TUCKER AUTO-MATION OF NORTH CAROLINA, LLC v. RUTLEDGE et al
Filing
38
MEMORANDUM OPINION AND ORDER signed by JUDGE LORETTA C. BIGGS on 7/10/2017; that Defendants' Motion to Dismiss (ECF No. 32 ) is GRANTED IN PART AND DENIED IN PART. The Motion to Dismiss is GRANTED with respect to Tucker's tortious interfer ence with contract and prospective economic advantage claims and Tucker's claim under N.C. Gen. Stat. § 99A-2. The Motion to Dismiss is DENIED with respect to Tucker's misappropriation of trade secrets claim and the UDTPA claim based on such misappropriation as stated herein. (Sheets, Jamie)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
TUCKER AUTO-MATION OF NORTH CAROLINA,
LLC,
Plaintiff/Counter Defendant,
v.
RUSSELL RUTLEDGE & RUTLEDGE
COMMERCIAL, LLC,
Defendants/Counterclaimants,
v.
PATRICK MERCIER & TUCKER
AUTO-MATION HOLDINGS, USA, LLC
Counterclaim Defendants.
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1:15-cv-893
MEMORANDUM OPINION AND ORDER
Loretta C. Biggs, District Judge.
Plaintiff,
Tucker-Automation
of
North
Carolina,
LLC,
(“Tucker”) initiated this diversity action on October 21, 2015
against Defendants, Russell Rutledge and Rutledge Commercial, LLC,
alleging claims arising under state law.
This matter is before
the Court on Defendants’ Motion to Dismiss pursuant to Rule
12(b)(6) of the Federal Rules of Civil Procedure.
(ECF No. 32.)
For the reasons stated below, Defendants’ motion is granted in
part and denied in part.
Tucker, in its Amended Complaint (“Complaint”), alleges that
it manufactures and distributes, among other things, revolving
automatic doors for commercial use.
(ECF No. 31 ¶ 10.)
Defendant
Russell Rutledge (“Rutledge”) served as Tucker’s president from
June 2013 to his resignation in September 2015.
(Id. ¶ 10.)
Eight
days following his resignation, Tucker alleges that Rutledge filed
paperwork with the North Carolina Secretary of State to form
Rutledge Commercial, LLC. (Id. ¶ 32.) According to the Complaint,
Rutledge Commercial, LLC is “in the business of providing automatic
door solutions to commercial business enterprises.”
On October 21, 2015,
following
claims
Tucker filed this action,
against
Defendants:
(Count
(Id. ¶ 62.)
alleging
1)
the
intentional
interference with actual and prospective contractual relations;
(Count 2) misappropriation of trade secrets in violation of N.C.
Gen. Stat. § 66-152; (Count 3) defamation; (Count 4) unfair and
deceptive trade practices in violation of N.C. Gen. Stat. § 751.1; (Count 5) conversion; and (Count 6)1 violation of North
Carolina’s Property Protection Act, N.C. Gen. Stat. § 99A-2.
(Id.
at 11–16.)
Defendants move to dismiss Counts 1, 2, 4, and 6 for failure
to state a claim upon which relief can be granted pursuant to Rule
12(b)(6) of the Federal Rules of Civil Procedure.
1
(ECF No. 32.)
The Complaint has two separate claims, which Tucker identifies as Count
5—its claim of conversion and claim under N.C. Gen. Stat. § 99A-2. For
purposes of this discussion, the Court will identify the claim under
N.C. Gen. Stat. § 99A-2 as Count 6.
2
I.
LEGAL STANDARD
A motion to dismiss under Rule 12(b)(6) “challenges the legal
sufficiency
of
a
complaint,”
including
pleading standard of Rule 8(a)(2).
F.3d 186, 192 (4th Cir. 2009).
whether
it
meets
the
Francis v. Giacomelli, 588
Rule 8(a)(2) requires a complaint
to contain “a short and plain statement of the claim showing that
the pleader is entitled to relief.”
Fed. R. Civ. P. 8(a)(2).
“[A]
complaint must contain sufficient factual matter, accepted as
true, to ‘state a claim to relief that is plausible on its face.’”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
A claim is plausible
when the complaint alleges facts that allow the court “to draw the
reasonable
inference
that
the
defendant
is
liable
for
the
misconduct alleged.” Id. When evaluating the complaint, the court
views the facts in the light most favorable to the plaintiff.
