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Campbell Alliance Group, Inc. v. Forrest

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

March 27, 2018

CAMPBELL ALLIANCE GROUP, INC, Plaintiff,
v.
LYNN FORREST, and ANDREW KWON, Defendants.

          ORDER

          JAMES C. DEVER III, Chief United States District Judge

         On December 23, 2015, Campbell Alliance Group, Inc. ("Campbell" or "plaintiff') sued defendants Lynn Forrest ("Forrest") and Andrew Kwon ("Kwon") (collectively "defendants") for breach of contract and injunctive relief to prevent defendants from violating their employment agreements [D.E. 1].[1] On September 23, 2016, the court held a hearing concerning Campbell's request for a preliminary injunction and denied that request [D.E. 64-65]. On March 23, 2017, defendants moved for summary judgment [D.E. 75] and filed a memorandum in support [D.E. 76]. On April 27, 2017, Campbell responded [D.E. 87]. On May 11, 2017, defendants replied [D.E. 102]. As explained below, defendants' motion for summary judgment is denied.

         I.

         Campbell is a pharmaceutical consulting company with its principal place of business in Raleigh, North Carolina. See Compl. [D.E. 1] ¶¶ 5, 11. In May 2008, Kwon began working for Campbell. See id. ¶ 32. In April 2010, Forrest began working for Campbell. See Id. ¶ 20. In December 2011, Kwon left Campbell to return to school but Campbell rehired him in September 2013. See Id. ¶ 34. Both Forrest and Kwon signed an "employee confidentiality, proprietary rights and intellectual property agreement" that contains restrictive covenants (the "employment agreements)"). See [D.E. 1-1, 1-2]. The employment agreements that Kwon and Forrest signed are identical in all material respects. See [D.E. 88] 8 ¶ 19. The employment agreements contain both a non-competition covenant and a non-solicitation covenant (collectively "restrictive covenants"). See [D.E. 1-1] (Sections 4.3, 4.4, 4.6). The non-competition covenant provides that

[e]mployee agrees that during the Non-competition Period, Employee shall not, directly or indirectly, on behalf of Employee or on behalf of any person, firm, partnership, corporation, association or entity: (a) provide Covered Services to any Client or Actively Targeted Prospect of Campbell with)whom Employee had any contact on behalf of Campbell during the last twelve (12) months of his or her employment with Campbell, or regarding whom Employee had significant exposure to Confidential Information through Campbell[.][2]

[D.E. 1-1] 5 (Section 4.6). The non-solicitation covenant provides that

[e]mployee agrees that during the Non-solicitation Period, Employee will not directly or indirectly, on behalf of Employee or on behalf of any person, firm, partnership, corporation, association or entity solicit or call upon any Client or Actively Targeted Prospect of Campbell with whom Employee had contact on behalf of Campbell, or for whom Employee had significant exposure to Confidential Information through Campbell, during the last twelve (12) months of Employee's employment with Campbell for the purpose of inducing such client or prospective client to discontinue ' their relationship with Campbell or soliciting business that is the same, similar to, or in competition with the Business of Campbell.

[D.E. 1-1] 4 (Section 4.3). The employment agreements define "Client" or "Actively Targeted Prospect" as a "department within a company or other entity (under the control of a Director, VP or comparable position) for which Campbell has provided Covered Services or actively marketed (e.g., called upon to discuss) Covered Services." Id. The employment agreements define "Covered Services" as "the services provided by Employee for or on behalf of Campbell during Employee's employment with Campbell." Id. The non-competition covenant remains in effect for 12 months after the employee leaves Campbell, and the non-solicitation covenant remains in effect for 18 months after the employee leaves Campbell. See Id. at 4-5. The employment agreements provide, however, that the period will be tolled during any time that the employee is not complying with the covenants. See id. at 4.

