Filed: Jul. 28, 2016
Latest Update: Mar. 03, 2020
Summary: PUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 14-2351 RLM COMMUNICATIONS, INC., Plaintiff - Appellant, v. AMY E. TUSCHEN; ESCIENCE AND TECHNOLOGY SOLUTIONS, INC., Defendants - Appellees. Appeal from the United States District Court for the Eastern District of North Carolina, at Raleigh. Louise W. Flanagan, District Judge. (5:14-cv-00250-FL) Argued: March 24, 2016 Decided: July 28, 2016 Before KING, DIAZ, and HARRIS, Circuit Judges. Affirmed by published opinion. Judge Diaz
Summary: PUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 14-2351 RLM COMMUNICATIONS, INC., Plaintiff - Appellant, v. AMY E. TUSCHEN; ESCIENCE AND TECHNOLOGY SOLUTIONS, INC., Defendants - Appellees. Appeal from the United States District Court for the Eastern District of North Carolina, at Raleigh. Louise W. Flanagan, District Judge. (5:14-cv-00250-FL) Argued: March 24, 2016 Decided: July 28, 2016 Before KING, DIAZ, and HARRIS, Circuit Judges. Affirmed by published opinion. Judge Diaz w..
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PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 14-2351
RLM COMMUNICATIONS, INC.,
Plaintiff - Appellant,
v.
AMY E. TUSCHEN; ESCIENCE AND TECHNOLOGY SOLUTIONS, INC.,
Defendants - Appellees.
Appeal from the United States District Court for the Eastern
District of North Carolina, at Raleigh. Louise W. Flanagan,
District Judge. (5:14−cv−00250−FL)
Argued: March 24, 2016 Decided: July 28, 2016
Before KING, DIAZ, and HARRIS, Circuit Judges.
Affirmed by published opinion. Judge Diaz wrote the opinion, in
which Judge King and Judge Harris joined.
ARGUED: R. Jonathan Charleston, THE CHARLESTON GROUP,
Fayetteville, North Carolina; Coy E. Brewer, Jr., COY E. BREWER,
JR., ATTORNEY AT LAW, Fayetteville, North Carolina, for
Appellant. Michael Coghlan Lord, WILLIAMS MULLEN, Raleigh,
North Carolina, for Appellees. ON BRIEF: Jose A. Coker, Dharmi
B. Tailor, THE CHARLESTON GROUP, Fayetteville, North Carolina,
for Appellant.
DIAZ, Circuit Judge:
After working for six years at RLM Communications, Inc.,
Amy Tuschen resigned and joined a competitor, eScience and
Technology Solutions, Inc. Although RLM and eScience had
offices just a few miles from each other, RLM did not initially
object to Tuschen’s move. Later, however, RLM discovered that
eScience was planning to bid against it on a government contract
very similar to one that Tuschen had managed during her tenure
at RLM. RLM also learned that Tuschen was soliciting her former
RLM colleagues to join eScience in the event her new employer
won the contract.
RLM brought multiple claims against eScience and Tuschen,
alleging principally that Tuschen breached a covenant not to
compete and unlawfully took confidential information from RLM
and shared it with eScience. After discovery, the district
court granted summary judgment to eScience and Tuschen on all of
RLM’s claims. Because the covenant not to compete was not
enforceable and RLM failed to present sufficient evidence that
Tuschen took or shared RLM’s confidential information, we
affirm.
2
I.
A.
RLM is a government contractor specializing in services
such as cyber security, information technology, information
assurance (i.e., managing the various risks associated with an
organization’s information and data systems), and management
support. On June 5, 2007, Tuschen signed an offer letter from
RLM, accepting a position as a Training and Development
Representative. In this role, Tuschen was to provide
instruction at the U.S. Army Leader College of Information
Technology at Fort Gordon, Georgia. On her first day of work,
Tuschen executed two more documents: a Confidentiality Agreement
and a Covenant Not to Compete (the “Noncompete”). 1
Over the next six years, RLM promoted Tuschen several
times, ultimately making her Director of Information Assurance.
One of Tuschen’s responsibilities in this position was to manage
an information-assurance contract with the U.S. government (the
“Contract”). The Contract was set to expire on June 30, 2014,
at which time the government was to rebid the services as a new
contract (the “Follow-on Contract”). About a year before the
Contract expired, Tuschen gave RLM two weeks’ notice of her
resignation. Prior to departing, she copied several files
1 We discuss these agreements in more detail below.
3
related to the Contract from her employer-issued laptop computer
onto a CD, which she gave to her successor, Dennis Yelverton.
