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Sirona Dental, Inc. v. Smithson

United States District Court, W.D. North Carolina, Charlotte Division

March 30, 2018

SIRONA DENTAL, INC., Plaintiff, Counter Defendant
MARIA SMITHSON and JOHN SMITHSON, Defendants, Third-Party Plaintiffs, Counter Claimants
MICHAEL S. AUGINS, Third-Party Defendant.


          Robert J. Conrad, Jr., United States District Judge.

         THIS MATTER comes before the Court on motions of Sirona Dental, Inc., (Doc. No. 70), Michael Augins, (Doc. No. 73), and Maria & John Smithson, (Doc. No. 76), for summary judgment, along with related responses and replies. Having considered the evidence presented after discovery and heard the arguments of the parties, the Court will grant the motions of Sirona Dental, Inc. and Michael Augins, and deny the motion of Maria & John Smithson, except as to Count Eighteen relating to misappropriation of trade secrets.

         I. BACKGROUND

         This case arises out of John Smithson's employment of his wife, Maria Smithson, as an outside vendor for Sirona Dental, Inc. (SDI). SDI, a subsidiary of Sirona Dental Systems, Inc. (SDS), develops, manufactures, and markets 3D imaging technology dental products. John Smithson was employed as SDI's Director of Marketing Extra-Oral Imaging from January 2003 until September 2014.

         His responsibilities included coordinating with the vendors who set up various websites SDI maintains as part of its business. He executed an Employee Patent and Secrecy Agreement, agreeing that all intellectual property or other work relating to SDI that he created during his employment belonged to the company. Although SDI paid for website buildout and development, John Smithson paid for the registration of the domain, using his own name and personal email address. He gave log-in and password information to employees under him to work on that website used for dentists to register to attend informational seminars put on by SDI called “3D Summits.”

         SDI's Employee Handbook contains a Code of Business Conduct instructing employees to “avoid conflicts of interest between personal and Sirona Group relationships.” In 2009, John Smithson told Dr. Tarun Agrawal, a compensated regular presenter at 3D Summits, that he was going to have his wife, Maria Smithson, perform marketing services for an SDI event under a fake name because they did not want questions or “any fuss” about the arrangement, which would “look bad” to SDI and vendors. John Smithson asked Dr. Agarwal to allow Maria Smithson to use the bank account of Townie Meeting d/b/a Practical Dental Learning Systems (PDL), which Dr. Agarwal founded and was an SDI preferred vendor, as a pass-through to conceal her identity from SDI. Dr. Agarwal agreed although Maria Smithson was not an actual contractor or employee of PDL.

         After SDI President Michael Augins approved a marketing services contract between SDI and PDL, John Smithson assigned work to Maria Smithson under the pseudonym “Elizabeth Brown.” John Smithson had authority to approve invoices up to a certain dollar amount. Invoices on PDL letterhead submitted by Maria Smithson via an Elizabeth Brown email account remained under that cap, although sometimes multiple invoices were submitted on the same day. Dr. Agawal did not prepare, review, or benefit from any of the invoices--all funds paid by SDI to PDL were subsequently transferred to Maria Smithson. Even after PDL ceased to exist as a company in 2014, Maria Smithson used Dr. Agarwal's dental practice account to receive money from SDI. SDI calculates the total amount of Maria Smithson-submitted invoices to be $349, 500. She used her personal checking account to pay subcontractors who invoiced PDL for website and graphic design and other work assigned to Maria Smithson by John Smithson.

         SDI human resources executives learned about the arrangement of John Smithson negotiating Maria Smithson's rates and approving her invoices when they were investigating another employee who worked under John Smithson. On Thursday, September 25, 2014, SDI suspended John Smithson's employment while it continued to investigate. The following Monday, SDI Human Resources Manager Kevin Mullinex was instructed to go to the Smithsons' house to retrieve John Smithson's company-issued laptop as soon as possible. Mullinex went that day to the Smithsons' residence, spoke with John Smithson, and requested that he turn over the laptop. John Smithson kept the laptop, telling Mullinex that he was backing up the data. John Smithson returned the laptop the following day, which was also the day he received his termination letter; however, all data on the laptop was deleted. John Smithson later provided a backup drive to SDI on October 14, 2014.