United States ex rel. Oberg v. Pa. Higher Educ. Assistance Agency,
745 F.3d 131, 136 (4th Cir. 2014).
Further, where, as in this case, subject matter jurisdiction
is based on diversity of citizenship, the court must apply the
substantive law of the forum state.
See Private Mortg. Inv.
Servs., Inc. v. Hotel & Club Assocs., Inc., 296 F.3d 308, 312 (4th
Cir. 2002).
In doing so, the court has an obligation to apply the
law as determined by the state’s highest court, i.e., the North
3
Carolina Supreme Court.
See id.
When the state’s highest court
has not addressed directly or indirectly the issue before the
federal court, the state’s appellate courts’ decisions, though not
binding, constitute the best indicia of what the state law is
unless the court is convinced by other persuasive data that the
state’s highest court would rule otherwise.
Id.
The court must
apply state laws as they currently exist and cannot expand them.
Burris Chem., Inc. v. USX Corp., 10 F.3d 243, 247 (4th Cir. 1993).
II.
DISCUSSION
A. (Count
1)
Intentional
Interference
Prospective Contractual Relations2
The
Court
Tucker’s
claim
first
of
considers
tortious
Defendants’
interference
2
with
Actual
motion
with
to
and
dismiss
contract
and
North Carolina courts have used varying terminology in identifying
tortious interference claims, referring to tortious interference with
relations, business relations, and contract interchangeably at times.
See Sunbelt Rentals, Inc. v. Head & Engquist Equip., L.L.C., No. 00-CVS10358, 2002 WL 31002955, at *10 (N.C. Super. Ct. July 10, 2002); see
Superior Performers, Inc. v. Phelps, 154 F. Supp. 3d 237, 248 (M.D.N.C.
2016). This Court explained that “claims for tortious interference with
business relations and prospective business relations are understood to
be claims for tortious interference with contract and prospective
contract.” Phelps, 154 F. Supp. 3d at 248. In a recent decision, the
North Carolina Supreme Court referred to the claims as tortious
interference with contract and tortious interference with prospective
economic advantage. Beverage Sys. of the Carolinas, LLC v. Associated
Beverage Repair, LLC, 784 S.E.2d 457, 462–63 (N.C. 2016). The Court
will reference the claims consistent with the North Carolina Supreme
Court’s decision in Beverage Systems.
4
prospective economic advantage.3
Though raised as a single claim,
the Court notes that Count 1 actually includes two separate claims—
one for tortious interference with contract and one for tortious
interference with prospective economic advantage.
See Superior
Performers, Inc. v. Phelps, 154 F. Supp. 3d 237, 248 (M.D.N.C.
2016).
Defendants argue both claims should be dismissed because
the Complaint fails, among other things, to “specifically identify
any contracts that have been breached or any particular contract
that any customer has been induced to refrain from entering into
with Tucker.”
(ECF No. 33 at 18.)
The Court agrees.
To state a claim of tortious inference with contract, a
plaintiff must allege: “(1) a valid contract between the 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 person
not to perform the contract; (4) and in doing so acts without
justification;
(5)
resulting
in
actual
damage
to
plaintiff.”
Beverage Sys. of the Carolinas, 784 S.E.2d at 462 (quoting United
Labs., Inc. v. Kuykendall, 370 S.E.2d 375, 387 (N.C. 1988)).
“A
tortious interference with prospective economic advantage claim
3
Though the Defendants, in their briefing, address Tucker’s sixth claim
under N.C. Gen. Stat. § 99A-2 claim first, the Court will address the
claims as they appear in the Complaint, beginning with Tucker’s tortious
interference claims.
5
has the same elements except that instead of an existing contract,
there must be a contract that would have been entered into but for
the defendant’s conduct.”
BioSignia, Inc. v. Life Line Screening
of Am., Ltd., No. 1:12CV1129, 2014 WL 2968139, at *7 (M.D.N.C.
July 1, 2014) (citing Beck v. City of Durham, 573 S.E.2d 183, 191
(N.C. Ct. App. 2002)).
In its Complaint, Tucker alleges that in the automated door
industry “it is not customary for customers to sign written
contracts for a specified term with their manufacturer and/or
supplier.”
(ECF No. 31 ¶ 46.)
Rather, according to Tucker, it is
common practice for an automated door company to provide technical
and administrative service on a going-forward basis as needed,
once a product is installed.
