is facially
overbroad and unenforceable for the same grounds summarized above and
further that it fails for lack of consideration because it was not executed as
part of an employment agreement. This agreement is governed by North
Carolina law.
{73} Executed with Chemcraft, 8 the non-compete provision in the
Schoning Agreement seeks to prevent him from “directly or indirectly”
competing with Akzo Nobel and “any Company Entity” 9 in the wood coatings
business. (Schoning Agreement ¶ 1.)
{74} The Schoning non-compete provision would prevent Schoning
from working for a competitor in the wood coatings industry in a position
wholly outside the scope of his employment with Chemcraft and from indirect
ownership of a competing firm. Thus, this provision goes farther than is
necessary to protect a legitimate business interest. See Aeroflow Inc., 2011
NCBC 20 ¶¶ 35−37. The Motion with respect to the Schoning non-
competition provision is GRANTED.
{75} The Schoning Agreement prevents him from soliciting “any
customer of or vendor to [Chemcraft and its affiliates] . . . to conduct with any
person any business or activity which such customer conducts or could
conduct with any Company Entity.” (Schoning Agreement ¶ 2.)
{76} Under North Carolina law, whether the affiliates at issue in the
Schoning Agreement are part of Akzo Nobel’s legitimate business interest is a
factual question.

8 Akzo Nobel acquired Chemcraft Holdings Corp. and its subsidiaries through a stock sale
rather than in an asset purchase, it can enforce the employment agreements executed by its
predecessors. See Covenant Equipment Corp., 2008 NCBC 10 ¶ 40.

9 The Schoning Agreement defines “Company” as Chemcraft Holdings Corporation. It
defines “Company Entities” as the “Company and its affiliates” and “Company Entity” as an
individual affiliate of the “Company.”
{77} Defendants further argue that the language of the Schoning
Agreements prohibits the solicitation of prospective customers and should be
dismissed under McFarland. Plaintiff contends that the clause specifically
targets only current customers and vendors.
{78} As with the Taylor Agreement, the language does not appear to
prohibit the solicitation of future customers but seeks to prohibit any present
or future business activity with current customers.
{79} Defendants argue that the Schoning Agreement fails for want of
consideration because it is a stand-alone document and not part of an
employment agreement as required by North Carolina. See Kuykendall, 322
N.C. at 649−50, 370 S.E.2d at 380. Plaintiff alleges that Schoning signed his
Agreement on October 18, 2007, after the sale of Chemcraft but before the
merger with Akzo Nobel. (Compl. ¶ 69.) It is undisputed that Schoning
received $50,000.00 in return for his covenants. The Court does not believe
the covenant supported by independent consideration fails because it was not
integrated into a single employment agreement. It is nevertheless part of
this employment agreement as required by Kuykendall.
{80} The Motion as to the Schoning Agreement is DENIED except as
to the non-competition covenant.
4. Parker and Caravello Agreements
{81} These agreements are governed by North Carolina law. Executed
with Chemcraft International, Inc., the non-competition provision of the
Parker and Caravello Agreements seek to restrict them from “directly or
indirectly” contacting any customers with whom Chemcraft or Akzo Nobel
“did business during the three (3) years preceding” the termination of
employment for the purpose of competing in the industrial liquid coatings
business. (Parker & Caravello Agreements ¶ 4.1 (emphasis added).) Exhibit
A lists four territorial descriptions in order from broadly to narrowly defined
geographic areas.
{82} The Parker and Caravello Agreements raise different legal issues
than the other agreements because of their time restrictions. Paragraph 4.1,
the Agreements restrict Parker and Caravello’s conduct “for a period of
twenty-four months following termination of employment with the Company
for any reason,” and prohibits them from contacting “any of the Companies’
customers with whom the Company did business during the three (3) years
preceding [their] termination for the purpose of selling, purchasing,
developing, manufacturing or distributing industrial liquid coatings.”
{83} As indicated by Farr Assocs., Inc., the look-back provision must be
added to the restrictive period to determine the real scope of the time
limitation. 138 N.C. App. at 280, 530 S.E.2d at 881 (citing Prof’l Liab.
Consultants, Inc. v. Todd, 345 N.C. 176, 478 S.E.2d 201 (1996)).
{84} Plaintiff argues that Farr Assocs., Inc. is distinguishable and cites
Wachovia Ins. Servs., Inc. v. McGuirt, 2006 NCBC 23 ¶¶ 80−82 (N.C. Super.
Ct. Dec. 19, 2006), http://www.ncbusinesscourt.net/opinions/2006%20NCBC
%2023.pdf. In McGuirt, the applicable covenant stated that the defendant
would not service or solicit clients that he “has been assigned or has
developed . . . or has in any way serviced at any time during the last two
years of his employment[,]” but did not prevent solicitation of customers with
whom the defendant did not have contact during the course of employment.
Id. at ¶ 77. At paragraph 4.1, the Parker and Caravello non-competition
clauses prevent the salesmen from contacting “any of the Companies’
customers with whom the Company did business” within the three (3) years
prior to their termination. Though the language limits the proscribed
competition to the field of industrial liquid coatings, it fails to explicitly limit
the restriction to former customers of Parker and Caravello’s. Thus, McGuirt
does not apply and the Court must apply a five-year restriction.
{85} As noted above, a five-year restriction on competition is
disfavored and requires a showing of special circumstances. Farr Assocs.,
Inc., 138 N.C. App. at 280, 530 S.E.2d at 881. Plaintiff alleges that Parker
and Caravello were sales representatives who attempted to solicit its
customers and employees in violation of their restrictive covenants. (Compl.
¶¶ 59−68.) There are no special circumstances pled that would allow the
Court to determine that a five-year restriction is reasonable in this case.
{86} Even if the Court could use its limited “blue pencil” authority to
curtail the scope of the geographic restriction to one of the narrower choices
contained in Exhibit A, which it need not now do, the five-year duration
standing alone is incurable and unreasonable as a matter of law.
{87} Defendants’ Motion with respect to the Parker and Caravello
Agreements is GRANTED.
D. Tort Claims
{88} The Motion asserts that Plaintiff’s tort claims are barred by the
economic loss doctrine and are not supported by factual allegations
independent from the underlying breach of contract claims. (Defs.’ Br. in
Supp. 15−17.) Plaintiff counters that the Complaint complies with the
requisite notice pleading requirements and that the economic loss doctrine is
wholly inapplicable in this case. (Pl’s. Br. in Opp’n 19−20.)
1. The Economic Loss Doctrine
{89} While it may have initially been thought of as a restriction that
precludes a claim seeking only recovery for economic loss rather than non-
economic loss such as a personal injury, the term “economic loss doctrine” has
a broader meaning. It has been used to denote limitations on the recovery in
tort when a contract exists between the parties that defines the standard of
conduct and which the courts believe should set the measure of recovery.
“Ordinarily, a breach of contract does not give rise to a tort action by the
promisee against the promisor.” North Carolina State Ports Auth. v. Lloyd A.
Fry Roofing, Co., 294 N.C. 73, 81, 240 S.E.2d 345, 349 (1978). Generally,
then, the North Carolina courts do not recognize a claim for tortious breach of
contract. To state a viable claim in tort for conduct that is also alleged to be a
breach of contract, “a plaintiff must allege a duty owed to him by the
defendant separate and distinct from any duty owed under a contract.” Kelly
v. Georgia Pacific LLC, 671 F. Supp. 2d 785, 791 (E.D.N.C. 2009) (citations
omitted). This so called “independent duty” exception has been “carefully
circumscribed by state law.” Strum v. Exxon Co., USA, 15 F.3d 327, 331 (4th
Cir. 1994). The independent tort must be “identifiable” and “the tortious
conduct must have an aggravating element” such as fraud, malice, reckless
indifference, oppression, insult, or willfulness. Strum, 15 F.3d at 331; see
also Taha v. Thompson, 120 N.C. App. 697, 705, 463 S.E.2d 553, 558 (1995).
The policy behind the independent tort exception recognizes that the open-
ended nature of tort damages should not distort bargained-for contractual
terms. Broussard v. Mineke Discount Muffler Shops, Inc., 155 F.3d 331, 346
(4th Cir. 1998).
{90} Plaintiff contends that “the economic loss rule has no application
to employment cases, nor [has] it [been] applied in an action seeking
injunctive relief.” (Pl’s. Br. in Opp’n 19.) Relying on Ellis-Don Const., Inc. v.
HKS, Inc., Plaintiff broadly asserts that “North Carolina’s economic loss rule
bars claims in tort for purely economic loss in the sale of goods covered by
contract law, including the UCC. It does not limit tort actions that arise in
the absence of a contract, nor is there any indication that the courts of North
Carolina have expanded the rule beyond its traditional role in product
liability cases.” (Pl’s. Br. in Opp’s 19 (citing Ellis-Don Const., Inc. v. HKS,
Inc., 353 F. Supp. 2d 603, 606 (M.D.N.C. 2004).)
