Alamance Family Practice, P.A. v. Lindley

Alamance Family Practice, P.A. v. Lindley, 2018 NCBC 82.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
ALAMANCE COUNTY 18 CVS 913

ALAMANCE FAMILY PRACTICE,
P.A.,

Plaintiff,

v.
ORDER AND OPINION
ON DEFENDANTS’
CHERYL LINDLEY and JEFF
MOTION TO DISMISS
KIMBALL, Individually and d/b/a
PREFERRED PRIMARY CARE,
PLLC,

Defendants.

1. THIS MATTER is before the Court on Defendants’ Rule 12(b)(6) Motion to

Dismiss (the “Motion”) filed on June 26, 2018. For the reasons set forth herein, the

Court GRANTS the Motion.

Whited, Doby & Ray, by Julian M. Doby, for Plaintiff.

The Noble Law Firm, PLLC, by Jennifer L. Bills and Kathryn F.
Abernethy, for Defendants.

Robinson, Judge.

I. FACTUAL BACKGROUND

2. The Court does not make findings of fact on a motion to dismiss under Rule

12(b)(6) of the North Carolina Rules of Civil Procedure (“Rule(s)”) but only recites

those factual allegations of the Amended Complaint that are relevant and necessary

to the Court’s determination of the Motion.
3. Plaintiff Alamance Family Practice, P.A. (“Plaintiff”) is a North Carolina

professional corporation with an established medical practice that has treated

patients since 1989. (Am. Compl. ¶¶ 1, 27, ECF No. 3.) Plaintiff treats many patients

and families for ongoing medical issues. (Am. Compl. ¶ 27.)

4. Defendant Cheryl Lindley (“Lindley”) is a North Carolina resident and a

licensed nurse practitioner who was hired by Plaintiff in July 2013 to work in

Plaintiff’s medical practice. (Am. Compl. ¶¶ 2, 8; Am. Compl. Ex. A, ECF No. 4.2.)

5. Defendant Jeff Kimball (“Kimball”) is a North Carolina resident who

worked as Plaintiff’s office manager since before Lindley was hired. (Am. Compl.

¶¶ 3, 6.) As part of his role as Plaintiff’s office manager, Kimball set up Plaintiff’s e-

mail account as alamancefp@yahoo.com. (Am. Compl. ¶ 15.)

6. Defendant Preferred Primary Care, PLLC (“PPC”) is a North Carolina

professional limited liability company formed by Lindley in 2016. (Am. Compl. ¶¶ 4,

11.)

7. When Plaintiff’s owner, Dr. Meindert Niemeyer, agreed to employ Lindley,

Plaintiff and Lindley executed an employment agreement on July 15, 2013 for a term

of one year. (Am. Compl. ¶ 8, Ex. A.) Pursuant to the employment agreement,

Plaintiff and Lindley stood in an employer-employee relationship. (Am. Compl. Ex.

A, § 3.) As part of the agreement, Lindley agreed to maintain her professional licenses

and “devote her utmost knowledge and best skill to the care of such patients as shall

be entrusted to her.” (Am. Compl. Ex. A, §§ 1, 5, 12.)
8. The employment agreement obligated Lindley not to disclose “any

information relating to [Plaintiff], its officers, employees, or patients, including

information regarding the affairs or operation of [Plaintiff], to any third parties

during or after the term of [the] [a]greement without the prior written consent of

[Plaintiff.]” (Am. Compl. Ex. A, § 5.) The agreement further provided that Lindley

agreed to treat all matters and information related to [Plaintiff]’s
business, including . . . lists and identities of patients, as confidential
information entrusted to the parties solely for their use in the
performance of this [a]greement, and not to use such information or
divulge, disclose, or communicate such information in any way to any
person or entity (other than to an officer, employee, or authorized agent
of [Plaintiff] for use in the business of [Plaintiff]) during the term of this
[a]greement and any renewals thereof, and thereafter.

(Am. Compl. Ex. A, § 18.)

9. In addition, the agreement prohibited Lindley, during the term of the

agreement and any renewals, from being “an owner, employee or agent of any

business, partnership or limited liability company engaged in the practice of

medicine” unless she obtained Plaintiff’s prior written permission. (Am. Compl. Ex.

A, § 17(e).)

10. After the initial one-year term of Lindley’s employment agreement, Lindley

and Plaintiff agreed to renew the contract. (Am. Compl. ¶ 9.)

