Wells Fargo Ins. Servs. USA v. Link , 372 N.C. 260 ( 2019 )

IN THE SUPREME COURT OF NORTH CAROLINA
No. 300A18
Filed 10 May 2019
WELLS FARGO INSURANCE SERVICES USA, INC.
v.
KEVIN LINK, NELSON RAYNOR, ELIZABETH PACK, and BB&T INSURANCE
SERVICES, INC.
Appeal pursuant to N.C.G.S. § 7A-27(a)(2) from an order and opinion on
defendants’ motion to dismiss entered on 8 May 2018 by Judge Gregory P. McGuire,
Special Superior Court Judge for Complex Business Cases, in Superior Court, Wake
County, after the case was designated a mandatory complex business case by the
Chief Justice under N.C.G.S. § 7A-45.4(a). Heard in the Supreme Court on 10 April
2019.
Fisher & Phillips LLP, by J. Michael Honeycutt, Meredith W. Norvell, and
Holly N. Mancl, for plaintiff-appellant.
Parry Tyndall White, by K. Alan Parry, Michelle M. Walker, and Megan E.A.
Bishop, for defendant-appellees.
PER CURIAM.
AFFIRMED.
STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
COUNTY OF WAKE SUPERIOR COURT DIVISION
17 CVS 12848
WELLS FARGO INSURANCE
SERVICES USA, INC.,
Plaintiff,
ORDER AND OPINION ON
v. DEFENDANTS’ MOTION TO
KEVIN LINK, NELSON RAYNOR, DISMISS
ELIZABETH PACK and BB&T
INSURANCE SERVICES, INC.
Defendants.
THIS MATTER comes before the Court on Defendants Kevin Link, Nelson
Raynor, Elizabeth Pack, and BB&T Insurance Services, Inc.’s Partial Motion to
Dismiss Pursuant to Rule 12(b)(6). (“Motion to Dismiss”, ECF No. 7.) Defendants
seek to dismiss Counts One–Five, Seven, and Eight in the Complaint, but do not seek
dismissal of Count Six.
THE COURT, having considered the Motion to Dismiss, the briefs filed in
support of and in opposition to the Motion to Dismiss, the arguments of counsel at
the hearing, and other appropriate matters of record, CONCLUDES, in its discretion,
that the Motion to Dismiss should be GRANTED, in part, and DENIED, in part, for
the reasons set forth below.
Fisher & Phillips, by J. Michael Honeycutt and Meredith W. Norvell, for
Plaintiff Wells Fargo Insurance Services USA, Inc.
Parry Tyndall White, by K. Alan Parry and Michelle M. Walker, for Defendants
Kevin Link, Nelson Raynor, Elizabeth Pack, and BB&T Insurance Services,
Inc.
McGuire, Judge.
I. FACTS AND PROCEDURAL BACKGROUND
1. The Court does not make findings of fact on motions to dismiss under
N.C. Gen. Stat. § 1A-1, Rule 12(b)(6) (hereinafter, “Rule(s)”), but only recites those
facts included in the complaint that are relevant to the Court’s determination of the
Motion. See, e.g., Concrete Serv. Corp. v. Inv’rs Grp., Inc., 79 N.C. App. 678, 681, 340
S.E.2d 755, 758 (1986).
A. The parties
2. Plaintiff Wells Fargo Insurance Services USA, Inc. (“Plaintiff” or “Wells
Fargo”) is a North Carolina-licensed insurance broker that sells insurance products
and services to its customers. (Compl., ECF No. 3, at ¶ 9.) Wells Fargo alleges that
it provides “insurance products and services that are unique to the particular needs
of its customers.” (Id. at ¶ 16.)
3. Defendant BB&T Insurance Services, Inc. (“BB&T”) is also an insurance
broker providing insurance products and services to its customers in the same
segment of the insurance market. (Id. at ¶ 10.)
4. Wells Fargo employed Defendant Kevin Link (“Link”) as a Senior Sales
Executive. Link was responsible for “soliciting insurance customers and providing
risk management services.” (Id. at ¶ 11.) Link resigned from Wells Fargo effective
October 31, 2016, and began working for BB&T. (Id.)
5. Wells Fargo employed Defendant Nelson Raynor (“Raynor”) as a
Commercial Insurance Producer. Raynor was responsible for “procuring insurance
customers and providing risk management services.” (Id. at ¶ 12.) On April 12, 2017,
Raynor resigned from Wells Fargo and began working for BB&T. (Id.)
6. Wells Fargo employed Elizabeth Pack (“Pack”) as a Marketing
Placement Specialist. Pack was responsible for marketing to Wells Fargo’s insurance
customers. (Id. at ¶ 13.) On April 3, 2017, Pack resigned from Wells Fargo and began
working for BB&T. (Id. at ¶ 13.) (Collectively, Link, Raynor, and Pack are referred
to as the “Individual Defendants.”)
7. While employed with Wells Fargo, the Individual Defendants “brokered
and serviced the insurance needs of Wells Fargo customers assigned to them” and
had knowledge about the insurance needs and policies of their customers. (Id. at
¶ 14.)
8. Wells Fargo has developed and maintains certain “confidential and
trade secret information” concerning its customers. (Id. at ¶¶ 17–21.) The
confidential and trade secret information “provides Wells Fargo with a competitive
advantage over its competitors who do not know the information.” (Id. at ¶ 20.) Wells
Fargo makes efforts to protect the secrecy of its confidential and trade secret
information through the use of written confidentiality agreements, and the
implementation of a Code of Ethics and Information Security Policy and policies in
its Team Member Handbook. (Id. at ¶¶ 22–25.)
B. Link’s and Raynor’s Restrictive Agreements
9. During their employment with Wells Fargo, Link and Raynor each
executed an agreement with Wells Fargo entitled “Agreement Regarding Trade
Secrets, Confidential Information, Nonsolicitation and Assignment of Inventions”
(the “Restrictive Agreements”). (ECF No. 3, at ¶ 27; Link Restrictive Agreement,
ECF No. 3, Ex. 1; Raynor Restrictive Agreement, ECF No. 3, Ex. 2.) The Restrictive
Agreements provide that for a period of two (2) years immediately following
termination of their employment for any reason, Link and Raynor will not:
a. [S]olicit, recruit or promote the solicitation or recruitment of any
employee or consultant of the Company for the purpose of
encouraging that employee or consultant to leave the Company’s
employ or sever an agreement for services;
b. [S]olicit, participate in or promote the solicitation of any of the
Company’s clients, customers, or prospective customers with whom
[they] had Material Contact and/or regarding whom [they] received
Confidential Information, for the purpose of providing products or
services that are in competition with the Company’s products or
services (“Competitive Products/Services”). “Material Contact”
means interaction between [them] and the customer, client or
prospective customer within one (1) year prior to [their] last day as a
team member which takes place to manage, service, or further the
business relationship; or
c. Accept insurance business from or provide Competitive
Products/Services to customers or clients of the Company:
i. with whom [they] had Material Contact, and/or
ii. were [their] clients or customers of the Company within six
(6) months prior to [their] termination of employment.
(ECF No. 3, at ¶¶ 30, 34.)
10. The Restrictive Agreements also prohibit Link and Raynor from using
or disclosing Wells Fargo’s “Trade Secrets” and “Confidential Information”. (Id. at
¶¶ 30 and 35.) The Restrictive Agreements define “Trade Secrets” as including, but
not limited to:
[T]he names, addresses, and contact information of the
Company’s customers and prospective customers, as well
as any other personal or financial information relating to
any customer or prospect, including, without limitation,
account numbers, balances, portfolios, maturity and/or
expiration or renewal dates, loans, policies, investment
activities, purchasing practices, insurance, annuity
policies and objectives;
[A]ny information concerning the Company’s operations,
including without limitation, information related to its
methods, services, pricing, costs, margins and mark ups,
finances, practices, strategies, business plans, agreements,
decision-making, systems, technology, policies, procedures,
marketing, sales, techniques, agent information, and
processes;
[A]ny other proprietary and confidential information
relating to the Company’s customers, employees, products,
services, sales, technologies, or business affairs.
