American Air Filter Co., Inc. v. Price

• Court: Superior Court of North Carolina
• Writing for the Court: Gregory P. McGuire Special Superior Court Judge
• Citation: American Air Filter Co., Inc. v. Price, 2017 NCBC 54, 16 CVS 13610 (N.C. Super. Ct. Jun 26, 2017)
• Decision Date: 26 June 2017
• Docket Number: 16 CVS 13610
• Parties: AMERICAN AIR FILTER COMPANY, INC. d/b/a AAF International, Plaintiff, v. SAMUEL C. PRICE, JR. and CAMFIL USA, INC. d/b/a CAMFIL AMERICAS, Defendants.

2017 NCBC 54

AMERICAN AIR FILTER COMPANY, INC. d/b/a AAF International, Plaintiff, v. SAMUEL C. PRICE, JR. and CAMFIL USA, INC. d/b/a CAMFIL AMERICAS, Defendants.

No. 16 CVS 13610

Superior Court of North Carolina, Wake

June 26, 2017

THIS MATTER comes before the Court on Defendants Samuel C. Price Jr.'s ("Price") and Camfil USA, Inc.'s d/b/a Camfil Americas ("Camfil") (collectively "Defendants") Motion to Dismiss ("Motion to Dismiss").

THE COURT, after considering the Motion to Dismiss, the briefs 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 that the Motion to Dismiss should be GRANTED, in part, and DENIED, in part, for the reasons set forth below.

Young Moore and Henderson P.A. by Christopher A. Page, Esq. Jonathan L. Crook, Esq., for Plaintiff American Air Filter Company, Inc. d/b/a AAF International.

Smith Moore Leatherwood, LLP by George J. Oliver, Esq., Jeffrey R Whitley, Esq., for Defendants Samuel C. Price, Jr. and Camfil USA Inc. d/b/a Camfil Americas.

OPINION AND ORDER ON DEFENDANTS' MOTION TO DISMISS PLAINTIFF'S FIRST AMENDED COMPLAINT

Gregory P. McGuire Special Superior Court Judge

FACTUAL AND PROCEDURAL BACKGROUND

1. The Court does not make findings of fact on motions to dismiss under Rule 12(b)(6) of the North Carolina Rules of Civil Procedure (N.C. Stat. § 1A-1, Rule 12(b)(6) (hereinafter the "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).

2. Plaintiff American Air Filter, Inc. ("AAF") is a Delaware corporation with its principal place of business in Louisville, Kentucky. It "maintains operations" in Wake County, North Carolina. (VFAC ¶ 1.)^[1] AAF manufactures and services clean air products and equipment for commercial buildings, data centers, healthcare facilities, food and beverage, microelectronics, and schools and universities.

3. Camfil is a direct competitor of AAF. Camfil also does business in North Carolina, including Wake County.

4. Price is a resident of Johnston County, North Carolina, and a former employee of AAF. Price is currently employed with Camfil.

A. AAF's confidential business information.

5. AAF's "business is driven by relationships with its customers." (VFAC ¶ 8.) AAF has made significant investment in developing and enhancing customer relationships and in obtaining and compiling a substantial body of what it alleges is "confidential and proprietary information and trade secrets . . . critical to its ability to serve existing and prospective" customers. (VFAC ¶¶ 11, 12.)

6. AAF maintains web-based tools called "Sales Playbook" and "Salesforce.com" in which it compiles confidential and proprietary information used in its sales efforts.

7. AAF also has a proprietary program called Total Cost of Ownership Diagnostics ("TCOD"). (VFAC ¶ 17.) TCOD provides technical data about AAF products and competitors' products based on AAF's internal and third-party testing and performance studies. TCOD also calculates the costs of ownership of AAF's products as compared to competitors' products.

8. AAF alleges that "[t]he specific trade secrets accessible through these programs include, " inter alia: "secret and highly sensitive company-wide prices that AAF corporate officers negotiated on behalf of AAF with its national accounts"; "quoting tools that use proprietary algorithms to create custom quotes that incorporate prices AAF negotiated with national accounts, AAF's custom discounts, and customer-specific needs"; "audit reports created by AAF sales professionals at the physical location of customer facilities which include identification of customers' current air filtration products, sizes, specifications, and customer-specific issues or talking points developed by AAF sales professionals"; "information on the costs of goods sold that could allow calculation of AAF profit margins"; "technical specifications and data that resulted from extensive internal and third-party product testing and performance studies"; and "detailed drawings and product specifications created by AAF for new customer construction projects." (VFAC ¶ 18.)

9. All three databases are password-protected, requiring an employee to log in with a username and password. As an additional security measure, information in Sales Playbook cannot be downloaded or printed.