11. Between 2015 and 2018, Kimball helped Lindley to establish Piedmont

Diagnostic Services, LLC (“PDS”), a separate business formed to provide allergy

testing for patients. (Am. Compl. ¶ 11.) Kimball and Lindley established PDS

without Dr. Niemeyer’s knowledge or consent and began ordering allergy testing

supplies and storing them at Plaintiff’s medical practice and conducting the allergy
tests in Plaintiff’s medical offices. (Am. Compl. ¶ 11.) Lindley then used a fictitious

address to form PPC in 2016 to operate within Plaintiff’s practice. (Am. Compl. ¶ 11.)

PPC would conduct allergy testing and buy the allergy kits necessary to do such

testing from PDS. (Am. Compl. ¶ 11.)

12. At some point, Dr. Niemeyer discovered Lindley’s operation and asked that

she cease conducting allergy tests at Plaintiff’s practice because it was unauthorized

and more patients were referred for testing than necessary. (Am. Compl. ¶ 12.) In

response, Lindley offered to provide Dr. Niemeyer a referral fee (or a “kickback”) for

allergy testing, but Dr. Niemeyer refused because he believed such an arrangement

would be illegal. (Am. Compl. ¶ 12.)

13. At some point between 2015 and 2018, Kimball began giving himself

unauthorized pay raises and also began paying to himself and Lindley other

unauthorized benefits, including cell phone payments, gym memberships, fees for

seminars, and professional association dues. (Am. Compl. ¶¶ 13, 15.) Some of these

benefits were paid after Lindley and Kimball had decided they would leave Plaintiff’s

practice. (Am. Compl. ¶ 15.)

14. In the fall of 2017, Kimball told Dr. Niemeyer that Lindley would be leaving

Plaintiff’s practice soon. (Am. Compl. ¶ 14.) Around that same time, Lindley began

telling Plaintiff’s patients that she would be moving to her own practice and gave

them notice of her change of employment on Plaintiff’s letterhead. (Am. Compl. ¶ 15.)

Lindley and Kimball also began telling Plaintiff’s patients that Plaintiff’s owner Dr.

Niemeyer was about to be “shut down” and that he would no longer be able to treat
patients. (Am. Compl. ¶ 54.) In addition, Kimball and Lindley accessed Plaintiff’s

confidential business and patient information that was stored in Dr. Niemeyer’s

electronic database in order to use the information to solicit Plaintiff’s patients to

leave Plaintiff’s practice and seek treatment at PPC. (Am. Compl. ¶ 18.)

15. At some point during the relevant time period, Kimball refused to let

anyone else access the Yahoo! e-mail account that Kimball had previously set up for

Plaintiff. (Am. Compl. ¶ 15.) The e-mail account contains valuable communications

regarding Plaintiff’s patients and billing. (Am. Compl. ¶ 35.)

16. On February 1, 2018, Lindley e-mailed Dr. Niemeyer to inform him that

she would be leaving Plaintiff’s practice. (Am. Compl. ¶ 17.) On February 20, 2018,

Lindley refused to see more than five patients per day until she left the practice and

then told Dr. Niemeyer that February 20 would be her last day. (Am. Compl. ¶ 17.)

II. PROCEDURAL HISTORY

17. The Court sets forth here only those portions of the procedural history

relevant to its determination of the Motion.

18. Plaintiff initiated this action by filing its verified Complaint on May 11,

2018. (ECF No. 15.)

19. On May 29, 2018, Plaintiff filed its verified Amended Complaint. (ECF No.

3.) The Amended Complaint asserts claims against Lindley and Kimball for breach

of contract; “intentional and negligent tortious interference with contract”; breach of

duty of loyalty; and fraud, and requests that punitive damages be awarded. (Am.

Compl. 3–5.) Plaintiff also asserts a claim for intentional misappropriation and use
of trade name against only Kimball and a claim for unfair and deceptive trade

practices (“UDTP”) against only Lindley. (Am. Compl. 4–5.)

20. This action was designated as a mandatory complex business case by order

of Chief Justice Mark Martin of the Supreme Court of North Carolina dated June 12,

2018, (ECF No. 1), and was assigned to the undersigned by order of then-Chief

Business Court Judge James L. Gale on the same date, (ECF No. 2).

21. The Motion was filed on June 26, 2018 and seeks dismissal, pursuant to

Rule 12(b)(6), of all of Plaintiff’s claims except for the breach of contract claim against

Lindley.

22. The Motion has been fully briefed and the Court held a hearing on the

Motion on August 8, 2018 at which all parties were represented by counsel.