(ECF No. 3, at Exs. 1 and 2.) The Restrictive Agreements do not contain a
separate definition of “Confidential Information.”
11. The Restrictive Agreements define “the Company” as: “a Wells Fargo
company and/or any of its past, present, and future parent companies, subsidiaries,
predecessors, successors, affiliates, and acquisitions.” (Id.)
12. Under the Restrictive Agreements, Link and Raynor also were required
to return to Wells Fargo upon termination of employment all “Confidential
Information of the Company” and all “Records of the Company” in their respective
possessions. (Id. at ¶¶ 31, 36; Exs. 1 and 2.)
C. The resignations from Wells Fargo and breaches of the Restrictive
Agreements
13. Link resigned from Wells Fargo on October 31, 2016, Pack resigned on
April 3, 2017, and Raynor resigned on April 12, 2017. Link and Raynor “solicit[ed]
and encourage[ed]” each other, and Pack, to terminate employment with Wells Fargo.
(ECF No. 3, at ¶¶ 40–41.)
14. On or about April 12, 2017, immediately prior to submitting his
resignation, Raynor entered Wells Fargo’s offices at around 8:00 p.m. and printed and
copied documents for approximately one hour. (Id. at ¶¶ 42, 101.) Wells Fargo alleges
that it “is informed and believes . . . that the documents printed and copied by
Defendant Raynor contained highly confidential and trade secret information
belonging to Wells Fargo.” (Id. at ¶ 46.)
15. Since becoming employed with BB&T, Link, Raynor, and Pack have
contacted and solicited Wells Fargo’s customers “in an attempt to divert their
insurance business away from Wells Fargo” and to BB&T. (Id. at ¶¶ 47–48.) Wells
Fargo alleges upon information and belief that Link, Raynor, and Pack used Wells
Fargo’s trade secrets and confidential information “to identify, contact, solicit and
induce Wells Fargo clients to transfer their accounts and otherwise divert business
from Wells Fargo to BB&T.” (Id. at ¶ 56.) In the Complaint, Wells Fargo lists
approximately 18 Wells Fargo customers assigned to Link or Raynor who have
transferred their insurance business to BB&T since Link and Raynor left Wells
Fargo. (Id. at ¶¶ 53–71.)
16. On November 27, 2017, Wells Fargo filed the Complaint. In the
Complaint, Wells Fargo alleges four separate claims against Link and Raynor for
breaches of Restrictive Agreements: breach of the non-solicitation of customers
provision (Count One); breach of the non-solicitation of employees provisions (Count
Two); breach of the confidential information provisions (Count Three); and breach of
the return of property provision (Count Four). Wells Fargo also alleges the following
claims against all of the Defendants: misappropriation of trade secrets in violation
of the North Carolina Trade Secrets Protection Act (“NCTSPA”), N.C. General
Statute § 66-152 et seq., (hereinafter “G.S.”) (Count Five); tortious interference with
contractual relations (Count Seven); and unfair and deceptive trade practices (Count
Eight). Finally, Wells Fargo alleges a claim for computer trespass under G.S. § 14-
458 against Raynor only (Count Six).
17. On November 28, 2017, the case was designated to the North Carolina
Business Court and assigned to the undersigned. (Designation Order, ECF No. 1;
Assignment Order, ECF No. 2.)
18. On December 28, 2017, Defendants filed the Motion to Dismiss and a
supporting memorandum of law. (Def. Memo. Supp. Mot. Dismiss, ECF No. 8.) On
January 22, 2018, Plaintiff filed its brief in opposition to the Motion to Dismiss. (Pl.
Br. Opp. Mot. Dismiss, ECF No. 10.) Defendants filed a reply on February 8, 2018.
(Def. Reply Supp. Mot. Dismiss, ECF No. 15.) On February 20, 2018, the Court heard
oral argument on the Motion to Dismiss. The Motion to Dismiss is now ripe for
disposition.
II. ANALYSIS
19. The Court, in deciding a Rule 12(b)(6) motion, treats the well-pleaded
allegations of the complaint as true and admitted. Sutton v. Duke, 277 N.C. 94, 98
(1970). However, conclusions of law or unwarranted deductions of fact are not
deemed admitted. Id. The facts and permissible inferences set forth in the complaint
are to be treated in a light most favorable to the nonmoving party. Ford v. Peaches
Entm’t Corp., 83 N.C. App. 155, 156 (1986). As our Court of Appeals has noted, the
“essential question” raised by a Rule 12(b)(6) motion is “whether the complaint, when
liberally construed, states a claim upon which relief can be granted on any theory.”
Barnaby v. Boardman, 70 N.C. App. 299, 302, 318 S.E.2d 907, 909 (1984), rev’d on
other grounds, 313 N.C. 565 (1985) (citations and emphasis omitted).
20. Our appellate courts frequently reaffirm that North Carolina is a notice
pleading state. See, e.g., Feltman v. City of Wilson, 238 N.C. App. 246, 252, 767 S.E.2d
615, 620 (2014) (quoting Wake Cty. v. Hotels.com, L.P., 235 N.C. App. 633, 646–47,
762 S.E.2d 477, 486 (2014)). “Under notice pleading, a statement of claim is adequate
if it gives sufficient notice of the claim asserted to enable the adverse party to answer
and prepare for trial, to allow for the application of the res judicata, and to show the
type of case brought.” Id. Accordingly, “a complaint should not be dismissed for
insufficiency unless it appears to a certainty that plaintiff is entitled to no relief under
any state of facts which could be proved in support of the claim.” Sutton, 277 N.C. at
103, 176 S.E.2d at 166 (1970) (emphasis omitted).
21. A Rule 12(b)(6) motion should be granted when the complaint, on its
face, reveals (a) that no law supports the plaintiff's claim, (b) the absence of facts
sufficient to form a viable claim, or (c) some fact which necessarily defeats the
plaintiff's claim. Jackson v. Bumgardner, 318 N.C. 172, 175 (1986). In addition, the
Court may consider documents which are the subject of plaintiff’s complaint and to
which the complaint specifically refers, including the contract that forms the subject
matter of the action. Oberlin Capital, L.P. v. Slavin, 147 N.C. App. 52, 60, 554 S.E.2d
840, 847 (2001).
22. The Court first will address Wells Fargo’s claims for breach of the
Restrictive Agreements by Link and Raynor, and then the claims alleged against all
of the Defendants.
A. Breach of the non-solicitation of customers restriction (Count One)
23. In its first claim, Wells Fargo alleges Link and Raynor breached the
prohibitions against soliciting or accepting insurance business from Wells Fargo’s
customers contained in sections III.b. and III.c. of the Restrictive Agreements. (ECF
No. 3, at ¶¶ 80–84.) Section III.b. prohibits Link and Raynor from soliciting “the
Company’s” customers or prospective customers with whom they had “Material
Contact and/or” customers about whom they received “Confidential Information.” (Id.
at ¶¶ 30 and 34.) “Material Contact” is defined as interaction with the customer
during the year prior to their respective terminations of employment from Wells
Fargo. Section III.c. of the Restrictive Agreements prohibits Link and Raynor from
accepting “insurance business” from or providing competitive products and services
to customers of “the Company” with whom they had “Material Contact and/or” who
were “customers of the Company within six (6) months prior to [their] termination of
employment.” (Id.)
24. North Carolina courts will enforce a covenant not to compete if it is:
“(1) in writing; (2) reasonable as to [the] terms, time, and territory; (3) made a part of
the employment contract; (4) based on valuable consideration; and (5) not against
public policy.” Triangle Leasing Co. v. McMahon, 327 N.C. 224, 228, 393 S.E.2d 854,
857 (1990); United Lab., Inc. v. Kuykendall, 322 N.C. 643, 649–50, 370 S.E.2d 375,
380 (1988). The party seeking enforcement of a restrictive covenant has the burden
of proving its reasonableness. Medical Staffing Network, Inc. v. Ridgway, 194 N.C.