(Id. ¶¶ 46–47.) Tucker alleges that,
before Rutledge’s resignation, its customers included AshevilleBuncombe Technical Community College, UNC Heart and Vascular at
Meadowmont, Moses H. Cone Memorial Park, Duke University Hospital,
and Sampson Regional Medical Center.
(See id. ¶ 45.)
These
clients, Tucker alleges, provided over $500,000 in business in the
last two years, but after Rutledge’s resignation, they elected to
retain Rutledge Commercial, LLC to fulfill their needs on a goingforward basis.
(Id. ¶¶ 45, 48.)
According to the Complaint, it
was Defendants’ actions that induced these customers to transition
their business from Tucker to Defendants.
6
(See id. ¶¶ 44, 48.)
While these allegations, viewed in the light most favorable
to Tucker, demonstrate an ongoing business relationship between
Tucker and its former customers, an ongoing business relationship,
without
any
insufficient
contractual
obligations
to
claim
state
a
of
contract under North Carolina law.
between
tortious
the
parties,
interference
is
with
See Phelps, 154 F. Supp. 3d at
249, 250 (dismissing the plaintiff’s tortious interference with
contract claim because the plaintiff failed to sufficiently allege
a valid contract between itself and a third party, but rather
“refers
to
its
‘relationships’
with
its
customers,
which
is
insufficient under North Carolina law”); Beverage Sys. of the
Carolinas,
784
S.E.2d
at
462–63
(dismissing
the
tortious
interference with contract claim, holding that although it was the
“industry
custom . . .
for
owners
of
beverage-dispensing
equipment” to engage repair companies “on an as-needed basis only,”
rather than via contract, the plaintiff had failed to establish a
legal obligation between it and the customers it acquired); Sports
Quest, Inc. v. Dale Earnhardt, Inc., Nos. 02 CVS 0140, 01 CVS 2200,
2004 WL 742918, at *6 (N.C. Super. Ct. Mar. 12, 2004) (explaining
that the “fatal flaw[]” in the plaintiff’s tortious interference
claim is that “not all of [the plaintiff’s] relationships with
third
parties
included
contracts”
and
thus
plaintiff
cannot
maintain its tortious interference claim with respect to the
7
“existing business relations” in the absence of a “contractual
obligation to [the plaintiff]”).
sufficient
to
allege
a
claim
Nor are Tucker’s allegations
of
tortious
interference
with
prospective economic advantage under North Carolina law, because
Tucker has failed to sufficiently allege that a contract would
have resulted with a third party but for Defendants’ tortious
interference.
See Phelps, 154 F. Supp. 3d at 249–50; Beverage
Sys. of the Carolinas, 784 S.E.2d at 463.
allegations
reveal
an
expectation
continue to do business with it.
that
its
At best, Tucker’s
customers
would
However, a mere expectation
customers “would continue to do business with [a] plaintiff” is
“insufficient to support a claim for either tortious interference
with contract or tortious interference with prospective economic
advantage.”
Beverage Sys. of the Carolinas, 784 S.E.2d at 463.
Because Tucker has failed to specifically identify a contract
that confers a contractual right between Tucker and any third party
or any specific contract Defendants induced a third party to
refrain from entering into with Tucker,4 the Complaint fails to
state a claim of tortious interference with contract or tortious
4
Defendants only made arguments on the first and fourth
ECF No. 33 at 18–19.) In light of the Court’s ruling
failed to sufficiently allege the first element, it is
the Court to evaluate Defendants’ arguments related
element.
8
elements. (See
that Tucker has
unnecessary for
to the fourth
interference
with
prospective
economic
advantage.
Thus,
Defendants’ motion to dismiss these claims must be granted.
B. (Count 2) Misappropriation of Trade Secrets
Count
2
of
Tucker’s
Complaint
alleges
that
Defendants
misappropriated various trade secrets in violation of the North
Carolina Trade Secrets Protection Act (“TSPA”), N.C. Gen. Stat. §
66-152.
(ECF No. 31 ¶¶ 77–88.)
Defendants seek dismissal,
contending, among other things, that Tucker: (1) has not identified
any alleged trade secrets with the requisite particularity; and
(2) has not alleged acts of misappropriation with the requisite
particularity.
(ECF No. 33 at 9.)
The Court disagrees.
Under the TSPA, an “owner of a trade secret shall have remedy
by civil action for misappropriation of his trade secret.”
