Morris v. Scenera Research, LLC

• Citation: 747 S.E.2d 362
• Decision Date: 20 August 2013
• Docket Number: No. COA12–1481.,COA12–1481.
• Parties: Robert Paul MORRIS, Plaintiff, v. SCENERA RESEARCH, LLC, and Ryan C. Fry, Defendants.
• Court: Court of Appeal of North Carolina (US)

747 S.E.2d 362

Robert Paul MORRIS, Plaintiff,

v.SCENERA RESEARCH, LLC, and Ryan C. Fry, Defendants.

No. COA12–1481.

Court of Appeals of North Carolina.

Aug. 20, 2013.

Appeal by Defendants from order entered 27 June 2012 and judgment entered 14 May 2012 by Judge James L. Gale in Wake County Superior Court. Appeal by Plaintiff from order entered 27 June 2012, judgment entered 14 May 2012, and memorandum opinion and order entered 4 January 2012 by Judge James L. Gale in Wake County Superior Court. Heard in the Court of Appeals 21 May 2013.

Young Moore and Henderson P.A., Raleigh, by Walter E. Brock, Jr., and Andrew P. Flynt, for Plaintiff.

Kilpatrick Townsend & Stockton LLP, Winston–Salem, by Adam H. Charnes and John M. Moye, Raleigh; and Womble Carlyle Sandridge & Rice, Raleigh, by Burley B. Mitchell, Jr., for Defendants.

STEPHENS, Judge.

Procedural History and Factual Background

This case concerns a dispute regarding compensation and ownership rights between Plaintiff Robert Paul Morris (“Morris”) and his employer, Scenera Research, LLC (“Scenera”), for inventions developed by Morris during his employment with Scenera. On 25 September 2009, Morris filed a complaint against Scenera and its chief executive officer, Ryan C. Fry (“R. Fry”)—collectively, “Defendants”—in Wake County Superior Court, alleging violations of the North Carolina Wage and Hour Act (“WHA”) and the Retaliatory Employment Discrimination Act (“REDA”) as well as claims for fraud, unjust enrichment, and breach of contract. R. Fry is the son of Stan Fry (“S. Fry”), who founded Scenera under the name “IPAC, LLC.”

On 6 October 2009, Defendants filed notice of removal to the United States District Court for the Eastern District of North Carolina. Sixteen months later, on 16 February 2011, the District Court remanded the case for lack of subject matter jurisdiction to Wake County Superior Court, where it was designated a complex business case and assigned to the Honorable James L. Gale of the North Carolina Business Court (“the business court”). Defendants filed their second amended answer and counterclaims on 31 March 2011, denying Morris's material allegations and, inter alia, seeking declaratory judgments that Morris: (1) was not entitled to rescind any patent ownership assignment he had already made to Scenera, (2) was obligated to assign ownership of unassigned inventions to Scenera, and (3) had resigned his employment and was not entitled to further bonus payments. Scenera also asserted claims that Morris breached his fiduciary duties and breached his obligation to continue assigning patents to Scenera.

On 24 October 2011, Morris moved for partial summary judgment, and Scenera moved for summary judgment. Morris sought to dismiss certain of Scenera's counterclaims and defenses, and Scenera sought to have the business court declare that Morris was “hired to invent” and, thus, that Scenera owned the rights to the inventions Morris had developed while working there. Scenera also sought to dismiss Morris's claims of fraud, unjust enrichment, and retaliatory discrimination. The business court addressed those motions on 4 January 2012 and described the background facts as follows:

{9} Morris was a former [International Business Machines Corporation] employee with substantial training in software. He later was employed by Flashpoint Technologies, a company founded by S. Fry. S. Fry had also formed a company ... known as IPAC. IPAC later became known as Scenera. While employed by Flashpoint, Morris and IPAC entered a[c]onfidentiality [a]greement which included mutual non-disclosure obligations and pursuant to which any confidential information remained the property of the disclosing party.... Morris was not at that time an IPAC employee[,] but contracted with IPAC.

{10} S. Fry hired Morris in 2004 as Scenera's first employee. Morris had a series of discussions with S. Fry preceding this employment, the extent, nature, and significance of which are disputed [as to Morris's ownership rights over the inventions he developed at Scenera]. Morris testified that he expressed an interest in inventing but was neither obligated to nor expected to invent as a part of the regular employment duties he would undertake for Scenera, and that his base salary was for the substantial duties other than inventing for which he was responsible.