{91} While Ellis properly states that the economic loss rule, by that
name, was initially “conceived of as a means by which to confine products
liability in tort to damages for personal injury and injury to property other
than the goods sold, and leave to contract law the questions of liability for
purely economic losses,” Ellis, 353 F. Supp. 2d at 606, North Carolina law
has not confined its limitation of remedies as Plaintiff suggests. A broader
doctrine labeled as the “economic loss rule” routinely operates to bar tort
claims that “piggyback” breach of contract claims outside of the products
liability context. See, e.g., Ford v. All-Dry of the Carolinas, Inc., No. COA10-
931, 2011 N.C. App. LEXIS 713 (N.C. Ct. App. Apr. 19, 2011) (relying on
economic loss rule to dismiss negligent construction claim arising out of
breach of underlying construction contract), aff’d, 2011 N.C. App. LEXIS 774
(N.C. Ct. of App., Apr. 19, 2011); Land v. Tall House Bldg. Co., 165 N.C. App.
880, 602 S.E.2d 1 (2004) (affirming dismissal of negligent construction claim
based on the economic loss rule), aff’d, 2004 N.C. App. LEXIS 1541 (N.C. Ct.
App., Aug. 17, 2004); ACS Partners, LLC v. American Group, Inc., No.
3:09cv464-RJC-DSC, 2010 U.S. Dist. LEXIS 19906 (W.D.N.C. Mar. 5, 2010)
(adopting recommendation of Magistrate Judge Cayer in ACS Partners, LLC
v. American Group, Inc., No. 3:09cv464-RJC-DSC, 2010 U.S. Dist. LEXIS
19907 (W.D.N.C. Feb. 12, 2010) and relying on the economic loss rule to
dismiss plaintiff’s tort claims in action for breach of non-compete and
confidential disclosure provisions of employment contract); Schumacher
Immobilien Und Beteiligungs AG v. Prova, Inc., No. 1:09cv00018, 2010 U.S.
Dist. LEXIS 107526 (M.D.N.C. Oct. 7, 2010) (relying on economic loss rule to
dismiss plaintiff’s negligent misrepresentation claim in common law breach
of contract action); Johnson v. Sprint Solutions, Inc., No. 3:08-CV-00054,
2008 U.S. Dist. LEXIS 110205 (W.D.N.C. July 29, 2008) (relying on economic
loss rule to dismiss plaintiff’s negligent misrepresentation claim in common
law breach of contract action).
{92} The holding in ACS is particularly instructive in determining
whether the economic loss rule precludes Akzo Nobel from pursuing its tort
claims against the Individual Defendants. In ACS, plaintiff-employer sued
its former employee for breach of the parties’ non-compete and confidential
disclosure agreements after defendant resigned from employment with the
plaintiff and began working for Americon, a direct competitor. ACS, 2008
U.S. Dist. LEXIS 19906, at *3−4. In its complaint, plaintiff asserted claims,
inter alia, for breach of contract, tortious interference with a contract and
prospective economic advantage, misappropriation of trade secrets, and
unfair and deceptive trade practices alleging that the defendant used
confidential and proprietary information in his employment with Americon
and confidential information to induce customers to stop doing business with
the plaintiff. Id. at *5.
{93} Citing Broussard and Strum, the ACS court found that the
economic loss rule operated to bar the plaintiff’s tort claims because like
Broussard, the parties’ dispute was contractually based and “[p]laintiff
fail[ed] to allege an independent reason for a tort-based claim.” Id. at *21. In
holding that “[p]laintiff’s tort claims arise out of the performance of the Non-
Compete and Confidential Disclosure Agreements and the alleged breach of
those agreements” the court explained:
Plaintiff argues that [defendant] solicited its customers and
prospects and made a bid to an ACS prospect on behalf of
Americon, while still employed by [plaintiff]. At most, Plaintiff
may be able to prove that [defendant] did not carry out his
contractual obligations. The mere failure to carry out an
obligation in contract, however, does not support an action for
tortious interference with contract and prospective advantage.

Plaintiff’s claim for tortious interference with contract is neither
“identifiable” nor “distinct from” the breach of contract . . .
Plaintiff’s claim for tortious interference with prospective
advantage may be “identifiable,” but it is not “distinct from” the
primary breach of contract. The purpose of the Non-Compete
Agreement was to ensure that [defendant] would not compete
with [plaintiff] or solicit its customers. Broussard does not allow
Plaintiff double recovery from the same conduct alleged in the
breach of contract claim.

Id. at *19−23.