App. 649, 655, 670 S.E.2d 321, 327 (2009). The reasonableness of a non-competition
covenant is a matter of law for the court to decide. Id.
25. In the absence of an express geographic territory restriction, a court can
enforce a restriction prohibiting a former employee from soliciting customers or
clients. Whittaker Gen. Med. Corp. v. Daniel, 324 N.C. 523, 526, 379 S.E.2d 824, 826f
(1989) (relying on Kuykendall and enforcing a noncompetition agreement that
included client-based restrictions for 24 months without any expressly defined
geographical territory other than the employee's sales territory at the time of
termination and holding that “customers developed by a salesperson are the property
of the employer and may be protected by a contract under which the salesperson is
forbidden from soliciting those customers for a reasonable time after leaving his or
her employment”); Wade S. Dunbar Ins. Agency, Inc. v. Barber, 147 N.C. App. 463,
469, 556 S.E.2d 331, 336 (2001) (enforcing covenant prohibiting solicitation of any
former employer’s customers).
26. A customer-based restriction on solicitation is analyzed in much the
same manner as a geographic restriction, taking into consideration many of the same
factors and, particularly, the time period of the restriction. See, e.g., Wade S. Dunbar
Ins. Agency, 147 N.C. App. at 469, 556 S.E.2d 335; Farr Assocs., Inc. v. Baskin, 138
N.C. App. 276, 281–82, 530 S.E.2d 878, 883 (2000) (“The geographic limitation of that
case is analogous to the client-based limitation in the case at bar.”); Sandhills Home
Care, L.L.C. v. Companion Home Care – Unimed, Inc., 2016 NCBC LEXIS 61, at *25
(N.C. Super. Ct. Aug. 1, 2016).
27. In this case, Defendants challenge the prohibitions on soliciting or
accepting insurance business from Wells Fargo customers on the grounds that the
definitions of the terms “the Company” and “Confidential Information” make the
restrictions unreasonably broad and vague, and unenforceable as a matter of law.
(ECF No. 8, at pp. 8–10.) Accordingly, the Court must determine whether sections
III.b. and III.c. are unreasonable as a matter of law.
i. Section III.b.
28. Section III.b. does not have a geographic restriction, but instead
prohibits Link and Raynor, for a period of two years, from soliciting “the Company’s”
customers and prospective customers with whom Link and Raynor had “Material
Contact and/or” about whom they received “Confidential Information.” (ECF No. 3,
at Exs. 1 and 2, sec. III.) Defendants do not challenge the reasonableness of the
prohibition on Link and Raynor soliciting Wells Fargo customers or prospective
customers with whom they had Material Contact. Instead, Defendants argue that
the terms “the Company” and “Confidential Information” are defined so broadly in
the Employment Agreement that it makes the prohibition against Link and Raynor
soliciting customers and prospective customers about whom they received
“Confidential Information” unreasonably vague and overly broad. (ECF No. 8, at pp.
8–10.)
29. The Employment Agreements define “the Company” to include not
only Wells Fargo Insurance Services, but also its “past, present, and future parent
companies, subsidiaries, predecessors, successors, affiliates, and acquisitions.” (ECF
No. 3, Exs. 1 and 2.) The Employment Agreement does not identify the subsidiary
and affiliate companies, but according to publicly available data from Wells Fargo, it
is a vast organization with many affiliate companies.
30. Wells Fargo noted to its shareholders in its 2016 Annual Report that
Wells Fargo “provide[s] banking, insurance, investments, mortgage, and consumer
and commercial finance through more than 8,600 locations, 13,000 ATMs, digital
(online, mobile and social), and contact centers (phone, email and correspondence),
and [Wells Fargo] ha[s] offices in 42 countries and territories.” WELLS FARGO, 2016
ANNUAL REPORT 36 (2016)1. Wells Fargo listed 44 significant subsidiaries in an
attached exhibit to its Form 10-K annual report to the United States Securities
Exchange Commission (“SEC”) for 2017. Wells Fargo, Form 10-K Annual Report to
SEC (Exhibit 21) (Jan. 3, 2018)2. The listed subsidiaries include, inter alia,
companies that provide personal, commercial, and real estate financing, insurance
companies, venture capital firms, securities companies, and holding companies. Id.
1 Available online at: https://www.wellsfargo.com/assets/pdf/about/investor-relations/annual-
reports/2016-annual-report.pdf
2 Available online at:
https://www.sec.gov/Archives/edgar/data/72971/000007297118000272/wfc-
12312017xex21.htm
In 2016, Wells Fargo employed over 269,000 full-time employees. WELLS FARGO, 2016
ANNUAL REPORT 36 (2016).
31. Defendants contend that North Carolina courts have found similarly
broad prohibitions on soliciting customers of parent, subsidiary, and affiliate
companies for whom the former employees performed no services unreasonable as
matter of law. Medical Staffing Network, 194 N.C. App. at 657, 670 S.E.2d at 328
(finding restrictive covenants unenforceable because the plaintiff had no legitimate
business interest in foreclosing solicitation of clients of “an unrestricted and
undefined set of [the plaintiff's] affiliated companies that engage in business distinct
from the . . . business in which [the defendant] had been employed”).
32. To the extent that Link and Raynor are prohibited from soliciting Wells
Fargo customers or prospective customers with whom they had “Material Contact”
during the last year of their employment, the potential inclusion of customers of
affiliate companies does not necessarily render the restriction overbroad and
unreasonable. See, e.g., Laboratory Corp. of America Holdings v. Kearns, 84 F. Supp.
3d 447, 459 (M.D.N.C. Jan. 30, 2015) (“In North Carolina, covenants prohibiting
competition for a former employer’s customers are only enforceable when they
prohibit the employee from contacting customers with whom the employee actually
had contact during his former employment.”). If Link and Raynor had significant
interactions with customers or prospective customers of affiliate companies of Wells
Fargo, Wells Fargo may have a legitimate interest in restricting them from soliciting
those customers.
33. Link and Raynor, however, are not only prohibited from soliciting Wells
Fargo customers with whom they had “Material Contact”, but also from soliciting
customers and prospective customers about whom they received “Confidential
Information.” The Restrictive Agreements define “Confidential Information” as
including “the Company’s Trade Secrets and other proprietary information relating
to its business methods, personnel, and customers.” (ECF No. 3, at Exs. 1 and 2, sec.
II.) Wells Fargo’s “Trade Secrets” are defined as including, but not limited to:
[T]he names, address, and contact information of the
Company’s customers and prospective customers, as well
as any other personal or financial information relating to
any customer or prospect, including, without limitation,
account numbers, balances, portfolios, maturity and/or
expiration or renewal dates, loans, policies, investment
activities, purchasing practices, insurance, annuity
policies and objectives;
[A]ny information concerning the Company’s operations,
including without limitation, information related to its
methods, services, pricing, costs, margins and mark ups,
finances, practices, strategies, business plans, agreements,
decision-making, systems, technology, policies, procedures,
marketing, sales, techniques, agent information, and
processes; [and]
[A]ny other proprietary and/or confidential information
relating to the Company’s customers, employees, products,
services, sales, technologies, or business affairs.
(Id.)
34. The Restrictive Agreements further expand the definition of
“Confidential Information” to include the “Records of the Company,” and provide
that:
‘Records’ include, but are not limited to original,
duplicated, computerized, memorized, handwritten or any
other form of information, whether contained in materials
provided to me by the Company, or by any institution
acquired by the Company, or compiled by me in any form
or manner including information in documents or
electronic devices, such as software, flowcharts, graphs,
spreadsheets, resource manuals, videotapes, calendars,
day timers, planners, rolodexes, or telephone directories
maintained in personal computers, laptop computers,
personal digital assistants or any other device.
(Id.)