{11} Morris and Scenera did not sign a written employment agreement. Morris contends that the [p]arties understood that the ownership provisions of the [c]onfidential[ity] [a]greement that Morris signed while employed by Flashpoint continued. Scenera contends that there was no such agreement and that once Morris was hired to invent for Scenera, he had no ownership rights in inventions made during the course of that employment.

{12} ... It is undisputed that during certain times of Morris's employment, in addition to his base salary, Morris was entitled to receive up to $10,000.00 for each of his inventions on which Scenera pursued patents, with $5,000.00 being earned when a patent application was submitted and $5,000.00 being earned when a patent issued....

{13} Morris proved to be a prolific inventor. By July 2009 when Morris's employment with Scenera ended, Morris contends that the unpaid amount that had accrued under his bonus compensation plan was $210,000.00.... While Morris concedes that he voluntarily suspended bonus payments beginning at the end of 2007 as Scenera undertook to formulate an alternative compensation program, he contends that the bonus program was not cancelled, and that he continued to make patent assignments during 2008 only because he knew he was entitled to compensation in addition to his base salary. Morris contends that R. Fry promised ... the offered alternative compensation would be tied to Scenera's profitability[,] more favorably reflect Morris's contribution to that profitability, and better reflect Morris's risk and his reward.

{14} Morris alternatively claims that even if the bonus program had been terminated at year-end 2007, R. Fry in July 2008 promised that the bonus system would be re[-]implemented for Morris if Scenera did not meet certain conditions ..., such as providing Morris with an individual written employment contract and an appropriate incentive compensation program, and that these conditions were then not met.

{15} Scenera contests Morris's recollection of these conversations, and further claims that if R. Fry made promises, he kept them by proposing a[n] employment contract and an employee incentive program. Ultimately, no agreement on any alternative compensation plan was ever reached and no written employment agreement was executed. Morris claims that these proposals did not satisfy promises R. Fry made and that other documents prove that R. Fry never had any intention of keeping his promises. Scenera claims R. Fry had never made promises specific enough to be enforceable[,] but rather had only agreed to make a proposal for further negotiation, which he did, and that essentially Morris seeks to enforce “an agreement to agree.”

{16} Morris testified to his frustration with the lack of progress toward the promised incentive plan and written employment agreement and that he began in 2008 to press R. Fry for progress. He continued to press in 2009, ultimately hiring a lawyer who threatened on Morris's behalf to bring a wage claim under [the WHA] ... for the $210,000.00 bonus compensation that had accrued and which Scenera refused to pay after Morris's demand.

{17} The parties disagree both on the facts leading up to the end of Morris's employment in July [of] 2009 and whether that end should be treated as a resignation or a termination. Morris claims that he was terminated in retaliation for his threat to bring a wage claim, which is a protected activity, such that he is entitled to recover under [REDA]. Scenera contends that Morris had made clear his intention to leave the company and his attorney had indicated that the only option was to negotiate a severance agreement, so that, as a result, Morris had [“]effectively resigned[”] and Scenera accepted [this] resignation. Scenera alternatively contends that even if it had terminated [Morris], the termination was not retaliatory because [Scenera] had an independent right to terminate him because he refused to make any further invention assignments to Scenera while being legally obligated to do so.

{18} Scenera further claims that Morris, during the course of his employment, breached fiduciary duties owed to Scenera....

In that context, the business court denied Morris's motion for partial summary judgment in its entirety. It granted Scenera's motion on the question of whether Morris was “hired to invent” ¹ and on Morris's fraudulent inducement and unjust enrichment claims. The business court otherwise denied Scenera's motion.

The remaining claims—Morris's breach of contract, WHA, and REDA claims plus Scenera's patent ownership and breach of assignment counterclaims ²—were tried before a jury beginning 30 January 2012. In its judgment entered after the trial, the business court described the evidence as follows:

{3} ... Morris was employed by Scenera and ... his employment ended on July 10, 2009.... [B]oth Scenera and Defendant [R. Fry] were Morris's employers under the [WHA] and [REDA].

...

{5} ... [O]n the date Morris's employment ended[,] July 10, 2009, Scenera had 150 pending patent applications on inventions for which Morris was the inventor.... Morris, by the time of trial, had assigned executed written agreements on all but a few of these inventions.

{6} [A]ny ... bonus which [was] owed qualifie[d] as “wages” under the [WHA].... The evidence for both parties indicated that Morris and Scenera reached [an] agreement on some changes to be implemented as of January 1, 2008, in consideration of Defendants potentially implementing a company-wide incentive compensation plan....

{7} Morris contended that he [was]...