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Rlm Communications, Inc. v. Tuschen

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

November 7, 2014

RLM COMMUNICATIONS, INC., Plaintiff,
v.
AMY E. TUSCHEN and ESCIENCE AND TECHNOLOGY SOLUTIONS, INC., Defendants

Unsealed November 25, 2014 by Order of the Court.

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For RLM Communications, Inc., Plaintiff: Jose A. Coker, R. Jonathan Charleston, LEAD ATTORNEYS, Dharmi B. Tailor, The Charleston Group, Fayetteville, NC; Coy E. Brewer, Jr., Coy E. Brewer, Attorney At Law PLLC, Fayetteville, NC.

For Amy E. Tuschen, Escience and Technology Solutions, Inc., Defendants: Michael C. Lord, Williams Mullen, Raleigh, NC.

OPINION

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Unsealed November 25, 2014 by Order of the Court

ORDER (SEALED)[1]

LOUISE W. FLANAGAN, United States District Judge.

This matter comes before the court on defendants' motion for summary judgment (DE 6), and plaintiff's motion for permanent injunction (DE 17). Also before the court is plaintiff's response to the court's order to show cause (DE 60) with respect to costs incurred in connection with defendant's motion to compel (DE 42). The motions have been fully briefed. In this posture, the issues raised are ripe for adjudication. For the following reasons, the court grants defendants' motion, denies plaintiff's motion, and orders payment of costs in part as set forth herein.

STATEMENT OF THE CASE

Plaintiff filed suit in state court on April 17, 2014, seeking injunctive relief and damages against defendant eScience and Technology Solutions, Inc., (" eSTS" ) and defendant Amy E. Tuschen (" Tuschen" ), who is an employee of eSTS and a former employee of plaintiff. Plaintiff asserts nine claims for relief based upon defendants' allegedly improper use of confidential information and trade secrets: (1) breach of contract covenant not to compete, (2) breach of contract confidentiality agreement, (3) unfair and deceptive trade practices, (4) tortious interference with contractual relations, (5) misappropriation of trade secrets, (6) unjust enrichment, (7) civil conspiracy, (8) preliminary and permanent injunction, and (9) conversion.

The day after the complaint was filed, plaintiff obtained a temporary restraining order in state court. On April 25, 2014, defendants removed to this court on the basis of diversity jurisdiction. Defendants filed a motion to dismiss part of plaintiff's claims on April 27, 2014, and plaintiff filed an emergency motion for temporary restraining order on April 28, 2014. By text order entered April 29, 2014, this court granted the temporary restraining order on the terms and conditions set forth in the state court order.

That same date, plaintiff filed a second emergency motion to temporary restraining order, preliminary injunction, and to expedite discovery (DE 17). The court held an administrative conference on April 30, 2014, and, based upon discussion at the

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conference, the court directed the parties to tender a proposed consent order regarding temporary injunctive relief and case scheduling. Upon notice of the parties' respective positions, the court entered a preliminary injunction order on May 14, 2014, in part based upon consensus of the parties, and also based upon findings of fact and conclusions of law. Through scheduling order entered the same date, the court converted plaintiff's emergency motion into a motion for permanent injunction, and converted defendants' motion to dismiss into a motion for summary judgment to be supplemented upon further discovery and briefing as scheduled by the court.

Defendants alerted the court of a discovery dispute on May 27, 2014, and hearing was held before a magistrate judge partially resolving issues presented. Defendants filed a motion to compel on May 30, 2014, and an amended motion to compel on May 31, 2014 (DE 39, 42). Plaintiff filed a motion for protective order on June 13, 2014. The court stayed briefing on the dispositive motions in the case, and held motion hearing on June 16, 2014, whereupon the court granted the motion to compel and entered plaintiff's proposed protective order. Memorializing rulings at the June 16, 2014, hearing, the court set a revised briefing schedule on dispositive motions, and directed plaintiff to show cause why it should not pay defendants' costs incurred in connection with the motion to compel. Plaintiff filed a response to the show cause order on July 3, 2014, and the parties completed briefing on the dispositive motions on July 11, 2014.

