Conspiracy complaint survives death of defendant

Beer has driven many a man to acts of intemperance, but a German company in the business of importing beer growlers—large glass jugs marketed to serious drinkers of the stuff—claims that a former employee went so far as to conspire with a partner to sabotage the whole outfit and set up their own rival shop. The former employee has since died, but the North Carolina Business Court has allowed the case against his alleged co-conspirator to move forward.

The late Kenneth Armke was a minority owner, and the sole employee, of Koch Measurement Devices, the Wilmington-based subsidiary of a German glass conglomerate. Koch was a wholesale distributor for high-end glass beer growlers imported by Wassmann, another German company.

Koch alleges that in 2011, Armke and Michael Walsak conspired to steal away Koch’s business by closing the company without advance notice to its majority owners and taking the hard drive of his company-owned laptop computer, along with Koch’s internal web server and customer files, with him to Tote Glass, the company he had set up with Walsak. Armke then instructed Wassmann to terminate its relationship with Koch and instead do business with Tote, which started importing growlers using the same pricing plan and partners that Koch had used, Koch alleges.

Koch brought a number of claims against Armke and Walsak, including civil conspiracy, conversion and constructive trust, but before the case could go to trial, Armke died and Koch dismissed him from the suit.

Walsak argued that because Koch dismissed its claims against Armke, the only other alleged conspirator, it had to dismiss its conspiracy claim against him as well. North Carolina Business Court Judge John R. Jolly disagreed and allowed the claim to move forward, finding that Koch had alleged overt acts committed by both men in furtherance of that common scheme that, if proven, could result in liability for Walsak regardless of Armke’s death. Jolly did not describe the issue as a new one for the courts, but also did not cite to any previous cases reaching the same conclusion.

Jolly also allowed Koch’s claim for constructive trust over the defendants’ objections that Koch could not be legally entitled to its customer base.

“While there may not be a legal entitlement to customers, the Amended Complaint alleges that Defendants are in the wrongful possession of more than just customers,” Jolly wrote. “The Amended Complaint specifically alleges that Defendants are in possession of certain tangible business assets and inventory rightfully belonging to Koch. Further, the Amended Complaint alleges that Defendants are in possession of those assets by virtue of the fact that Armke, while in league with Walsak, breached the fiduciary duty of care he owed to Koch as its officer and director.”

Interestingly, the conversion claim included allegations that Armke and Walsak had stolen Koch’s email account and all the email and information associated with it. Jolly ruled that an email account could rightfully belong to a plaintiff and a defendant could exercise unauthorized authority and control over the assets to the exclusion of the plaintiff, and thus allowed the claim for conversion of an email account to move forward as well. Again, the court did not cite any previous cases dealing with such an issue. In the end, all of the defendants’ motions to dismiss were denied.

Matthew B. Davis of Marshall, Williams & Gorham represented Koch. G. Grady Richardson Jr. represented Armke’s estate and David A. Nash of Hogue Hill represented Walsak. All three are in Wilmington.

The 14-page decision is Koch Measurement Devices, Inc. v. Armke (Lawyers Weekly No. 13-15-1001). The full text of the opinion is available online at nclawyersweekly.com.

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