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Domtar AI Inc. v. J.D. Irving, Ltd.

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

August 20, 2014



TERRENCE W. BOYLE, District Judge.

This cause comes before the Court on defendants' motion for judgment on the pleadings, or in the alternative, for summary judgment [DE 40], plaintiffs' motion for discovery [DE 45], and plaintiffs' motion to seal [DE 50]. For the reasons discussed below, the motion for judgment on the pleadings is GRANTED, the motion for discovery is DENIED AS MOOT and the motion to seal is DENIED.


Plaintiffs filed this action in lieu of arbitration on January 31, 2014, seeking injunctive relief and alleging claims for breach of contract, unfair competition and unfair and deceptive trade practices, violation of the North Carolina Uniform Trade Secrets Protection Act ("UTSPA"), tortious interference with contractual relations, conspiracy, and conversion. The complaint alleges that defendant DeFelice was hired by plaintiff Associated Hygiene Products ("AHP") in December 2009 and thereafter executed an employment agreement that contains covenants not to compete and to protect against the disclosure of confidential information. AHP was acquired by plaintiff Domtar AI Inc. ("Domtar") in June 2013 and became a wholly-owned subsidiary thereof; all agreements to which AHP was a party were assigned to and accepted by Domtar.

Defendant DeFelice notified plaintiffs that he intended to resign to accept employment with defendant J.D. Irving ("JDI"), who plaintiffs contend is a direct competitor in the baby diaper product segment. Plaintiffs thereafter filed this suit. JDI then moved to transfer this case to the Northern District of Georgia. On the same day, plaintiffs filed an amended complaint and a motion for preliminary injunction pursuant to Rule 65 of the Federal Rules of Civil Procedure. Plaintiffs then requested an expedited hearing on their motion for preliminary injunction, and defendant JDI moved to stay this matter pending resolution of its own motion for injunctive relief filed in the Northern District of Georgia, or for an expedited hearing on its motion to transfer.[1] The Court denied the motion to transfer. [DE 25]. On April 25, 2014, the Court held a hearing on the motion for preliminary injunction and the motion to stay. The Court denied the motion for preliminary injunction and held the motion to stay in abeyance until motions practice in this Court concluded. [DE 38]. Defendants then filed the instant motion for judgment on the pleadings on May 23, 2014 and plaintiffs filed their motion for discovery on June 16, 2014.

The United States District Court for the Northern District of Georgia transferred to this Court DeFelice and Irving's declaratory judgment action seeking relief identical to De Felice's counterclaim in this action. The case (No. 5:14-CV-280-BO) is currently pending before this Court and defendants seek judgment in their favor on the claims in that case through their motion for judgment on the pleadings.[2]


In the amended complaint, plaintiffs seek injunctive relief (count one) and allege that DeFelice breached the noncompetition provision in a form key employee employment agreement ("the Agreement") with AHP by resigning and relocating to Canada to work for Irving (count two); that defendants engaged in unfair competition and unfair and deceptive trade practices ("UDTPA") by Irving hiring DeFelice to work in Canada (count three); that DeFelice will inevitably disclose unspecified trade secrets to Irving in violation of the North Carolina Trade Secrets Protection Act ("TSPA") simply because he is working for Irving (count four); that Irving induced DeFelice to breach the Agreement by hiring him (count five); and that all defendants engaged in a conspiracy to harm plaintiffs (count six). Defendants seek a declaratory judgment that the restrictive covenants in the Agreement are governed by Georgia law and void and unenforceable under Georgia law.


Federal rule of Civil Procedure 12(c) provides that "[a]fter the pleadings are closed - but early enough not to delay trial - a party may move for judgment on the pleadings." The test applicable for judgment on the pleadings is whether or not, when viewed in the light most favorable to the party against whom the motion is made, genuine issues of material fact remain or whether the case can be decided as a matter of law. Smith v. McDonald, 562 F.Supp. 829, 842 (M.D. N.C. 1983). A motion for judgment on the pleadings pursuant to Rule 12(c) is analyzed under the same standard as a Rule 12(b)(6) motion to dismiss. Burbach Broad. Co. of Del. v. Elkins Radio Corp., 278 F.3d 401, 405-06 (4th Cir. 2002).

When ruling on the motion, the court "must accept as true all of the factual allegations contained in the complaint." Erickson v. Pardus, 551 U.S. 89, 93-94 (2007) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-56 (2007)). Although complete and detailed factual allegations are not required, "a plaintiffs obligation to provide the grounds' of his entitle[ment] to relief requires more than labels and conclusions." Twombly, 550 U.S. at 555 (citations omitted). "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 555). Similarly, a court need not accept as true a plaintiffs "unwarranted inferences, unreasonable conclusions, or arguments." Eastern Shore Mkts. v. JD. Assocs. Ltd., 213 F.3d 175, 180 (4th Cir. 2000). A trial court is "not bound to accept as true a legal conclusion couched as a factual allegation." Twombly, 550 U.S. at 555. "In determining a motion for judgment on the pleadings, the court may consider documents incorporated by reference in the pleadings." Farmer v. Wilson Hous. Auth., 393 F.Supp.2d 384, 386 (E.D. N.C. 2004) (quotation omitted).

A. Breach of Contract and Declaratory Judgment Claims.

The Court finds that the breach of contract claim is governed by Georgia law. North Carolina's conflicts of law standard is lex loci contractus. The law of the place where the contract was formed is presumed to govern unless an express or implied contrary intent rebuts that presumption. Eli Research, Inc. v. United Communications Group, LLC, 312 F.Supp.2d 748, 754 (M.D. N.C. 2004); Morton v. Morton, 332 S.E.2d 736, 738 ( N.C. App. 1985). Here, the Agreement was prepared by Georgia-based AHP, presented to DeFelice in Georgia, during his employment in Georgia, and was executed by both parties in Georgia.

Defendants argue that the Agreement contains a clause specifying that arbitration will take place in the city in which the company's branch office is located where the employee is or was last employed. Defendants hold this clause to mean that the express intent of the parties at the time of the Agreement's execution was for arbitration and injunctive relief to be pursued in the State of North Carolina. Defendants cite to ACS Partners, LLC v. Caputo, 2010 U.S. Dist. LEXIS 19907 (M.D. N.C. Feb. 12, 2010), to support that argument. Defendants' reliance on Caputo is misplaced. In Caputo the parties entered into the agreement in Georgia with the intent that Mr. Caputo would relocate from Georgia to North Carolina for the purpose of performing his job. Here, when AHP and DeFelice entered into the Agreement AHP did not have a North Carolina office. Further, plaintiffs have not pled or submitted any facts suggesting that AHP or DeFelice intended DeFelice to work anywhere except Georgia when the Agreement was executed. Further, DeFelice continued to work in Georgia for ...

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