35. Defendants argue that the restriction on soliciting customers or
prospective customers of “the Company” about whom they received “Confidential
Information” is far too broad based on the definitions used in the Restrictive
Agreements. For example, the Restrictive Agreements define “Confidential
Information” as including the names and addresses of customers and prospective
customers of Wells Fargo and any of its affiliate companies, and Wells Fargo’s
“Records” as including “memorized, handwritten or any other form of
information, . . . such as software, flowcharts, graphs, spreadsheets, resource
manuals, videotapes, calendars, day timers, planners, rolodexes, or telephone
directories.” Arguably, the clause prohibits solicitation of any customers or
prospective customers of Wells Fargo-affiliate companies whose name, address, or
other contact information was shown (purposefully or inadvertently) to Link or
Raynor during their employment, whether or not that customer or prospective
customer had any dealings with Wells Fargo’s insurance division or with Link or
Raynor. Defendants aptly point out that, read literally, the non-solicitation provision
in section III.b. would prohibit Link and Raynor from soliciting a prospective
customer of a Wells Fargo affiliate company based simply on them having seen an
“actual or prospective customer’s name in a calendar, day timer, planner, rolodex, or
telephone directory maintained anywhere at any Wells Fargo company.” (ECF No.
8, at pp. 9–10.)
36. In its brief, Plaintiff does not address the breadth of the definitions of
“the Company” and “Confidential Information” in the Restrictive Agreements, or
attempt to explain why it has a business interest in prohibiting solicitation of such a
vast array of customers. Instead, it argues that the provision restricting solicitation
of customers or prospective customers about whom Link and Raynor received
“Confidential Information” can be disregarded because “Link and Raynor would not
have had access to confidential information concerning a client or customer they did
not service, and there is no allegation in the Complaint alleging that they did.” (ECF
No. 10, at p. 9.) Plaintiff misapprehends their burden in responding to the Motion to
Dismiss. Plaintiff has not alleged that Link and Raynor received “Confidential
Information” only regarding Wells Fargo customers and prospective customers whom
they serviced, and the Court cannot accept the representations in its brief in lieu of
allegations in the Complaint.
37. At the hearing on the Motion to Dismiss, Plaintiff’s counsel also
suggested that Wells Fargo would only seek to restrain Link and Raynor from
soliciting customers with whom they had “Material Contact,” as Plaintiff has done in
this lawsuit, and not customers about whom Link and Raynor received Confidential
Information. This argument, however, is unavailing. It is the Court’s duty at this
stage to analyze the restrictive covenant, as alleged, and determine whether it is
reasonable and enforceable. The Court cannot read provisions out of the Restrictive
Agreements based on Plaintiff’s representations in order to make the covenant
enforceable. A court may not construe an agreement in a way that ignores or deletes
its plain terms. See, e.g., State v. Philip Morris USA, Inc., 193 N.C. App. 1, 12–13,
666 S.E.2d 783, 791 (2008) (stating that where the language of a contract is
unambiguous, a court cannot ignore, insert, or improperly construe the meaning of
any contract terms, but instead a court must infer the intent of the parties from the
terms in the contract); Happ v. Creek Pointe Homeowner’s Ass’n, 215 N.C. App. 96,
103–04, 717 S.E.2d 401, 406 (2011) (holding that even where the language of a
contract is ambiguous, it is a “fundamental rule of contract construction” that the
court “gives effect to all of its provisions, if the court is reasonably able to do so”).
38. Finally, Plaintiff argues that, to the extent the prohibition in section
III.b. on soliciting customers about whom Link and Raynor received “Confidential
Information” makes the covenant over-broad, the Court can “blue pencil,” or remove,
that provision and enforce only the restriction on soliciting customers with whom they
had “Material Contact.” (ECF No. 10, at pp. 12–13.) Under the “blue pencil doctrine,”
North Carolina courts may specifically enforce divisible or separable sections of
restrictive covenants while striking portions that are unenforceable. Whittaker
General Medical Corp., 324 N.C. at 528, 379 S.E.2d at 828 (“If the contract is
separable, however, and one part is reasonable, the courts will enforce the reasonable
provision” (citing Welcome Wagon, Inc. v. Pender, 255 N.C. 244, 120 S.E.2d 739
(1961).); see also, Hartman v. W.H. Odell & Assocs., 117 N.C. App. 307, 317, 450
S.E.2d 912, 920 (1994) (“When the language of a covenant not to compete is overly
broad, North Carolina's “blue pencil” rule severely limits what the court may do to
alter the covenant. A court at most may choose not to enforce a distinctly
separable part of a covenant in order to render the provision reasonable. It may not
otherwise revise or rewrite the covenant.”).
39. The Court cannot “blue pencil” the provisions in section III.b. because
the provision addressing customers about whom Link and Raynor received
“Confidential Information” is not “distinctly separable” from the “Material Contact”
provision. The two provisions are not contained in separately numbered paragraphs,
separate sentences, or even separated by the word “or.” Rather, the provisions are
separated by the term “and/or.” The use of “and/or” suggests that the prohibitions
could be read in both the conjunctive and disjunctive senses, and creates an
ambiguity. “When the language in a contract is ambiguous, we view the practical
result of the restriction by ‘construing the restriction strictly against its
draftsman[.]’” Electrical South, Inc. v. Lewis, 96 N.C. App. 160, 167, 385 S.E.2d 352,
356 (1989) (citing Manpower of Guilford County, Inc. v. Hedgecock, 42 N.C. App. 515,
522, 257 S.E.2d 109, 115 (1979)). In this case, the Court concludes that the term
“and/or” must be construed against Wells Fargo and read in the conjunctive sense for
the purpose of applying the “blue pencil” doctrine. Under this interpretation, the
provision restricting Link and Raynor from soliciting customers about whom they
received “Confidential Information” is not clearly separable from the other
restrictions in section III.b. and cannot be stricken.
ii. Section III.c.
40. Section III.c. of the Restrictive Agreement prohibits Link and Raynor,
for two years from their dates of termination, from accepting “insurance business
from or provid[ing] Competitive Products/Services to” customers of “the Company”
with whom they had “Material Contact, and/or” who were customers of “the
Company” within the six months prior to their respective terminations from Wells
Fargo. (ECF No. 3, at ¶¶ 30 and 34; Exs. 1 and 2.)
41. Defendants first challenge the scope of section III.c. on the grounds that
it prohibits Link and Raynor from “accepting insurance business from” former Wells
Fargo customers. (ECF No. 8, at pp. 10–11.) Defendants contend that the term
“insurance business” is undefined in the Restrictive Agreements and could encompass
insurance products and services beyond the commercial insurance policies and
services with which Link and Raynor were involved. (Id.) Defendants argue that the
prohibition on accepting “insurance business” of any type from former customers is
broader than necessary to protects Wells Fargo’s business interests. (Id.) While the
Court concludes that there may be merit to Defendants’ argument, the Court
arguably could “blue pencil” the phrase “accepting insurance business from” out of
the description of the conduct restricted by section III.c. because the term is separated
from the prohibition on “provid[ing] Competitive Products/Services to” by the word
“or”, and could be viewed as a “distinctly severable” part of the covenant. Hartman,
117 N.C. App. at 317, 450 S.E.2d at 920; see also, Superior Performers, Inc. v. Meaike,
2014 U.S. Dist. LEXIS 50302, at *39–40 (M.D.N.C. Apr. 11, 2014) (“Although it is not
separated off by number or in a different clause, the language can readily be struck
through and the rest of the restrictive covenant still makes sense and stands on its
own. Therefore, to the extent that the “or its Affiliates” language renders the
restrictive covenant unreasonable, it is likely separable from the remainder of the
covenant, which is reasonable.”).
42. However, even if the phrase “accepting insurance business from” could
be severed from the prohibition, it would not salvage the covenant in section III.c.
because the covenant prohibits Link and Raynor from providing competitive
insurance products to customers with whom they had “Material Contact, and/or . . .
customers of the Company within six (6) months prior to” their respective
terminations from employment with Wells Fargo. (ECF No. 3, at ¶¶ 30 and 34.)
Again, “the Company” is defined so broadly in the Restrictive Agreements that it
sweeps within its ambit customers of far-flung Wells Fargo subsidiaries and affiliates
unrelated to Wells Fargo’s commercial insurance business, and customers w ith
whom Link and Raynor would have had no contact. See, Medical Staffing Network,
194 N.C. App. at 657, 670 S.E.2d at 328. In addition, for the same reasons discussed
above, the use of “and/or” must be construed against Wells Fargo, and III.c.ii. cannot
be “blue penciled” out of the covenant contained in section III.c. Accordingly, the
Court concludes that the restrictive covenant in section III.c. is too broad and is
unreasonable as a matter of law.