2. The Fraud and Negligent Misrepresentation Claims
{94} For a fraud claim to withstand judgment on the pleadings, a
plaintiff must allege:
(1) a material misrepresentation of a past or existing fact; (2) the
representation must be definite and specific; (3) made with
knowledge of its falsity or in culpable ignorance of the truth; (4)
that the misrepresentation was made with intention that it
should be acted upon; (5) that the recipient of the
misrepresentation reasonably relied upon it and acted upon it;
and (6) that there resulted in damage to the injured party.

Rosenthal v. Perkins, 42 N.C. App. 449, 451, 257 S.E.2d 63, 65 (1979). To
overcome the economic loss rule, a plaintiff must also “allege a duty owed to
him by the defendant separate and distinct from any duty owed under a
contract.” Kelly, 671 F. Supp. 2d at 791 (E.D.N.C. 2009) (citations omitted).
{95} “The tort of negligent misrepresentation occurs when a party
justifiably relies to his detriment on information prepared without reasonable
care by one who owed the relying party a duty of care.” Raritan River Steel
Co. v. Cherry, Bekaert & Holland, 322 N.C. 200, 206, 367 S.E.2d 609, 612
(1988), appeal after remand, 101 N.C. App. 1, 398 S.E.2d 889 (1990), rev’d on
other grounds, 329 N.C. 646, 407 S.E.2d 178 (1991). By definition, the tort of
negligent misrepresentation also requires an independent duty of care.
{96} In support of its fraud and alternative negligent
misrepresentation claim against Individual Defendant Rogers, Plaintiff
alleges “Rogers, in his Response communication to Akzo Nobel in August
2009 and otherwise, as described [in the Complaint], intentionally, or
alternatively negligently, misrepresented his intentions as to compliance
with his Agreement with Akzo Nobel and his plans and activities in violation
of such Agreement” and “Akzo Nobel actually and reasonably relied to its
detriment on the aforementioned material misrepresentations of Defendant
Rogers.” (Compl. ¶ 86−87.)
{97} Specifically, Plaintiff alleges in August 2009, more than two (2)
years after its acquisition of Chemcraft, Akzo Nobel sent Rogers a letter
reminding him of his obligations under the Rogers Agreement. (Compl. ¶
29−30.) In response, Rogers affirmatively misrepresented that he was “not
an employee or sales representative of the German company [Bergolin][;]”
“the only ‘purpose of Bergolin USA is to sell coatings to windmill blade
manufacturers[;]’” “Bergolin USA is not engaged in the industrial wood
coatings business in the US[;]” he “did not retain any confidential documents
upon [his] resignation from Chemcraft in July 2007[;]” and that he had “no
intention of violating the agreement.” (Compl. ¶ 32−36.) Notably, Akzo
Nobel does not contend that Rogers’ alleged misrepresentations induced its
execution of the Rogers Agreement. Rather, Plaintiff asserts that it relied on
the alleged misrepresentations in forbearing an action against Rogers in
contract. (Compl. ¶ 40.)
{98} Although the Complaint alleges, with specificity, several material
misrepresentations made by Rogers once he was confronted about his
relationship with Bergolin, Plaintiff has failed to allege the existence of a
duty, owed to it by Rogers, separate and distinct from the duty owed under
the Rogers Agreement. Under the Rogers Agreement, Rogers owed a
contractual duty to refrain from competing with Akzo Nobel and refrain from
soliciting its customers. The breach of that contractual duty cannot provide
the basis for an independent claim of fraud or negligent misrepresentation.
{99} Plaintiff has fatally failed to allege the existence of a duty, owed
to it by Rogers, that is separate and distinct from the duty imposed by the
Rogers Agreement. Absent allegations of a separate and distinct legal duty,
Plaintiff has failed to state a claim against Rogers for fraud or negligent
misrepresentation upon which relief can be granted.
{100} The Individual Defendants’ Motion with respect to Plaintiff’s
fraud and negligent misrepresentation claims is GRANTED.
3. The Tortious Interference With Contract and Prospective Advantage
Claims

{101} To state a claim for tortious interference with a contract, a
plaintiff must allege five (5) elements:
(1) a valid contract between 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 party not to perform
the contract; (4) and in doing so acts without lawful justification;
(5) resulting in actual damage to the plaintiff.

Kuykendall , 322 N.C. 643, 370 S.E.2d 375 (citing Childress v. Abeles, 240
N.C. 667, 84 S.E.2d 176 (1954)).
