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Cox v. Dine-A-Mate Inc.

June 16, 1998

DAVID B. COX, PLAINTIFF APPELLEE,
v.
DINE-A-MATE, INC., ENTERTAINMENT PUBLICATIONS, INC., AND CUC INTERNATIONAL, INC., DEFENDANTS APPELLANTS.



The opinion of the court was delivered by: Smith, Judge

Appeal by defendants from orders entered 11 July 1997 by Judge L. Todd Burke in Guilford County Superior Court. Heard in the Court of Appeals 11 May 1998.

This case arises from a dispute involving a purported employment agreement between plaintiff, who is a former employee of defendant Dine-A-Mate, and defendants. After having responded to a blind advertisement in the Greensboro News and Record, plaintiff was hired by defendant Dine-A-Mate in or about April 1993. Plaintiff worked under an oral agreement as an area director. Plaintiff's office was in Greensboro, N.C. Beginning in or about July 1995, plaintiff repeatedly was asked to sign employment agreements that included covenants not to compete. In January 1996, plaintiff signed an employment agreement under threat of losing his job. Plaintiff was fired from his job in December 1996. Plaintiff filed suit in April 1997, alleging defendants breached their contract with him by refusing to pay money owed to him for work done during his employment. Plaintiff also sought a declaratory judgment that the employment agreement he signed was void and unenforceable. Defendants counter-claimed that plaintiff had breached a covenant-not-to-compete agreement by engaging in activities prohibited in the agreement. Defendants also counter-claimed that plaintiff had breached a fiduciary duty with respect to commercially sensitive proprietary information and trade secrets of Dine-A-Mate. Defendants moved for dismissal pursuant to N.C.R. Civ. P. 12(b)(6) by reason of a forum selection clause and moved for a preliminary injunction. The trial court denied both motions. In its orders, the trial court made findings that the forum selection clause in the employment agreement signed by plaintiff was the product of unequal bargaining power, that enforcement of the clause would be unfair and unreasonable, that North Carolina is the proper forum for claims arising in this lawsuit and that defendants produced no evidence that plaintiff had disclosed or misappropriated any trade secrets. Defendants appeal.

Defendants assign error to the trial court's denial of defendants' motion to dismiss, contending that the trial court should have enforced the forum selection clause in plaintiff's employment agreement with Dine-A-Mate. First, we examine whether the appeal on this issue is properly before the Court. Generally, a party has no right to appeal an interlocutory order. N.C. Dept. of Transportation v. Page, 119 N.C. App. 730, 733, 460 S.E.2d 332, 334 (1995). However, "an appeal is permitted under N.C. Gen. Stat. § 1-277(a) and 7A-27(d)(1) if the trial court's decision deprives the appellant of a substantial right [that] would be lost absent immediate review." Id. at 734, 460 S.E.2d at 334 (citation omitted). "[A]n immediate appeal is permitted where `an erroneous order denying a party the right to have the case heard in the proper court would work an injury to the aggrieved party [that] would not be corrected if no appeal was allowed before the final judgment.'" Perkins v. CCH Computax, Inc., 106 N.C. App. 210, 212, 415 S.E.2d 755, 757 (citation omitted), reviewed on other grounds, 332 N.C. 149, 419 S.E.2d 574, decision reversed, 333 N.C. 140, 423 S.E.2d 780 (1992). In Perkins, a case that also involved a forum selection clause, this Court heard the appeal of the trial court's denial of defendant's motion to dismiss. Furthermore, when defendant appealed this Court's decision, our Supreme Court heard the appeal. Likewise, in Appliance Sales & Service v. Command Electronics Corp., 115 N.C. App. 14, 443 S.E.2d 784 (1994), also a forum selection dispute, this Court heard an appeal of the trial court's denial of a motion to dismiss. Based on these precedents, we hold that the trial court's denial of defendants' motion to dismiss is appealable.

Our Supreme Court has held that forum selection clauses are valid in North Carolina. A plaintiff who executes a contract that designates a particular forum for the resolution of disputes and then files suit in another forum seeking to avoid enforcement of a forum selection clause carries a heavy burden and must demonstrate that the clause was the product of fraud or unequal bargaining power or that enforcement of the clause would be unfair or unreasonable.