         On December 11, 2014, the website was shut down, blocking customers from registering for SDI's events. John Smithson admitted changing the domain account password after he thought his personal email account had been hacked, which prevented SDI from regaining control of that website. On December 24, 2014, the Court ordered John Smithson to relinquish control of SDI websites. (Doc. No. 8: TRO at 2).


         Summary judgment shall be granted “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). A factual dispute is genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A fact is material only if it might affect the outcome of the suit under governing law. Id. The movant has the “initial responsibility of informing the district court of the basis for its motion, and identifying those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (internal citations omitted). “The burden on the moving party may be discharged by ‘showing' . . . an absence of evidence to support the nonmoving party's case.” Id. at 325.

         Once this initial burden is met, the burden shifts to the nonmoving party. The nonmoving party “must set forth specific facts showing that there is a genuine issue for trial.” Id. at 322 n.3. The nonmoving party may not rely upon mere allegations or denials of allegations in his pleadings to defeat a motion for summary judgment. Id. at 324. The nonmoving party must present sufficient evidence from which “a reasonable jury could return a verdict for the nonmoving party.” Anderson, 477 U.S. at 248; accord Sylvia Dev. Corp. v. Calvert Cty., Md., 48 F.3d 810, 818 (4th Cir. 1995).

         When ruling on a summary judgment motion, a court must view the evidence and any inferences from the evidence in the light most favorable to the nonmoving party. Anderson, 477 U.S. at 255. “Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial.” Ricci v. DeStefano, 557 U.S. 557, 586 (2009) (internal citations omitted). The mere argued existence of a factual dispute does not defeat an otherwise properly supported motion. Anderson, 477 U.S. at 248. If the evidence is merely colorable, or is not significantly probative, summary judgment is appropriate. Id. at 249-50.


         A. SDI's and Augins's Motions for Summary Judgment (Doc. Nos. 70, 73)

         SDI seeks summary judgment on its declaratory judgment claim (Count Eleven) against John Smithson. SDI and Augins seek summary judgment on the Smithsons' slander per se (Count One) and slander per quod (Count Two) claims against them. Augins also seeks summary judgment on the Smithsons' tortious interference claim (Count Three).

         1. Declaratory judgment claim (SDI's Count Eleven)

         SDI seeks a judgment pursuant to 28 U.S.C. § 2201 declaring that,, and rightfully belong to SDI and John Smithson has no right to own, control, or access those domain accounts. (Doc. No. 22: Amend. Compl. at ¶ 167). John Smithson asserts no ownership interest in the websites, (Doc. No. 76-1: Mem. at 22); therefore, summary judgment in favor of SDI on this claim will be granted.

         2. Slander per se claim (Smithsons' Count One)

         The North Carolina Business Court has detailed a helpful summary of North Carolina defamation law:

