Beverage Sys. of the Carolinas, LLC v. Associated Bev. Repair, LLC - 368 N.C. 693, 784 S.E.2d 457 (2016)

Rule:

The elements of a claim for tortious interference with contract are: (1) a valid contract between the plaintiff and a third person which confers upon the plaintiff a contractual right against a third person, (2) the defendant knows of the contract; (3) the defendant intentionally induces the third person not to perform the contract, (4) and in doing so acts without justification, (5) resulting in actual damage to the plaintiff. Interference with a contract is justified if it is motivated by a legitimate business purpose, as when the plaintiff and the defendant, an outsider, are competitors.

Facts:

Elegant Beverage Products, LLC ("Elegant") and Imperial Unlimited Services, Inc. ("Imperial") were two businesses that supplied, installed, and serviced beverage products and beverage dispensing equipment in parts of North Carolina and South Carolina. Elegant sold premium coffee and tea, and Imperial serviced soft drink dispensers. At the time these companies were sold to plaintiff, Thomas Dotoli owned Imperial, while Thomas's wife Kathleen and their son Loudine Dotoli owned Elegant. Both Imperial and Elegant operated out of Statesville, North Carolina. Mark Gandino organized plaintiff Beverage Systems of the Carolinas, LLC ("Beverage Systems" or "plaintiff") under North Carolina law in May 2009, and on or about 20 July 2009, Gandino purchased Elegant and Imperial to operate as Beverage Systems. Beverage Systems entered into an Asset Purchase Agreement with Thomas, Kathleen, and Loudine Dotoli, and with Elegant and Imperial to purchase the assets, customer lists, equipment, existing inventory, and associated real property of Elegant and Imperial for $650,000. The closing, sale, and purchase were completed on 30 September 2009. That same day, the parties executed a "Non-Competition, Non-Solicitation and Confidentiality Agreement" ("the Agreement") in which Loudine and his parents agreed not to compete with plaintiff's business in either North or South Carolina before 1 October 2014. Defendant Cheryl Dotoli, Loudine's wife, was not a party to either the purchase contract or the Agreement. In 2011, Cheryl formed defendant Associated Beverage Repair, LLC ("Associated Beverage"). Associated Beverage began to install and service beverage dispensing equipment in parts of North and South Carolina, thus operating in a manner similar to Imperial. Gandino learned of Associated Beverage's existence in March 2011 when Thomas Dotoli communicated to representatives of Bunn-O-Matic, one of Imperial's former customers, that Imperial had been sold to Beverage Systems, which had vacated the building that Imperial previously had occupied. Thereafter, Bunn-O-Matic elected to conduct business with defendant Associated Beverage rather than plaintiff Beverage Systems. After plaintiff's requests that defendants cease and desist went unanswered, Beverage Systems filed a complaint on 14 June 2012 in Superior Court, Iredell County, against Loudine, Cheryl, and Associated Beverage, seeking injunctive relief and damages. Plaintiff alleged against Loudine breach of the Agreement not to compete. Plaintiff also alleged claims against all defendants for tortious interference with contract, tortious interference with plaintiff's prospective economic advantage, and unfair and deceptive practices. Defendants filed their answer on 4 October 2012. Although defendants asserted multiple defenses, they admitted that Associated Beverage "with the help of Loudine Dotoli, intends to compete with Plaintiff," but "denied that such competition violates any Non-Competition Agreement." Defendants contended, inter alia, that neither Cheryl Dotoli, the sole member in Associated Beverage, nor Associated Beverage signed the Agreement not to compete, and therefore they were not bound by its terms. Defendants also asserted that the Agreement was unenforceable by virtue of being overly broad in geographic scope. On 11 September 2013, defendants moved for summary judgment on all issues. After conducting a hearing, the trial court entered an order on 3 October 2013 granting defendants' motion for summary judgment in all respects. Plaintiff appealed. The Court of Appeals reversed the trial court's order.

Issue:

Did the trial court err in granting defendants' motion for summary judgment on its claims of tortious interference with contract and tortious interference with prospective economic advantage? 

Answer:

No

Conclusion:

The court held that the court of appeals erred in reversing the trial court's order granting competitors summary judgment on a limited liability company's (LLC) claims for tortious interference with contract, tortious interference with prospective economic advantage, and unfair and deceptive practices because the trial court correctly refused to amend the covenant not to compete. Blue-penciling could not save the agreement because the restrictions to all of North Carolina and South Carolina, the only territorial restrictions in the agreement, were unreasonable, and striking the unreasonable portions left no territory left within which to enforce the covenant not to compete. The LLC failed to show tortious interference with a contract because the evidence did not establish any legal obligation of a third-party customer to the competitors that would have been transferred to the LLC.