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Market America, Inc. v. Lee

Court of Appeals of North Carolina

December 19, 2017

MARKET AMERICA, INC., Plaintiff,
v.
PAMELA LEE and RUSTY ANCHOR GROUP, INC., Defendants.

          Heard in the Court of Appeals 19 September 2017.

         Appeal by plaintiff from orders entered 17 August 2016 and 16 November 2016 by Judge Patrice A. Hinnant in Guilford County No. 15 CVS 10300 Superior Court.

          Womble Carlyle Sandridge & Rice, LLP, by Pressly M. Millen and Samuel B. Hartzell, for plaintiff-appellant.

          Essex Richards, P.A., by Marc E. Gustafson, for defendants-appellees.

          DAVIS, Judge.

         There are two questions presented in this appeal. The first issue is whether a plaintiff is permitted to voluntarily dismiss its claims pursuant to Rule 41(a)(1) of the North Carolina Rules of Civil Procedure after the trial court has announced its ruling against the plaintiff on the defendant's dispositive motion but before the court's ruling is memorialized in a written order. The second issue concerns the circumstances under which a covenant not to compete contained in an employment contract can be held unenforceable as a matter of law under Rule 12 of the North Carolina Rules of Civil Procedure.

         Market America, Inc. ("Market America") appeals from the trial court's 17 August 2016 order vacating its notice of voluntary dismissal and dismissing with prejudice its claims against Pamela Lee[1] and from the court's 16 November 2016 order denying its motion for reconsideration. Because we conclude that Market America's voluntary dismissal was improperly taken, we affirm the portion of the trial court's order vacating the voluntary dismissal. However, in light of our determination that the court's dismissal of Market America's claims under Rule 12 constituted error, we reverse that portion of the trial court's order.

         Factual and Procedural Background

         We have summarized the pertinent facts below using Market America's own statements from its complaint, which we treat as true in reviewing a trial court's order granting a motion to dismiss. See, e.g., Stein v. Asheville City Bd. of Educ., 360 N.C. 321, 325, 626 S.E.2d 263, 266 (2006) ("When reviewing a complaint dismissed under Rule 12(b)(6), we treat a plaintiff's factual allegations as true.").

         Market America is a product brokerage company that is headquartered in Greensboro, North Carolina and "sells its products through a network of independent distributors." Its employees have the opportunity to attain the status of "certified trainers" in order to provide specialized training to Market America's distributors. Certified trainers are required to sign a Certified Trainer Agreement, which requires them to agree not to compete or solicit other distributors in a specified geographic area for one year after ceasing their employment with Market America.

         Market America's employees can also become "approved speakers" who "represent the company's finest distributors and, as a result of their role, also attain a high profile with the Market America field sales organization." Approved speakers must sign a Speakers Bureau Agreement, which also imposes "certain restrictions concerning confidentiality and non-solicitation of Market America distributors."

         Lee was hired as an independent distributor in 1997. During her employment with Market America, she became a certified trainer and later - through her corporate entity, Rusty Anchor Group, Inc. - an approved speaker. On 14 March 2008, she signed the Certified Trainer Agreement. On 26 June 2015, she signed the Speakers Bureau Agreement.

         In 2015, while she was still employed with Market America, Lee began working with a network marketing company called ARIIX, which used "person-to-person and/or Internet sales of products or services directly to consumers in their homes or at places other than fixed, permanent retail establishments, through independent distributors or salespersons." Market America learned of Lee's involvement with ARIIX and discovered that she had "actively solicited other Market America distributors to become involved in ARIIX." Based on this discovery, Lee's employment with Market America was terminated. After her employment with Market America ended, Lee continued to solicit Market America distributors to join ARIIX.

         On 22 December 2015, Market America filed a complaint against Lee and Rusty Anchor Group, Inc. (collectively "Defendants") in Guilford County Superior Court, alleging that Lee had breached the Certified Trainer Agreement and the Speakers Bureau Agreement. On or about 2 March 2016, Defendants filed an answer along with a motion to dismiss based on Rule 12(b)(6) and a motion for judgment on the pleadings pursuant to Rule 12(c).