Before Tuschen’s departure, RLM learned that she planned to
join eScience, a competing federal contractor with an office
just down the street from RLM. Not only did RLM not object to
Tuschen’s plan to work for eScience, but it gave her $1,000 in
gift cards and a “giant bouquet of roses” as parting gifts.
J.A. 257.
Within days of resigning from RLM, Tuschen began working
for eScience as its Director of Cyber and IT Solutions. At
eScience, she was charged with helping the company develop a bid
for the Follow-on Contract and with reaching out to former
colleagues at RLM to secure their services should eScience win
the Follow-on Contract. She contacted several RLM employees for
this purpose.
Meanwhile, the government issued its request for proposals
for the Follow-on Contract in May 2014. This led to some
technical jockeying between RLM and eScience over how large a
company would be permitted to serve as prime contractor. The
original request for proposals assigned the Follow-on Contract a
North American Industry Classification System (NAICS) code that
had the effect of enabling eScience to bid as prime contractor
but disqualifying the larger RLM. But the day after the request
for proposals was released, the government amended it, assigning
4
a different NAICS code that would allow RLM to bid as prime
contractor.
Seeking to avoid competition from larger firms such as RLM,
eScience appealed to the U.S. Small Business Administration,
which reinstated the original NAICS code. It was a fleeting
victory: RLM, which could participate in a bid as a
subcontractor rather than as prime contractor, was part of the
team that won the Follow-on Contract.
B.
RLM filed suit in North Carolina state court against
Tuschen and eScience, seeking a temporary restraining order
(“TRO”) and asserting nine claims: (1) breach of contract
(related to the Noncompete); (2) breach of contract (related to
the 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 state court granted the TRO, and
Tuschen and eScience removed to federal court, where they moved
to dismiss all claims.
The district court converted their motion to dismiss into a
motion for summary judgment to be supplemented after discovery.
RLM quickly moved for a TRO and a preliminary injunction (as
relevant here). The district court granted a TRO on the same
5
terms set forth in state court, but soon after replaced it with
a preliminary injunction based in part on the parties’ consent.
It also converted the request for a preliminary injunction into
a motion for a permanent injunction.
In November 2014, the district court granted Tuschen and
eScience’s motion for summary judgment on all claims and denied
RLM’s motion for a permanent injunction. RLM Commc’ns, Inc. v.
Tuschen, 66 F. Supp. 3d 681 (E.D.N.C. 2014).
This appeal followed.
II.
We review the district court’s grant of summary judgment de
novo, viewing the facts in the light most favorable to RLM, the
nonmovant. See Askew v. HRFC, LLC, 810 F.3d 263, 266 (4th Cir.
2016). We may affirm “on any legal ground supported by the
record and are not limited to the grounds relied on by the
district court.” Jackson v. Kimel,
992 F.2d 1318, 1322 (4th
Cir. 1993). Summary judgment is warranted where “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). Because we are sitting in diversity, addressing matters
of North Carolina law, we apply governing North Carolina law or,
if necessary, predict how the Supreme Court of North Carolina
would rule on an unsettled issue. See
Askew, 810 F.3d at 266.
6
On appeal, RLM has abandoned its unjust-enrichment claim.
We address the remaining issues in the following order: breach
of the Noncompete, breach of the Confidentiality Agreement,
misappropriation of trade secrets, conversion, tortious
interference with contractual relations, unfair and deceptive
trade practices, civil conspiracy, and permanent injunction.
III.
First, RLM faults the district court for granting summary
judgment on its claim that Tuschen breached the terms of the
Noncompete. The district concluded that the Noncompete was
invalid for lack of consideration. Tuschen, 66 F. Supp. 3d at
693. In RLM’s view, however, the Noncompete was part of the
larger employment contract, and so employment itself was the
consideration. Moreover, RLM argues, even if the Noncompete was
a separate contract requiring separate consideration, it recited
adequate consideration, promising that RLM would give Tuschen
access to “company private information.” Appellant’s Br. at 28.