23. The Motion is ripe for resolution.

III. LEGAL STANDARD

24. In ruling on a motion to dismiss pursuant to Rule 12(b)(6), the Court

reviews the allegations of the Amended Complaint in the light most favorable to

Plaintiff. The Court’s inquiry is “whether, as a matter of law, the allegations of the

complaint, treated as true, are sufficient to state a claim upon which relief may be

granted under some legal theory.” Harris v. NCNB Nat’l Bank of N.C., 85 N.C. App.

669, 670, 355 S.E.2d 838, 840 (1987). The Court construes the Amended Complaint

liberally and accepts all allegations as true. Laster v. Francis, 199 N.C. App. 572,

577, 681 S.E.2d 858, 862 (2009).
25. Where the pleading refers to and depends on certain documents, the Court

may consider those documents without converting the motion into one for summary

judgment under Rule 56. Schlieper v. Johnson, 195 N.C. App. 257, 261, 672 S.E.2d

548, 551 (2009). At the same time, the Court may not consider materials that are not

mentioned, contained in, or attached to the pleading; otherwise, a Rule 12(b)(6)

motion will be converted into a Rule 56 motion and subject to its standards of

consideration and review. Fowler v. Williamson, 39 N.C. App. 715, 717, 251 S.E.2d

889, 890−91 (1979).

26. Dismissal of a claim pursuant to Rule 12(b)(6) is proper “(1) when the

complaint on its face reveals that no law supports [the] claim; (2) when the complaint

reveals on its face the absence of fact sufficient to make a good claim; [or] (3) when

some fact disclosed in the complaint necessarily defeats the . . . claim.” Oates v. JAG,

Inc., 314 N.C. 276, 278, 333 S.E.2d 222, 224 (1985); see also Jackson v. Bumgardner,

318 N.C. 172, 175, 347 S.E.2d 743, 745 (1986). Otherwise, “a complaint should not

be dismissed for insufficiency unless it appears to a certainty that plaintiff is entitled

to no relief under any state of facts which could be proved in support of the claim.”

Sutton v. Duke, 277 N.C. 94, 103, 176 S.E.2d 161, 166 (1970) (emphasis omitted).

27. The Court is not required “to accept as true allegations that are merely

conclusory, unwarranted deductions of fact, or unreasonable inferences.” Good Hope

Hosp., Inc. v. N.C. Dep’t of Health & Human Servs., 174 N.C. App. 266, 274, 620

S.E.2d 873, 880 (2005). A “trial court can reject allegations that are contradicted by

the documents attached, specifically referred to, or incorporated by reference in the
complaint.” Laster, 199 N.C. App. at 577, 681 S.E.2d at 862. The Court can also

ignore a party’s legal conclusions set forth in its pleading. McCrann v. Pinehurst,

LLC, 225 N.C. App. 368, 377, 737 S.E.2d 771, 777 (2013).

IV. ANALYSIS

A. Breach of Contract

28. The Amended Complaint alleges that Lindley and Kimball “breached the

agreement between themselves and [Plaintiff]” by removing confidential patient

information from Plaintiff’s business, disclosing confidential patient information to

PPC, and using Plaintiff’s funds to pay for Lindley’s professional memberships and

programs and other benefits not provided for in the employment agreement. (Am.

Compl. ¶¶ 20–23.) The Amended Complaint further alleges that Lindley breached

her employment agreement by establishing a competing business while employed by

Plaintiff. (Am. Compl. ¶ 24.)

29. Defendants seek dismissal of Plaintiff’s breach of contract claim as to

Kimball and PPC, arguing that the Amended Complaint fails to allege the existence

of a valid contract between either Kimball or PPC, on the one hand, and Plaintiff, on

the other. (Defs.’ Rule 12(b)(6) Mot. Dismiss ¶¶ 1–2, ECF No. 6 [“Mot. Dismiss”];

Defs.’ Br. Supp. Rule 12(b)(6) Mot. Dismiss 1–2, ECF No. 7 [“Defs.’ Br. Supp.”].)