STATEMENT OF FACTS

Viewing the evidence in the light most favorable to plaintiff, the material facts may be summarized as follows. Plaintiff is a North Carolina corporation with offices in North Carolina and Georgia. Plaintiff specializes in a variety of business services related to information technology, including information assurance; cyber security; infrastructure library and service-level management implementation; systems integration and audio visual support; and program management and staff support services.

On June 5, 2007, defendant Tuschen executed an employment agreement accepting plaintiff's offer of employment as a Training and Development Representative. On her first day at work, on June 14, 2007, defendant Tuschen executed a covenant not to compete, stating that while employed and for one year thereafter she would not " directly or indirectly participate in a business that is similar to a business now or later operated by [plaintiff] in the same geographical area," among other restrictions. (DE 1-1 at 21). That same date, defendant Tuschen also executed a confidentiality agreement, stating that she would not " remove or copy any confidential information or materials" that she may have access to in her employment without plaintiff's permission, among other restrictions. (DE 1-1 at 23).

Plaintiff promoted defendant Tuschen several times during her employment with plaintiff, to positions including technical trainer, program manager, director of training operations, and director of information assurance. In each of her positions with plaintiff, defendant Tuschen was involved with oversight and provision of services to the United States government, including pursuant to a contract to provide information technology training to the United States Army, numbered W91249-12-C-00 17 (the " Contract" ), the term of which expired June 30, 2014. At times during the course of her employment, defendant Tuschen had access to and acquired for purposes of performing her

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duties information not available to the public regarding plaintiff's business strategies and resources for bidding on government contracts, including the Contract.

Around June 1, 2013, defendant Tuschen notified plaintiff of her resignation, effective June 13, 2013. She informed plaintiff and her co-workers before leaving that she intended to take a position with defendant eSTS. Prior to her last day, defendant Tuschen gathered data related to management and operations under the Contract and copied it onto a compact disc (CD). Defendant Tuschen gave the CD to her successor program manager on the Contract, plaintiff's employee Dennis Yelverton, before her last day. Plaintiff subsequently took possession of the CD.

Defendant Tuschen began employment with defendant eSTS on or shortly after June 13, 2013. Defendant eSTS is a South Carolina corporation with offices in South Carolina, Georgia, Virginia, and Maryland. Defendant eSTS is a business engaged in engineering and management support services, including through contracts with the United States government. Defendant eSTS employs defendant Tuschen as Director of Cyber and IT Solutions in the company's Augusta, Georgia, office. During the course of her employment with defendant eSTS, defendant Tuschen has been involved with developing a bid for a government contract (the " follow-on contract" ) involving services similar to that provided by RLM under the Contract. The time period for bids on the follow-on contract originally was set to close in June 2014, but since was extended to October 24, 2014. Defendant Tuschen also has assisted eSTS during the course of her employment with soliciting employees of RLM to work for eSTS, in the event eSTS has the winning bid on the follow-on contract.

DISCUSSION

A. Motion for Summary Judgment

1. Standard of Review

Summary judgment is appropriate where " the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). The party seeking summary judgment bears the initial burden of demonstrating the absence of any genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the moving party has met its burden, the nonmoving party then affirmatively must demonstrate with specific evidence that there exists a genuine issue of material fact requiring trial. Matsushita Elec. Indus. Co. Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). Only disputes between the parties over facts that might affect the outcome of the case properly preclude the entry of summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

" [A]t the summary judgment stage the [court's] function is not [itself] to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Id. at 249. Similarly, " [c]redibility determinations ... are jury functions, not those of a judge." Id. at 255. In determining whether there is a genuine issue for trial, " evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in [non-movant's] favor." Id.; see United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962) (" On summary judgment the inferences to be drawn from the underlying facts contained in [affidavits, attached exhibits, and depositions] must be

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viewed in the light most favorable to the party opposing the motion." ).

Nevertheless, " permissible inferences must still be within the range of reasonable probability, ... 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." Lovelace v. Sherwin-Williams Co., 681 F.2d 230, 241 (4th Cir. 1982) (quotations omitted). Thus, judgment as a matter of law is warranted where " a reasonable jury could reach only one conclusion based on the evidence," or when " the verdict in favor of the non-moving party would necessarily be based on speculation and conjecture." Myrick v. Prime Ins. Syndicate, Inc., 395 F.3d 485, 489 (4th Cir. 2005). By contrast, when " the evidence as a whole is susceptible of more than one reasonable inference, a jury issue is created," and judgment as a matter of law should be denied. Id. at 489-90.

2. Analysis

a. Breach of Contract Covenant Not to Compete

Defendants argue that plaintiff's first breach of contract claim fails as a matter of law because the covenant not to compete upon which it is based is invalid and unenforceable, due to lack of consideration, among other deficiencies. Because the court agrees that the covenant not to compete is unenforceable due to lack of consideration, the court need not reach defendants' remaining arguments in support of summary judgment on this claim.

Under North Carolina law, the " elements of a claim for breach of contract are (1) existence of a valid contract and (2) breach of the terms of that contract." Crosby v. City of Gastonia, 635 F.3d 634, 645 (4th Cir. 2011) (quotations omitted). " [I]n order for a contract to be enforceable it must be supported by consideration. A mere promise, without more, is unenforceable." Investment Properties of Asheville, Inc. v. Norburn, 281 N.C. 191, 195, 188 S.E.2d 342 (1972).

Where a covenant not to compete is entered into at the time and as a part of a contract of employment, the " mutual promises of employer and employee furnish valuable considerations each to the other for the contract." James C. Greene Co. v. Kelley, 261 N.C. 166, 168, 134 S.E.2d 166 (1964); see Am. Hot Rod Ass'n, Inc. v. Carrier, 500 F.2d 1269, 1277 (4th Cir. 1974) (stating that covenant not to compete may be enforceable if " entered into at the time and as a part of the contract of employment," among other requirements). " However, when the relationship of employer and employee is already established without a restrictive covenant, any agreement thereafter not to compete must be in the nature of a new contract based upon a new consideration." Kelley, 261 N.C. at 168.

Plaintiff asserts that the covenant not to compete is supported by consideration in two alternative respects. First, plaintiff argues that the covenant not to compete was part of defendant Tuschen's employment contract. Second, plaintiff argues that the covenant not to compete was supported by separate consideration in the form of " company private information." (DE 74 at 5). The court will address each in turn.

Whether the covenant not to compete was part of defendant Tuschen's employment contract turns on an antecedent question regarding the terms of the employment contract. Under North Carolina law, in order for parties to enter into a contract, " [t]he offer must be communicated, must be complete, and must be accepted in its exact terms." Yeager v. Dobbins, 252 N.C. 824, 828, 114 S.E.2d 820 (1960);

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see Chappell v. Roth, 353 N.C. 690, 692 (2001), 548 S.E.2d 499. " To constitute a valid contract, the parties must assent to the same thing in the same sense, and their minds must meet as to all the terms." Boyce v. McMahan, 285 N.C. 730, 734, 208 S.E.2d 692 (1974); see Horton v. Humble Oil & Refining Co., 255 N.C. 675, 679, 122 S.E.2d 716 (1961) (" [I]t is necessary that the minds of the parties meet upon a definite proposition. There is no contract unless the parties thereto assent, and they must assent to the same thing, in the same sense." ).

In addition, " [i]t is the general law of contracts that the purport of a written instrument is to be gathered from its four corners, and the four corners are to be ascertained from the language used in the instrument." Carolina Power & Light Co. v. Bowman, 229 N.C. 682,693-94, 51 S.E.2d 191 (1949). " [W]hen the language of a contract is clear and unambiguous, construction of the contract is a matter of law for the court." Hagler v. Hagler, 319 N.C. 287, 294, 354 S.E.2d 228 (1987). Terms in a contract are to be " interpreted according to their usual, ordinary, and commonly accepted meaning." Anderson v. Allstate Inc. Co., 266 N.C. 309, 312, 145 S.E.2d 845 (1966).

The employment agreement in this case is embodied in a written instrument, an offer letter dated May 29, 2007, accepted and executed by defendant Tuschen on June 5, 2007. The offer letter extends to defendant Tuschen " an offer of employment effective on 14 June 2007," including terms of salary, benefits, work hours, position title, travel requirements, and employment supervision. (DE 1-1 at 19). The offer letter states that the offer is contingent in two respects: 1) on final execution of a contract with the government in support to the Leader College of Information Technology, United States Army Signal Center, Fort Gordon, Georgia; and 2) on securing and maintaining a personnel security clearance, if needed. No mention is made of any covenant not to compete requirement. The offer letter concludes by stating " [y]our signature and date constitutes 'Full' acceptance of this job offer." (Id.). Defendant signed and dated the letter June 5, 2007.

