An employer sued a former employee and his new employer in North Carolina state court over allegedly divulging trade secrets in Atkore v. Keith D. Dinkheller et al.. Late last year, the defendants brought a motion to dismiss all counts in Atkore’s complaint, obtaining a somewhat surprising result.
Mr. Dinkheller had worked in numerous leadership positions at Atkore, including the management of several plants that manufactured water pipes and conduits, as well as flexible piping coupled with electrical wiring. Dinkheller left Atkore once and then came back before leaving for good. He did so with a thorough nondisclosure agreement and noncompete clause restricting his future employment. When Dinkheller found employment with National Pipe & Plastic (“National Pipe”), Atkore caught wind of it and filed this suit against Dinkheller for misappropriation of trade secrets, breach of fiduciary duty, constructive fraud, and a breach of the Unified Deceptive Trade Practices Act (“UDTPA”) — and National Pipe for tortious interference in Dinkheller’s employment agreement.
Atkore claimed that Dinkheller’s employment at National Pipe necessarily meant that he misappropriated trade secrets by violating his noncompete and nondisclosure agreements, further alleging that Dinkheller actively disclosed confidential information to help the rollout of National Pipe’s new operations.
The North Carolina court first noted that restrictive covenants are increasingly regarded in a dim light by courts, so it wasn’t surprising that it found Dinkheller’s to be overly broad and not enforceable as a matter of law. According to the court, the terms of the agreements covered too wide a range of protected businesses that included all business, directly or indirectly performed by the employer’s subsidiaries and affiliates.
In its complaint, Atkore also claimed that Dinkheller owed a fiduciary duty because of the “confidence” it had bestowed him with. That, Atkore said, justified a longer duration of his restrictive covenants, including “extensions.” As a result, Dinkheller’s employment could have been limited for three years. However, the court pointed out that North Carolina courts have consistently ruled that employer-employee relationships are not fiduciary in nature, and therefore the breach of fiduciary duty claims were tossed out.
In analyzing the misappropriation of trade secrets claim, the court noted that Dinkheller had taken a PowerPoint presentation from Atkore and given it to National Pipe. Because of that allegation of a specific alleged trade secret, the court found that Atkore had sufficiently passed the threshold for this claim.
However, Plaintiffs didn’t respond to Dinkheller’s motion to dismiss the statutory claim for trade secret violations, which alleged that Dinkheller transferred trade secrets to National Pipe while he still worked at Atkore. (Perhaps Plaintiff’s attorneys thought those arguments were covered by the state law misappropriation claims.) So, the court granted that part of defendant’s motion to dismiss.
This case shows that no matter how carefully noncompete and nondisclosure agreements might be sewn up, they can be undone by a court as simply too broad in scope (e.g., all business that in which the employer’s affiliates might engage) or too long in duration. The agreements looked thorough to me — but apparently, too thorough, overreaching and unenforceable according to this court.