In Tuschen and eScience’s view, the Noncompete was not part of
the employment contract, and the recited consideration was
illusory because RLM never promised to provide Tuschen access to
the company private information. In the alternative, they argue
that the Noncompete is impermissibly broad.
7
Because we agree with Tuschen and eScience that the
Noncompete is overbroad, we do not address the consideration
issues. 2
Covenants not to compete are disfavored in North Carolina.
See Kadis v. Britt, 29 S.E.2d 543, 546 (N.C. 1944); VisionAIR,
Inc. v. James,
606 S.E.2d 359, 362 (N.C. Ct. App. 2004). They
are valid only if they are “(1) in writing; (2) made a part of
the employment contract; (3) based on valuable consideration;
(4) reasonable as to time and territory; and (5) designed to
protect a legitimate business interest of the employer.” Farr
Assocs., Inc. v. Baskin,
530 S.E.2d 878, 881 (N.C. Ct. App.
2000). The restrictions on an employee’s future employment
“must be no wider in scope than is necessary to protect the
business of the employer.” Manpower of Guilford Cty., Inc. v.
Hedgecock,
257 S.E.2d 109, 114 (N.C. Ct. App. 1979).
More specifically, “restrictive covenants are unenforceable
where they prohibit the employee from engaging in future work
that is distinct from the duties actually performed by the
employee.” Med. Staffing Network, Inc. v. Ridgway, 670 S.E.2d
321, 327 (N.C. Ct. App. 2009); see also Copypro, Inc. v.
2
Similarly, we do not reach the issue of whether the
Noncompete violates public policy as expressed by Executive
Order Number 13495 (Jan. 30, 2009). See Appellees’ Br. at 45-
46.
8
Musgrove, 754 S.E.2d 188, 192 (N.C. Ct. App. 2014) (“[W]e have
held on numerous occasions that covenants restricting an
employee from working in a capacity unrelated to that in which
he or she worked for the employer are generally overbroad and
unenforceable.”).
The Noncompete, in relevant part, provides as follows:
While I, the Employee, am employed by Employer, and
for 1 years/months afterward, I will not directly or
indirectly participate in a business that is similar
to a business now or later operated by Employer in the
same geographical area. This includes participating
in my own business or as a co-owner, director,
officer, consultant, independent contractor, employee,
or agent of another business.
J.A. 37.
The restriction on Tuschen’s future employment is largely
unmoored from RLM’s legitimate business interests. Even
ignoring for a moment the bar on indirect participation in
similar businesses, the Noncompete is overly broad by preventing
direct participation in similar businesses. Tuschen is not
merely prohibited from working for RLM’s competitors in a
position like the one she held at RLM. She may also not mow
their lawns, cater their business lunches, and serve as their
realtor. See Hartman v. W.H. Odell and Assocs., Inc., 450
S.E.2d 912, 920 (N.C. Ct. App. 1994) (finding a covenant
unenforceable where it “would appear to prevent plaintiff from
9
working as a custodian for any ‘entity’ which provides
‘actuarial services’” (quoting the record)).
And if RLM were to take up software development as a new
line of business (i.e., “a business . . . later operated by
Employer”), Tuschen would be barred from working as a sales
representative for a nearby software developer. See VisionAIR,
606 S.E.2d at 363 (striking down a restriction on selling
software when sales work was “unrelated to that which [the
employee] did for [the employer]”). The ban on indirect
participation could have even more startling consequences: if
Tuschen has retirement accounts invested in mutual funds, she
may have to monitor their holdings to be sure she is not
investing in companies similar to RLM. See
id.
Such a broad prohibition on future employment (let alone
investment) cannot be justified by RLM’s legitimate business
concerns. “With everything Tuschen knew . . . in her leadership
positions,” RLM asserts, “she could singlehandedly affect RLM’s
future in terms of its ability to bid on and secure upcoming
contracts.” Appellant’s Br. at 34. Assuming this is true
(despite RLM’s beating out eScience for the Follow-on Contract),
RLM’s legitimate business interests fall well short of
justifying the Noncompete’s prohibitions.
Instead of focusing on employment that raises the risk that
Tuschen will use knowledge obtained from RLM to RLM’s detriment,
10
the Noncompete targets the similarity of a new employer to RLM.