{102} To state a claim for tortious interference with a prospective
economic advantage, a plaintiff must allege:
(1) a specific potential contract between the Plaintiff and a third
party exists; (2) the Defendant intentionally induced the third
party not to enter into the contract; (3) the Defendant acted
without justification; (4) but for the Defendant’s action the
Plaintiff and third party would have entered into the contract;
and (5) the Defendant’s action caused actual damage to the
Plaintiff.

Dalton v. Camp, 353 N.C. 647, 654, 548 S.E.2d 704, 709 (2001).
{103} In order to withstand Individual Defendants’ Motion, Plaintiff’s
claims must be “identifiable” and “distinct from” the primary breach of
contract claim. Broussard, 155 F.3d at 237; see Taha, 120 N.C. App. at 705,
463 S.E.2d at 558; see also PCS Phosphate Co. v. Norfolk S.Corp., 559 F.3d
212, 224 (4th Cir. 2009). Plaintiff must also “allege a duty owed to [it] by the
defendant separate and distinct from any duty owed under a contract.”
Kelly, 671 F. Supp. 2d at 791 (E.D.N.C. 2009) (citations omitted).
{104} Plaintiff relies upon the Individual Defendants’ solicitation of its
customers and employees to support its claims for tortious interference with a
contract and prospective economic advantage. (Compl. ¶ 94−107.) The
pleadings specifically allege that “Rogers has caused, or conspired with other
Defendants, to successfully solicit away customers of Akzo Nobel . . . For
example, Rogers, through ATec and in concert with other Individual
Defendants, has stolen from Akzo Nobel an Arizona-based metal-buildings
coating customer.” (Compl. ¶ 50.)
{105} When considered in isolation, the allegations in the Complaint
might be sufficient to state a claim for tortious interference, but when viewed
in tandem with the primary breach of contract allegations, the Complaint
lacks tort allegations that can be considered “distinct from” the alleged
primary breach of the non-compete and non-solicitation agreements.
Moreover, the Complaint fails to allege the existence of a duty “separate and
distinct” from the Individual Defendants’ obligation under their respective
agreements.
{106} Plaintiff’s claim for tortious interference with a contract and
prospective economic advantage may be “identifiable,” but the legal duty that
precludes the Individual Defendants from soliciting customers and employees
of Akzo Nobel is imposed by express contractual agreement between Plaintiff
and the Individual Defendants. The purpose of the non-compete and non-
solicitation agreements at issue was to ensure that the Individual Defendants
would not compete with Akzo Nobel and solicit its customers. Any breach of
that contractual duty is properly actionable in contract, without the potential
for an open-ended tort damage award.
{107} The Individual Defendants’ Motion with respect to Akzo Nobel’s
claims for tortious interference with a contract and prospective advantage is
GRANTED.
4. The Unfair and Deceptive Trade Practices Claims
{108} To state a claim for unfair and deceptive trade practices under
Chapter 75, the plaintiff must allege: (1) an unfair or deceptive act or
practice; (2) affecting commerce; and (3) which proximately causes actual
injury. Poor v. Hill, 138 N.C. App. 19, 27, 530 S.E.2d 838, 844 (2000); see also
Strickland v. Lawrence, 176 N.C. App. 656, 665, 627 S.E.2d 301, 307 (2006).
“[A] practice is unfair when it offends established public policy” and “when
the practice is immoral, unethical, oppressive, unscrupulous, or substantially
injurious to consumers.” Eastover Ridge, L.L.C. v. Metric Constructors, Inc.,
139 N.C. App. 360, 367, 533 S.E.2d 827, 832 (2000) (quoting Warfield v.
Hicks, 91 N.C. App. 1, 8, 370 S.E.2d 689, 693, disc. review denied, 323 N.C.
629, 374 S.E.2d 602 (1988)) (citations omitted). “The fair or unfair nature of
particular conduct is to be judged by viewing it against the background of
actual human experience and by determining its intended and actual effects
upon others.” McDonald v. Scarboro, 91 N.C. App. 13, 18, 370 S.E.2d 680,
684 (1988). For a practice to be deceptive, it must “possess the tendency or
capacity to mislead.” Forsyth Mem’l Hosp. v. Contreras, 107 N.C. App. 611,
614, 421 S.E.2d 167, 170 (1992). Whether a particular commercial act or
practice constitutes an unfair or deceptive trade practice is a question of law.
Norman Owen Trucking, Inc. v. Morkoski, 131 N.C. App. 168, 177, 506
S.E.2d 267, 273 (1998); see also First Union Nat'l Bank v. Brown, 166 N.C.