Plaintiff conceded, in its brief and at the hearing, that the Amended Complaint

asserts a breach of contract claim against only Lindley. (Pl.’s Br. Resp. Defs.’ 12(b)(6)

Mot. Dismiss 1, ECF No. 10 [“Pl.’s Br. Opp’n”].)
30. Accordingly, to the extent the Motion seeks dismissal of a breach of contract

claim against Kimball and PPC, the Motion is granted and Plaintiff’s claim, as it

relates to Kimball and PPC, is dismissed. Notwithstanding the Court’s conclusion

that this claim should be dismissed, “[t]he decision to dismiss an action with or

without prejudice is in the discretion of the trial court[.]” First Fed. Bank v. Aldridge,

230 N.C. App. 187, 191, 749 S.E.2d 289, 292 (2013). The Court concludes, in the

exercise of its discretion, that dismissal of Plaintiff’s breach of contract claim against

Kimball and PPC should be without prejudice to Plaintiff’s right to attempt to

reassert such claim.

B. Tortious Interference

31. Plaintiff alleges that it has treated and continues to treat many of its loyal

patients for ongoing medical issues but that Defendants accessed and used Plaintiff’s

confidential patient information to solicit patients to leave Plaintiff’s practice and

seek medical treatment at PPC instead. (Am. Compl. ¶¶ 27–28.) Specifically,

Plaintiff alleges that from the fall of 2017 until February 2018, Lindley told Plaintiff’s

patients that she would be leaving Plaintiff and moving to her own practice and that

Dr. Niemeyer would be shut down and no longer able to treat patients. (Am. Compl.

¶¶ 16, 18, 54.) Plaintiff further alleges that such conduct was done “intentionally and

with malice” because Plaintiff would not permit Defendants to conduct their allergy

testing business within Plaintiff’s medical practice. (Am. Compl. ¶¶ 28–29, 31.)

Plaintiff alleges that, as a result of Defendants’ conduct, at least 100 of Plaintiff’s

patients have been solicited to seek treatment at PPC, thus amounting to tortious
interference with contract and tortious interference with prospective business

relations. (Am. Compl. ¶¶ 29–30.)

32. Defendants argue that the Amended Complaint fails to state a claim for

tortious interference with contract or prospective economic advantage because

Plaintiff neither alleges the existence of a valid contract nor a prospective contractual

relationship between Plaintiff and any of its patients. (Defs.’ Br. Supp. 2.) Plaintiff

counters that the Amended Complaint alleges enough information to put Defendants

on notice of the basis for its tortious interference claims and that further facts will be

provided through discovery. (Pl.’s Br. Opp’n 2–3.)

33. Plaintiff is correct that under North Carolina’s notice pleading standard, a

claim for relief need only set forth “[a] short and plain statement of the claim

sufficiently particular to give the courts and the parties notice of the transactions,

occurrences, or series of transactions or occurrences, intended to be proved showing

that the pleader is entitled to relief[.]” N.C. Gen. Stat. § 1A-1, Rule 8(a)(1). “[D]espite

the liberal nature of the concept of notice pleading, a complaint must nonetheless

state enough to give the substantive elements of at least some legally recognized

claim or it is subject to dismissal under Rule 12(b)(6).” Stanback v. Stanback, 297

N.C. 181, 204, 254 S.E.2d 611, 626 (1979); see also Turner v. Thomas, 369 N.C. 419,

444, 794 S.E.2d 439, 456 (2016) (notwithstanding the fact that Rule 8(a)(1) does not

require detailed fact-pleading, “no amount of liberalization should seduce the pleader

into failing to state enough to give the substantive elements of his claim”).

Accordingly, and separate and apart from the question of whether a complaint gives
defendants adequate notice of the basis for a claim, dismissal is proper under Rule

12(b)(6) “when the complaint reveals on its face the absence of fact sufficient to make

a good claim[.]” Oates, 314 N.C. at 278, 333 S.E.2d at 224.

34. To state a claim for tortious interference with contract, a plaintiff must

allege

(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 plaintiff.

Krawiec v. Manly, 370 N.C. 602, 606–07, 811 S.E.2d 542, 546 (2018).

35. “To establish tortious interference with prospective economic advantage, a

plaintiff must show that the defendant, without justification, induced a third party

to refrain from entering into a contract with the plaintiff, which would have been

made absent the defendant’s interference.” MLC Auto., LLC v. Town of S. Pines, 207

N.C. App. 555, 571, 702 S.E.2d 68, 79 (2010). “However, a plaintiff’s mere expectation

of a continuing business relationship is insufficient to establish such a claim.”

Beverage Sys. of the Carolinas, LLC v. Associated Beverage Repair, LLC, 368 N.C.

693, 701, 784 S.E.2d 457, 463 (2016). “Instead, a plaintiff must produce evidence that

a contract would have resulted but for a defendant’s malicious intervention.” Id.

