Spirax Sarco, Inc. v. SSI Eng'g, Inc.

• Decision Date: 10 August 2015
• Docket Number: No. 5:14–CV–519–F.,5:14–CV–519–F.
• Citation: 122 F.Supp.3d 408
• Court: U.S. District Court — Eastern District of North Carolina
• Parties: SPIRAX SARCO, INC. and Spirax Sarco Engineering, PLC, Plaintiffs, v. SSI ENGINEERING, INC., Bryan Johnson, Benjamin Donald Lewis and Michelle H. Lewis, Defendants.

122 F.Supp.3d 408

SPIRAX SARCO, INC. and Spirax Sarco Engineering, PLC, Plaintiffs,

v.SSI ENGINEERING, INC., Bryan Johnson, Benjamin Donald Lewis and Michelle H. Lewis, Defendants.

No. 5:14–CV–519–F.

United States District Court, E.D. North Carolina, Western Division.

Signed Aug. 10, 2015.

Bryce R. Lowder, Reed J. Hollander, Nelson Mullins Riley & Scarborough, LLP, Raleigh, NC, for Plaintiffs.

Amanda A. Bailey, McNair Law Firm, P.A., Myrtle Beach, SC, Allan W. Singer, McNair Law Firm, P.A., Russ A. Brinson, Cozen O'Connor, PC, Charlotte, NC, for Defendants.

ORDER

JAMES C. FOX, Senior District Judge.

This matter is before the court on the Motion to Dismiss [DE–57] filed by Defendants SSI Engineering, Inc., SSI Services, Inc., Bryan Johnson, Benjamin Donald Lewis, and Michelle H. Lewis (collectively, "Defendants"). Also before the court are the Motions to Dismiss [DE–76; DE–78] Defendants' Counterclaims filed by Plaintiffs Spirax Sarco, Inc. and Spirax–Sarco Engineering, PLC (collectively, "Spirax" or "Plaintiffs"). For the reasons stated below, all of the motions to dismiss are ALLOWED in part and DENIED in part.

I. BACKGROUND

Plaintiffs filed a verified complaint in this court on September 17, 2014, and with Defendants' consent, filed an amended verified complaint on October 16, 2014 [DE–24]. The amended verified complaint alleges a claim of computer trespass against Johnson; violation of the North Carolina and South Carolina trade secrets acts against all defendants; unfair and deceptive trade practices against all defendants; breach of contract against Johnson; breach of duty of loyalty against Johnson; conversion against all Defendants; and tortious interference with prospective economic advantage/contractual relations against all Defendants. That same day, Plaintiffs filed a motion for temporary restraining order and preliminary injunction.

The court held a hearing on the motion on October 22, 2014, and issued an order on October 23, 2014, reflecting the injunctive relief to which the parties had agreed to in open court: that Defendants are enjoined from any use, copying, or disclosure of Spirax data that presently is in the custody of Clark Walton. The court requested additional briefing on the issue of "inevitable disclosure," as it related to Plaintiffs' request for an order enjoining Defendant Johnson's solicitation of certain Spirax customers.

While the additional briefing was underway, Defendants filed a verified answers and counterclaims. Defendant Johnson asserts counterclaims for abuse of process; tortious interference with prospective and contractual relations; conversion; trespass; unfair and deceptive trade practices; defamation; and violation of the South Carolina Payment of Wages Act. The remaining defendants assert counterclaims for abuse of process; tortious interference with prospective and contractual relations; unfair and deceptive trade practices; and quantum meruit/unjust enrichment. All the parties subsequently filed the instant motions to dismiss. On April 17, 2015, the court issued an order denying Plaintiffs' request for further preliminary injunctive relief other than that already provided in the court's October 23, 2014, Order.

II. STANDARD OF REVIEW

The purpose of a motion to dismiss under Rule 12(b)(6) is to test the legal sufficiency of the complaint, not to resolve conflicts of fact or to decide the merits of the action. Edwards v. City of Goldsboro, 178 F.3d 231, 243–44 (4th Cir.1999). While the court accepts the factual allegations as true, the " ‘[f]actual allegations must be enough to raise a right to relief above the speculative level’ and the plaintiff must allege ‘enough facts to state a claim to relief that is plausible on its face.’ " Wahi v. Charleston Area Med. Ctr., Inc., 562 F.3d 599, 615 n. 26 (4th Cir.2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). The court may consider "documents incorporated into the complaint by reference, and matters of which a court may take judicial notice" when deciding a Rule 12(b)(6) motion. Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007).

III. DEFENDANTS' MOTION TO DISMISS

Defendants move to dismiss several of the claims asserted against them.

