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Home Meridian International, Inc. v. Cabot Longnecker

United States District Court, M.D. North Carolina

May 29, 2014

HOME MERIDIAN INTERNATIONAL, INC., Plaintiff,
v.
CABOT LONGNECKER, Defendant.

MEMORANDUM OPINION AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE

JOE L. WEBSTER, Magistrate Judge.

This matter is before the Court on Defendant Cabot Longnecker's motion for summary judgment and partial summary judgment. (Docket Entry 65.) Plaintiff Home Meridian International, Inc. (hereinafter "Plaintiff" or "HMI") opposes the motion. Also before the Court is Plaintiffs motion for summary judgment. (Docket Entry 68.) All matters are ripe for disposition. For the reasons stated herein, the Court recommends that Defendant's motion for summary judgment and partial summary judgment be granted in part and denied in part, and Plaintiffs motion for partial summary judgment be granted in part and denied in part.

I. PROCEDURAL BACKGROUND

Plaintiff filed this action against Defendant on August 17, 2012 in the General Court of Justice, Superior Court Division, Guilford, North Carolina asserting claims for breach of contract and violation of North Carolina's Unfair and Deceptive Trade Practices Act, N.C. Gen. Stat. § 75-1.1 ("UDTPA"). (Docket Entry 2.) Thereafter, the case was removed to this Court on October 9, 2012. (Docket Entry 1.) Plaintiff filed an Amended Complaint on November 8, 2012 (Docket Entry 8), and Defendant answered with counterclaims on December 3, 2012. (Docket Entry 11.) On May 6, 2013, Plaintiff filed a motion for preliminary injunction (Docket Entry 23) which the undersigned recommended be denied. (Docket Entry 56.)[1] Defendant filed his motion for summary judgment as to Plaintiffs claims and partial summary judgment as to his counterclaims on October 30, 2013. (Docket Entry 65.) Plaintiff filed its motion for partial summary judgment as to Counts I, III and IV of Defendant's counterclaims on October 30, 2013.

II. FACTUAL BACKGROUND

HMI is a company that designs and markets case goods and upholstered furniture, primarily selling its wares to furniture retailers and club stores. (Am. Compl. ¶ 2, Docket Entry 8.) In its Amended Complaint, Plaintiff alleges that on April 5, 2011, the parties entered into a Sales Representation Agreement ("SRA") in which HMI engaged Defendant as an independent contractor "to promote and solicit orders... for [HMI's] products from the customers and potential customers" for a period of time from April 1, 2011 through March 31, 2013. ( See SRA ¶ 1, Ex. 1, Docket Entry 8-1.) Defendant also agreed to "vigorously promote the sale of [HMI's] products to the Customers and use [his] best efforts in connection therewith." ( Id. ¶ 5.) The SRA also contained a restrictive covenant in which Defendant was prohibited from engaging in any activity during the term that was "competitive with or harmful to [HMI]." ( Id. ¶ 6.) After the term ended, for a period of twelve months Defendant agreed that he would not "solicit, encourage, cause or attempt to cause any Restricted Customer (as defined in [paragraph 13(e)]) to reduce any part of its business with [HMI]." ( Id. ¶ 13(b)).

Plaintiff alleges that Defendant breached sections 5 and 6 of the SRA by "selling... case goods and/or upholstered furniture for the residential and hospitality markets directly to HMI's customer and/or potential customers in a manner that is competitive with or harmful to HMI." (Am. Compl. ¶ 14.) The Complaint further alleges that Defendant attempted to establish a direct relationship with HMI's furniture manufacturer to facilitate direct sales to HMI's customers. ( Id. ¶ 15.) Defendant also breached the SRA by indicating in an October 9, 2012 letter his intent to "fully and fairly compete with [HMI' in the marketplace, " less than one month after receiving his termination letter. ( See Ex. 3 at 3, Docket Entry 8-3.) Plaintiff also asserts that Defendant is in violation of the UDTPA. (Am. Compl. ¶¶ 36-40.)