App. 519, 603 S.E.2d 808, 819 (2004).
{109} “It is well recognized . . . that actions for unfair or deceptive
trade practices are distinct from actions for breach of contract, and that a
mere breach of contract, even if intentional, is not sufficiently unfair or
deceptive to sustain an action under [N.C. Gen. Stat. § 75-1.1].” Eastover
Ridge, L.L.C., 139 N.C. App. at 367, 533 S.E.2d at 832; Branch Banking and
Trust Co. v. Thompson, 107 N.C. App. 53, 62, 418 S.E.2d 694, 700, disc.
review denied, 332 N.C. 482, 421 S.E.2d 350 (1992) (citations omitted). To
become an unfair trade practice, the breach of contract must be
“characterized by some type of egregious or aggravating circumstance.”
Norman Owen Trucking, Inc., 131 N.C. App. at 177, 506 S.E.2d at 273. It is
“unlikely that an independent tort could arise in the course of contractual
performance, since those sorts of claims are most appropriately addressed by
asking simply whether a party adequately fulfilled its contractual
obligations.” Broussard, 155 F.3d at 347 (citing Strum, 15 F.3d at 333).
{110} With respect to Taylor, Parker, Caravello, and Schoning, the
Complaint contains generic allegations that do little more than recite the
prima facie elements of an unfair and deceptive trade practices claim.
(Compl. ¶ 90−93.) Plaintiff has failed to plead the existence of substantial
aggravating circumstances capable of sustaining a claim for unfair and
deceptive trade practices that is “identifiable” and “distinct from” the
Individual Defendants’ primary breach of contract.
{111} With respect to Rogers, Plaintiff has pled that in August 2009,
more than two (2) years after its acquisition of Chemcraft, Rogers
affirmatively misrepresented that he was “not an employee or sales
representative of the German company [Bergolin][;]” “the only ‘purpose of
Bergolin USA is to sell coatings to windmill blade manufacturers[;]’”
“Bergolin USA is not engaged in the industrial wood coatings business in the
US[;]” he “did not retain any confidential documents upon [his] resignation
from Chemcraft in July 2007[;]” and that he had “no intention of violating the
agreement.” (Compl. ¶ 32−36.)
{112} Accepting these allegations as true, and giving effect to all
permissible inferences to be drawn from these facts, Plaintiff might be found
to have pled an unfair and deceptive trade practice by Rogers, separate and
distinct from the underlying breach of contract, in or affecting commerce, but
it has not pled the requisite harm resulting from the wrongful act.
{113} It is well settled that “to succeed under G.S. 75-1.1, it is not
necessary for the plaintiff to show fraud, bad faith, deliberate or knowing acts
of deception, or actual deception, plaintiff must, nevertheless, show that the
acts complained of possessed the tendency or capacity to mislead, or created
the likelihood of deception.” Christian v. Wall, 78 N.C. App. 350, 356, 337
S.E.2d 150, 153−54 (1985) (citing Overstreet v. Brookland, Inc., 52 N.C. App.
444, 453−53, 279 S.E.2d 1, 7 (1981)). Although Plaintiff’s allegations fall
short of actionable fraud or negligent misrepresentation, the allegations of
specific misrepresentations, taken as true, demonstrate a tendency or
capacity to mislead and a likelihood of deception.
{114} But, in order to withstand the Motion, and “[a]s an essential
element of plaintiff’s cause of action, plaintiff must [allege] not only a
violation of G.S. 75-1.1 by the defendants, but also that plaintiff has suffered
actual injury as a proximate result of defendants’ misrepresentations.” Ellis
v. Smith-Broadherst, Inc., 48 N.C. App. 180, 184, 268 S.E.2d 271, 273−74
(1980) (citing Mayton v. Haitt’s Used Cars, 45 N.C. App. 206, 262 S.E.2d 680
(1980)); see Walker v. Branch Banking & Trust Co., 133 N.C. App. 580, 585,
515 S.E.2d 727, 730 (1999).
{115} In a cursory attempt to satisfy the injury and proximate cause
requirements, Plaintiff avers that “[a]s a result of Defendants’ unfair and
deceptive acts and practices, Akzo Nobel has been damaged in this State in
an amount in excess of $10,000 and is entitled to recover same from each
Defendant jointly and severally” and that it “is entitled to have such damages
trebled and to an award of costs and reasonable attorney’s fees.” (Compl. ¶
92.)
{116} The only specific allegation of damages related to the alleged
August 2009 misrepresentations of Rogers provides that Akzo Nobel
“reasonably and justifiably relied on the aforementioned representations by
Rogers in his Response in not taking legal action against Rogers in August
2009.” (Compl. ¶ 40.)