A. Facts underlying Plaintiffs' claims

The facts, as alleged in Plaintiffs' Amended Verified Complaint [DE–24], are as follows:

Plaintiff Spirax–Sarco, Inc. is a Delaware corporation with its principal place of business in South Carolina. It manufactures goods and sells services for control and efficient use of steam, air, and other industrial fluids to industrial and commercial users in the United States. Ver. Am. Compl. [DE–24] ¶ 1 Spirax–Sarco Engineering, PLC is a UK-based engineering company and the parent of Spirax Sarco, Inc. Id. at ¶ 2.

Defendant Bryan Johnson is a former employee of Spirax Sarco, Inc. He was hired as a District Sales Manager for Spirax on June 1, 1998. Id. at ¶ 13. Spirax alleges that at the time of his hire, Johnson was bound to a covenant of non-solicitation, pursuant to which he agreed that for the 12–month period following his employment with Spirax, he would not solicit any customers upon whom he had called in the last two years of his employment with Spirax. Id. at ¶ 18. Plaintiffs also allege that Johnson was bound a covenant of confidentiality, pursuant to which he agreed to protect proprietary and trade secret information belonging to Spirax in accordance with specified policies and procedures.Id. at ¶ 20.

During the course of his employment, Johnson was the Spirax employee handling the relationship with Defendant SSI Engineering, Inc. ("SSI Engineering") on Spirax's behalf from December 2013 until his resignation on May 27, 2014. Id. at ¶ 28. SSI Engineering had a Consulting Agreement with Spirax Sarco, Inc., which it terminated by letter dated May 30, 2014, three days after Johnson resigned. Id. at ¶ 43. Defendants Benjamin Lewis and Michelle Lewis, who are married, are the principals of SSI Engineering and SSI Services. Following Johnson's resignation from Spirax, he went to work for SSI Services and SSI Engineering as a sales manager. Id. at ¶ 44.

On June 2, 2014, two employees retrieved the laptop issued to Johnson by Spirax. Later that week, IT employees reviewed the laptop and were suspicious that Johnson had deleted files, so the laptop was sent to a third-party for forensic analysis. That analysis revealed that two external electronic storage devices were connected to the laptop on May 26, 2014 (the day before Johnson resigned), and that he copied approximately 11,000 files on May 12 and 19,000 files on May 26. He also deleted 18,000 files on May 26. Id. at ¶¶ 33–34. Spirax alleges that the files copied include documents containing confidential, proprietary, and/or trade secret information belonging to Spirax.

Spirax alleges that Defendants were bidding on or seeking to become involved in projects of existing Spirax customers, including the "Coty Project" in Sanford, North Carolina, and the Greenland Veteran's Administration Hospital project (the "VA project") in Columbia, South Carolina. Id. at ¶ 46. Spirax alleges that Defendants Johnson and Benjamin Lewis had been involved with both projects since February of 2014 until the end of May of 2014, when Johnson left Spirax and SSI Engineering terminated its Consulting Agreement with Spirax. According to Spirax, Defendants used stolen proprietary information to underbid Spirax on the VA project. Id. at ¶ 48.

Spirax also alleges Johnson secretly leased a storage unit in the name of "Spirax, Inc., in care of Bryan Johnson" in which he stored Spirax parts, literature, and materials, and paid for the unit in a manner designed to disguise the secret storage unit from Spirax management. Id. at ¶¶ 51–52. Spirax, upon discovering the existence of the rental unit after Johnson's resignation, took repossession and custody of the Spirax material in the rental unit, which it valued at approximately $6,500.00. Id. at ¶ 60.

Against this backdrop, Spirax asserts a claim of computer trespass against Johnson; violation of the North Carolina and South Carolina trade secrets acts against all defendants; unfair and deceptive trade practices against all defendants; breach of contract against Johnson; breach of duty of loyalty against Johnson; conversion against all Defendants; and tortious interference with prospective economic advantage/contractual relations against all Defendants. The Defendants now move to dismiss the breach of contract, computer trespass, and breach of duty of loyalty claim asserted against Defendant Johnson. They also move to dismiss the claims for tortious interference with prospective economic advantages/contractual relations, unfair and deceptive trade practices, conversion, violation of the trade secrets act, and civil conspiracy asserted against all Defendants. They further contend there is no basis for individual liability for Defendants Benjamin and Michelle Lewis, and that Plaintiff Spirax–Sarco Engineering, PLC, has no standing to assert claims. The court will address these arguments in turn.

B. Breach of Contract claim against Defendant Johnson

Spirax alleges that "[a]s a condition of employment, Defendant Johnson agreed to a covenant not to solicit for a period of 12 months after termination of his employment any and all Spirax customers upon whom he called within 24 months prior to the termination of his employment with Spirax." Ver. Am. Compl. [DE–24] ¶ 102. Spirax also alleges that as another condition of employment, Johnson "agreed to a covenant of confidentiality to protect Spirax's proprietary and confidential information, including...