Gen. Stat. § 66-153.
information
commercial
that
value
N.C.
“A trade secret is business or technical
‘[d]erives
from
not
independent
being
actual
generally
or
known
potential
or
readily
ascertainable through independent development . . . and [is] the
subject of efforts that are reasonable under the circumstances to
maintain its secrecy.’”
Equip.,
L.L.C.,
620
Sunbelt Rentals, Inc. v. Head & Engquist
S.E.2d
222,
226
(N.C.
Ct.
App.
2005)
(alterations in original) (quoting N.C. Gen. Stat. § 66-152(3)(a)–
(b)). Courts consider the following factors in determining whether
an item constitutes a trade secret:
9
(1) the extent to which information is known
outside the business; (2) the extent to which it is
known to employees and others involved in the
business; (3) the extent of measures taken to guard
secrecy of the information; (4) the value of
information to business and its competitors; (5)
the amount of effort or money expended in
developing the information; and (6) the ease or
difficulty with which the information could
properly be acquired or duplicated by others.
Id. (quoting State ex rel. Utils. Comm’n v. MCI Telecomms. Corp.,
514 S.E.2d 276, 282 (N.C. Ct. App. 1999)).
“Misappropriation,”
under the TSPA, 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.”
N.C. Gen. Stat.
§ 66-152(1).
To state a claim for misappropriation of trade secrets, the
complaint
“must
identify
[the]
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.”
Washburn v.
Yadkin Valley Bank & Tr. Co., 660 S.E.2d 577, 585 (N.C. Ct. App.
2008) (quoting VisionAIR, Inc. v. James, 606 S.E.2d 359, 364 (N.C.
Ct.
App.
sufficient
2004)).
“The
specificity
complaint
the
misappropriation occurred.”
acts
must
by
also
which
set
forth
the
with
alleged
Bldg. Ctr., Inc. v. Carter Lumber,
10
Inc., No. 16 CVS 4186, 2016 WL 6142993, at *3 (N.C. Super. Ct.
Oct. 21, 2016).
“[A] complaint that makes general allegations in
sweeping
conclusory
and
identifying
insufficient
the
trade
under
statements,
secrets
North
without
allegedly
Carolina
misappropriation of trade secrets.
law
to
specifically
misappropriated,”
state
a
claim
is
for
Washburn, 660 S.E.2d at 585–
86.
Tucker’s Complaint identifies the following trade secrets
allegedly misappropriated by Defendants:
(a) financial information, including pricing methods
and profit/loss statistics;
(b) business strategy, growth plans, and business
development initiatives;
(c) customer lists, which include customer names,
identity of key personnel, telephone numbers,
street addresses, and email addresses;
(d) customer
information,
including
customer
preferences
as
to
product
types
and
specifications,
pricing,
and
retention
strategies;
(e) contract terms;
(f) historic sales data;
(g) pricing arrangements, including margins;
(h) products and product developments; and
(i) capital investments[.]
(ECF No. 31 ¶ 22.)
Tucker’s Complaint also identifies “specific
data” that allegedly “compromises [sic] a significant portion of
the Confidential Information and Trade Secrets” that are at issue
here:
(a) the prices charged by Tucker to its customers
for automatic door products and services on
specific types of projects;
11
(b) discounts, if any, provided by Tucker to its
customers for products sold and services
rendered;
(c) the costs incurred by Tucker with respect to its
provision of products and services, and the
profit margin related to the same; and
(d) other relevant items that may be useful to
maintaining the customer relationship, such as
the frequency at which a customer may order new
products, or request service on existing items.
(Id. ¶ 24.)
The foregoing allegations in paragraphs 22 and 24 of the
Complaint, taken as true and drawing all reasonable inferences in
favor of Tucker, adequately identify the trade secrets Defendants
allegedly misappropriated.
North Carolina courts have held that
similar types of information can constitute trade secrets.
See Ge
Betz, Inc. v. Conrad, 752 S.E.2d 634, 649 (N.C. Ct. App. 2013);
Sunbelt Rentals, 620 S.E.2d at 227–28; Byrd’s Lawn & Landscaping,
Inc. v. Smith, 542 S.E.2d 689, 692 (N.C. Ct. App. 2001); Bldg.