         The employment agreements contain an additional non-solicitation covenant that concerns solicitation of Campbell's employees. That provision provides

[e]mployee agrees that during the Non-solicitation Period, Employee will not directly or indirectly, on behalf of Employee or on behalf of any person, firm, partnership, corporation, association or entity, hire (in any capacity) or call upon or solicit any person who is, or had been during the preceding 12 months, an employee ... of Campbell, for the purpose of soliciting or inducing such employee... to discontinue his or her relationship with Campbell or to establish a relationship with any other person or business, whether or not it competes with the Business of Campbell.

[D.E. 1-1] 5. This covenant remains in effect for 18 months after the employee leaves Campbell and is also subject to tolling. See ii, at 4.

         Between July 2015 and October 2015, Kwon and Forrest discussed possible employment with Acsel Health, LLC ("Acsel"). See [D.E. 88] 40 ¶ 71. On August 10, 2015, Kwon resigned from Campbell, and on the same day, Forrest told her direct supervisor that she intended to resign. See id. 39 ¶¶ 66-67. Shortly thereafter, Forrest and Kwon began working for Acsel.

         Campbell alleges that defendants breached their restrictive covenants by soliciting and providing "covered services" to "one of [Campbell's] largest pharmaceutical-group clients, the Janssen Pharmaceutical Companies of Johnson & Johnson, ("Janssen")." [D.E. 87] 2. Specifically, Campbell contends that while at Campbell, defendants performed work for the following "clients, " as defined by the employment agreements: (1) the Oncology, Immunology, and Training departments at Janssen Global Services, LLC, (2) the Cardiovascular and Metabolic, Immunology, Oncology, and Training departments at Janssen Pharmaceuticals, Inc., (3) the Oncology department at Janssen Biotech, Inc., and (4) the Oncology department at Janssen Research & Development, LLC. See Id. at 13. According to Campbell, each of these departments is Campbell's "client, " and defendants violated their restrictive covenants by soliciting and providing covered services to individuals in these departments after joining Acsel. See Id. at 10-13.

         Defendants admit that they have performed work for at least ten different client contacts at Janssen related entities. Defendants worked with at least some of those contacts while employed at Campbell. See [D.E. 77] ¶¶ 76, 78 (defendants do not appear to dispute that they have worked with Meredith Unger and Annette Lam at both Campbell and Acsel); [D.E. 88] 42-43 ¶ 76.[3] In support of their motion for summary judgment, defendants argue that numerous provisions in the restrictive covenants are unenforceable. See [D.E. 76] 1-2. Defendants also contend that Campbell has failed to show the restrictive covenants are no broader than necessary to protect its legitimate business interests, that Campbell failed to show defendants solicited its clients, and that Campbell failed to identify what departments at Janssen are its "clients." See id.

         II.

         In considering a motion for summary judgment, the court views the evidence in the light most favorable to the non-movant and applies well-established principles under Rule 56 of the Federal Rules of Civil Procedure. See, e.g., Fed.R.Civ.P. 56; Scott v. Harris, 550 U.S. 372, 378 (2007); Celotex Corp. v. Catrett, 477 U.S. 317, 325-26 (1986); Anderson v. Liberty Lobby. Inc., 477 U.S. 242, 247-55 (1986); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 585-87 (1986). Summary judgment is appropriate "if 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); see Anderson, 477 U.S. at 247-48. The party seeking summary judgment must demonstrate an absence of a genuine issue of material fact. See Celotex Corp., 477 U.S. at 325. Once the moving party has met its burden, the nonmoving party then must demonstrate that there exists a genuine issue of material fact for trial. See Matsushita, 475 U.S. at 587. "[T]here is no issue for trial unless there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party." Anderson, 477 U.S. at 249. Conjectural arguments will not suffice. See Id. at 249-52; Beale v. Hardy, 769 F.2d 213, 214 (4th Cir. 1985) ("The nonmoving party... cannot create a genuine issue of material fact through mere speculation or the building of one inference upon another.")- Likewise, a "mere... scintilla of evidence in support of the [nonmoving party's] position [will not suffice]; there must be evidence on which the [fact finder] could reasonably find for the [nonmoving party]." Anderson, 477 U.S. at 252; see Evans v. Techs. Applications & Serv. Co., 80 F.3d 954, 962 (4th Cir. 1996).