The valid employment agreement is contained within the four comers of this offer letter and acceptance, and its terms are plain and unambiguous. It does not state or suggest that any covenant not to compete will be a part of the employment agreement. Nor does it make the employment agreement contingent upon signature of a covenant not to compete, and the absence of such contingency is further highlighted by the two items which are expressly noted as contingencies. The limited terms of the employment agreement are further confirmed by the statement that defendant Tuschen's signature and date constitutes " 'Full' acceptance of [the] job offer." (DE 1-1 at 20). In sum, by its terms, the employment agreement does not include a covenant not to compete.

Furthermore, the covenant not to compete, executed June 14, 2007, itself makes clear that it is a separate, independent, agreement. It states that " [t]his agreement is between [plaintiff], Employer, and [defendant Tuschen], Employee," at the outset indicating that an employer-employee relationship has already been established. (DE 1-1 at 24). It recites separate consideration in the form of provision of " Company Private Information," and it confirms that the covenant not to compete " is the entire agreement between the parties." (Id.). In addition, the covenant not to compete was executed seven days after defendant Tuschen executed the employment agreement. Thus, the covenant not

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to compete was not entered into at the time of nor made part of the employment agreement.

Plaintiff argues that the employment agreement included the covenant not to compete because the offer of employment states that it is an " offer of employment effective on 14 June 2007." (DE 65 at 16). Plaintiff suggests that because defendant Tuschen started employment on June 14, 2007, and because she signed the covenant not to compete on that day, a factual dispute is raised as to whether the covenant not to compete is part of the employment agreement. The inferences plaintiff seeks to draw from these facts, however, are unreasonable and contrary to the plain language of the employment agreement and covenant not to compete. As noted above, the employment agreement states that defendant Tuschen's signature and date constitutes " 'Full' acceptance of [the] job offer," and the employment agreement was not contingent in any respect upon signature of the covenant not to sue on the first day at work. (DE 1-1 at 20). The fact that the offer letter extended an " offer of employment effective on 14 June 2007," in itself, does not alter the execution and thus completion of the employment agreement on June 5, 2007.

">Worth Chemical Corp. v. Freeman, 261 N.C. 780, 136 S.E.2d 118 (1964), is a useful case for comparison. There, a corporation engaged defendant as a salesman on September 1, 1960. Id. at 780. " Thereafter on September 16, 1960, the parties signed an employment contract which recited" a covenant not to sue. Id. The Supreme Court held that the covenant not to sue was invalid because it was not supported by " new consideration." Id. at 781. In so holding, the court noted " [a]t the time the relationship of employer and employee was established between the plaintiff and defendant [] on September 1, 1960, no written contract evidenced a covenant restricting [defendant's] right to engage in competitive employment." Id. The court noted that " [t]he written contract of September 16, 1960 was a new contract without a new consideration." Id.

The same reasoning applies in the case at bar, where the earlier contract for employment did not evidence in any respect a covenant not to compete. The facts in the present case are further decisive because the earlier contract for employment is spelled out in plain and unambiguous terms in the offer letter accepted by defendant Tuschen. Worth, thus, is controlling.

Plaintiff also suggests that extrinsic evidence regarding the circumstances surrounding the execution of the employment agreement and covenant not to sue could shed light on whether the parties intended to incorporate the covenant not to sue into the employment agreement. But parol evidence may be used to determine the intent of the contracting parties only if the contract's language is ambiguous. See Lattimore v. Fisher's Food Shoppe, Inc., 313 N.C. 467, 474, 329 S.E.2d 346 (1985). Where the terms of both agreements are plain and unambiguous as discussed above, recourse to extrinsic evidence to define the meaning of terms in the contracts is not permitted. See Mobil Oil Corp. v. Wolfe, 297 N.C. 36, 39, 252 S.E.2d 809 (1979).

In sum, because the covenant not to compete is not included within the employment agreement between plaintiff and defendant Tuschen, the covenant must be supported by " new consideration" to be valid. Kelley, 261 N.C. at 168. Accordingly, the court turns next to plaintiff's alternative contention that the covenant was supported by consideration in ...


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