That is not a sufficient limiting factor for a covenant not to
compete. See Henley Paper Co. v. McAllister, 117 S.E.2d 431,
434 (N.C. 1960) (holding that a covenant was overbroad where it
barred a salesman of “fine” paper products from “‘either
directly or indirectly’ engaging ‘in the manufacture, sale or
distribution of paper or paper products’”); Kinesis Advert.,
Inc. v. Hill,
652 S.E.2d 284, 294 (N.C. Ct. App. 2007) (“We have
previously held that a covenant-not-to-compete is ‘overly broad
in that, rather than attempting to prevent [the former employee]
from competing for [] business, it requires [the former
employee] to have no association whatsoever with any business
that provides [similar] services.’” (quoting
Hartman, 450 S.E.2d
at 920)). Simply put, the Noncompete is overly broad and cannot
be enforced as written. 3
RLM encourages us to take up North Carolina’s “blue-pencil”
doctrine and strike the offending language. Appellant’s Br. at
35-36. Under this doctrine, a court “may choose not to enforce
a distinctly separable part of a covenant in order to render the
provision reasonable.” Hartman, 450 S.E.2d at 920. But North
Carolina’s blue-pencil rule “severely limits what the court may
do to alter” an overly broad covenant not to compete.
Id.
3
We do not reach the question whether the Noncompete is
reasonable as to time and territory.
11
“[W]hen an agreement not to compete is found to be
unreasonable, . . . the court is powerless unilaterally to amend
the terms of the contract.” Beverage Sys. of the Carolinas, LLC
v. Associated Beverage Repair, LLC, 784 S.E.2d 457, 461 (N.C.
2016). We therefore cannot rewrite the Noncompete to save it
from its fatal flaws. Moreover, even if we assume blue-
penciling were appropriate in this case, we do not see how it
would help RLM. RLM suggests that we strike the term
“indirectly,” but we have already explained that a prohibition
limited to direct participation in a similar business is
overbroad.
Because the Noncompete is unenforceable and cannot be
mended by blue-penciling, the district court properly dismissed
the associated claim for breach of contract.
IV.
RLM’s second breach-of-contract claim alleges that Tuschen
violated the terms of the Confidentiality Agreement. The
district court granted summary judgment, finding the cited
consideration illusory. We assume without deciding that the
Confidentiality Agreement was valid and affirm on the
alternative ground that RLM has failed to put forth sufficient
evidence of breach.
12
In relevant part, the Confidentiality Agreement reads as
follows: “While I am employed by Employer and afterward, I will
not, except in performing my duties, remove or copy any
confidential information or materials or assist anyone in doing
so without Employer’s written permission.” J.A. 39. In the
Verified Complaint, RLM alleges that the breach occurred when
“Tuschen disclosed confidential information acquired during her
employment with RLM.” J.A. 23. On appeal, RLM has pivoted to a
new theory: Tuschen breached the Confidentiality Agreement
merely by copying confidential information without permission
and not in performance of her duties.
Tuschen readily admits that before she left RLM, she copied
confidential information regarding the Contract from her
employer-issued laptop onto a CD without written permission.
The question is whether she did so “in performing [her] duties.”
According to Tuschen, she made the CD to gather all of the
files relevant to the Contract in “a single, one-stop source of
information that [her successor, Dennis Yelverton,] would not
otherwise have.” J.A. 258. Although Tuschen knew that RLM
would retain the laptop and all of the information in it, she
believed the CD would ease the transition for Yelverton. She
also testified that she gave the only copy to Yelverton, and RLM
has conceded it has no evidence to the contrary.
13
Tuschen has also presented evidence that (1) Yelverton
lacked access to many of the files on the CD and her computer
was to be sent to a different office and would not be
immediately available to Yelverton; (2) before she created the
CD, RLM’s Vice President of IT Services and Solutions had
similarly created a CD for his successor when he resigned, and
there had been no “Corporate pushback,” J.A. 428; (3) no one at
RLM objected upon learning that Tuschen had made the CD;
(4) “[t]he CD was used extensively to access the information on
it to manage the Contract following Ms. Tuschen’s resignation,”
J.A. 429; and (5) Yelverton, upon his own resignation, “passed
the CD to the incoming Program Manager as well as providing a
copy of the CD to the Senior Program Manager,” J.A. 434.
RLM provides no evidence to contradict Tuschen’s contention
that she created the CD to ease the transition for Yelverton.
Nonetheless, RLM asserts that nobody told Tuschen to create the
CD, and doing so was not a common practice at RLM. In most
workplaces, however, such an employee would be lauded for her
initiative, rather than accused of wrongdoing. Something more
is required to raise an inference that Tuschen, as RLM’s
Director of Information Assurance and the person responsible for
managing the Contract, was not performing her duties when she
made the CD for her successor.
14
Because RLM has not shown a genuine issue of fact that
Tuschen breached the Confidentiality Agreement, we affirm the
grant of summary judgment as to this claim.
V.
RLM’s misappropriation-of-trade-secrets claim is similar to
its claim for breach of the Confidentiality Agreement. Here,
RLM alleges not only that Tuschen created the CD, but also that
she kept a copy for herself and shared confidential information
with eScience.
A.
In North Carolina, “‘[m]isappropriation’ means acquisition,
disclosure, or use of a trade secret of another without express
or implied authority or consent, unless such trade secret was
arrived at by independent development, reverse engineering, or
was obtained from another person with a right to disclose the
trade secret.” N.C. Gen. Stat. § 66-152. The misappropriation
statute also sets out a scheme for shifting the burden of
production:
Misappropriation of a trade secret is prima facie
established by the introduction of substantial
evidence that the person against whom relief is sought
both:
(1) Knows or should have known of the trade
secret; and
(2) Has had a specific opportunity to acquire it
for disclosure or use or has acquired, disclosed, or
15
used it without the express or implied consent or
authority of the owner.
This prima facie evidence is rebutted by the
introduction of substantial evidence that the person
against whom relief is sought acquired the information
comprising the trade secret by independent
development, reverse engineering, or it was obtained
from another person with a right to disclose the trade
secret. This section shall not be construed to
deprive the person against whom relief is sought of
any other defenses provided under the law.
Id. § 66-155.
The first prong of the prima facie case plainly requires
that the defendant “[k]nows or should have known of the trade
secret.” Id. The second prong provides two alternatives,
requiring that the defendant “[1] has had a specific opportunity
to acquire [the trade secret] for disclosure or use or [2] has
acquired, disclosed, or used it without the express or implied
consent or authority of the owner.”
Id. (emphasis added). At
first blush, this second prong appears to allow a plaintiff to
show either that the defendant had an opportunity to acquire
trade secrets or that the defendant in fact acquired them
without permission.
But there is a problem with this reading. To understand
why, it is first important to note the effect of a trade-secrets
prima facie case in the context of summary judgment.
Interpreting the phrase “prima facie evidence” in another
statute, the Supreme Court of North Carolina has explained that
“prima facie evidence means, and means no more, than evidence
16
sufficient to justify, but not to compel an inference” of the
fact in question. Home Fin. Co. of Georgetown v. O’Daniel, 74
S.E.2d 717, 721 (N.C. 1953) (citing N.C. Gen. Stat. § 44-38.1(a)
(repealed 1967)). Prima facie evidence “furnishes evidence to
be weighed, but not necessarily to be accepted, by the jury. It
simply carries the case to the jury for determination, and no
more.”
Id. Therefore, a prima facie case of misappropriation
permits a plaintiff to survive summary judgment. See Anderson
v. Liberty Lobby, Inc.,
477 U.S. 242, 248-49 (1986); Collingwood
v. Gen. Elec. Real Estate Equities, Inc.,
376 S.E.2d 425, 427
(N.C. 1989).
In the employment context, if knowledge and opportunity
suffice for a prima facie case of misappropriation, then an
employer can state a prima facie case against its employee
merely by showing that it gave the employee access to its trade
secrets. The employer can therefore force such an employee to
go to trial on a misappropriation claim—unless the employee can
rebut the prima facie case. Unfortunately, the statute does not
clearly address rebuttal in a case such as this one, where the
employee claims that she never acquired or used trade secrets at
all. The statute provides three grounds for rebutting the prima
facie evidence, but all grounds assume that the employee has in
fact acquired the trade secrets: “prima facie evidence is
rebutted by the introduction of substantial evidence that the
17
person against whom relief is sought acquired the information
comprising the trade secret by independent development, reverse
engineering, or it was obtained from another person with a right
to disclose the trade secret.” § 66-155. If these grounds were
exclusive, an absurd result would follow: Every employee in
North Carolina who had access to her employer’s trade secrets
but did not acquire them would have to go to trial to fend off
the employer’s claim of misappropriation.