36. Viewing the allegations of the Amended Complaint as true and taking all

reasonable inferences in Plaintiff’s favor, the Court concludes that the Amended

Complaint fails to adequately allege a claim for tortious interference with contract or

prospective economic advantage.
37. As to tortious interference with contract, the Amended Complaint nowhere

alleges that Plaintiff’s patients were contractually obligated to continue receiving

treatment from Plaintiff. Plaintiff’s patients cannot be induced not to perform a

contract that does not exist. Therefore, the Court concludes that the Amended

Complaint fails to state a claim for tortious interference with contract because it fails

to allege the existence of a valid contract between Plaintiff and a third party.

38. As to tortious interference with prospective economic advantage, the Court

concludes that the Amended Complaint’s allegation that Plaintiff’s loyal customers

received treatment from Plaintiff for ongoing medical problems is insufficient to show

that Plaintiff had anything more than a mere expectation that its patients would

continue seeking treatment from Plaintiff. Plaintiff alleges no facts from which the

Court can infer that Plaintiff’s patients would have continued to seek treatment from

Plaintiff but for Defendants’ alleged conduct. The Amended Complaint, therefore,

fails to state a claim for tortious interference with prospective economic advantage.

39. Accordingly, the Court concludes that Plaintiff’s tortious interference

claims should be dismissed and the Motion is granted as to that claim without

prejudice.

C. Misappropriation of Trade Name

40. Plaintiff alleges that Kimball, while employed by Plaintiff as an office

manager, set up a Yahoo! e-mail account for Plaintiff using the e-mail address

alamancefp@yahoo.com but would not let anyone else access the account or Plaintiff’s

financial information. (Am. Compl. ¶¶ 6, 15.) The Amended Complaint alleges a
claim for “intentional misappropriation and use of trade name” based on allegations

that Plaintiff owns the Yahoo! account, which contains valuable communications

regarding Plaintiff’s patients and billing, but that Kimball has refused to turn over

the password and has disabled the account. (Am. Compl. ¶¶ 34–35.)

41. Defendants contend that Plaintiff’s claim for misappropriation of trade

name should be dismissed as to Lindley and PPC because the Complaint fails to allege

any facts showing that Lindley or PPC misappropriated or misused any trade name.

(Defs.’ Br. Supp. 4.) Plaintiff has conceded that the trade name claim relates only to

Kimball. (Pl.’s Br. Opp’n 3.)

42. Defendants further contend that the misappropriation of trade name claim

against Kimball must be dismissed because (1) Plaintiff does not allege that the

e-mail account constitutes a protectable trade name and (2) Plaintiff fails to allege

that Kimball used the e-mail address after the termination of his employment with

Plaintiff. (Defs.’ Br. Supp. 4–5.)

43. Usually, claims premised on misappropriation of a trade name are brought

by a company that has acquired a proprietary interest in a trade name against a

company that is using a confusingly similar name in the public sphere. Two Way

Radio Serv., Inc. v. Two Way Radio of Carolina, Inc., 322 N.C. 809, 814, 370 S.E.2d

408, 411 (1988) (citing R. Robinson, North Carolina Corporation Law and Practice

§ 4-1, at 52 (3d ed. 1983)). Here, Plaintiff does not allege that any Defendant is using

a trade name that is confusingly similar to Plaintiff’s trade name, but that Kimball

is denying Plaintiff access to an e-mail account that uses an abbreviation for
Plaintiff’s business name. (Am. Compl. ¶¶ 34–36.) The Court is not aware of (and

Plaintiff has not alleged) a “misappropriation of trade name” claim that may be

brought to remedy the conduct alleged. Nevertheless, the Court will proceed to

analyze whether Plaintiff may state a valid claim were such a cause of action to be

recognized by our courts.

44. “The law will afford protection against the tortious appropriation of

tradenames and trademarks alike.” Charcoal Steak House of Charlotte, Inc. v. Staley,

263 N.C. 199, 202, 139 S.E.2d 185, 187 (1964). “[A] corporate name (i.e., a trade

name) is like a trademark to the extent that a proprietary interest therein can be

acquired only by adoption and continuous use” Two Way Radio Serv., Inc., 322 N.C.

at 816, 370 S.E.2d at 412. However, “generic, or generally descriptive, words and

phrases, as well as geographic designations, may not be appropriated by any business

enterprise either as a tradename or as a trademark.” Id. Thus, a geographic term,

such as “Carolina,” is by itself, a generic or descriptive term that is not protectable as

a trademark. Johnson & Morris, PLLC v. Abdelbaky & Boes, PLLC (Johnson &

Morris II), 2017 NCBC LEXIS 89, at *15 (N.C. Super. Ct. Sept. 28, 2017).