         On 6 July 2016, a hearing was held before the Honorable Patrice A. Hinnant on the Rule 12 motions. At the close of the hearing, Judge Hinnant announced from the bench that she was granting Defendants' motions and directed Defendants' counsel to draft a written order.

         A few hours after Judge Hinnant announced her ruling in open court, Market America filed a notice of voluntary dismissal stating that it was dismissing without prejudice all of its claims against Defendants pursuant to Rule 41(a)(1). On 11 July 2016, Defendants filed a motion to vacate the notice of voluntary dismissal on the ground that the dismissal was ineffective because it was not taken in good faith.

         On 17 August 2016, Judge Hinnant entered a written order (1) granting Defendants' motion to vacate the voluntary dismissal; (2) dismissing Market America's claims against Rusty Anchor Group without prejudice; and (3) dismissing its claims against Lee with prejudice to the extent that those claims were based upon a breach of paragraphs 18(b) and (c) and 19(b) and (c) of the Certified Trainer Agreement.

         Market America filed a motion for reconsideration on 31 August 2016. On 16 November 2016, Judge Hinnant entered an order denying this motion. Market America subsequently filed a notice of appeal as to both of the trial court's orders.

         Analysis

         I. Appellate Jurisdiction

         As an initial matter, we must determine whether we have jurisdiction to hear this appeal. "A final judgment is one which disposes of the cause as to all the parties, leaving nothing to be judicially determined between them in the trial court." Duval v. OM Hospitality, LLC, 186 N.C.App. 390, 392, 651 S.E.2d 261, 263 (2007) (citation omitted). Conversely, an order or judgment is interlocutory if it does not settle all of the issues in the case but rather "directs some further proceeding preliminary to the final decree." Heavner v. Heavner, 73 N.C.App. 331, 332, 326 S.E.2d 78, 80, disc. review denied, 313 N.C. 601, 330 S.E.2d 610 (1985). In the present case, Lee asserts that Judge Hinnant's rulings were interlocutory because "the trial court did not dismiss those portions of Market America's claim involving [Lee]'s alleged breach of the Speakers Bureau Agreement or [Lee]'s alleged breach of Paragraph 18(a) and Paragraph 19(a) of the Certified Trainer Agreement."

         "Generally, there is no right of immediate appeal from interlocutory orders and judgments." Paradigm Consultants, Ltd. v. Builders Mut. Ins. Co., 228 N.C.App. 314, 317, 745 S.E.2d 69, 72 (2013) (citation and quotation marks omitted). The prohibition against interlocutory appeals "prevents fragmentary, premature and unnecessary appeals by permitting the trial court to bring the case to final judgment before it is presented to the appellate courts." Russell v. State Farm Ins. Co., 136 N.C.App. 798, 800, 526 S.E.2d 494, 496 (2000) (citation and brackets omitted).

However, there are two avenues by which a party may immediately appeal an interlocutory order or judgment. First, if the order or judgment is final as to some but not all of the claims or parties, and the trial court certifies the case for appeal pursuant to N.C. Gen. Stat. § 1A-1, Rule 54(b), an immediate appeal will li e. Second, 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 which would be lost absent immediate review.

N.C. Dep't of Transp. v. Page, 119 N.C.App. 730, 734, 460 S.E.2d 332, 334 (1995) (internal citations omitted).

         Judge Hinnant's order does not contain a certification under Rule 54(b). Therefore, Market America's appeal is proper only if it can demonstrate a substantial right that would be lost absent an immediate appeal. See Embler v. Embler, 143 N.C.App. 162, 166, 545 S.E.2d 259, 262 (2001) ("The burden is on the appellant to establish that a substantial right will be affected unless he is allowed immediate appeal from an interlocutory order." (citation omitted)).

         Here, Lee concedes - and we agree - that a substantial right is affected with respect to the trial court's order vacating Market America's voluntary dismissal. However, Lee argues that Market America will not be deprived of a substantial right in the event it is required to await a final judgment in this ...


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