N.C. Business Court Opinions, November 20, 2024 – November 26, 2024
By: Ashley Oldfield
Miller v. RedGoose, LLC, 2024 NCBC 74 (N.C. Super. Ct. Nov. 26, 2024) (Davis, J.)
Key Terms: motion to dismiss; fraud; computer trespass; N.C.G.S. § 14-458; tortious interference with contract, UDTP
Plaintiff Miller initiated this suit against his former employer, Defendant RedGoose, alleging claims under the N.C. Wage and Hour Act and for breach of contract. RedGoose counterclaimed, alleging that following Miller’s resignation from Defendant RedGoose, he agreed to assist during a transition period to ensure that other employees were aware of the location of key client information stored on the company’s computer system. However, Miller instead used his continued access to the computer system to sabotage RedGoose’s business and to access proprietary information which he then used to compete. Miller moved to dismiss several of the counterclaims.
Fraud. Miller argued that the fraud claim should be dismissed because RedGoose’s allegations failed to show a causal connection between Miller’s misrepresentation (that he would assist RedGoose in order to ensure continuous service to its client, when in reality he had no intention of doing so and instead sought to use his computer access for his own purposes) and the harm RedGoose allegedly suffered. The Court concluded that Miller read the claim too narrowly—RedGoose alleged that Miller’s representation was for the purpose of inducing its clients to leave and follow him to his new business. This was sufficient to allege a causal connection between the injury and Miller’s misrepresentation.
Computer Trespass. Miller argued that RedGoose’s computer trespass claim under N.C.G.S. § 14-458 failed because RedGoose voluntarily gave him access to its computer systems. The Court rejected this argument, concluding that RedGoose’s allegations that Miller had exceeded his authorized use was sufficient to plead a claim under the statute.
Tortious Interference with Contract. Miller argued that the tortious interference claim failed because 1) RedGoose failed to sufficiently identify the contracts allegedly interfered with; and 2) RedGoose didn’t allege that he was subject to a restrictive covenant and therefore failed to allege that he acted without justification. The Court found neither argument persuasive. First, RedGoose’s allegations regarding the contracts was sufficient to satisfy the notice pleading standard. Second, the Court noted that a competitor cannot escape liability by arguing that he acted with justification where the competitor competed through unlawful means. Here, RedGoose’s allegations that Miller fraudulently obtained continued access to its computer systems was sufficient to allege unlawful methods of competition.
UDTP. Miller argued that the UDTP claim should be dismissed because 1) RedGoose merely alleged that Miller breached a contract which is insufficient to give rise to a UDTP claim; and 2) RedGoose failed to adequately plead that Miller’s acts were in or affecting commerce because they took place within an employment relationship. The Court rejected these arguments as well. First, RedGoose’s allegations regarding fraud, embezzlement, tortious interference, etc. went far beyond a mere breach of contract claim and, in any event, some of the claims automatically served as a predicate for a UDTP claim to proceed. Second, the Court was satisfied that the allegations that Miller had induced RedGoose’s clients to leave RedGoose and follow him were sufficient to satisfy the “in or affecting commerce” element.
Accordingly, the Court denied Miller’s motion to dismiss.
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BioGas Corp. v. NC BioGas Dev., LLC, 2024 NCBC 75 (N.C. Super. Ct. Nov. 26, 2024) (Robinson, J.)
Key Terms: declaratory judgment; breach of contract; breach of fiduciary duty; negligence; economic loss rule; implied covenant of good faith and fair dealing; duty to mitigate
This case arose from a lending relationship where Defendants provided funding through various promissory notes to Plaintiffs related to multiple biogas projects. This funding and related conduct lead to other agreements, many of which Plaintiffs contend Defendants breached by failing to satisfy various duties. Defendants, in turn, contended that Plaintiffs are the ones who breached the agreements, including by failing to pay the promissory notes. Both sides moved for summary judgment, in whole or in part, as to Plaintiffs’ claims and Defendants’ counterclaims.
The Court first addressed those claims which hinged on the question of who had a legal ownership interest in the Monroe Project. Because no evidence was presented which definitively stated who held legal title to the Monroe Project, the Court denied summary judgment on the claims dependent on such a determination.
The Court next addressed Plaintiffs’ requests for declarations regarding the duties and obligations owed by Defendants in relation to the various agreements entered into between them. Plaintiffs first sought a declaration that Defendants owed them an implied duty of good faith and fair dealing under certain agreements. The Court granted the declaration in part, declaring that several of the agreements at issue contained an implied covenant of good faith and fair dealing as a matter of law. However, the Court refused to grant such a declaration regarding the remaining agreements because Plaintiffs had not asserted a breach of contract claim based on those agreements and therefore summary judgment would be inappropriate as it would not be determinative of any legal issue in the case. Plaintiffs also sought a declaration that Defendants had a duty to mitigate their damages relating to their counterclaim for breach of contract as to certain promissory notes. Because North Carolina law generally recognizes a duty to mitigate damages, the Court granted the requested declaration. Lastly, Plaintiffs sought a declaration that, if Defendants prevailed on certain of their counterclaims, they should be limited to nominal damages. The Court denied the request for such a declaration, as many facts remained in dispute as to the damages allegedly sustained by Defendants.
Finally, the Court addressed Defendants’ motion for summary judgment on Plaintiffs’ claims for breach of contract, breach of fiduciary duty, and negligence, and on Defendants’ claim for breach of contract related to the promissory notes. Regarding Plaintiffs’ breach of contract claim, Plaintiffs alleged that Defendants breached five separate agreements. However, because Plaintiffs did not present any evidence of Defendants’ breach of four of the agreements, the Court summarily dismissed the claim to the extent it was based on those agreements. As to the fifth agreement, the Court concluded that a genuine issue of material fact existed as to whether Defendant Leyline had breached the implied covenant of good faith and fair dealing by failing to pursue Plaintiffs’ offer to purchase the Tillamook Project. Accordingly, the Court denied summary judgment on this basis. Regarding the breach of fiduciary duty and negligence claims, Defendants sought summary judgment on the basis that the claims were barred by the economic loss rule because the injury and damages alleged arose solely under an agreement between the parties. The Court agreed and granted summary judgment to Defendant on these claims. Lastly, the Court granted summary judgment in Defendants’ favor as to Plaintiffs’ liability on Defendants’ claim for breach of the promissory notes as there was no dispute that the promissory notes were in default. However, the Court denied summary judgment as to damages because an issue of fact remained as to whether Defendants mitigated their damages and whether set-off was available.
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The information in this article is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation.