Heritage Operating, L.P. v. N.C. Propane Exch., LLC

Decision Date03 April 2012
Docket NumberNo. COA11–1212.,COA11–1212.
Citation727 S.E.2d 311
PartiesHERITAGE OPERATING, L.P., Plaintiff, v. N.C. PROPANE EXCHANGE, LLC, Kendall T. Rhine, Kendall L. Rhine, Janice G. Rhine, Anthony L. Rhine, Christy Lambeth, and Craig Lambeth, Defendants.
CourtNorth Carolina Court of Appeals

OPINION TEXT STARTS HERE

Appeal by defendants from order entered 6 June 2011 by Judge Richard D. Boner in Davidson County Superior Court. Heard in the Court of Appeals 22 February 2012.

Young Moore and Henderson P.A., Raleigh, by Christopher A. Page and Michael S. Rainey, and GlassWilkin, PC, by R. Charles Wilkin, Goldsboro, pro hac vice, for the plaintiff.

Pinto Coates Kyre & Brown, PLLC, Greensboro, by Brady A. Yntema and Jon Ward, and Jackson Kelly, PLLC, by Chad J. Sullivan, for defendants N.C. Propane Exchange, LLC, Kendall T. Rhine, Kendall L. Rhine, Janice G. Rhine, and Anthony L. Rhine.

THIGPEN, Judge.

N.C. Propane Exchange, LLC, (N.C. Propane), Kendall T. Rhine, Kendall L. Rhine, Janice G. Rhine, and Anthony L. Rhine (collectively, Defendants) appeal from the denial of their motion for summary judgment on the basis that prior verdicts in Texas and Kentucky constitute res judicata and collateral estoppel. We must determine whether the trial court properly denied Defendants' motion for summary judgment. Because the present case does not involve the same factual issues and there is no possibility of inconsistent verdicts, we conclude this appeal does not affect a substantial right and dismiss this appeal as interlocutory.

I. Factual and Procedural History

Plaintiff Heritage Operating, L.P. (Heritage) owns and operates a business in Thomasville and Mooresville, North Carolina, known as Metro Lift Propane, Inc. (“Metro Lift Propane”). Kendall L. Rhine is a former officer, director, and shareholder of Metro Lift Propane and, his sons, Kendall T. Rhine and Anthony L. Rhine, are former district managers for Metro Lift Propane.

Heritage acquired the assets of Metro Lift Propane in late 2003. As part of that acquisition, Heritage entered into Non–Competition Agreements with Kendall L. Rhine, Kendall T. Rhine, and Anthony L. Rhine on 1 January 2004. Heritage paid Kendall L. Rhine $500,000.00 in exchange for his agreement to be restricted from engaging in certain activities within a seventy-five (75) mile radius of each of nine Metro Lift locations (“Restricted Areas”) for a period of ten (10) years. The Restricted Areas included Charlotte, Mooresville, and Greensboro, North Carolina. Pursuant to the Non–Competition Agreement, Kendall L. Rhine agreed that he would not:

(a) Engage in the business of the propane cylinder exchange business within a 75–mile radius of (i) any of the operations of the locations listed on Annex I (the “Restricted Area”).

(b) Solicit, service, or sell propane cylinder exchange services to any present or future propane cylinder exchange related customer or account in the Restricted Area.

(c) Directly or indirectly solicit or hire any of the employees of [Metro Lift Propane or Metro Lift Energy, LLC] who become employees of Heritage or its affiliates ... to become employees of any entity in which the Restricted Party is a holder of any ownership interest or to which the Restricted Party renders any service....

(d) Furnish, divulge, or make accessible to anyone any confidential or proprietary information or trade secrets (“Confidential Information”) concerning the Metro Lift Business including, but not limited to customer identification, customer lists, business records and supply cost and pricing data....

(e) Provide to, arrange for, guarantee funds, or arrange for product supply or consumer tank or cylinder purchases to any person who engages in the Restricted Area.

(f) Be a member of a partnership or a stockholder, investor, officer, director, employee, agent, associate, or consultant, of any person, partnership, or corporation which does any of the acts described in the foregoing subparagraphs (a), (b), (c), (d), (e) or (f)....

Heritage paid Kendall T. Rhine and Anthony L. Rhine $65,734.50 each to restrict them from engaging in similar activities within a 75 mile radius of the Metro Lift business for a period of five years.

Defendant N.C. Propane Exchange, LLC, (N.C. Propane) was organized on 17 October 2008, and its Articles of Organization were filed with the North Carolina Secretary of State on 3 November 2008. Kendall T. Rhine organized N.C. Propane and was one of its initial members/managers, as were Kendall T. Rhine's mother, Janice Rhine, Anthony L. Rhine, and Defendant Craig Lambeth. Craig Lambeth formerly worked for Heritage and had served as a District Manager for its Thomasville, North Carolina, location for a period leading up to 2 February 2009. Craig Lambeth's wife, Christy Lambeth, was the registered agent of N.C. Propane.