{117} The temporary forbearance of legal action is not, however,
sufficient to establish the actual injury requirement of Chapter 75.
{118} Akzo Nobel has failed to present allegations of actual injury
suffered as a proximate result of Rogers’ and the other Individual
Defendants’ alleged unfair and deceptive trade practices.
{119} The Motion concedes that the Trade Secrets Protection Act
(“TSPA”) survives a Rule 12(b)(6) dismissal at least against Parker. Under
N.C. Gen. Stat. § 66-146, a violation of the TSPA necessarily constitutes an
unfair act or practice under G.S. 75-1.1. See Ridgway, 194 N.C. App. at 659,
670 S.E.2d at 329. Accordingly, the Chapter 75 claim against Parker must
survive.
{120} But, with the exception of Parker, the Individual Defendants’
Motion with respect to Akzo Nobel’s claims for unfair and deceptive trade
practices is GRANTED.
5. The Misappropriation of Trade Secrets Claim
{121} The TSPA, N.C. Gen Stat. § 66-152, et seq., provides the owner
of a trade secret with a private right of action against a party alleged to have
misappropriated trade secrets. N.C. Gen. Stat. § 66-153. To adequately
plead a cause of action under the TSPA, “a plaintiff must identify a trade
secret with sufficient particularity so as to enable a defendant to delineate
that which he is accused of misappropriating and a court to determine
whether misappropriation has or is threatened to occur.” Analog Devices,
Inc. v. Michalaski, 157 N.C. App. 462, 468, 579 S.E.2d 449, 453 (2003); see
also VisionAIR, 167 N.C. App. at 510−11, 606 S.E.2d at 364 (finding
preliminary injunction inappropriate where trade secret is described only in
broad product and technology categories).
{122} In support of its TSPA claim, Plaintiff alleges “[s]hortly before
leaving his employment with Akzo Nobel, Parker . . . obtained technical
materials for Akzo Nobel products wholly unrelated to his work for the
company, including his removal from the Akzo Nobel premises formulas and
technical information concerning Akzo Nobel’s fiberglass door coating
products.” (Compl. ¶ 111.) The Complaint alleges that the formulas meet the
statutory definition of trade secrets under N.C. Gen. Stat. § 66-152(3) in that
they “derive independent actual or potential commercial value form not being
generally known or readily ascertainable through independent development
or lawful reverse engineering” and that Akzo Nobel “made reasonable efforts
under the circumstances to maintain the secrecy of its trade secrets.”
(Compl. ¶ 112-16.)
{123} While the Individual Defendants acknowledge that the
Complaint states a TSPA claim against Parker, they challenge the sufficiency
of the pleadings as they relate to the other Individual Defendants, specifically
contending that the TSPA claim “fails to identify with specificity the trade
secrets allegedly misappropriated by Rogers, Schoning, Caravello, or Taylor.”
(Defs.’ Br. in Supp. 17.)
{124} In support of their position, the Individual Defendants cite
Washburn v. Yadkin Valley Bank and Trust Co. for the proposition that “[a]
complaint that makes general allegations in sweeping and conclusory
statements, without specifically identifying the trade secrets allegedly
misappropriated, is ‘insufficient to state a claim for misappropriation of trade
secrets.’” 190 N.C. App. 315, 327, 660 S.E.2d 577, 585−86 (2008) (citation
omitted).
{125} In Washburn, an employer alleged that a former employee
“acquired knowledge of [the former] employer’s business methods, clients,
and other confidential information pertaining to [the] employer’s business.”
Washburn, 190 N.C. App. at 327, 660 S.E.2d at 586. In affirming the trial
court’s dismissal of employer’s claim under the TSPA, the Court of Appeals
found it fatal that the “identification of the trade secrets allegedly
misappropriated [was] broad and vague” and “d[id] not identify with
sufficient specificity either the trade secrets Plaintiffs allegedly
misappropriated or the acts by which the alleged misappropriations were
accomplished.” Id.
{126} Similar to the allegations in Washburn, Plaintiff alleges that the
Individual Defendants “obtained detailed knowledge of Akzo Nobel’s
confidential and proprietary information and trade secrets while employed by
the company.” (Compl. ¶ 109.) It defines its trade secrets broadly as “Akzo
Nobel’s proprietary formulas, methodologies, customer and pricing data and
other confidential information . . . deriv[ing] independent actual or potential
commercial value from not being generally known or readily ascertainable.”