B.
We do not think the Supreme Court of North Carolina, which
has not had occasion to consider the meaning of the statute,
would adopt such an interpretation. See State v. Hunt, 591
S.E.2d 502, 503 (N.C. 2003) (“[W]here a literal interpretation
of the language of a statute will lead to absurd results, or
contravene the manifest purpose of the Legislature, as otherwise
expressed, the reason and purpose of the law shall control and
the strict letter thereof shall be disregarded.” (quoting Mazda
Motors of Am., Inc. v. Sw. Motors, Inc.,
250 S.E.2d 250, 253
(N.C. 1979))).
Nor do other North Carolina courts appear to have
interpreted the statute this way. Instead, when determining
whether a prima facie case exists, North Carolina courts
generally look for proof of more than a mere opportunity to
misappropriate; they require evidence that the defendant
18
actually acquired or used trade secrets. See, e.g., Modular
Techs., Inc. v. Modular Sols., Inc., 646 S.E.2d 864, at *4 (N.C.
Ct. App. 2007) (unpublished) (“[E]ven assuming that at least
some of the information to which [the employee] had access
qualifies as trade secrets, plaintiff [employer] has not
introduced substantial evidence that [the employee] acquired the
information for disclosure or use, or disclosed or used the
information.”); Static Control Components, Inc. v. Summix, Inc.,
No. 1:08CV928,
2012 WL 1379380, at *7 (M.D.N.C. Apr. 20, 2012)
(granting summary judgment to a defendant–competitor where the
employer could show that an employee had access to its trade
secrets but could not make the further showing that the employee
shared them with the competitor); Amerigas Propane, L.P. v.
Coffey, No. 14 CVS 376,
2015 WL 6093207, at *13 (N.C. Super. Ct.
Oct. 15, 2015) (finding no prima facie case because the employer
“has not offered evidence that [the employee] accessed or
downloaded customer information from [the employer’s] computer
database in connection with his departure from the company”);
cf. Sunbelt Rentals, Inc. v. Head & Engquist Equip., L.L.C.,
620
S.E.2d 222, 229 (N.C. Ct. App. 2005) (holding that a prima facie
case of misappropriation was established where a competitor
hired employees from an employer and immediately expanded into
the employer’s territory, taking a large chunk of the employer’s
business); Byrd’s Lawn & Landscaping, Inc. v. Smith,
542 S.E.2d
19
689, 693 (N.C. Ct. App. 2001) (finding that a prima facie case
was established where an employee who had access to his
employer’s confidential cost-history information on customer
contracts resigned and started a competing business that
underbid the employer on several contracts). But see Barr-
Mullin, Inc. v. Browning,
424 S.E.2d 226, 230 (N.C. Ct. App.
1993) (“[A] prima facie case of misappropriation exists since
defendant Browning helped to develop the COMPU–RIP software
during his employ with plaintiff and Browning had access to
copies of the COMPU–RIP source code prior to his resignation.”).
At least two potential interpretations of the statute would
produce results consistent with those of the North Carolina
courts, and we think the Supreme Court of North Carolina would
adopt one of them.
1.
First, a more sensible—if less grammatically obvious—
reading of the second prong of the prima facie case is
available. As we have pointed out, the second prong of the
prima facie case presents two alternate scenarios for a
plaintiff to prove: Either the defendant “has had a specific
opportunity to acquire [the trade secret] for disclosure or use
or has acquired, disclosed, or used it without the express or
implied consent or authority of the owner.” § 66-155. The
final phrase—“without the express or implied consent or
20
authority of the owner”—may be read to apply only to the second
scenario; but one could also reasonably read it to apply to the
first.
Thus, in the first scenario the plaintiff would have to
show that the defendant “[h]as had a specific opportunity to
acquire [the trade secret] for disclosure or use . . . without
the express or implied consent or authority of the owner.” Read
this way, the employer would have to prove not merely that its
employee had access to trade secrets, but also that the employee
abused such access—the employer would have to show knowledge and
an unauthorized opportunity to acquire or use trade secrets.
Cf. Ridgway, 670 S.E.2d at 329 (finding a prima facie case where
an employer proved that its employee accessed confidential files
“with unusual frequency” shortly before attending a meeting with
a competitor). Although this is perhaps not the most natural
reading of the statute, it would avoid the problem outlined
above and produce results consistent with decisions of North
Carolina courts.
