Sometimes when seeking a trail of breadcrumbs to help unwind a twisty problem, one finds the whole loaf, instead. So it was for the N.C. Business Court in granting a preliminary injunction on a claim for misappropriation of trade secrets in Biesse America, Inc. v. Dominici, 2019 NCBC 50 (N.C. Super. Ct. Aug. 19, 2019). See Order and Opinion.
- Trade Secret Misappropriation cannot be remedied by return of confidential information. N.C. Gen. Stat. § 66-155 is violated when a defendant acquires information it knew (or should know) is a trade secret.
- A geographically unbounded covenant not to compete is not dead on arrival, but showing its rational tie to the employer’s business and the employee’s job is a “tall order.” 2019 NCBC 50 at ¶43.
Shortly before leaving a job with Plaintiff, Defendant Dominici “began making unusual requests for documents” containing confidential information, including sensitive purchase order forms, price lists and negotiated discounts. Id. at ¶10. In entering a temporary restraining order, the Court ordered the return of that information; Dominici complied, and also produced thousands of other electronic files to his former employer. Id. at ¶15.
Contained in that bevy of confidential information was a conveniently labeled “Opportunities” spreadsheet created by Dominici that recorded dozens of Plaintiff’s perceived business opportunities in the Pacific Northwest, an area Dominici did not supervise for Biesse but where he was expected to work for his new employer, Defendant SCM Group North America, Inc. Id. at ¶17. While the Court concluded such information was unneeded for Dominici’s work with Plaintiff, “it “had self-evident value for his next job.” Id. at ¶28. A tart footnote sealed the analysis:
As best the Court can tell, Dominici’s position is that he never intended to contact these customers but instead identified them so that he would know which customers not to contact during his employment with SCM America. Nothing in the record lends credence to this alleged motive[.] (emphasis in original).
Id. at n.1. Placing special emphasis on the purloined “opportunity” information, as well as another self-created “Masterfile” spreadsheet that contained Plaintiff’s stock inventory and sales price information, the Court found “substantial evidence” that Dominici acquired and used Plaintiff’s trade secrets in violation of N.C. Gen. Stat. § 66-155, and entered a preliminary injunction. Id. at ¶¶16, 32.
Dominici and his new employer argued that any harm to Plaintiff had been “cured” by the return of Plaintiff’s information in conjunction with the TRO, but the Court demurred, stating that “[t]his is simply not the law.” Noting the long-term effects associated with misappropriations, the Court affirmed the necessity of a preliminary injunction given Dominici’s acquisition of the information with intent to compete. Id. at ¶34.
Judge Conrad’s resolute findings on misappropriation did not color the Court’s plain rejection of a non-compete clause in Dominici’s employment agreement with Plaintiff. The Court found the clause had no geographic restrictions, essentially making it a worldwide covenant. The opinion noted that neither the Plaintiff, nor the Court of its own inquiry, had identified “any case in which a North Carolina court has granted a preliminary injunction to enforce a worldwide covenant not to compete.” Id. at ¶¶42-43. The Court found that the non-compete clause’s short duration of six months did not sufficiently balance its “boundless territorial scope.” Id. at ¶45.
The Court did not reach the issue of whether the non-solicitation clause was unenforceable. While the case’s early record was replete with references to Dominici’s acquisition of Plaintiff’s information with the intent to compete against it, the Court denied a preliminary injunction because “there is no evidence that Dominici has solicited [Plaintiff’s] customers.” Id. at ¶38.
Brad Risinger is a partner in the Raleigh office of Fox Rothschild LLP. He maintains a commercial litigation practice that frequently involves business disputes before the North Carolina Business Court, and the state’s federal and state trial courts.