45. “A well established exception to this rule applies when the descriptive

phrase in question has acquired ‘secondary meaning.’” Two Way Radio Serv., Inc.,

322 N.C. at 814, 370 S.E.2d at 411. Secondary meaning exists when a business has

used generic or descriptive words “for so long or so exclusively or when it has

promoted its product to such an extent that the words do not register their literal

meaning on the public mind but are instantly associated with one enterprise[.]”
Staley, 263 N.C. at 201–02, 139 S.E.2d at 187. In determining whether a mark has

acquired secondary meaning, our courts look to the factors established by the Court

of Appeals for the Fourth Circuit (the “Perini Factors”). Johnson & Morris II, 2017

NCBC LEXIS 89, at *15–16 (citing Perini Corp. v. Perini Constr., Inc., 915 F.2d 121,

125 (4th Cir. 1990)). The six Perini Factors are “(1) plaintiff’s advertising

expenditures; (2) consumer studies linking the mark to the source; (3) the plaintiff’s

record of sales success; (4) unsolicited media coverage of the plaintiff’s business;

(5) attempts to plagiarize the mark; and (6) the length and exclusivity of the plaintiff’s

use of the mark.” Johnson & Morris, PLLC v. Abdelbaky & Boes, PLLC (Johnson &

Morris I), 2016 NCBC LEXIS 78, at *15 (N.C. Super. Ct. Oct. 11, 2016).

46. The Court first observes that the e-mail address, alamancefp@yahoo.com,

which Plaintiff claims as its “trade name,” consists almost entirely of the name of a

county and the domain name of Yahoo!, a separate company that provides free e-mail

services to the public. Plaintiff’s e-mail address, by itself, is likely a generic or

descriptive name that is not entitled to trade name protection absent secondary

meaning. See id. at *12–13.

47. Plaintiff has failed to allege any facts from which the Court could conclude

that alamancefp@yahoo.com could have acquired secondary meaning for purposes of

the Motion. See Old S. Apparel, LLC v. JEB Designs, Inc., 272 F. Supp. 3d 734, 738–

39 (E.D.N.C. 2017) (concluding that plaintiff failed to state a claim for trademark

infringement under federal or North Carolina law where plaintiff failed to allege facts

that would show how its purported mark has secondary meaning). Finally, even had
Plaintiff adequately alleged that it owned a protectable trade name, Plaintiff has not

alleged that any Defendant has used Plaintiff’s trade name or a confusingly similar

name. Thus, even if a misappropriation of trade name case could be premised on

Kimball’s alleged conduct, Plaintiff would fail to state a claim because it has not

alleged the existence of a protectable trade name.

48. Therefore, the Court concludes that Plaintiff’s misappropriation of trade

name claim should be dismissed.

D. Breach of Duty of Loyalty

49. Plaintiff alleges that Lindley and Kimball, as employees of Plaintiff, owed

Plaintiff a duty of loyalty that obligated them to act in the best interest of Plaintiff

and its patients. (Am. Compl. ¶ 38.) Plaintiff alleges that Lindley and Kimball

breached this duty of loyalty by performing unnecessary allergy testing on patients,

paying for personal benefits without authorization, misusing patient information,

interfering in Plaintiff’s business relationships, and preparing a new business while

employed by Plaintiff. (Am. Compl. ¶ 39.)

50. Defendants contend that Plaintiff’s breach of the duty of loyalty claim must

be dismissed because a standard employer-employee relationship does not give rise

to a fiduciary duty under North Carolina law and Plaintiff does not allege the

existence of a fiduciary relationship apart from Kimball and Lindley’s status as

employees of Plaintiff. (Defs.’ Br. Supp. 6.) In response, Plaintiff’s counsel

represented in its brief in opposition to the Motion that Plaintiff does not wish to be
heard on the Motion as to this claim, thus conceding the correctness of the Motion as

it relates to this claim. (Pl.’s Br. Opp’n 3.)

51. Accordingly, the Court concludes that Plaintiff has failed to state a claim

against Lindley or Kimball for breach of the duty of loyalty and this claim is

dismissed.