Ctr., 2016 WL 6142993, at *3–4; accord Philips Elecs. N. Am. Corp.
v. Hope, 631 F. Supp. 2d 705, 721 (M.D.N.C. 2009) (“Customer
pricing lists, cost information, confidential customer lists, and
pricing and bidding formulas may constitute trade secrets.”).
While Defendants may desire a more particularized description of
12
the alleged trade secrets,5 at this stage in the litigation, the
Court finds that Tucker’s allegations are sufficient to place
Defendants on notice as to the trade secrets they are accused of
misappropriating.
See Bldg. Ctr., 2016 WL 6142993, at *4.
The Court also finds that Tucker has sufficiently alleged
acts that plausibly demonstrate that Defendants misappropriated
the alleged trade secrets.
Tucker’s Complaint alleges that: (1)
Rutledge, at the time of his departure, took with him “a smartphone
and
a
number
of
hard-copy
files
containing
Confidential
Information and Trade Secrets;” and (2) “Rutledge accessed the
electronic database containing information respecting Tucker’s
vendors,
contractors,
price
quotes,
costs,
and
discounts,
downloaded or otherwise copied this information, and took it with
him for the purpose of using the information to further his own
business interests to the detriment of Tucker” (ECF No. 31 ¶¶ 42,
43). See E-Ntech Indep. Testing Servs., Inc. v. Air Masters, Inc.,
5
In addition to arguing Tucker has not sufficiently identified alleged
trade secrets, Defendants contend that the allegations in the Complaint
defeat Tucker’s misappropriation claim. (ECF No. 33 at 15.) According
to Defendants, Tucker’s Complaint alleges that “sales in the automatic
door industry are generated through personal relationships, and
customers rely on those personal relationships in deciding who to do
business with.”
(Id. at 15.)
Defendants assert that “personal
relationships, experience, and knowledge of an employee are not trade
secrets” and thus Tucker’s claim of misappropriation must be dismissed.
(Id. at 16.) However, as stated above, Tucker’s Complaint sufficiently
identifies information that could constitute trade secrets under North
Carolina law to survive dismissal.
13
No. 16 CVS 3092, 2017 WL 73449, at *5 (N.C. Super. Ct. Jan. 5,
2017) (holding that allegations that information was copied or
recorded from plaintiff’s computer system and hard files, and such
information was obtained from one of three employees with access
to the information, was sufficient at the Rule 12(b)(6) stage).
The Complaint further alleges that Rutledge took the trade secrets
and other confidential information while he was still employed by
Tucker and used the information to transition business from Tucker
to Rutledge.
(See ECF No. 31 ¶¶ 35–37, 43–44.)
“[W]here a former
employee has access to [confidential information] through former
employment, moves to another company, and causes the same customers
to move their business to the new company,” courts have found such
allegations of misappropriation sufficient.
Safety Test & Equip.
Co. v. Am. Safety Util. Corp., No. 13 CVS 1037, 2015 WL 1880769,
at *15 (N.C. Super. Ct. Apr. 23, 2015) (citing Byrd’s Lawn &
Landscaping, 542 S.E.2d at 693); see Philips Elecs. N. Am. Corp.,
631 F. Supp. 2d at 722 (“Courts have found misappropriation where
a former employee had access to confidential information or helped
a competitor quickly deliver the new products to market.”).
The
Court
concludes
that
Tucker
misappropriation of trade secrets.
dismiss this claim is denied.
14
has
stated
a
claim
of
Thus, Defendants’ motion to
C. (Count 4) Unfair and Deceptive Trade Practices
Tucker’s fourth claim alleges that Defendants’ activities in
“unlawfully interfer[ing] with Tucker’s existing and prospective
customer relationships, malign[ing] Tucker’s business reputation,
solicit[ing]
Tucker’s
employees,
misappropriat[ing]
Tucker’s
confidential and proprietary information, and retain[ing] Tucker’s
personal property” violate the North Carolina Unfair and Deceptive
Trade Practices Act (“UDTPA”), N.C. Gen. Stat. § 75-1.1.
(See ECF
No. 31 ¶¶ 96–97.) Defendants argue that, because Tucker has failed
to state claims of tortious interference and misappropriation of
trade secrets, the UDTPA claim should be dismissed to the extent
it is based on those claims.
(ECF No. 33 at 19.)
The UDTPA declares “unfair or deceptive acts or practices”
unlawful.
N.C. Gen. Stat. § 75-1.1(a).
“A practice is unfair if
it is unethical or unscrupulous, and it is deceptive if it has a
tendency to deceive.”
