Labor & Employment – Non-Competition Agreement – Misappropriation of Trade Secrets

The non-compete is unenforceable as overbroad and the remaining contract, trade secret, fraud, and unfair and deceptive trade practices (UDTP) claims inadequately pleaded or legally barred.

The Court granted Defendant’s motion to dismiss all claims brought by his former employer.

The Court addressed a dispute between an employer and its former employee involving the enforceability of a non-competition agreement and a claim that the employee misappropriated the employer’s trade secrets.

The dispute followed Plaintiff Box Co.’s 2023 asset purchase of CorTek, Inc., where Defendant had worked for nearly 13 years. As part of the transaction, Box acquired CorTek’s assets and purportedly assumed Defendant’s 2010 non-competition agreement, which barred him for two years post-employment from owning, working for, or otherwise associating with any business engaged in various forms of packaging within a 300-mile radius of CorTek’s location. Defendant continued working for Box after the acquisition but resigned in February 2024 and later joined a competitor. Box alleged that Defendant violated the non-compete, misappropriated trade secrets, committed fraud, and engaged in unfair and deceptive trade practices.

The Court first held that the non-competition agreement was unenforceable as a matter of law. Relying on well-established North Carolina precedent, the Court concluded the covenant was impermissibly broad because it barred Defendant from having any association, including ownership interests, with businesses in the packaging industry, regardless of his role. The Court rejected Box’s attempt to rely on parol evidence to narrow the covenant’s scope, finding the agreement unambiguous, and declined to “blue pencil” the provision because doing so would require rewriting, rather than severing, the contract. The breach of contract claim based on the non-compete was therefore dismissed with prejudice.

Box’s parallel claim that Defendant breached a confidentiality agreement also failed. The Court noted the absence of any written confidentiality agreement and found the complaint insufficiently pled to establish the formation, terms, or scope of any oral confidentiality obligation. That claim was dismissed without prejudice.

The Court likewise dismissed claims for breach of the implied covenant of good faith and fair dealing and breach of implied contract, explaining that such claims cannot survive where the underlying contract claims fail or are inadequately pled. Box’s quantum meruit theory also failed because it did not allege any services rendered to Defendant with an expectation of payment.

Box’s trade secrets claim was dismissed with prejudice for failure to allege reasonable measures taken to protect the alleged secrets or specific acts of misappropriation. The Court emphasized that conclusory allegations and speculative inferences are insufficient under the North Carolina Trade Secrets Protection Act.

Finally, the Court dismissed Box’s fraud and unfair and deceptive trade practices claims with prejudice. The fraud claim failed to meet Rule 9(b)’s heightened pleading standard and was based largely on alleged unfulfilled promises of future intent, which are not actionable. The UDTP claim failed both because its predicate claims were dismissed and because employer-employee disputes generally fall outside the statute’s scope.

Granted.

Box Company of America LLC v. Bostick (Lawyers’ Weekly No. 020-075-25, 23 pp.) (Mark A. Davis, J.) 2025 NCBC 75. Law Offices of Matthew K. Rogers, PLLC, by Matthew K. Rogers, for Plaintiff. Brooks, Pierce, McLendon, Humphrey & Leonard, LLP, by Lindsey S. Barber and Jennifer K. Van Zant, for Defendant. North Carolina Business Court