E. Unfair or Deceptive Acts or Practices

52. Plaintiff alleges that Lindley committed an unfair or deceptive act or

practice by “fraudulently obtaining patient information,” misappropriating Plaintiff’s

trade name and internet contacts, soliciting Plaintiff’s patients, and using Plaintiff’s

funds to pay unauthorized expenses. (Am. Compl. ¶ 43.) Plaintiff further alleges

that Lindley’s conduct of forming her own business while employed by Plaintiff and

soliciting Plaintiff’s patients was “in or affecting commerce” as defined by the North

Carolina Unfair and Deceptive Trade Practices Act (“UDTPA” or the “Act”). (Am.

Compl. ¶¶ 41–42.)

53. The Amended Complaint alleges a UDTP claim against Lindley alone.

Further, because the Amended Complaint alleges that only Kimball misappropriated

Plaintiff’s trade name and internet contacts, such conduct cannot form part of the

basis for a UDTP claim against Lindley. Accordingly, Plaintiff’s UDTP claim against

Lindley is premised on allegations that she fraudulently obtained Plaintiff’s patient

information to solicit patients to PPC and used Plaintiff’s funds to pay expenses

without authorization.
54. Defendants argue that Plaintiff’s UDTP claim is barred by the learned

profession exemption. (Defs.’ Br. Supp. 6.) Defendants contend that Lindley, as a

licensed nurse practitioner, is entitled to the exemption because her alleged conduct

fell within the broad definition of “rendering of professional services” that exempts

her from the UDTPA. (Defs.’ Br. Supp. 6–7.)

55. The UDTPA declares unlawful “unfair or deceptive acts or practices in or

affecting commerce[.]” N.C. Gen. Stat. § 75-1.1(a). The Act defines commerce to

include “all business activities, however denominated, but does not include

professional services rendered by a member of a learned profession.” Id. § 75-1.1(b).

For the learned profession exemption to apply, (1) the entity or person whose conduct

is being challenged must be a member of a learned profession, and (2) the challenged

conduct must constitute a rendering of professional services. Wheeless v. Maria

Parham Med. Ctr., Inc., 237 N.C. App. 584, 589, 768 S.E.2d 119, 123 (2014); Reid v.

Ayers, 138 N.C. App. 261, 266, 531 S.E.2d 231, 235 (2000).

56. Our courts have interpreted membership in a learned profession broadly,

including both individuals and entities, largely in the medical and legal fields.

Shelton v. Duke Univ. Health Sys., Inc., 179 N.C. App. 120, 126, 633 S.E.2d 113, 117

(2006) (hospitals); Reid, 138 N.C. App. at 266, 531 S.E.2d at 235 (law firms and

attorneys); Sykes v. Health Network Sols, Inc., 2017 NCBC LEXIS 73, at *54–55 (N.C.

Super. Ct. Aug. 18, 2017) (chiropractors). Moreover, our Court of Appeals “has made

clear that unfair and deceptive acts committed by medical professionals are not
included within the prohibition of [N.C. Gen. Stat.] § 75-1.1(a).” Wheeless, 237 N.C.

App. at 590, 768 S.E.2d at 123.

57. Despite Plaintiff’s suggestion in its brief that a nurse practitioner is,

arguably, “not contemplated under the learned profession exception,” at the hearing,

Plaintiff’s counsel conceded that a nurse practitioner is a medical professional. (Pl.’s

Br. Opp’n 4.) Plaintiff instead argues that the exception applies to unfair or deceptive

conduct directed toward a member of the consuming public, but not to anticompetitive

conduct between two learned professionals. (Pl.’s Br. Opp’n 4.) Thus, the issue before

the Court is whether Lindley’s alleged conduct constituted the rendering of

professional services such that Plaintiff’s UDTP claim is barred.

58. “It is well-settled by our Courts that a matter affecting the professional

services rendered by members of a learned profession . . . falls within the exception.”

Wheeless, 237 N.C. App. at 590, 768 S.E.2d at 123 (quotation marks omitted). “This

exception for medical professionals has been broadly interpreted by this Court . . . .”

Shelton, 179 N.C. App. at 126, 633 S.E.2d at 117. Further, and contrary to Plaintiff’s

argument, it has been held to apply where a plaintiff alleges that the unfair or

deceptive acts constituted anticompetitive conduct directed by one learned

professional at another. Cameron v. New Hanover Mem’l Hosp., Inc., 58 N.C. App.