Dalton v. Camp, 548 S.E.2d 704, 711 (N.C.
2001)). To prevail on a UDTPA claim, a plaintiff must demonstrate:
“(1) defendant committed an unfair or deceptive act or practice,
(2) the act in question was in or affecting commerce, and (3) the
act proximately caused injury to the plaintiff.”
Tucker’s UDTPA
tortious
claim rests,
interference
with
in part,
contract
and
Id.
on its claims for
prospective
economic
advantage and, in part, on the claim of misappropriation of trade
15
secrets.
state
(See ECF No. 31 ¶¶ 96–97.)
claims
of
tortious
Because Tucker has failed to
interference
with
contract
and
prospective economic advantage, its UDTPA claim must be dismissed
to the extent it is based on the tortious interference claims.
See Beverage Sys. of the Carolinas, 784 S.E.2d at 463 (“Plaintiff’s
section 75-1.1 claim presupposes success of at least one of
plaintiff’s contract claims.
Because we hold that each of those
claims fails, plaintiff’s unfair and deceptive practices claim
also fails.”).
On the other hand, because Tucker has stated a
claim of misappropriation of trade secrets, the Court denies
Defendants’ motion to dismiss the UDTPA claim to the extent such
claim is based on the claim for misappropriation of trade secrets.6
D. (Count 6) Property Protection Act, N.C. Gen. Stat. § 99A-27
Finally, the Court must examine Defendants’ motion to dismiss
Tucker’s sixth claim, which Tucker asserts only against Rutledge
individually, under the Property Protection Act, N.C. Gen. Stat.
§ 99A-2.
The statute states that “[a]ny person who intentionally
gains access to the nonpublic areas of another’s premises and
6
Tucker also bases its UDPTA claim on allegations of Defendants’
commercial disparagement, solicitation, and retention of Tucker’s
property. (ECF No. 31 ¶ 97; ECF No. 35 at 12.) Defendants have not
sought dismissal of Tucker’s UDTPA claim based on these allegations.
Thus, the UDTPA claim also survives to the extent it is based on these
allegations.
7
See supra note 1.
16
engages in an act that exceeds the person’s authority to enter
those areas is liable to the owner or operator of the premises for
any damages sustained.”
N.C. Gen. Stat. § 99A-2(a).
Rutledge
contends that the General Assembly provided N.C. Gen. Stat. § 99A2 with an effective date of January 1, 2016, making the statute
applicable only to acts committed on or after that date.
33 at 5.)
(ECF No.
Rutledge further argues that, because the alleged acts
that form the basis of Tucker’s claim under N.C. Gen. Stat. § 99A2 occurred prior to January 1, 2016, the statute is inapplicable
and the claim must be dismissed.
(Id. at 6.)
The Court agrees.
“All statutes are given an effective date by the General
Assembly, either in the statute itself or under N.C. Gen. Stat. §
120-20[.]”
2012).
Ray v. N.C. Dep’t of Transp., 727 S.E.2d 675, 682 (N.C.
To determine whether the General Assembly provided an
effective date in the statute itself, the court must first examine
“the plain language of the statutory provision[] at issue,” and,
if
necessary,
consider
legislative
history
and
circumstances
surrounding the statute’s enactment. State v. Sitoksy, 767 S.E.2d
623, 625–26 (N.C. Ct. App. 2014).
If the statutory language is
clear and unambiguous, the court eschews statutory interpretation
and must give effect to the statute’s plain and definite meaning.
Id.
In the absence of an effective date in the statute, the
default rule in N.C. Gen. Stat. § 120-20 provides that “[a]cts of
17
the General Assembly shall be in force only from and after 60 days
after the adjournment of the session in which they shall have
passed.”
N.C. Gen. Stat. § 120-20.
Here, the session law enacting N.C. Gen. Stat. § 99A-2 plainly
states that “[t]his act becomes effective January 1, 2016, and
applies to acts committed on or after that date.”
Laws 2015-50.
2015 N.C. Sess.
This Court is therefore obligated to give effect to
this unambiguous stated effective date.
See Sitoksy, 767 S.E.2d
at
the
626
(concluding
that,
because
General
Assembly
“specifically articulated a clear effective date” in the session
law, the court is “obligated to give effect to this unambiguously
stated effective date”).