43. Sections III.b. and III.c. of the Restrictive Agreements are too broadly
written to be enforceable under North Carolina law. Accordingly, Defendants’ motion
to dismiss Plaintiff’s First Count for breach of the non-solicitation of customers
provisions in sections III.b. and III.c. of the Restrictive Agreements should be
GRANTED.
B. Breach of the non-solicitation of employees covenants (Count Two)
44. In its second claim, Wells Fargo alleges that Link and Raynor breached
the provisions of the Restrictive Agreements prohibiting them from soliciting Wells
Fargo’s employees to terminate employment with Wells Fargo. (ECF No. 3, at ¶¶ 80–
84.) Section III.a. of the Restrictive Agreements provide that for two years following
termination, Link and Raynor “will not . . . solicit, recruit, or promote the solicitation
or recruitment of any employee or consultant of the Company for the purpose of
encouraging that employee or consultant to leave the Company’s employ or sever an
agreement for services.” (Id. at ¶¶ 30 and 34.)
45. Courts in North Carolina have recognized that reasonable restrictions
on a former employee's right to solicit an employer's current employees are
enforceable. Kennedy v. Kennedy, 160 N.C. App. 1, 11–12, 584 S.E.2d 328, 335 (2003)
(“[T]he covenant prohibiting Carroll from soliciting and hiring plaintiff’s former
employees for the three-year period does not violate public policy.”); Superior
Performers, Inc., 2014 U.S. Dist. LEXIS 50302, at *30 (finding a two year restriction
on soliciting former employer's current employees reasonable). A restriction on
solicitation of employees generally is subject to the same requirements as other
restrictive covenants. Sandhills Home Care, L.L.C., 2016 NCBC LEXIS 61, at *36.
46. Here, the non-solicitation of employees covenant is in writing and
supported by consideration. Defendants do not argue that the covenant would violate
public policy. See, Sandhills Home Care, 2016 NCBC LEXIS 61, at *36 (citing Phelps
Staffing, LLC v. C.T. Phelps, Inc., 226 N.C. App. 506, 510, 740 S.E.2d 923, 927 (2013)).
Defendants contend, however, that the non-solicitation of employees restriction is
overbroad and unreasonable because it prohibits Link and Raynor from soliciting
employees of “the Company.” (ECF No. 8, at pp. 11–12.) As noted herein, in 2016,
Wells Fargo claimed to have 44 subsidiary companies employing a total of over
269,000 employees in personal and commercial banking, investment, insurance, and
other businesses. As written, the Restrictive Agreement would prohibit Link and
Raynor from soliciting or attempting to solicit hundreds of thousands of employees in
a variety of businesses other than commercial insurance and across a vast geographic
area.
47. Covenants restricting former employees from soliciting a former
employer’s employees are another means of protecting the former employer’s interest
in the good-will it has with its customers. Kennedy, 160 N.C. App. at 11–12, 584
S.E.2d at 335 (enforcing prohibition against dentist soliciting his former practice’s
employees, holding “[t]he evidence demonstrates that plaintiff’s employees, many of
whom had been employed in plaintiff's practice for several years, were a valuable part
of the asset owned by plaintiff, that the employees had developed personal
relationships with plaintiff's patients, that the employees were an integral part of a
patient’s experience with plaintiff”). To establish that a non-solicitation of employees
covenant is reasonable, an employer must establish that it has a protectable business
interest in prohibiting solicitation of former employees, and such prohibition must be
no broader than necessary to protect that interest. In Medical Staffing Network, Inc.,
the Court held that a prohibition on the defendant soliciting employees of the
plaintiff’s affiliate businesses for which the defendant did not work was overbroad.
[The plaintiff] presented no evidence, and the trial court
made no findings that [the plaintiff] had any legitimate
business interest in . . . foreclosing the solicitation of
employees of . . . an unrestricted and undefined set of [the
plaintiff’s] affiliated companies that engage in business
distinct from the medical staffing business in which [the
defendant] had been employed. We conclude that on its
face, this bar extends beyond any legitimate interest [the
plaintiff] might have in this case.
194 N.C. App. at 657, 670 S.E.2d at 328.
48. Plaintiff has not alleged any facts that would support a legitimate
business interest in restricting Link or Raynor from soliciting employees working for
Wells Fargo’s affiliate companies in any segment of the banking, investment, or
insurance industries. It is highly unlikely that the vast majority of these employees
would have had any involvement or contact with Wells Fargo’s commercial insurance
customers. The non-solicitation of employees covenant, as written, is unreasonable
and unenforceable as a matter of law. Id.
49. Accordingly, the Defendants’ motion to dismiss Count Two for breach of
the non-solicitation of employees provisions in section III.a. of the Restrictive
Agreements should be GRANTED.
C. Breach of the confidentiality covenant against Link and return of
property provision against Link (Counts Three and Four)
50. Plaintiff also makes claims that Link and Raynor violated the covenants
prohibiting use or disclosure of “Confidential Information,” and the provisions
requiring return of “Records” and “Confidential Information,” in the Restrictive
Agreements. (ECF No. 3, at ¶¶ 85–94.) Defendants argue the Complaint does not
state claims against Link and seek dismissal of Counts Three and Four against Link
only. (ECF No. 8, at pp. 12–14.) They do not seek dismissal of these claims against
Raynor. (Id.) Defendants argue that Plaintiff makes nothing more than conclusory
allegations against Link, and does not plead facts supporting the claims for breach of
the confidentiality and return of property provisions. (Id.)
51. “The elements of a claim for breach of contract are (1) existence of a valid
contract and (2) breach of the terms of [the] contract.” McLamb v. T.P. Inc., 173 N.C.
App. 586, 588, 619 S.E.2d 577, 580 (2005); Regency Ctrs. Acquisition, LLC v. Crescent
Acquisitions, LLC, 2018 NCBC LEXIS 7, at *18 (N.C. Super. Ct. Jan. 24, 2018). The
North Carolina Court of Appeals has held that “an agreement is not in restraint of
trade . . . if it does not seek to prevent a party from engaging in a similar business in
competition with the promisee, but instead seeks to prevent the disclosure or use
of confidential information.” Chemimetals Processing, Inc. v. McEneny, 124 N.C. App.
194, 197, 476 S.E.2d 374, 376 (1996). Such an agreement is enforceable “even though
the agreement is unlimited as to time and area, upon a showing that it protects a
legitimate business interest of the promisee.” Id. at 197, 476 S.E.2d at 376-
77 (citation omitted).
52. The Court has thoroughly reviewed the allegations in the Complaint
and concludes that Plaintiff has sufficiently alleged a claim against Link for breach
of the “Confidential Information” restrictions, but has not alleged any facts that
would support the claim that Link failed to return “Records and Confidential
Information” after his resignation from Wells Fargo.
53. With regard to the claim for breach of the “Confidential Information”
covenant, Plaintiff alleges that Link executed the Restrictive Agreement prohibiting
the use or disclosure of “Confidential Information.” (ECF No. 3, at ¶ 30.) Plaintiff
further alleges that Link solicited and obtained for BB&T the insurance business of
customers that he serviced for Wells Fargo. (Id. at ¶¶ 39, 47, and 53.) Finally,
Plaintiff alleges, albeit “upon information and belief”, that Link “used “Wells Fargo’s
Confidential Information . . . to identify, contact, solicit, and induce” his former
customers and to divert their business to BB&T. (Id. at ¶¶ 56, 88.) These allegations
sufficiently state a claim for breach of contract regarding the “Confidential
Information” provisions of the Restrictive Agreement at this stage of the case. Myrtle
Apartments, Inc. v. Lumbermen's Mut. Casualty Co., 258 N.C. 49, 51, 127 S.E.2d 759,
761 (1962) (finding that in stating claims in a complaint, a plaintiff “may allege facts
based on actual knowledge, or upon information and belief”). Defendants’ motion to
dismiss Plaintiff’s Count Three against Link should be DENIED.