2.
Alternatively, a second interpretation would accept our
original reading of the prima facie case, permitting an employer
to show mere knowledge and opportunity. As we have noted, the
grounds set out in the statute for rebutting the prima facie
case do not assist an employee who wishes to rebut by arguing
21
that she never acquired or used any trade secrets at all. But
because the statute does not expressly limit a defendant to
these grounds for rebuttal—indeed, section 66-155 states that
“[t]his section shall not be construed to deprive the person
against whom relief is sought of any other defenses provided
under the law”—we may infer the existence of another ground for
rebuttal that would avoid the absurd result outlined above.
If a defendant’s opportunity to steal trade secrets may
give rise to an inference of misappropriation, we think the
defendant rebuts the inference by showing that the circumstances
surrounding the opportunity were not suspicious. In the
employment context, if an employee can show that the opportunity
was provided with the consent of the employer—as will often be
the case—then an inference of misappropriation is no longer
justified. The burden of production then shifts back to the
employer to show evidence sufficient to raise an inference of
actual acquisition or use. The practical effect of this burden
shifting, of course, is that an employer accusing an employee of
misappropriation will often gain little benefit from making a
prima facie case based on opportunity. Instead, the framework
will collapse into the question whether the employer has
sufficient evidence of misappropriation to raise an inference of
actual acquisition or use of its trade secrets. Here again,
22
this result is generally consistent with the practice of the
North Carolina courts.
3.
To summarize: we conclude that the Supreme Court of North
Carolina would adopt one of the two interpretations of section
66-155 we have discussed. Both produce a rule sufficient to
resolve this case: When an employer brings a misappropriation
claim against an employee, admitting that the employee had
authorized access to its trade secrets at all relevant times,
the employer must raise an inference of actual acquisition or
use of trade secrets to survive summary judgment.
We note finally that this rule is consistent with the
parties’ views of the law, and that neither raised the meaning
of section 66-155 as an issue in their briefs. See, e.g.,
Appellant’s Br. at 17-18 (noting that Tuschen “had access to all
of the documents and information,” but arguing that RLM should
have survived summary judgment because it had raised “a
compelling circumstantial inference that a copy of the CD was
taken by Tuschen and used by her and eScience”); Appellees’ Br.
at 19 (arguing that summary judgment was warranted because RLM
could not raise an inference that Tuschen made an extra copy of
the CD for herself or took the information stored on it).
23
C.
The rule we have just stated applies straightforwardly to
this case. RLM admits it gave Tuschen access to its trade
secrets, and it does not claim she ever accessed them without
authorization. On either of our interpretations, these facts
would prevent an inference of misappropriation from Tuschen’s
access alone: on the first, RLM fails to state a prima facie
case, and on the second, though RLM states the prima facie case,
Tuschen successfully rebuts it. RLM’s burden, then, is to raise
an inference of misappropriation, relying on circumstantial
evidence if necessary. GE Betz, Inc. v. Conrad, 752 S.E.2d 634,
649 (N.C. Ct. App. 2013).
RLM has admitted “[it] doesn’t have any” evidence “that Ms.
Tuschen retained any of the information on the CD,” J.A. 169,
and we have already explained (in affirming the dismissal of
RLM’s claim that Tuschen breached the Confidentiality Agreement)
why Tuschen’s creation of the CD cannot raise an inference that
she retained trade secrets. 4
4 RLM’s reliance on Ridgway to urge a different result is
misplaced. There, the employer put forth evidence that the
employee “accessed [the employer’s] ‘game plan’ and other
confidential documents from [the employer’s] network with
unusual frequency” just prior to a meeting with a competitor.
670 S.E.2d at 329 (emphasis added). RLM has no comparable
evidence that Tuschen’s creation of the CD was suspicious.
24
Nevertheless, RLM contends that after hiring Tuschen,
eScience underwent an “unexplained leap in technical capacity”
that permits an inference of misappropriation. Appellant’s Br.
at 18. RLM cites Static Control Components, Inc. v. Darkprint
Imaging, Inc., 200 F. Supp. 2d 541, 545-46 (M.D.N.C. 2002),
which found “strong circumstantial evidence” of misappropriation
where an aftermarket-toner distributor alleged that a competitor
developed new toner product lines unusually quickly after hiring
five of its employees. But unlike in Darkprint, where the
evidence was undisputed that the competitor developed new
products similar to the distributor’s soon after hiring its
employees, id., RLM’s evidence fails to raise a genuine issue of
fact as to whether eScience made a “leap in technical capacity.”