To recover for defamation, “a plaintiff must allege and prove that the defendant made false, defamatory statements of or concerning the plaintiff, which were published to a third person, causing injury to the plaintiff's reputation.” Tyson v. L'eggs Prods., Inc., 84 N.C.App. 1, 10-11, 351 S.E.2d 834, 840 (1987). Slander per se is a particular kind of defamation defined as “an oral communication to a third party which amounts to (1) an accusation that the plaintiff committed a crime involving moral turpitude; (2) an allegation that impeaches the plaintiff in his trade, business, or profession; or (3) an imputation that the plaintiff has a loathsome disease.” Phillips v. Winston-Salem/Forsyth Cnty. Bd. of Educ., 117 N.C.App. 274, 277, 450 S.E.2d 753, 756 (1994). When a statement falls into one of these three categories, “malice and damages are deemed presumed by proof of publication, with no further evidence required as to any resulting injury.” Boyce & Isley v. Cooper, 153 N.C.App. 25, 30, 568 S.E.2d 893, 898 (2002).
In order to be slanderous per se, defamatory words “must be susceptible of but one meaning and of such a nature that the court can presume as a matter of law that they tend to disgrace and degrade the party or hold him up to public hatred, contempt or ridicule, or cause him to be shunned and avoided.” Renwick v. News & Observer Pub. Co., 310 N.C. 312, 317-18, 312 S.E.2d 405, 409 (1984) (citation omitted). Constitutional limits on the regulation of speech dictate that defamatory statements are not actionable if they “cannot ‘reasonably [be] interpreted as stating actual facts' about an individual[.]” Daniels v. Metro Magazine Holding Co., LLC, 179 N.C.App. 533, 539, 634 S.E.2d 586, 590 (2006) (quoting Milkovich v. Lorain Journal Co., 497 U.S. 1, 20 (1990)). Moreover, “to fall within the class of slander per se as concerns a person's trade or profession, the defamatory statement must do more than merely harm a person in [his] business.” Market Am., Inc. v. Christman- Orth, 135 N.C.App. 143, 151, 520 S.E.2d 570, 577 (1999) (citations and quotation marks omitted). The false statement “(1) must touch the plaintiff in [his] special trade or occupation, and (2) must contain an imputation necessarily hurtful in its effect on [his] business.” Id.

Hopkins v. MWR Management Co., 15 CVS 697, 2017 WL 2380227 (May 31, 2017).

         a) statements at issue

         All the statements alleged by the Smithsons in their Amended Counterclaim and Amended Third Party Complaint as slander per se were purportedly made by SDI President Michael Augins between September 23-29, 2014 to Jeff Slovin, SDS Chief Executive Officer; Lynn Blankenship, Vice President of Human Resources & Services; Susan Murphy, Senior Vice President of Finance; and Michael Williamson, an SDI sales and marketing employee. (Doc. No. 41 at ¶¶ 46-55). He allegedly told each of them that he had no knowledge that John Smithson was secretly employing his wife, Maria Smithson, as Elizabeth Brown, and, thus, John Smithson was embezzling or misusing SDI funds and was committing fraud against SDI.

         SDI has distilled the following statements as being alleged by the Smithsons in discovery as actionable:

         1. Michael Augins told Sirona employees and executives that he did not know about Maria Smithson's work for Sirona USA;

         2. Prior to October 24, 2014, Michael Augins, Michael Williamson, Gary Berg, and Dean Pferschy described Maria Smithson's work for PDL as embezzlement when speaking to Sirona's sales force employees and Patterson Dental employees. The Smithsons learned about these statements from Javid Tokhi on October 14, 2014;

         3. On October 29, 2014, Chris Goodson told Dr. Darin and CeCe O'Bryan that Maria Smithson's work was essentially embezzlement and that Maria Smithson billed for non-existent projects. The Smithsons learned about these statements from the O'Bryans;

         4. At ¶ 3D Summit in San Francisco in November 2014, Jochen Kusch overheard Mike Williamson stating that John was terminated for having a vendor relationship with his wife that the Smithsons had set up a fake company and the Smithsons were involved in a fraudulent scheme. The Smithsons learned about these statements from Kusch;

         5. Mike Williamson and other Sirona sales and marketing employees provided false statements to individuals in the dental industry. The Smithsons learned about these statements from Tokhi on December 10, 2014;

         6. On or before January 8, 2015, Pat Hess told Dr. John White (i) the Smithsons were embezzling, (ii) the reason John Smithson was terminated, (iii) John was a “really bad guy, ” and (iv) John Smithson was funneling money to his spouse. The Smithsons learned about these statements from Dr. White;

         7. During February 2015, Mike Williamson had conversations with Ivoclar representatives resulting in the termination of employment discussions relating to Mr. Smithson;

         8. On or before February 20, 2015, various Sirona sales employees were gossiping to Dr. Neal Patel about the reason John Smithson was fired. The Smithsons ...

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