54. With regard to Count Four, the Complaint contains only the conclusory
allegation that Link “fail[ed] to return to Wells Fargo its property upon resigning”
from employment with Plaintiff. (Id. at ¶ 92.) Plaintiff does not, however, allege
what property Link possessed or failed to return at the time of his resignation, nor
any other facts underlying its claim for breach of the return of property provisions in
the Restrictive Agreement. This is insufficient to support a claim for breach of the
return of property provision. Myrtle Apartments, Inc., 258 N.C. at 51, 127 S.E.2d at
761 (“In testing the sufficiency of a complaint, the court ignores the conclusions and
looks to the facts.”) Defendants’ motion to dismiss Count Four against Link should
be GRANTED.
D. Misappropriation of trade secrets (Count Five)
55. Plaintiff makes claims for misappropriation of trade secrets against all
of the Defendants. (ECF No. 3, at ¶¶ 95–104.) Defendants first argue that Plaintiff
has not identified its trade secrets with sufficient specificity to support a claim
for misappropriation under the NCTSPA. (ECF No. 8, at pp. 14–16.) Defendants also
contend that Plaintiff does not allege the act or acts by which Defendants
misappropriated any trade secrets. (Id. at pp. 15–16.)
56. Under the NCTSPA, “misappropriation” is defined as the “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.” G.S. § 66-152(1). A “Trade Secret” is:
[B]usiness or technical information, including but not
limited to a formula, pattern, program, device, compilation
of 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.
G.S. § 66-152(3).
57. The courts consider the following factors in determining whether
information constitutes 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 [the] 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.
Wilmington Star-News, Inc. v. New Hanover Reg’l Med. Ctr., Inc., 125 N.C. App. 174,
180–81, 480 S.E.2d 53, 56 (1997).
58. To survive a motion to dismiss, a plaintiff's complaint “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.” VisionAir, Inc. v. James,
167 N.C. App. 504, 510–11, 606 S.E.2d 359, 364 (2004); AYM Techs., LLC. v. Rodgers,
2018 NCBC LEXIS 14, at *36–37 (N.C Super. Ct. Feb. 9, 2018) (quoting VisionAir).
The complaint also must set forth with sufficient specificity the acts by which the
alleged misappropriation occurred. Washburn v. Yadkin Valley Bank & Tr. Co., 190
N.C. App. 315, 327, 660 S.E.2d 577, 586 (2008) (“These allegations do not identify
with sufficient specificity either the trade secrets [p]laintiffs allegedly
misappropriated or the acts by which the alleged misappropriations were
accomplished” (emphasis added).); see also, Bldg. Ctr., Inc. v. Carter Lumber, Inc.,
2016 NCBC LEXIS 79, at *9 (N.C. Super. Ct. Oct. 21, 2016) (citing Washburn).
59. Defendants focus on Plaintiff’s inclusion of “customers’ names and
addresses” as part of its alleged trade secrets, and argue that such information by
itself generally does not constitute a trade secret. (ECF No. 8, at pp. 14–15.) Plaintiff,
however, has not alleged that its trade secrets consist only of its customer names and
contact information. Although the Complaint is vague in this regard, read liberally
in favor of Plaintiff, the Complaint and the attached Restrictive Agreements appear
to allege that Plaintiffs trade secrets include, inter alia:
Information concerning Wells Fargo’s customers and the
details of their insurance needs and policies, including but
not limited to information concerning Wells Fargo’s
customers and the details of their insurance needs and
policies, including but not limited to, customer policies,
insurance application information, policy cost information,
payment information, profit loss statements, insurance
schedules, certificate of holder lists, underwriting
information, detailed customer information, detailed
employee information, detailed property information,
customer financial information, expiration dates of
insurance policies and insurance daily reports.
(ECF No. 3, at ¶ 17);
The books, files, electronic data, and all other records of
Wells Fargo, the confidential information contained in [the
records], and especially the data pertaining to Wells Fargo
customers, such as customers’ names and addresses, as
well as additional information such as customers’ social
security numbers, account numbers, financial status, and
other highly confidential personal and financial
information[.]
(Id. at ¶ 97); and,
[T]he names, addresses, and contact information of the
Company’s customers and prospective customers, as well
as any other personal or financial information relating to
any customer or prospect, including, without limitation,
account numbers, balances, portfolios, maturity and/or
expiration or renewal dates, loans, policies, investment
activities, purchasing practices, insurance, annuity
policies and objectives[.]
(Id., Exs. 1 and 2, at sec. II.)
60. Within these sprawling lists, there are particular pieces of information
that might constitute trade secrets, including: “insurance application information,
policy cost information, payment information, profit loss statements, insurance
schedules, certificate of holder lists, [and] underwriting information”; “expiration
dates of insurance policies and insurance daily reports”; “customers’ social security
numbers, account numbers, [and] financial status”; and “maturity and/or expiration
or renewal dates, loans, . . . investment activities, purchasing practices, [and],
annuity policies and objectives.” (Id.) In addition, while not expressly pleaded, this
information, if compiled in a database or other form for each of Plaintiff’s customers,
might also constitute a trade secret. This Court has held that “where an individual
maintains a compilation of detailed records over a significant period of time,” such
that they have particular value as a compilation or manipulation of information,
“those records could constitute a trade secret even if ‘similar information may have
been ascertainable by anyone in the . . . business.’” Koch Measurement Devices, Inc.
v. Armke, 2015 NCBC LEXIS 45, at *13 (N.C. Super. Ct. May 1, 2015) (quoting Byrd's
Lawn & Landscaping, Inc. v. Smith, 142 N.C. App. 371, 376, 542 S.E.2d 689, 692
(2001)). See also, State ex rel. Utils. Comm'n v. MCI Telecomms., Corp., 132 N.C. App.
625, 634, 514 S.E.2d 276, 282 (1999) (concluding that a “compilation of information”
involving customer data and business operations which has “actual or potential
commercial value from not being generally known” is sufficient to constitute a trade
secret under the NCTSPA); RoundPoint Mortg. Co. v. Florez, 2016 NCBC LEXIS 18,
at *31–32 (N.C. Super. Ct. Feb. 18, 2016); Red Valve v. Titan Valve, 2018 NCBC
LEXIS 41, at *27 (N.C. Super. Ct. Apr. 17, 2018) (citing Koch, Byrd’s, and
RoundPoint).
61. The Court concludes that the allegations in this case, read generously,
are minimally sufficient to put Defendants on notice of the trade secrets that they
have allegedly misappropriated.
62. Defendants next argue that the claims for misappropriation must be
dismissed because Plaintiff fails to allege facts regarding the means by which
Defendants misappropriated Plaintiff’s trade secrets. (ECF No. 8, at pp. 15–16.)
With regard to Pack and BB&T, the Court agrees. Misappropriation requires the
“acquisition, disclosure, or use of a trade secret without express or implied authority
or consent.” G.S. § 66-152(1). Plaintiff does not allege any acts by which Pack and
BB&T allegedly misappropriated trade secrets. While Plaintiff alleges that Pack
“had access to” Wells Fargo’s trade secret information while she was employed, there
is no allegation that Pack accessed or acquired trade secrets at any time when she
was not authorized to do so. Plaintiff also fails to allege facts that would show Pack
disclosed or used Wells Fargo’s trade secrets, or that any particular customers for
whom Pack was responsible have diverted their business from Wells Fargo to BB&T.
63. In sum, the Complaint does not allege facts to support an allegation of
misappropriation against Pack, and the claim against her must be dismissed.
Defendants’ motion to dismiss the misappropriation of trade secrets claims against
Pack in Count Five of the Complaint therefore should be GRANTED.
