Akzo Nobel Coatings Inc. v. Rogers

• Decision Date: 03 November 2011
• Docket Number: 11 CVS 3013
• Court: Superior Court of North Carolina
• Parties: AKZO NOBEL COATINGS INC., Plaintiff, v. DAVID B. ROGERS, BUDDY KEITH TAYLOR, ROBERT A. PARKER, JOSEPH E. CARAVELLO, MARTIN R. SCHONING, ATEC COATINGS, LLC, and ATEC WIND ENERGY PRODUCTS, LLC, Defendants.

2011 NCBC 41

AKZO NOBEL COATINGS INC., Plaintiff, v. DAVID B. ROGERS, BUDDY KEITH TAYLOR, ROBERT A. PARKER, JOSEPH E. CARAVELLO, MARTIN R. SCHONING, ATEC COATINGS, LLC, and ATEC WIND ENERGY PRODUCTS, LLC, Defendants.

No. 11 CVS 3013

Superior Court of North Carolina, Guilford

November 3, 2011

Nelson Mullins Riley & Scarborough, L.L.P. by Mark A. Stafford, Donald R. Pocock, and Brian R. Anderson for Plaintiff.

Womble Carlyle Sandridge & Rice, PLLC by Ronald R. Davis and Brent F. Powell for Defendants David B. Rogers, Buddy Keith Taylor, Robert A. Parker, Joseph E. Caravello, and Martin R. Schoning.

ORDER ON MOTION FOR JUDGMENT ON THE PLEADINGS

Gale, Judge.

{1} THIS MATTER is before the Court on the Motion for Judgment on the Pleadings ("Motion") on Behalf of David B. Rogers ("Rogers"), Buddy Keith Taylor ("Taylor"), Robert A. Parker ("Parker"), Joseph E. Caravello ("Caravello"), and Martin R. Schoning ("Schoning") (collectively, "Individual Defendants"), pursuant to Rule 12(c) of the North Carolina Rules of Civil Procedure ("Rule(s)").

I. INTRODUCTION

{2} Plaintiff filed this action seeking injunctive and monetary relief against the Individual Defendants and two corporate defendants. The Individual Defendants are former employees of a company acquired by Plaintiff, some of whom continued employment with Plaintiff. Plaintiff alleges they have misused confidential information and misappropriated trade secrets in violation of various non-compete and non-solicitation agreements. The Motion attacks all of Plaintiff's claims except one trade secrets claim against Defendant Parker. The Motion asserts, inter alia, that each claim depends on non-competition and non-solicitation covenants which are overly broad and unenforceable as a matter of law. The Motion further asserts that the tort claims and the unfair and deceptive practices claim must fail because Plaintiff should be confined to its contract remedies.

{3} The Motion is GRANTED IN PART and DENIED IN PART. Disputed material facts remain on at least some of the contract claims. Plaintiff should not be allowed to pursue tort claims based on the contracts at issue. The unfair and deceptive practice claims against defendants other than Parker should be dismissed.

II. PROCEDURAL HISTORY

{4} Plaintiff filed this action in Guilford County on January 24, 2011. The matter was designated a Complex Business Case and assigned to this Court on January 27, 2011. Plaintiff asserts seven claims: 1) breach of contract based on non-compete, non-solicitation, and confidentiality agreements; 2) fraud, or alternatively, negligent misrepresentation (against only Defendant Rogers); 3) unfair and deceptive trade practices under N.C. Gen. Stat. §§ 75-1.1 et seq. ("Chapter 75"); 4) tortious interference with contract; 5) tortious interference with prospective economic advantage; 6) misappropriation of trade secrets; and 7) punitive damages. The Complaint incorporates each of the Individual Defendant's employment agreements.

{5} All Defendants answered the Complaint on March 30, 2011. The Individual Defendants filed the Motion on May 26, 2011.

{6} The Motion has been fully briefed, the Court heard oral argument, and the Motion is ripe for disposition.

III. STATEMENT OF FACTS

{7} The following facts are taken from the Complaint and accepted as true for purposes of the Motion with reasonable inferences drawn in Plaintiff's favor without giving effect to conclusions of law unsupported by factual allegations or inferences drawn from those facts. Branch Banking & Trust Co. v. Lighthouse Fin. Corp., 2005 NCBC 3 ¶ 8 (N.C. Super. Ct. July 13, 2005), http://www.ncbusinesscourt.net/opinions/2005%20NCBC%203.htm.

A. The Parties

{8} Plaintiff Akzo Nobel Coatings, Inc. ("Plaintiff" or "Akzo Nobel") is a company existing under the laws of the State of Delaware doing business in North Carolina. Plaintiff conducts business throughout the United States and its affiliated companies sell industrial coatings and specialty chemicals internationally.

{9} Defendants ATec Coatings, LLC ("ATec Coatings") and ATec Wind Energy Products, LLC ("ATec Wind") (together, "ATec") are North Carolina limited liability companies. The Individual Defendants are former employees of Chemcraft Holdings Corporation ("Chemcraft") or one of its subsidiaries. Defendant Rogers was a Chemcraft officer and shareholder. Chemcraft and its subsidiaries merged into Akzo Nobel via a stock purchase.^1[] With the exception of Rogers, each Individual Defendant continued to work for Akzo Nobel after the merger.