It is undisputed that Tucker’s claim
under N.C. Gen. Stat. § 99A-2 is based on alleged acts by Rutledge
that occurred prior to January 1, 2016, as the Complaint alleges
that the relevant acts were committed prior to September 14, 2015—
the date in which Rutledge ceased employment with Tucker.
generally ECF No. 31 ¶¶ 31–60.)
(See
Accordingly, N.C. Gen. Stat. §
99A-2 does not provide Tucker with a cause of action based on the
allegations in the Complaint.
Tucker advances two arguments in an attempt to avoid dismissal
of this claim.
First, Tucker argues that the January 1, 2016
effective date “appeared in the bill introduced in the North
Carolina legislature,” and “such limitation is omitted in the
18
enacted statute.”
(ECF No. 35 at 3.)
However, the stated
effective date of N.C. Gen. Stat. § 99A-2 was contained in the
session law enacting the statute.
50.
See 2015 N.C. Sess. Laws 2015-
Where, as in this case, a bill “becomes law, the term ‘bill’
is no longer used,” and the “law is given a chapter number and is
published under that number in a volume called ‘Session Laws of
North
Carolina.’”
See
How
a
Law
is
Made,
http://www.ncga.state.nc.us/NCGAInfo/Bill-Law/bill-law.html (last
visited July 5, 2017) (emphasis added).
While Tucker is correct
that the codified statute, N.C. Gen. Stat. § 99A-2, does not
contain an effective date, the North Carolina Supreme Court has
held that a “statement of a legislative enactment contained in the
Session laws is controlling over the statement [of it as] codified
in the General Statutes.” Custom Molders, Inc. v. Am. Yard Prods.,
Inc., 463 S.E.2d 199, 202 (N.C. 1995); see also Schofield v. Great
Atl. & Pac. Tea Co., 264 S.E.2d 56, 62 (N.C. 1980); Wright v.
Fidelity & Cas. Co. of N. Y., 155 S.E.2d 100, 107 (N.C. 1967).
Moreover, even if, for the sake of argument, the General
Assembly failed to designate a specific effective date for N.C.
Gen. Stat. § 99A-2, as Tucker appears to argue, the default
effective date supplied by N.C. Gen. Stat. § 120-20 would still
require the Court to dismiss Tucker’s claim.
The 2015 session of
the General Assembly was adjourned on September 30, 2015, (ECF No.
19
33-4), providing N.C. Gen. Stat. § 99A-2 with a default effective
date of November 29, 2015, which is more than two months after the
date on which Rutledge resigned, on September 14, 2015.
Second, Tucker argues that N.C. Gen. Stat. § 99A-2 is a
clarification of existing law and applies to Rutledge’s conduct
irrespective of the effective date.
(See ECF No. 35 at 3–4.)
Specifically, Tucker argues that “Chapter 99A has always provided
statutory civil remedies for interference with private property
rights” and that “Section 99A-2 simply supplements and codifies
existing
thereto.”
law
with
specific
statutory
penalties
applicable
(Id. at 4.)
“In construing a statute with reference to an amendment it is
presumed that the legislature intended either (a) to change the
substance of the original act, or (b) to clarify the meaning of
it.”
Childers v. Parker’s, Inc., 162 S.E.2d 481, 483 (N.C. 1968).
“A clarifying amendment, unlike an altering amendment, is one that
does not change the substance of the law but instead gives further
insight into the way in which the legislature intended the law to
apply from its original enactment.”
Ray, 727 S.E.2d at 681.
Clarifying amendments function retroactively, applying “to all
cases brought after their effective dates” irrespective of when
the claim actually arose.
Id.
In contrast, because altering
amendments are substantive changes in the law, the effective date
20
provided by the General Assembly controls.
Id. at 681–82; Wiggins
v. E. Carolina Health-Chowan, Inc., 760 S.E.2d 323, 326 n.2 (N.C.
Ct. App. 2014).
“To determine whether the amendment clarifies the prior law
or alters it requires a careful comparison of the original and
amended statutes.”
315 (N.C. 1993).
Ferrell v. Dep’t of Transp., 435 S.E.2d 309,
“Often the amendment is ‘to improve the diction,
or to clarify that which was previously doubtful.’”
Childers, 162 S.E.2d at 484).
Id. (quoting
In such case, the amendment is
presumed to be clarifying rather than altering.