(Compl. ¶ 112.) In further support of its claim, Plaintiff pleads that the
Individual Defendants “intentionally . . . through [themselves] and in concert
with the other Defendants . . . ma[de] improper use of confidential and
proprietary information and trade secrets of Akzo Nobel” and “[u]pon
information and belief, by their conduct described above and as will be proven
via discovery in this action, Defendants have wrongfully misappropriated
Akzo Nobel’s trade secrets.” (Compl. ¶¶ 49, 58, 68, 77, 114 (emphasis
added).)
{127} Even when viewed in concert with Parker’s alleged TSPA
violation, the sweeping and conclusory allegations in the Complaint fail to
identify the trade secrets the Individual Defendants are accused of
misappropriating “with sufficient particularity so as to enable [the]
defendant[s] to delineate that which [they are] accused of misappropriating
and a court to determine whether misappropriation has or is threatened to
occur.” Analog Devices, Inc., 157 N.C. App. at 468, 579 S.E.2d at 453.
{128} In sum, Plaintiff’s “identification of the trade secrets allegedly
misappropriated [was] broad and vague” and “d[id] not identify with
sufficient specificity either the trade secrets Plaintiffs allegedly
misappropriated or the acts by which the alleged misappropriations were
accomplished.” Washburn, 190 N.C. App. at 327, 660 S.E.2d at 586. As a
result of Plaintiff’s failure to identify the trade secrets allegedly
misappropriated, the Individual Defendants’ Motion is GRANTED with
respect Akzo Nobel’s claims for violation of the TSPA other than the TPSA
claim against Parker.
6. The Punitive Damages Claim
{129} N.C. Gen. Stat. § 1D-15(a) provides “[p]unitive damages may be
awarded only if the claimant proves that the defendant is liable for
compensatory damages and that an aggravating factor[,]” such as fraud,
malice, or willful or wanton conduct, “was present and was related to the
injury for which compensatory damages were awarded.”
{130} By statute, punitive damages cannot be awarded solely for
breach of contract. See N.C. Gen. Stat. § 1D-15(d). The North Carolina
Supreme Court has consistently given effect to this general rule stating “[t]he
appellate courts of this state have long and consistently held that punitive
damages should not be awarded in a claim for breach of contract.” Shore v.
Farmer, 351 N.C. 166, 170, 522 S.E.2d 73, 76 (1999). An exception to the
general rule arises when the breach is “accompanied by an identifiable
tortious act” and “some element of aggravation.” Id. (quoting Stanback v.
Stanback, 297 N.C. 181, 196, 254 S.E.2d 611, 621 (1979) and Newton v.
Standard Fire Ins. Co., 291 N.C. 105, 111, 229 S.E.2d 297, 301 (1976)).
{131} As detailed above, the Court is not persuaded that Plaintiff can
maintain any independent tort claims because the alleged breach of contract
was not “accompanied by an identifiable tortious act” and “some element of
aggravation.” As a result of this deficiency, Plaintiff’s punitive damages
claims against Rogers, Taylor, Schoning, and Caravello should be dismissed.
{132} The Court cannot dismiss the punitive damages claim against
Parker because a claim for punitive damages necessarily follows an
allegation of willful and malicious misappropriation of trade secrets. See N.C.
Gen. Stat. § 66-154(c) (“If willful and malicious misappropriation [of trade
secrets] exists, the trier of fact also may award punitive damages in its
discretion”).
{133} The Individual Defendants’ Motion is GRANTED with respect to
Plaintiff’s punitive damage claims against Rogers, Taylor, Caravello, and
Schoning.

VI. CONCLUSION
{134} Individual Defendants’ Motion with respect to the following
claims is GRANTED:
1) The Schoning non-competition provision.
2) The Parker and Caravello Agreements.
3) Fraud and negligent misrepresentation.
4) Tortious interference with contract and prospective economic
advantage.
5) Unfair and deceptive trade practices claim against Rogers,
Taylor, Schoning, and Caravello.
6) The TSPA claims against Rogers, Taylor, Schoning, and
Caravello.
7) Punitive damages claim against Rogers, Taylor, Schoning, and
Caravello.
{135} Individual Defendants’ Motion with respect to the following
claims is DENIED.
1) The Rogers Agreement.
2) The Taylor Agreement.
3) The Schoning non-solicitation provision.
4) Unfair and deceptive trade practices claim against Parker.
5) Punitive damage, to the extent that it depends on the TSPA
claim against Parker.

IT IS SO ORDERED, this 3rd day of November, 2011.