         This court has subject-matter jurisdiction based on diversity. Thus, the court applies state substantive law and federal procedural rules. See Erie R.R. v. Tompkins, 304 U.S. 64, 78-80 (1938); Dixon v. Edwards, 290 F.3d 699, 710 (4th Cir. 2002). Defendants' motion for summary judgment requires the court to consider the parties' state-law claims and defenses, and the parties agree that North Carolina law applies. Accordingly, the court applies North Carolina law, and the court must determine how the Supreme Court of North Carolina would rule. See, e.g., Twin City Fire Ins. Co. v. Ben Arnold-Sunbelt Beverage Co. of S.C., 433 F.3d 365, 369 (4th Cir. 2005). "If the Supreme Court of [North Carolina] has spoken neither directly nor indirectly on the particular issue before us, [this court is] called upon to predict how that court would rule if presented with the issue." Id. (quotation omitted).[4] In making that prediction, the court may consider opinions of the North Carolina Court of Appeals, treatises, and the practices of other states. See id.

         A.

         Covenants not to compete between an employer and employee are not viewed favorably in modern law. See Henley Paper Co. v. McAllister, 253 N.C. 529, 534, 117 S.E.2d 431, 434 (1960); Kadis v. Britt, 224 N.C. 154, 159-60, 29 S.E.2d 543, 546 (1944); Farr Assocs., Inc. v. Baskin, 138 N.C.App. 276, 279, 530 S.E.2d 878, 881 (2000); Hartman v. W.H. Odell & Assocs., Inc., 117 N.C.App. 307, 311, 450 S.E.2d 912, 916 (1994). The party who seeks to enforce a covenant not to compete must prove that the covenant is reasonable. See, e.g., Kadis, 224 N.C. at 158, 29 S.E.2d at 545.

         North Carolina courts will enforce a covenant not to compete if it is: "(1) in writing; (2) reasonable as to [the] terms, time, and territory; (3) made a part of the employment contract; (4) based on valuable consideration; and (5) not against public policy." Triangle Leasing Co. v. McMahon. 327 N.C. 224, 228, 393 S.E.2d 854, 857 (1990); see United Labs., Inc. v. Kuykendall, 322 N.C. 643, 649-50, 370 S.E.2d 375, 380 (1988); Ene'g Assocs., Inc. v. Pankow, 268 N.C. 137, 139, 150 S.E.2d 56, 58 (1966); James C. Greene Co. v. Kelley, 261 N.C. 166, 168, 134 S.E.2d 166, 167 (1964): Orkin Exterminating Co. v. Griffin, 258 N.C. 179, 181, 128 S.E.2d 139, 140-41 (1962) (per curiam); Asheville Assocs., Inc. v. Miller, 255 N.C. 400, 402, 121 S.E.2d 593, 594 (1961).

         The reasonableness of a non-competition covenant is a matter of law for the court to decide. See Shute v. Heath, 131 N.C. 281, 282, 42 S.E. 704, 704 (1902). "To be valid, the restrictions must be no wider in scope than is necessary to protect the business of the employer." Med. Staffing Network, Inc. v. Ridgway,194 N.C.App. 649, 656, 670 S.E.2d 321, 327 (2009) (quotation omitted); see Triangle Leasing Co., 327 N.C. at 229, 393 S.E.2d at 857; Manpower of Guilford Cty., Inc. v. Hedgecock,42 N.C.App. 515, 521, 257 S.E.2d 109, 114 (1979). "When considering the enforceability of a covenant not to compete, a court examines the reasonableness of its time and geographic restrictions, balancing the substantial right of the employee to work with that of the employer to protect its legitimate business interests." Okuma Am. Corp. v. Bowers,181 N.C.App. 85, 86, 638 S.E.2d617, 618 (2007). In evaluating a covenant not to compete, a court must consider time and geographic limitations in tandem. See, e.g., Jewel Box Stores Corp. v. Morrow, 272 N.C. 659, 665, 158 S.E, 2d 840, 844 (1968). Generally, the shorter ...


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