64. Plaintiff also fails to allege facts that support its claim that BB&T
misappropriated Wells Fargo’s trade secrets. Plaintiff does not allege that Link,
Raynor, or Pack disclosed Wells Fargo’s trade secrets to BB&T or that BB&T acquired
Wells Fargo’s trade secrets by some other means. Nor does Wells Fargo claim that
BB&T has used Wells Fargo’s trade secrets, alleging only that “[u]pon information
and belief, Individual Defendants have used Wells Fargo’s . . . Trade Secrets to
identify, contact, solicit, and induce Wells Fargo’s clients.” (ECF No. 3, at ¶ 56;
emphasis added.) Instead, Plaintiff alleges only that “[u]pon information and belief,
the Defendants have misappropriated Wells Fargo’s trade secret information in order
to unfairly compete against Wells Fargo and solicit its customers.” (Id. at ¶ 102.) The
Court is not required to accept Wells Fargo’s conclusory speculation regarding
BB&T’s alleged misappropriation of trade secrets. Washburn, 190 N.C. App. at 327,
660 S.E.2d at 586 (affirming dismissal of misappropriation claim and holding
“Defendant’s allegation that it ‘believes [Plaintiffs] used its trade secrets’ is general
and conclusory”). Defendants’ motion to dismiss the misappropriation of trade secrets
claims against BB&T in Count Five of the Complaint therefore should be GRANTED.
65. Plaintiff’s allegations in support of its claim that Link misappropriated
trade secrets are weak, at best. Plaintiff does not expressly allege that Link ever
accessed Wells Fargo’s trade secrets without authorization or consent. To the
contrary, Plaintiff alleges that Link had access to trade secret information only “by
way of his employment with Wells Fargo.” (ECF No. 3, at ¶ 96.) The Complaint does
not allege that Link downloaded, copied, or otherwise removed from Wells Fargo any
trade secret information, nor that Link has disclosed trade secrets to BB&T or anyone
else. Instead, Plaintiff alleges only that Link had access to Wells Fargo’s trade secret
information during his employment with Wells Fargo, that Link became employed by
BB&T, that some Wells Fargo customers for whom Link was responsible have
transferred their business to BB&T, and “upon information and belief” Link has used
Wells Fargo’s trade secret information to solicit these customers. A significant
inferential leap is required from those alleged facts to conclude that Link
misappropriated trade secrets.
66. Nevertheless, the Court is mindful that Plaintiff is entitled to have
inferences drawn in its favor at this stage of the proceedings. Accordingly, the Court
concludes that the claim for misappropriation of trade secrets against Link should
survive dismissal. Therefore, Defendants’ motion to dismiss the misappropriation of
trade secrets claims against Link in Count Five of the Complaint should be DENIED.
67. Plaintiff’s allegations that Raynor, immediately prior to submitting his
resignation, entered Plaintiff’s offices after hours, and downloaded and copied
documents that, on information and belief, contained Plaintiff’s trade secrets,
sufficiently alleges the acts by which Raynor misappropriated trade secrets.
Therefore, Defendants’ motion to dismiss the misappropriation of trade secrets claims
against Raynor in Count Five of the Complaint should be DENIED.
E. Tortious interference with contractual relations (Count Seven)
68. As its seventh claim, Plaintiff makes claims for tortious interference
with contract against all Defendants, alleging that they each interfered with the
Restrictive Agreements between Wells Fargo and Link and Raynor, respectively.
(ECF No. 3, at ¶¶ 110–15.)
69. To state a claim for tortious interference with contract, a plaintiff must
allege: “(1) a valid contract between plaintiff and a third party which confers upon
the plaintiff a contractual right against a third party; (2) the defendant knows of the
contract; (3) the defendant intentionally induces the third person not to perform the
contract; (4) and in doing so he acts without justification; (5) resulting in actual
damage to the plaintiff.” Kuykendall, 322 N.C. at 661, 370 S.E.2d at 387 (citing
Childress v. Abeles, 240 N.C. 667, 674, 84 S.E.2d 176, 181–82 (1954)).
70. As a preliminary matter, the Court has already concluded that
Plaintiff’s claims for breach of the non-solicitation of customers and non-solicitation
of employees covenants in sections III.a., III.b. and III.c. of the Restrictive
Agreements should be dismissed because those covenants are invalid and
unenforceable. Since no valid contract existed based on these covenants, Plaintiff’s
claims that the Defendants interfered with those covenants in the Restrictive
Agreements must also fail. Medical Staffing Network, Inc., 194 N.C. App. at 658, 670
S.E.2d at 328 (affirming dismissal of tortious interference claim where trial court had
found restrictive covenants overbroad and unenforceable). Accordingly, Defendants’
motion to dismiss the claims for tortious interference in Count Seven of the Complaint
claiming interference with the covenants not to solicit customers and employees
should be GRANTED.
71. Similarly, to the extent that Plaintiff attempts to make a claim for
tortious interference with contract based on Defendants’ alleged interference with the
return of property provisions in Restrictive Agreement, the Court has dismissed the
claim for breach of this provision as against Link. In addition, the Complaint does
not plead any facts to support an allegation that Link, Pack, or BB&T engaged in any
conduct intended to induce Raynor’s alleged breach of the return of property
provisions. Defendants’ motion to dismiss the claims for tortious interference in
Count Seven of the Complaint claiming interference with the return of property
provisions should be GRANTED.
72. This leaves only the claim that Defendants intentionally interfered with
the confidential information covenants in the Restrictive Agreements. With regard
to this claim, the Complaint fails to plead any facts to support an allegation that Pack
interfered with the Restrictive Agreements between Wells Fargo and Link and
Raynor. The claim against Pack for tortious interference fails and should be
dismissed.
73. Defendants contend that the claim for tortious interference against
BB&T should be dismissed because Plaintiff does not plead facts in support of the
allegation that BB&T intentionally induced Link or Raynor to breach the Restrictive
Agreements. (ECF No. 8, at p. 17.) Defendants also argue that the claim for tortious
interference against BB&T fails because the allegations in the Complaint establish
that Wells Fargo and BB&T are competitors, but Plaintiff does not allege facts
supporting the conclusory claim that BB&T acted without justification in interfering
with the Restrictive Agreements. (Id. at pp. 17–18.) The Court agrees with
Defendants on both contentions.
74. First, as with Pack, the Complaint does not contain a single allegation
of fact that BB&T engaged in any conduct designed to interfere with the Restrictive
Covenants. Unlike the vast majority of cases that arise in this context, Plaintiff does
not allege that BB&T recruited Link and Raynor as part of a campaign to raid Wells
Fargo’s sales force, that BB&T encouraged Link and Raynor to secretly acquire Wells
Fargo’s confidential information, nor that BB&T directed Link and Raynor to target
their former Wells Fargo customers and solicit their commercial insurance business.
Rather, Plaintiff alleges only that Link and Raynor resigned from Wells Fargo,
became employed with BB&T, and subsequently diverted several customers from
Wells Fargo to BB&T. These allegations do not sufficiently state that BB&T
intentionally interfered with the Restrictive Covenants.
75. In addition, Wells Fargo and BB&T were competitors in the commercial
insurance industry. The North Carolina Supreme Court has held that if the
defendant’s interference is “for a legitimate business purpose, his actions are
privileged. . . . [C]ompetition in business constitutes justifiable interference in
another’s business relations and is not actionable so long as it is carried on in
furtherance of one’s own interest and by means that are lawful.” Peoples Sec. Life
Ins. Co. v. Hooks, 322 N.C. 216, 221, 367 S.E.2d 647, 650 (1988). This “privilege [to
interfere] is conditional or qualified; that is, it is lost if exercised for a wrong purpose.
In general, a wrong purpose exists where the act is done other than as a reasonable
and bona fide attempt to protect the interest of the defendant which is involved.” Id.
at 220, 367 S.E.2d at 650.
76. “If the defendant's only motive is a malicious wish to injure the plaintiff,
[defendant’s] actions are not justified.” Hooks, 322 N.C. at 221, 367 S.E.2d at 650.