Defendant counterclaimed seeking a declaratory judgment and asserting that Plaintiff breached the SRA and breached the implied covenant of good faith and fair dealing. ( See generally Def.'s Countercl., Docket Entry 11.) He also asserted a claim under the UDTPA. ( Id. ¶¶ 44-47.) On behalf of HMI, Defendant was to promote and solicit orders from certain customers and potential customers, including Sam's Club, Wal-Mart, Macy's and J.C. Penney. ( Id. ¶ 10; SRA Ex. A, Docket Entry 8-1.) Defendant's primary account was Sam's Club, which represented the majority of his past commissions and future expected commissions. (Def.'s Countercl. ¶ 20.) As alleged by Defendant, Plaintiff removed the Sam's Club account "for no reason other than to benefit [HMI] at the expense and to the detriment of [Defendant]." ( Id. ¶¶ 18, 19.) Defendant asserts that he complied with his obligations and that it was Plaintiff that materially breached the SRA by "unilaterally removing Sam's Club as a customer, refusing to pay [Defendant] his earned commissions, modifying the terms and conditions for calculating his commissions, and wrongfully terminating the [SRA]." ( Id. ¶ 33.) Defendant further asserts that HMI's conduct has caused injury to Defendant and his business. ( Id. ¶ 47.)

III. DISCUSSION

Summary judgment is appropriate when there exists no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Zahodnick v. Int'l Bus. Machs. Corp., 135 F.3d 911, 913 (4th Cir. 1997). The party seeking summary judgment bears the initial burden of coming forward and demonstrating the absence of a genuine issue of material fact. Temkin v. Frederick County Comm'rs, 945 F.2d 716, 718 (4th Cir. 1991) (citing Celotex v. Catrett, 477 U.S. 317, 323 (1986)). Once the moving party has met its burden, the non-moving party must then affirmatively demonstrate that there is a genuine issue of material fact which requires trial. Matsushita Elec. Indus. Co. Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). There is no issue for trial unless there is sufficient evidence favoring the non-moving party for a fact finder to return a verdict for that party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986); Sylvia Dev. Corp. v. Calvert County, Md., 48 F.3d 810, 817 (4th Cir. 1995). Thus, the moving party can bear his burden either by presenting affirmative evidence or by demonstrating that the non-moving party's evidence is insufficient to establish his claim. Celotex, 477 U.S. at 331 (Brennan, J., dissenting). When making the summary judgment determination, the court must view the evidence, and all justifiable inferences from the evidence, in the light most favorable to the non-moving party. Zahodnick, 135 F.3d at 913; Halperin v. Abacus Tech. Corp., 128 F.3d 191, 196 (4th Cir. 1997).

Moreover, "once the moving party has met his burden, the nonmoving party must come forward with some evidence beyond the mere allegations contained in the pleadings to show there is a genuine issue for trial." Baber v. Hosp. Corp. of Am., 977 F.2d 872, 874-75 (4th Cir. 1992). "Permissible inferences must still be within the range of reasonable probability, however, and it is the duty of the court to withdraw the case from the jury when the necessary inference is so tenuous that it rests merely upon speculation and conjecture." Ford Motor Co. v. McDavid, 259 F.2d 261, 266 (4th Cir. 1958). Moreover, the non-movant's proof must meet the substantive evidentiary standard of proof that would apply at a trial on the merits. Mitchell v. Data Gen. Corp., 12 F.3d 1310, 1316 (4th Cir. 1993), modified on other grounds, Stokes v. Westinghouse Savannah River Co., 420, 429-30 (4th Cir. 2000); DeLeon v. St. Joseph Hosp., Inc., 871 F.2d 1229, 1233 n.7 (4th Cir. 1989).

I. Defendant's motion for summary judgment and partial summary judgment

Defendant moves for summary judgment as to Plaintiff's claim for breach of contract and also moves for a finding that Plaintiff is liable for monetary damages to Defendant because the restrictive covenants in the SRA are a restraint on trade. Defendant argues that summary judgment should be granted in his favor because: (1) the SRA is void and unenforceable for lack of consideration and because Defendant is an independent contractor; (2) the SRA is void and unenforceable because there was no "meeting of the minds" as to the essential terms of computing Defendant's compensation; and (3) Plaintiff has not presented sufficient evidence to support its UDTPA claim.

A. Enforceability of SRA for Lack of Consideration & Defendant's Independent Contractor Status

Defendant first argues that the SRA is void and unenforceable for lack of consideration as to the restrictive covenant. Defendant bases this contention on the fact that he had already began working for Plaintiff prior to the signing of the SRA which included the restrictive covenant. Plaintiff argues that new or additional consideration in the form of commission advances, a two-year contractual term, and an exclusivity provision was in fact given to validify the ...


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