While certainly outside the main topic of this Reporter – motor vehicle negligence – a recent opinion of the North Carolina Court of Appeals reminds us all that there are limits to the application of N.C. Gen. Stat. §75-1.1. In Noble v. Hooters of Greenville (NC) LLC, No. COA08-1144 (N.C.App. Aug. 18, 2009), the plaintiffs, who had been involved in a horrendous motor vehicle accident, sued Hooters, asserting a claim under 75-1.1. The plaintiffs’ claim was based upon, in part, the argument that Hooters violated state law in serving them and other patrons 58 beers in a five hour span and then permitting them to leave in their car. The plaintiffs argued that this conduct not only violated state law but also North Carolina public policy of protecting its citizens. The claim was dismissed below and affirmed by the Court of Appeals, finding that the allegations did not show conduct which amounted to an inequitable assertion of Hooter’s power or position over the plaintiffs. Nor did the conduct have a tendency to deceive. In other words, the plaintiffs ordered the beer and they knew what they were getting. Significantly, while the Court of Appeals noted that plaintiffs had alleged that Hooter’s conduct violated a regulatory scheme and further noted that a violation of regulatory scheme could give rise to liability under Chapter 75-1.1 – specifically citing a violation of North Carolina’s Trade Secrets Protection Act – the Court found that the plaintiffs failed to allege conduct meeting the first element of the claim: “an unfair or deceptive act or practice, or an unfair method of competition.” Finally, the Court agreed that North Carolina public policy is to protect its citizens but that alone is not enough to state a claim. Bottom line here: while plaintiffs like to avail themselves of Chapter 75-1.1 because of its treble damages and ability to obtain attorney’s fees, there are limits to the reach of this statute.
Monthly Archives: October 2009
Last Call – 58 Beers Served in Five Hours is not an Unfair or Deceptive Act or Practice
Court of Appeals Finds Stock Award Not to Be Valid Consideration for Non-Compete
In a recent decision, the North Carolina Court of Appeals found, in affirming the denial of a preliminary injunction and dissolution of a TRO, that the award of restricted stock to a long time employee of the company was not valuable consideration to support a non-compete agreement. In affirming the lower court, the Court of Appeals in MSC Industrial Direct Co. , Inc. v. Steele, 2009 WL 2501762 (N.C.App. Aug. 18, 2009) summarized the state of law in North Carolina regarding the requirement that a non-compete provision be supported by valuable consideration. Here, one of the interesting parts of the opinion is that the employee, who had been employed by the company for about twelve years, signed the non-compete agreement and the restricted stock award on the same day. Even though both agreements were entered into the same day, and even though the Court of Appeals noted that uncertified shares of stock can be valuable consideration, here, the Court of Appeals concluded that “the stock at issue was not.” The Court of Appeals based its decision on the fact that by the terms of the Award, the earliest that any portion of the stock would have vested would be almost three years after the employee entered into the non-compete. Until vesting, the employee had no rights to the stock, it conferred no right to continued employment and was not to be considered part of his salary. Finally, the Court of Appeals noted that the grant and award of the stock actually predated the signing of the non-compete agreement by approximately 30 days. The Court of Appeals found the consideration illusory. Moral of the story: timing matters.
Welcoming Statement
This marks the inaugural edition of the Parker Poe Trade Secret and Unfair Competition Reporter. It is the intent of management (namely, me) to try to provide a timely and useful summary of developments in the law as related to trade secret misappropriation and unfair competition, with a focus on the law in North Carolina and South Carolina. This site will also act as a quick reference point to applicable statutes and other helpful references. As many of us practicing in the business tort community already know, the number of cases involving claims of trade secret misappropriation and unfair competition seem to increase every year. High profile cases, such as the criminal action surrounding the departure of a computer programmer from Goldman Sachs in June of this year, capture the headlines. But other smaller cases are brought without the fanfare or attention in the media and escape notice. This Reporter will hopefully give some of those cases the attention they deserve. Welcome.