The malice required to overcome a justification of business competition is legal
malice, and not actual malice. Childress, 240 N.C. at 675, 84 S.E.2d at 182 (“It is not
necessary, however, to allege and prove actual malice in the sense of personal hatred,
ill will, or spite in order to make out a case for the recovery of compensatory damages
against the outsider for tortiously inducing the breach of the third person’s contract
with the plaintiff. The term ‘malice’ is used in this connection in its legal sense, and
denotes the intentional doing of the harmful act without legal justification.”); Murphy
v. McIntyre, 69 N.C. App. 323, 328–29, 317 S.E.2d 397, 401 (1984) (noting that legal
malice “means intentionally doing a wrongful act or exceeding one's legal right or
authority in order to prevent the making of a contract between two parties” and the
act “must be taken with the design of injuring one of the parties to the contract or of
gaining some advantage at the expense of a party”); Robinson, Bradshaw, & Hinson,
P.A. v. Smith, 129 N.C. App. 305, 318, 498 S.E.2d 841, 851 (1998) (“A person acts with
legal malice if he does a wrongful act or exceeds his legal right or authority in order
to prevent the continuation of the contract between the parties.”).
77. In order to survive dismissal, a complaint alleging tortious interference
“must admit of no motive for interference other than malice.” Pinewood Homes, Inc.
v. Harris, 184 N.C. App. 597, 605, 646 S.E.2d 826, 832–33 (2007); Filmar Racing, Inc.
v. Stewart, 141 N.C. App. 668, 674, 541 S.E.2d 733, 738 (2001) (“[W]e have held that
the complaint must admit of no motive for interference other than malice.”); Kerry
Bodenhamer Farms, LLC v. Nature's Pearl Corp., 2017 NCBC LEXIS 27, at *16 (N.C.
Super. Ct. Mar. 27, 2017) (holding “[t]he pleading standards for a tortious
interference with contract claim are strict. The complaint must admit of no motive
for interference other than malice. When the complaint reveals that the interference
was justified or privileged, this Court must grant a motion” to dismiss (citations and
quotations omitted)).
78. Here, Plaintiff has alleged that the Defendants, including BB&T, acted
“without justification”, but does not plead facts supporting a claim that BB&T acted
with malice or for any improper purpose, nor that BB&T was motivated by anything
other than an interest in successfully competing against Wells Fargo. (ECF No. 3, at
¶ 113.) The recruitment of employees from a business competitor is presumptively
privileged competitive activity, absent an allegation of legal malice. Hooks, 322 N.C.
at 221, 367 S.E.2d at 650. The claim for tortious interference as against BB&T fails
and should be dismissed.
79. With regard to the claims against Link and Raynor for tortious
interference with the confidentiality covenants in the Restrictive Agreements,
Plaintiff has not alleged facts to support an allegation that Raynor induced Link to
violate his confidentiality covenant. To the contrary, Raynor resigned his
employment with Wells Fargo over five months after Link left Wells Fargo and
became employed with BB&T, and Plaintiff offers no explanation as to why Raynor
would encourage Link to violate confidentiality restrictions while both were still
employed with Wells Fargo. The allegations do not support a claim for tortious
interference with the confidentiality covenants against Raynor. Therefore, the
tortious interference with contract claim based on these allegations fails and should
be dismissed.
80. With regard to Link, Plaintiff alleges that “Raynor told his manager at
Wells Fargo that [ ] Link encouraged him to leave Wells Fargo for BB&T.” (ECF No.
3, at ¶ 41.) While this is not an express allegation that Link encouraged Raynor to
also violate his confidentiality covenant, the Court concludes that the allegation
arguably would support the claim for tortious interference against Link, and
Plaintiff’s claim that Link tortiously interfered with the confidentiality covenant in
Raynor’s Restrictive Agreement.
81. Therefore, Defendants’ motion to dismiss Count Seven for tortious
interference with contractual relations is DENIED as to Plaintiff’s claim that Link
interfered with the confidentiality covenant in Raynor’s Restrictive Agreement.
Defendants’ motion to dismiss Count Seven for tortious interference with contractual
relations as to all other Defendants and claims is GRANTED, and such claims are
DISMISSED.
F. Unfair and deceptive trade practices (Count Eight)
82. As its Eighth claim, Plaintiff alleges that all Defendants have engaged
in unfair and deceptive acts or practices in violation of G.S. § 75-1.1. (ECF No. 3, at
¶¶ 116–120.) Plaintiff specifically alleges that
Defendants’ wrongful acts, include[e] but [are] not limited
to, Defendants’ misappropriation of trade secrets,
conspiracy and fraudulent scheme to divert business
opportunities away from Wells Fargo, theft of company
property to gain an unfair advantage, interference with
Defendant Link and Defendant Raynor’s contractual
obligations owed to Wells Fargo, and other deceptive,
unethical and unscrupulous conduct[.]
(ECF No. 3, at ¶ 117.)
83. “To establish a prima facie case of unfair and deceptive trade practices,
a plaintiff must show that (1) the defendant committed an unfair or deceptive act or
practice, (2) the act was in or affecting commerce, and (3) the act proximately caused
injury to the plaintiff.” White v. Consol. Planning, Inc., 166 N.C. App. 283, 303, 603
S.E.2d 147, 161 (2004).
84. Defendants correctly point out that the facts pleaded in the Complaint
do not support allegations of a “conspiracy and fraudulent scheme to divert business
opportunities away from Wells Fargo.” Plaintiff does not make claims for fraud or
conspiracy, and there are no facts alleged that would support such claims. Plaintiff
makes no argument in support of these allegations, and the claim for unfair and
deceptive trade practices cannot be based on such conduct.
85. In addition, the underlying claims against Pack and BB&T for
misappropriation of trade secrets and intentional interference with contract have
been dismissed. Plaintiff does not allege, nor argue, that Pack or BB&T engaged in
any other conduct that would support a claim for unfair trade practices. Therefore,
Defendants’ motion to dismiss the claims against Pack and BB&T for unfair and
deceptive trade practices in Count Eight of the Complaint should be GRANTED.
86. With regard to the claims against Link and Raynor, “[a] violation of the
[NCTSPA] constitutes an unfair act or practice under N.C. Gen. Stat. § 75-1.1.”
Medical Staffing Network, Inc., 194 N.C. App. at 659, 670 S.E.2d at 329 (citing N.C.
Gen. Stat. § 66-146(2007)). Since Plaintiff’s claims against Link and Raynor for
misappropriation of trade secrets survive dismissal, so must the claims for violation
of G.S. § 75-1.1. Defendants’ motion to dismiss the claims against Link and Raynor
for unfair and deceptive trade practices in Count Eight of the Complaint should be
DENIED.
III. CONCLUSION
THEREFORE, IT IS ORDERED that Defendants’ motion to dismiss is GRANTED,
in part, and DENIED, in part, as follows:
1. Defendants’ motion to dismiss Plaintiff’s First and Second Counts for breach
of contract are GRANTED, and the claims are DISMISSED.
2. Defendants’ motion to dismiss Plaintiff’s Count Three for breach of contract
against Link is DENIED.
3. Defendants’ motion to dismiss Count Four for breach of contract against Link
is GRANTED, and the claim is DISMISSED.
4. Defendants’ motion to dismiss Count Five for misappropriation of trade
secrets against Pack and BB&T is GRANTED, and those claims are
DISMISSED.
5. Defendants’ motion to dismiss Count Five for misappropriation of trade
secrets against Link and Raynor is DENIED.
6. Defendants’ motion to dismiss Count Seven for tortious interference with
contractual relations is DENIED as to Plaintiff’s claim that Link interfered
with the confidentiality covenant in Raynor’s Restrictive Agreement.
7. Defendants’ motion to dismiss Count Seven for tortious interference with
contractual relations as to all other Defendants and claims is GRANTED, and
those claims are DISMISSED.
8. Defendants’ motion to dismiss the claims against Pack and BB&T in Count
Eight for unfair and deceptive trade practices is GRANTED, and those claims
are DISMISSED.
9. Defendants’ motion to dismiss the claims against Link and Raynor in Count
Eight for unfair and deceptive trade practices is DENIED.
This, the 8th day of May, 2018.
/s/ Gregory P. McGuire
Gregory P. McGuire
Special Superior Court Judge
for Complex Business Cases