Combs & Associates, Inc. v. Curtis Kennedy, et al.

Plaintiff initiated this action against defendants on 26 January 1999. In its amended complaint, plaintiff presents claims for misappropriation of trade secrets, two counts of tortious interference with a contract, defamation, breach of employee duty of loyalty, unfair and deceptive trade practices, civil conspiracy and punitive damages. Following discovery, plaintiff moved for summary judgment against defendant Curtis Kennedy (Kennedy) for the breach of employee duty of loyalty claim and against all defendantson the civil conspiracy claim. All defendants moved for summary judgment on all claims. Defendant American Sigma, Inc. (Sigma) also moved to strike certain exhibits which plaintiff submitted with its motion for summary judgment. After receiving arguments and reviewing the record over the course of three hearings, the trial court denied plaintiff's motion for summary judgment, Sigma's motion to strike, and Kennedy's motion for summary judgment with regard to the breach of employee duty of loyalty claim against him. However, the trial court granted defendants' summary judgment motion on all remaining claims. Plaintiff then voluntarily dismissed without prejudice its surviving claim against Kennedy.

The relevant facts as presented by the record may be summarized as follows: Plaintiff is a corporation which provides sales representation for manufacturers of water and wastewater equipment and processes. Sigma is a subsidiary corporation of Danaher, Inc. and manufactures water and wastewater equipment. In May of 1994, plaintiff and Sigma entered into a contract wherein Sigma appointed plaintiff as its exclusive sales representative for North Carolina, South Carolina and Virginia. The parties renewed the contract in April of 1997. Each contract included a clause giving either party the right to terminate the contract by serving the other written notice within thirty (30) days. The contracts also contained a provision in which plaintiff agreed to keep Sigma informed as to its sales activities within its assigned territory.

Kennedy began working for plaintiff as a salesperson on 18 April 1994. On this date, he signed a statement indicating that hehad reviewed plaintiff's “Policies and Rules” which contained provisions requiring employees to devote all of their “time, attention, knowledge, and skills solely” to plaintiff's business. The “Policies and Rules” also prohibited employees from imparting to outsiders information relative to plaintiff's business affairs. Kennedy's job responsibilities included the selling of Sigma's products.

Around August of 1998, Kennedy approached Donald Miller (Miller) and suggested the possibility of their forming a new manufacturers' sales representative company. Miller had worked for Sigma in various sales and business development positions since January 1983 but had resigned his employment effective 14 August 1998. At that time, Miller remained undecided as to his future plans; however, by mid-September both he and Kennedy had committed to the idea of their forming a new company--Carolina Environmental Technologies, LLC (CET). Throughout the next several weeks, they exchanged e-mails in which they discussed preliminary plans for launching CET. These plans involved setting up an office in Kennedy's home, attending a water and wastewater industry association conference, and identifying potential clients. The list of potential clients included Sigma. On 5 November 1998, they incorporated CET with Kennedy as the registered agent. However, Kennedy did not resign from plaintiff's employ until 7 December 1998.

Meanwhile, as part of its subsidiary relationship with Danaher Inc., Sigma had begun to implement various management techniquesdesigned to increase growth of its business. In early 1998, Sigma's Regional Sales Manager, James Heuer (Heuer), created a “Rep Plan” for each sales representative, including plaintiff. The “Rep Plan” provided plaintiff with sales goals and “action items” to assist plaintiff in achieving the goals within its territory. However, by May of 1998, Sigma had concluded that plaintiff was not going to achieve increased sales, unless it increased its representation activities. One month later, Sigma's President, Richard Wissenbach (Wissenbach), assigned Susan McHugh (McHugh) as the Regional Manager for plaintiff's territory and instructed her to increase sales and Sigma's market share. Over the next two months, McHugh met once with plaintiff and reached the conclusion that plaintiff “did not appear to be motivated to improve sales and increase Sigma's market share in the [t]erritory.” Consequently, during the fall of 1998, McHugh and Sigma's sales director, Todd Garber (Garber), began to re-evaluate plaintiff's representation of Sigma and considered finding a replacement.

In late September of 1998, Miller approached Garber to discuss the possibility of having CET represent its products in the Carolinas. Following this discussion and after CET was incorporated, CET developed a “Sales Action Plan” in which it identified key markets for Sigma products and outlined a business strategy time line for 1999. This plan was submitted to Sigma on 12 November 1998. In the meantime, McHugh, Garber and Wissenbach met with plaintiff's President, Tony Combs, regarding the lack of growth in Sigma's sales within plaintiff's territory. Subsequentto this meeting, McHugh prepared a memorandum dated 23 November 1998 and titled “Justification to Replace Representation in North Carolina/South Carolina/Virginia Territory” (McHugh memorandum). In the memorandum, McHugh pointed out that plaintiff's year-to-date sales were $668,000 against an annual target of $1.1 million and that plaintiff's sales of Sigma products had shown a zero growth rate over a three-year period. McHugh also stated that plaintiff had experienced an attrition rate in employees with “[t]he most recent vacancy [being] confirmed 12/7/98 by the resignation of Comb's key North & South Carolina salesman.” As a result of the factors summarized in this memorandum, Sigma notified plaintiff on 21 December 1998 of its intention to exercise the termination clause of their contract effective January 1999.

Plaintiff appeals the trial court's grant of summary judgment with respect to defendants Sigma, Kennedy and Miller. Sigma cross- assigns as error the trial court's denial of its motion to strike certain exhibits submitted by plaintiff. Finally, Kennedy filed a motion to dismiss plaintiff's appeal as interlocutory.

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Click the case caption above for the full text of the Court's opinion.

In sum, we deny defendant Kennedy's motion to dismiss plaintiff's appeal as interlocutory. The trial court's grant of summary judgment for defendants is affirmed. Therefore, we do not address Sigma's cross-assignment of error.

Affirmed.

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Reported by Kent Morlan