Trs. of Rowan
Tech. Coll. v. J. Hyatt Hammond Assocs., Inc., 328 S.E.2d 274, 280
(N.C. 1985).
where
“the
An amendment is also more likely to be clarifying
statute
initially
‘fails
expressly
to
address
particular point’ but addresses it after the amendment.”
a
Ray, 727
S.E.2d at 682 (quoting Ferrell, 435 S.E.2d at 315).
Where,
however, the legislature alters an unambiguous statute, it is
presumed
that
the
legislature
Childers, 162 S.E.2d at 484.
intended
to
change
the
law.
It is the court’s “job to determine
whether an amendment is clarifying or altering,” and “[t]he General
Assembly’s inclusion of an effective date in the session law does
not alter this outcome.”
Ray, 727 S.E.2d at 681–82.
Here, Tucker has not provided any North Carolina authority
addressing whether N.C. Gen. Stat. § 99A-2 is a clarifying or
21
altering amendment.
As a federal court sitting in diversity
jurisdiction, the Court must apply state laws as they currently
exist and cannot expand them. Burris, 10 F.3d at 247.
Nor does
this Court have an original statute to which it can compare N.C.
Gen. Stat. § 99A-2 because N.C. Gen. Stat. § 99A-2 is a new statute.
Specifically, the statute creates a civil cause of action in favor
of an employer against an employee who, among other things, engages
in certain acts that amount to a breach of the person’s duty of
loyalty to the employer.
See N.C. Gen. Stat. § 99A-2(b); People
for the Ethical Treatment of Animals, Inc. v. Stein, No. 1:16CV25,
2017 WL 1683188, at *1 (M.D.N.C. May 2, 2017) (considering “a preenforcement challenge to the North Carolina Property Protection
Act, . . . which in relevant part creates a civil cause of action
for
a
North
Carolina
employer
against
an
employee”),
docketed, No. 17-1669 (4th Cir. May 26, 2017).
appeal
The statute also
provides, inter alia, for exemplary damages in the amount of $5,000
per day for violations.
See N.C. Gen. Stat. § 99A-2(d)(4).
While
Tucker claims that the statute codifies existing common laws such
as
trespass
and
conversion,
(ECF
No.
35
at
4),
the
statute
specifically states, “Nothing in this section shall be construed
to limit any other remedy available at common law or provided by
22
the General Statutes.”8
N.C. Gen. Stat. § 99A-2(g).
Thus, the
Court is unpersuaded by Tucker’s argument that N.C. Gen. Stat. §
99A-2 is clarifying in nature and thus applies retroactively.
The Court concludes that N.C. Gen. Stat. § 99A-2 applies to
acts committed on or after its effective date of January 1, 2016.
Because Tucker’s claim is based on acts committed prior to this
date, Tucker has failed to state a claim under N.C. Gen. Stat. §
99A-2.
Thus, Defendants’ motion to dismiss this claim must be
granted.
III. CONCLUSION
Tucker has failed to state claims of tortious interference
with contract and tortious interference with prospective economic
advantage and, thus, to the extent that Tucker’s UDTPA claim is
based on these claims, it likewise fails to state a claim.
has stated a claim of misappropriation of trade secrets.
Tucker
As such,
Tucker’s UDTPA claim survives to the extent it is based on the
misappropriation of trade secrets claim.9
Finally, Tucker’s claim
under N.C. Gen. Stat. § 99A-2 also fails.
8
Further, unlike trespass and conversion, N.C. Gen. Stat. § 99A-2 applies
to certain acts that, among other things, amount to a breach of an
employee’s duty of loyalty to an employer.
9
The UDTPA claim also survives to the extent it is based on Defendants’
alleged commercial disparagement, solicitation, and retention of
Tucker’s property. See supra note 6.
23
For
the
reasons
outlined
herein,
the
Court
enters
the
following:
ORDER
IT IS THEREFORE ORDERED that Defendants’ Motion to Dismiss
(ECF No. 32) is GRANTED IN PART AND DENIED IN PART.
The Motion to
Dismiss is GRANTED with respect to Tucker’s tortious interference
with
contract
and
prospective
economic
advantage
Tucker’s claim under N.C. Gen. Stat. § 99A-2.
claims
and
The Motion to
Dismiss is DENIED with respect to Tucker’s misappropriation of
trade
secrets
claim
and
the
UDTPA
claim
based
on
misappropriation as stated herein.
This, the 10th day of July, 2017.
/s/ Loretta C. Biggs
United States District Judge
24
such
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