10. AAF immediately disables employee access to its databases upon the employee's notice of resignation or termination from AAF, or if the employee indicates that he or she is going to work for a competitor. (VFAC ¶¶ 25-26.)

B. Price's employment with AAF and the 2006 Agreement.

11. In December 1989, AAF hired Price as Branch Manager for territories consisting entirely of counties in North Carolina. (VFAC ¶¶ 28, 30.) Price was "responsible for leading and managing a sales team to achieve monthly, quarterly, and annual revenue goals, as well as growing sales and profitability in [his] assigned territory." (VFAC ¶ 29.) Price remained Branch Manager until his resignation from AAF on August 12, 2016. During his employment, Price had full access to, was trained to use, and regularly relied on Sales Playbook, Salesforce.com, and TCOD to perform his job duties.

12. As a condition of employment, AAF required Price to sign employment agreements which set out the respective rights and responsibilities of Price and AAF in relation to Price's employment with the company, the first of which was executed on December 11, 1989. Thereafter, AAF periodically entered into new agreements with Price that "altered Price's and AAF's respective rights and responsibilities." (VFAC ¶ 42.)

13. On November 13, 2006, AAF and Price entered into a written "Sales Representative Employment Agreement" ("the 2006 Agreement"). (VFAC ¶ 43, Ex. B; hereinafter, "2006 Agreement.") This was the final written employment agreement between AAF and Price. In exchange for the 2006 Agreement, AAF provided Price with a 3.5% salary increase and a materially different Sales Quota and Contribution Margin Target ("Margin Target").

14. The 2006 Agreement contained a covenant not to compete that read as follows:

If the Employee terminates this Agreement or Company terminates this Agreement for cause, then in either event, for a period of one (1) year after such termination, Employee will not either on Employee's own behalf or on behalf of any other person, firm, corporation or other entity, either directly or indirectly, (a) contact, for the purpose of diverting, any of Company's customers or the Accounts; (b) solicit the trade of, or trade with any of Company's customers of the Accounts/Territory; (c) engage in any Competitive Business with the Accounts/Territory; (d) seek to cause any person, firm or corporation with whom the Employee came in contact as a representative of Company to refrain from doing business in whole or in part with or through Company; or (e) solicit or induce any employee, current or future, of Company, to leave Company or to work for another individual.

(2006 Agreement § 6.1.)

15. The 2006 Agreement states that the "Accounts/Territory" from which Price willd be restricted under the covenant is "set out on Exhibit B" to the Agreement, but no Exhibit B was included with or attached to the 2006 Agreement. (2006 Agreement § 1.1.)

16. The 2006 Agreement commenced on November 13, 2006, and was for a term of one year. (2006 Agreement § 5.1.) The 2006 Agreement states that it "shall automatically renew for successive one (1) year terms unless terminated[.]" (Id.) AAF alleges "Price received consideration for each renewing year of the 2006 Agreement in the form of base salary, commission and or/bonus, " but does not allege that Price's salary or bonuses were increased in conjunction with the alleged renewals. (VFAC ¶ 50.)

C. Price's resignation from AAF and employment with Camfil.

17. On July 24, 2016, unbeknownst to AAF, Price accepted employment with Camfil. (VFAC ¶¶ 53-54.)

18. On August 5, 2016, Price submitted his notice of resignation from AAF effective at close of business on August 12, 2016. Price told AAF managers that he was retiring from the air filtration industry and would not be joining a competitor. (VFAC ¶ 52.) In reliance on Price's representations, AAF permitted Price to continue accessing its databases from August 5 until August 12, 2016. AAF alleges that had Price told AAF that he was going to work for Camfil, AAF would have revoked Price's access to its databases and trade secrets immediately. (VFAC ¶¶ 56-58.)

19. Price commenced his employment with Camfil sometime shortly after August 12, 2016. Price is employed as a Branch Manager for Camfil in North and South Carolina performing "substantially the same duties" as he had with AAF. (VFAC ¶ 72.)

20. Price accessed Salesforce.com at least three times after accepting employment with Camfil; attended a training seminar on the TCOD on or around August 1, 2016 during which he accessed TCOD; and, acquired knowledge of the algorithms and code used to create TCOD by receiving answers to detailed questions he asked of AAF's in-house developer of TCOD. (VFAC ¶¶ 60-63.)

21. In late August 2016 AAF learned that Price was working for Camfil. AAF sent a letter to Camfil's Executive Vice President, Armando Brunetti ("Brunetti") to inform Camfil of Price's continuing obligations under the covenant not to compete and to request that Camfil refrain from inducing Price to breach the covenant. Brunetti confirmed that Camfil had hired Price and that Price had sent four emails to customers he had previously serviced at AAF. AAF...