Perkins, 333 N.C. at 146, 423 S.E.2d at 784. In reviewing the trial court's decision in a forum selection case, this Court has held that because the Disposition of such cases is highly fact-specific, the abuse-of-discretion standard is the appropriate standard of review. Appliance Sales, 115 N.C. App. at 21, 443 S.E.2d at 789. "`The test for abuse of discretion requires the reviewing court to determine whether a decision "is manifestly unsupported by reason," or "so arbitrary that it could not have been the result of a reasoned decision."'" Id. at 21-22, 443 S.E.2d at 789 (citations omitted).

In the case at bar, the trial court made findings on which it based its decision to deny defendants' motion to dismiss. The trial court found, among other things, that plaintiff received no change in compensation, commission, duties, nature of employment or other consideration in exchange for signing the employment agreement. The trial court found that plaintiff was told that he must sign the employment agreement if he wished to keep his job with defendant Dine-A-Mate. It found that the forum selection clause in the agreement was the product of unequal bargaining power and that enforcement of the clause would be unfair and unreasonable. Based upon its findings, the trial court concluded that the forum selection clause in the employment agreement is unenforceable and that North Carolina is the proper forum for litigation of the lawsuit.

As noted above, in considering this appeal this Court must examine whether the trial court abused its discretion by reaching a Conclusion "manifestly unsupported by reason" or "so arbitrary that it could not have been the result of a reasoned decision." Appliance Sales, 115 N.C. App. at 21-22, 443 S.E.2d at 789 (citations omitted). The record before us supports the trial court's findings of fact, and the findings of fact support the Conclusions of law. We affirm the trial court's denial of defendants' motion to dismiss based on the forum selection clause.

We now turn to defendants' appeal of the trial court's denial of defendants motion for a preliminary injunction. This Court has said in such case that:

The denial of a preliminary injunction is interlocutory and as such an appeal to this Court is not usually allowed prior to a final determination on the merits. However, review is proper if "such order or ruling deprives the appellant of a substantial right which he would lose absent a review prior to final determination."

N.C. Electric Membership Corp. v. N.C. Dept. of Econ. & Comm. Dev., 108 N.C. App. 711, 716, 425 S.E.2d 440, 443 (1993), citing A.E.P. Industries v. McClure, 308 N.C. 393, 400, 302 S.E.2d 754, 759 (1983). In N.C. Electric Membership Corp., this Court recognized that disclosure of trade secrets could affect a substantial right. As a general rule, a preliminary injunction "is an extraordinary measure taken by a court to preserve the status quo of the parties during litigation. It will be issued only (1) if a plaintiff is able to show likelihood of success on the merits of his case and (2) if a plaintiff is likely to sustain irreparable loss unless the injunction is issued, or if, in the opinion of the Court, issuance is necessary for the protection of a plaintiff's rights during the course of litigation."

A.E.P., 308 N.C. at 401, 302 S.E.2d at 759-60 (citations omitted) (emphasis in A.E.P.).

"[O]n appeal from an order of superior court granting or denying a preliminary injunction, an appellate court is not bound by the findings, but may review and weigh the evidence and find facts for itself." Id. at 402 , 302 S.E.2d at 760 (citations omitted).

Based on the foregoing and the reasoning that follows, we have reviewed the entire record in this case, and we affirm the trial court's denial of defendants' motion for a preliminary injunction.

The trial court concluded that the covenant not to compete in the employment agreement is governed by the laws of the State of North Carolina. We agree, because enforcement of the covenant would be in violation of the public policy of this state. "In this state a covenant not to compete is valid and enforceable upon a showing that it is: 1. In writing. 2. Made part of a contract of employment. 3. Based on reasonable consideration. 4. Reasonable both as to time and territory. 5. Not against public policy." A.E.P., 308 N.C. at 402-03, 302 S.E.2d at 760 (1983) (citations omitted). "'The line of demarcation ... between freedom to contract on the one hand and public policy on the other must be left to the circumstances of the individual case. Just where this line shall be in any given situation is to be determined by the rule of reason. Of necessity, no arbitrary standard can be established in advance for the settlement of all cases.'" Welcome Wagon, Inc. v. Pender, 255 N.C. 244, 252, 120 S.E.2d 739, 745 (1961), citing Beam v. Rutledge, 217 N.C. 670, 674, 9 S.E.2d 476, 478 (1940). In A.E.P., our Supreme Court cited with approval a New ...


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