{10} Rogers, a North Carolina resident, executed a "Consulting Agreement" with Akzo Nobel in May 2007 in connection with the sale of his Chemcraft stock, whereby he agreed to consult and advise Akzo Nobel on the "industrial wood coatings business of Chemcraft, and certain other services related thereto . . . ." (Consulting Agreement ("Rogers Agreement") ¶ 1) in exchange for $9, 500, 000.00 and other consideration. (Compl. ¶ 20; Answer of Def. David B. Rogers ¶ 20.)

{11} Defendant Taylor, a Texas resident, was the former "national marketing manager for Chemcraft International specializing in European high solids wood finishes . . . ." (Compl. ¶ 57.) He became Director of Sales and Marketing for Akzo Nobel. Prior to May 2009, he had sales and management responsibilities across all Akzo Nobel markets in the United States. (Compl. ¶ 51.) He received $304, 000.00 from Akzo Nobel as consideration for an employment agreement dated May 17, 2007. (Compl. ¶ 52; Answer of Def. Buddy Keith Taylor ¶ 52.) Plaintiff refers to Taylor as a "founder" of ATec currently in charge of its sales and marketing. (Compl. ¶ 56.)

{12} Defendant Schoning, a North Carolina resident, was Business Development Manager for Flooring for Akzo Nobel prior to October 2009, based in High Point, North Carolina. Plaintiff asserts he played a substantial role in Akzo Nobel's wood and vinyl flooring business across the United States, and "formulated and modified coatings and obtained, through his employment with Akzo Nobel, substantial expertise in the application of industrial coatings." (Compl. ¶ 69.) He received $50, 000.00 to execute a "Non-Competition and Non-Solicitation Agreement" with Chemcraft on October 18, 2007. (Compl. ¶ 71; Answer of Def. Martin R. Schoning ¶ 71.) Schoning resigned his employment with Akzo Nobel in October 2009. Plaintiff refers to him as a "founder" of ATec. (Compl. ¶ 75.)

{13} Defendants Parker, an Arizona resident, and Caravello, a Texas resident, are former Akzo Nobel Sales Service Representatives. Parker signed a "Confidentiality Agreement and Covenant Not to Compete" with Chemcraft International, Inc. on August 1, 2003. Caravello signed a substantially similar "Confidentiality Agreement and Covenant Not to Compete" with Chemcraft International, Inc. on Apri11, 2004. Parker resigned his employment with Akzo Nobel in July 2009. Caravello resigned in January 2010. Plaintiff refers to both men as "founders" of ATec. (Compl. ¶ 66.)

B. The Consulting and Employment Agreements

1. The Rogers Consulting Agreement

{14} The Rogers Agreement executed with Akzo Nobel contains, inter alia, a choice-of-law provision, a non-competition provision, and a non-solicitation provision. It states that the agreement "shall be governed by the laws of the state of Delaware, without giving effect to any choice or conflict of laws provision or rules that would cause the application of laws of any jurisdiction other than the State of Delaware." (Rogers Agreement ¶ 18(a).)

{15} In the section titled "Non-Competition, " the Rogers Agreement states that for four (4) years following termination (the "Restricted Period"), Rogers would not

directly or indirectly (including as a creditor, guarantor, financial backer, stockholder, director, officer, consultant, advisor, employee, member, investor, producer, or otherwise), individually or through any Person that he controls, engage in, participate in, or acquire an equity interest in any Person that engages or participates in any business that competes in any way with any Company Entity engaged in the business of wood coatings ("Restricted Business"), other than in accordance with the provisions of this Section 7.

(Rogers Agreement ¶ 7(a)(i).)^2[]

{16} The Rogers Agreement also states that during the Restricted Period, Rogers would not, without Akzo Nobel's consent, directly or indirectly, individually or through any Person that he Controls:

(i) become an employee, consultant, advisor, director, officer, producer, partner or, or [sic] joint or co-venturer with, enter into any contract, agreement, or arrangement with, or seek to influence (x) any Person with respect to a Restricted Business, or (y) any Person that is a joint or co-venturer with, or partner of, any Company Entity, or otherwise engaged in any material on-going business relationship or discussions or negotiations with a view to entering into such a relationship, or

(ii) interfere with or negatively impact customer and other material business relationships of any Company Entity.

(Rogers Agreement ¶ 7(b).) The provisions of the Non-Compete section apply without any geographic limitation.

{17} In the section titled "Return of Property, Non-Solicitation, " the Rogers Agreement states that during the Restrictive Period, Rogers would not

directly or indirectly, individually or through any Person he Controls, (i) solicit for employment any employee of any Company Entity, (ii) interfere with or seek to interfere with the employment relationship between any employee of any Company Entity and a Company Entity (including any such solicitation or interference made on behalf of or as representative of, any other Person) or (iii) except in connection with the provision of the Consulting Services, call on or solicit any customer or client, or prospective customer or client, of any Company Entity, provided however, [Rogers] may hire persons who are not

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