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I can't remember the last time that the Business Court granted a motion opposing the designation of a case as a mandatory complex business case. And since the Business Court Modernization Act went into effect in October 2014? I don't think one has been granted.
But earlier this week, Judge Gale did exactly that, in an Order this week in Cornerstone Health Care, P.A. v. Moore, 2015 NCBC 62. Plaintiff Cornerstone, a medical practice in Greensboro, sued two of its former doctor-employees who joined competitive practices [subscribers can access an enhanced version of this opinion: lexis.com | Lexis Advance]. It asserted that they were violating their non-competition and confidentiality agreements. It made claims for breach of contract and for a declaratory judgment regarding deferred compensation which the doctors claimed was owed to them.
The Business Court has traditionally been a little prickly about accepting the designation of cases involving covenants not to compete. In 2008, in Workplace Benefits, LLC v. Lifecare, Inc. (unpublished), Judge Tennille held that "every suit based upon a breach of a restrictive covenant . . . [will not] give rise to a mandatory business case based upon 'unfair competition.'"
Nevertheless, the Court had displayed a willingness to accept the designation of such cases if they included claims alleging the theft of trade secrets or actions designed to "unfairly damage another's business." And the Court had also showed that it would go beyond the way in which the Plaintiff labelled its causes of action and delve into the facts alleged to determine whether there was a basis for the designation. That largesse was demonstrated by a decision from then Chief Judge Jolly in New Breed, Inc. v. Golden, which I wrote about in 2012.
The Cornerstone Complaint which was the subject of this week's decision seemed to walk the right walk for an acceptable designation. It asserted that the Defendant doctors would "inevitably disclose Cornerstone's confidential and proprietary information." Order ¶10(e). "Confidential and proprietary" information must be a trade secret, right?
No, apparently not, and those allegations were not enough to warrant the designation as a mandatory case for the Business Court. Now Chief Judge Gale observed that
This Court has historically handled cases designated as complex business disputes which involved employment agreements including restrictive covenants. In general, it has only done so where the allegations include a claim that the employee. . . misappropriated trade secrets in addition to violating the contract or restrictive covenant.
[t]he Court has not historically been assigned cases based on the assertion of more generalized allegations of the employer's loss of confidential or proprietary information. Certainly evidence of that nature may be involved in any case concerning an alleged violation of a restrictive covenant contained within an employment contract because such evidence is necessary to support the employer's need for the restrictive covenant. But that evidence was not the basis on which cases were assigned as mandatory complex business disputes.
Order ¶¶14&15. The Judge directed that the case should not proceed in the Business Court but on the "regular docket of the Superior Court of Guilford County." Order ¶20(e).
So it seems there must be some difference between a "trade secret" and "confidential and proprietary information". Yes, but Judge Gale unfortunately did not expand on the difference.
There is actually quite a bit written on the subject of confidential information as compared to trade secrets. The views range from the position of a Massachusetts federal court that "trade secrets and confidential information are essentially identical concepts." Take it Away, Inc. v. Home Depot, Inc., 2009 WL 458552, at *8 (D. Mass. Feb. 6, 2009), to the Business Court's apparent position that they are different.
You know from past blog posts here that the Business Court is particularly tough on the way trade secrets claims must be pleaded. The Cornerstone ruling continues in that vein. Saying that a trade secret is "confidential and proprietary" is not, standing alone, enough to get you into the Court as a mandatory complex case under G.S. §7A-45.4(a)(8). You need to say more.
Read other articles on the North Carolina Business Litigation Report, a blog for lawyers focusing on issues of North Carolina business law and the day-to-day practice of business litigation in North Carolina courts.
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