Its sole evidence is that eScience had never bid on the Contract
before Tuschen joined, but afterward it was able to bid on the
Follow-on Contract. We do not think submitting a bid,
particularly an unsuccessful one, represents the same sort of
“leap in technical capacity” described in Darkprint. 5
5
RLM also contends that, during discovery, Tuschen produced
a document “virtually identical” to one on the CD. Appellant’s
Br. at 20. (RLM does not contend the document itself contains
trade secrets.) But Tuschen testified she received the document
from a third-party source and RLM has no evidence to suggest
otherwise. While a fact finder could conclude that Tuschen
acquired the document from RLM rather than the third-party, this
would provide negligible evidence that she also acquired
documents containing trade secrets.
25
D.
Because RLM has not produced sufficient evidence to permit
an inference of misappropriation, summary judgment was properly
granted on the trade-secrets claim.
VI.
RLM’s conversion claim is easily dispatched based on the
analysis above. In North Carolina, conversion is “an
unauthorized assumption and exercise of the right of ownership
over goods or personal chattels belonging to another, to the
alteration of their condition or the exclusion of an owner’s
rights.” Peed v. Burleson’s, Inc., 94 S.E.2d 351, 353 (N.C.
1956) (quoting 89 C.J.S., Trover & Conversion § 1). For the
reasons set forth above, RLM’s evidence does not make a genuine
issue of its allegation that “Tuschen took RLM’s confidential
and proprietary information on a CD.” Appellant’s Br. at 23.
VII.
RLM next contests the district court’s grant of summary
judgment on its claim against eScience for tortious interference
with contractual relations. The tort has four elements:
First, that a valid contract existed between the
plaintiff and a third person, conferring upon the
plaintiff some contractual right against the third
person. Second, that the outsider had knowledge of
the plaintiff’s contract with the third person.
Third, that the outsider intentionally induced the
26
third person not to perform his contract with the
plaintiff. Fourth, that in so doing the outsider
acted without justification. Fifth, that the
outsider’s act caused the plaintiff actual damages.
Peoples Sec. Life Ins. Co. v. Hooks, 367 S.E.2d 647, 649-50
(N.C. 1988) (quoting Childress v. Abeles,
84 S.E.2d 176, 181-82
(N.C. 1954)). In explaining the fourth prong, the Supreme Court
of North Carolina has stated that “competition in business
constitutes justifiable interference in another’s business
relations and is not actionable so long as it is carried on in
furtherance of one’s own interests and by means that are
lawful.”
Id. at 650 (holding that a competitor is not liable
for tortious interference for hiring employees away from an
employer and placing them in competition with the employer, so
long as the competitor was motivated by competition rather than
malice).
The district court correctly relied on Hooks, explaining
that “[t]here is no genuine issue of fact that plaintiff and
defendant [eScience] are competitors in the same field, and that
[eScience] hired Tuschen to work on government contracts similar
to those that she worked on with plaintiff.” Tuschen, 66 F.
Supp. 3d at 694. Because the record discloses no evidence that
eScience was motivated by anything other than competition, its
interference with Tuschen and RLM’s employment contract was
justified and summary judgment was therefore appropriate.
27
VIII.
RLM’s remaining claims all rely in one way or another on
claims we have already found meritless. First, RLM bases its
claim for unfair and deceptive trade practices on its claims for
misappropriation and tortious interference. See Appellant’s Br.
at 49-50. Because we have held that those claims lack merit, so
does this one. Second, civil conspiracy requires “an underlying
claim for unlawful conduct,” Sellers v. Morton, 661 S.E.2d 915,
922 (N.C. Ct. App. 2008) (quoting Toomer v. Garrett,
574 S.E.2d
76, 92 (N.C. Ct. App. 2002)), and none remains. Finally, RLM’s
request for a permanent injunction is unwarranted because there
is no basis on which to enjoin Tuschen or eScience.
IX.
For the foregoing reasons, we affirm the district court’s
judgment.
AFFIRMED
28
