Aeroflow Inc. v. Arias, 070511 NCSUP, 11 CVS 1652

Docket Nº:11 CVS 1652
Opinion Judge:Gale, Judge.
Party Name:AEROFLOW INC., Plaintiff, v. CARLOS E. ARIAS, JR., DR. THOMAS P. STERN, AND ADVANCED RESPIRATORY AND SLEEP MEDICINE, PLLC, Defendants.
Attorney:McGuire, Wood & Bissette, P.A., by Hayley Roper Wells and Rendi Mann-Stadt, for Plaintiff Aeroflow, Inc. Parker Poe Adams & Berstein LLP, by John H. Beyer and James C. Lesnett, Jr., for Defendants Carole E. Arias, Jr., Dr. Thomas P. Stern, and Advanced Respiratory and Sleep Medicine, PLLC.
Case Date:July 05, 2011
Court:Superior Courts of Law and Equity of North Carolina
 
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2011 NCBC 20

AEROFLOW INC., Plaintiff,

v.

CARLOS E. ARIAS, JR., DR. THOMAS P. STERN, AND ADVANCED RESPIRATORY AND SLEEP MEDICINE, PLLC, Defendants.

No. 11 CVS 1652

Superior Court of North Carolina, Buncombe

July 5, 2011

McGuire, Wood & Bissette, P.A., by Hayley Roper Wells and Rendi Mann-Stadt, for Plaintiff Aeroflow, Inc.

Parker Poe Adams & Berstein LLP, by John H. Beyer and James C. Lesnett, Jr., for Defendants Carole E. Arias, Jr., Dr. Thomas P. Stern, and Advanced Respiratory and Sleep Medicine, PLLC.

ORDER ON PLAINTIFF'S MOTION FOR A PRELIMINARY INJUNCTION

Gale, Judge.

{1} This matter is before the Court on Plaintiff Aeroflow Inc.'s ("Aeroflow") Motion for a Preliminary Injunction ("Motion") against Defendant Carlos E. Arias, Jr. ("Arias") pursuant to Rule 65 of the North Carolina Rules of Civil Procedure. For the reasons stated below, the motion is DENIED. The Temporary Restraining Order has expired and is no longer in effect.

I. PROCEDURAL BACKGROUND

{2} Aeroflow filed this action in Buncombe County on March 28, 2011 against Defendants Arias, Dr. Thomas P. Stern ("Dr. Stern"), and Advanced Respiratory and Sleep Medicine, Inc. ("ARSM"). On the same day, Aeroflow filed a Motion for Temporary Restraining Order ("TRO") and a Motion for Preliminary Injunction against Arias. On March 30, 2011, the presiding Superior Court Judge for Buncombe County granted Aeroflow's Motion for TRO. On April 8, 2011, the parties consented to an extension of the TRO until the hearing on Aeroflow's Motion, scheduled for May 2, 2011, in Buncombe County Superior Court.

{3} On April 27, 2011, Defendants filed the Notice of Designation as a Mandatory Complex Business Matter. On April 28, 2011, the Chief Justice of the Supreme Court of North Carolina designated this matter a mandatory complex business matter, and the matter was assigned to the undersigned. On May 2, 2011, the parties consented to a second extension of the TRO until the hearing on Aeroflow's Motion, scheduled in this Court on June 8, 2011. Plaintiff and Defendants filed memoranda in support of their positions on June 3, 2011.

{4} The Court held a hearing on June 8, 2011, at which it received testimony and heard arguments of counsel. By consent of the parties, the hearing was held in Guilford County. The parties consented to an extension of the TRO until July 1, 2011 to allow the issuance of the Court's ruling on the Motion. By telephone conference on June 30, 2011, the Court advised the parties that it would allow the TRO to expire and that a written opinion would follow. The Court's decision and this Order are based on consideration and review of the pleadings, affidavits, briefs, oral testimony, and arguments of counsel.

II. FACTUAL BACKGROUND

{5} The Court notes that many facts essential to the Court's determination of the motion are not disputed. There are other disputed facts relevant to Plaintiff's probability of success on the merits and whether it has suffered or may suffer irreparable harm justifying injunctive relief. The Court will note the areas of factual dispute. In several instances, the Court's determination is that provisions of the Carlos Arias Employment Agreement ("Agreement") in question may be valid, but there has been insufficient evidence to date to demonstrate a breach of those provisions or that Aeroflow has suffered or will suffer irreparable harm because of any such breach.1 The Court's findings must be viewed in the context of the present Motion and, to that extent, must be considered preliminary and limited to the requested pendente lite relief.

A. The Parties

{6} Plaintiff Aeroflow is a North Carolina corporation with its principal place of business in Asheville, Buncombe County, North Carolina. (First Am. V. Compl. ¶ 1.)

{7} Defendant Arias is a citizen and resident of North Carolina. (Aff. Of Carlos E. Arias ("Arias Aff.") ¶ 1.)

{8} Defendant Dr. Stern is a citizen and resident of Mecklenburg County, North Carolina. (First Am. V. Compl. ¶ 4.)

{9} Defendant ARSM is a professional limited liability company organized and existing under the laws of North Carolina with its principal place of business in Huntersville, Mecklenburg County, North Carolina. (Answer ¶ 5.)

B. The Employment Contract and the Dispute Between the Parties

{10} The facts and claims must be considered in light of both the general business in which Aeroflow and ARSM are engaged and the more narrow contractual definition of the term "Business" in the Agreement in question. As noted below, the contractual definition narrows the scope of the covenants in the Agreement. The Court utilizes the capitalized term when referring to the contractual definition and the lower case term when referring to the parties' broader business.

{11} Aeroflow is a medical services company. (Test. Casey Hite at Hr'g June 8, 2011.) Aeroflow sells durable home medical equipment, including continuous positive airway pressure ("CPAP") machines and supplies, oxygen supplies, nebulizers, aerosol medications, power wheelchairs, and power scooters. Aeroflow also provides specialized diagnostic testing, such as diagnostic sleep tests and pulmonary function tests. Aeroflow conducts the majority of its diagnostic testing in physicians' offices and conducts a small minority of testing in patients' homes. Aeroflow does not employ physicians but hires physicians as independent contractors to perform and read testing. Physicians then may prescribe the use of medical products, which Aeroflow sells.

{12} On January 1, 2010, Dr. Stern opened ARSM with offices in Huntersville and Hendersonville, North Carolina. Dr. Stern is the only licensed physician and sole member of ARSM. Dr. Stern is board certified in internal medicine, pediatrics, pulmonology, critical care medicine, and sleep medicine. At ARSM, Dr. Stern provides adult pulmonary consultations and adult and pediatric sleep consultations. (Aff. of Dr. Thomas P. Stern ("Dr. Stern Aff.") ¶¶ 2–4.) Dr. Stern or ARSM occasionally sells home medical equipment, but such sales are incidental to the medical practice.

{13} On or about June 22, 2009, Aeroflow and Arias entered into the Agreement. (First Am. V. Compl. ¶ 13.) As an Outside Marketing Representative, Arias' duties were to meet with physicians, hospitals, and other medical providers to educate them about Aeroflow's products.

{14} The Agreement specifically defines Aeroflow's "Business" as "providing and selling home medical equipment[.]" (First Am. V. Compl., Ex. A ("Agreement").)

{15} The Agreement contains four restrictive provisions: non-competition, non-disclosure, non-solicitation, and employee interference. Some, but not all, depend on whether Arias was terminated for cause. Some, but not all, apply only to the defined term "Business."

{16} The non-competition provision restricts Arias from competing with Aeroflow "by entering into or attempting to enter into any business substantially similar to [Aeroflow's] Business for any reason whatsoever, directly or indirectly, . . ." within sixty (60) miles of the four Aeroflow facilities listed in the Agreement or any future facility established during Arias' employment with Aeroflow, for twelve (12) months following his employment with Aeroflow. (Id. at ¶ 14(b)(i).) The Agreement provides that the non-competition provision does not apply if Aeroflow terminates Arias' employment without cause.

{17} The non-disclosure provision restricts Arias from disclosing any of Aeroflow's Confidential Information that Arias became aware of by reason of his employment with Aeroflow for his benefit or the benefit of any other person or entity.2 (Id. at ¶ 14(b)(ii).) The provision further restricts Arias from retaining Confidential Information in any written or electronic form following termination. (Id.) This provision applies whether or not Arias was terminated for cause.

{18} The non-solicitation provision restricts Arias from soliciting Business from any customer, client, patient, referral source, or contractor of Aeroflow who did Business with Aeroflow during the twelve (12) months preceding Arias' termination, on his own behalf or as a agent or independent contractor of another person or entity, for twelve (12) months following his employment with Aeroflow. (Id. at ¶ 14(b)(iii).) The Agreement provides that the non-solicitation provision does not apply if Aeroflow terminates Arias' employment without cause.

{19} The employee interference provision restricts Arias from hiring, attempting to hire, inducing to terminate or otherwise work for an Aeroflow competitor, or attempting to induce to terminate or otherwise work for an Aeroflow competitor an Aeroflow employee, employed within the three (3) months preceding Arias' termination, for twelve (12) months following his employment with Aeroflow. (Id. at ¶ 14(b)(iv).) This provision applies whether or not Arias was terminated for cause.

{20} The Agreement allows Aeroflow to terminate Arias "for cause" without the necessity of prior notice. However, notice is required in connection with the termination.

{21} The Agreement specifically defines "for cause" as "Employee's gross, willful and continuous failure to comply with the terms of this Agreement; Employee's noncompliance with the rules and regulation of the Employer; Employee's failure to perform his or her duties competently; any material violation of Employee of his or her obligations under this Agreement; . . . ." (Id. at ¶ 5(c).)

{22} The Agreement does not detail any specific job description, duties, or quotas.

{23} The Agreement states that any notice required by the Agreement "shall be given in writing and delivered as follows: (a) by personal...

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