Heritage initiated this action on 3 February 2009, asserting causes of action for breach of contract for the Non–Competition Agreements, trade secret violations, intentional interference with contract, unfair or deceptive trade practices, and civil conspiracy, and seeking damages and injunctive relief. Also in February 2009, Heritage 1 filed actions against some of the same defendants in Texas, Kentucky, and Missouri alleging similar claims, including breach of contract of the Non–Competition Agreements as a result of the formation and operation of different propane cylinder exchange companies.

In October 2010, the Texas action went to trial, and the jury rendered a verdict finding the defendants liable on certain claims, but concluding that Heritage did not suffer any damages. On 14 December 2010, the Texas court entered a verdict in favor of the defendants and reduced the period of limitation in Kendall L. Rhine's Non–Competition Agreement to five years.

In March 2011, the Kentucky action went to trial. Kendall L. Rhine made a motion for summary judgment based on res judicata and collateral estoppel, which the Kentucky court denied. The Kentucky court directed a verdict in favor of Heritage at the close of its evidence on its claim of breach of contract of Kendall L. Rhine, and the jury subsequently rendered a verdict on various other issues. Additionally, the Kentucky court awarded $941,290.00 in damages to Heritage for its claim of breach of Kendall L. Rhine's Non–Competition Agreement.

Both the Texas and Kentucky actions are currently on appeal. The Missouri action has not yet gone to trial.

Following the Texas and Kentucky trials, all of the defendants in the present action moved for summary judgment on the basis that the prior verdicts in Texas and Kentucky constitute res judicata and collateral estoppel. On 6 May 2011, the trial court entered an order denying the motion for summary judgment. Defendants now appeal the denial of that motion.

II. Whether the Appeal Affects a Substantial Right

On appeal, Heritage contends Defendants' appeal from the trial court's order denying their motion for summary judgment is interlocutory and should be dismissed. We agree.

“The denial of summary judgment is not a final judgment, but rather is interlocutory in nature. We do not review interlocutory orders as a matter of course.” McCallum v. North Carolina Co–op. Extension Service of N.C. State University, 142 N.C.App. 48, 50, 542 S.E.2d 227, 230 (citation omitted), disc. review denied,353 N.C. 452, 548 S.E.2d 527 (2001). “As a general rule, a moving party may not appeal the denial of a motion for summary judgment because ordinarily such an order does not affect a ‘substantial right.’ Bockweg v. Anderson, 333 N.C. 486, 490, 428 S.E.2d 157, 160 (1993) (citation omitted). In deciding what constitutes a substantial right,

it is usually necessary to resolve the question in each case by considering the particular facts of that case and the procedural context in which the order from which appeal is sought was entered. Examples of when a substantial right is affected include cases where there is a possibility of a second trial on the same issues, and where there is a possibility of inconsistent verdicts.

Patterson v. DAC Corp. of North Carolina, 66 N.C.App. 110, 112–13, 310 S.E.2d 783, 785 (1984) (citations omitted).

[T]he denial of a motion for summary judgment based on the defense of res judicata may affect a substantial right, making the order immediately appealable.” Bockweg, 333 N.C. at 491, 428 S.E.2d at 161;see also Williams v. City of Jacksonville Police Dept., 165 N.C.App. 587, 589–90, 599 S.E.2d 422, 426 (2004) (stating that [t]he denial of summary judgment based on collateral estoppel, like res judicata, may expose a successful defendant to repetitious and unnecessary lawsuits. Accordingly, the denial of a motion for summary judgment based on the defense of collateral estoppel may affect a substantial right[.]) (quotation and quotation marks omitted). This rule is directed at “preventing the possibility that a successful defendant, or one in privity with that defendant, will twice have to defend against the same claim by the same plaintiff, or one in privity with that plaintiff.” Bockweg, 333 N.C. at 491, 428 S.E.2d at 161. Thus, the “denial of a motion for summary judgment based upon the defense of res judicata may involve a substantial right so as to permit immediate appeal only where a possibility of inconsistent verdicts exists if the case proceeds to trial.” Country Club of Johnston County, Inc. v. U.S. Fidelity and Guar. Co., 135 N.C.App. 159, 167, 519 S.E.2d 540, 546 (1999) (quotation and quotation marks omitted), disc. review denied,351 N.C. 352, 542 S.E.2d 207 (2000); see also Community Bank v. Whitley, 116 N.C.App. 731, 733, 449 S.E.2d 226, 227 (“A substantial right is likely to be affected where a possibility of inconsistent verdicts exists if the case proceeds to trial, but the facts of this case would not lead to such an outcome.”), disc. review denied,338 N.C. 667, 453 S.E.2d 175 (1994).2

To demonstrate that a second trial will affect a substantial right, Defendants must...

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