414, 446, 293 S.E.2d 901, 920 (1982) (rejecting plaintiffs’ argument that the learned

profession exemption does not exclude from coverage anticompetitive conduct

involving commercial activity); Wheeless, 237 N.C. App. at 590–91, 768 S.E.2d at 123

(concluding that defendant-medical professionals’ sending of an anonymous letter to
the medical board about plaintiff-medical professional was within the exemption,

notwithstanding plaintiff’s allegations that defendants illegally accessed and used

confidential peer review and patient records and acted out of malice and for financial

gain).

59. Given the breadth with which our courts have applied the learned

profession exemption, the Court concludes that the face of the Amended Complaint

reveals that the UDTP claim against Lindley is barred. Plaintiff complains that

Lindley engaged in unfair and deceptive conduct by creating a business within

Plaintiff’s business, illegally obtaining patient data, using that data to solicit

Plaintiff’s patients, paying unauthorized personal expenses, and attempting to give

Dr. Niemeyer kickbacks for allergy testing referrals. (Am. Compl. ¶¶ 11–13, 15–16,

18, 41–43; Pl.’s Br. Opp’n 4.) In its simplest form, Plaintiff’s claim is based on

allegations that Lindley began an allergy testing practice, obtained patient

information, solicited patients, and attempted to secure a referral agreement.

60. In considering whether a defendant’s conduct is exempt from the UDTPA’s

definition of commerce, the Court is not concerned with whether the conduct runs

afoul of other legal or ethical standards, but only whether the conduct affects the

professional services rendered by members of a learned profession. Burgess v. Busby,

142 N.C. App. 393, 406–07, 544 S.E.2d 4, 11–12 (2001) (holding that dismissal of

UDTP claim was proper because defendant-doctor’s conduct in sending a letter

naming patients who had sued defendant and jurors who found against defendant to

other medical professionals to discourage those professionals from treating the
persons named in the letter was within the exemption); Gaunt v. Pittaway, 139 N.C.

App. 778, 784, 534 S.E.2d 660, 664 (2000) (“[M]edical professionals are expressly

excluded from the scope of [N.C. Gen. Stat.] § 75-1.1(a) and thus it clearly does not

follow that a statement by a medical professional, criminal or otherwise, is governed

by this particular statute.”). Accordingly, the Court concludes that Lindley’s alleged

conduct, all of which related to the provision of allergy testing services and

communications with patients, falls within the learned profession exemption.

61. Apart from the question of whether Defendants’ conduct is excluded from

the UDTPA’s definition of commerce, the allegations that form the basis for Plaintiff’s

UDTP claim against Lindley are the same allegations that constitute Lindley’s

alleged breaches of her employment agreement. (Compare Am. Compl. ¶¶ 20–24,

with Am. Compl. ¶¶ 41–43.) Our courts generally disfavor allowing UDTP claims to

“piggyback” on breach of contract claims, “[b]ecause section 75-1.1 and contract law

serve different purposes and rest on divergent remedial principles[.]” Post v. Avita

Drugs, LLC, 2017 NCBC LEXIS 95, at *9 (N.C. Super. Ct. Oct. 11, 2017). Therefore,

absent “some type of egregious or aggravating circumstances,” Dalton v. Camp, 353

N.C. 647, 657, 548 S.E.2d 704, 711 (2001) (emphasis omitted), “a mere breach of

contract, even if intentional, is not sufficiently unfair or deceptive to sustain an action

under [N.C. Gen. Stat.] § 75-1.1[,]” Branch Banking & Tr. Co. v. Thompson, 107 N.C.

App. 53, 62, 418 S.E.2d 694, 700 (1992). Circumstances that are sufficiently egregious

or aggravating to permit a UDTP claim based on conduct that occurred during the

course of contractual performance involve “clear deception,” such as forgery,
destruction of documents, or concealment of the breach combined with other acts to

deter plaintiff from investigating the conduct. Post, 2017 NCBC LEXIS 95, at *11–

12.

62. Upon reviewing the Amended Complaint, and taking all inferences in

Plaintiff’s favor, the factual allegations are devoid of sufficiently egregious or

aggravating conduct on the party of Lindley that would permit Plaintiff to assert a

UDTP claim based on Lindley’s alleged breach of contract. The failure to plead such

conduct serves as an additional basis for dismissal of Plaintiff’s UDTP claim.

63. Having concluded both that Plaintiff’s UDTP claim is barred by the learned

profession exemption and that Lindley’s alleged breach of contract was not

sufficiently egregious to support a UDTP claim, the Court, therefore, concludes that

Plaintiff fails to state a claim for UDTP. Plaintiff’s UDTP claim is, accordingly,

dismissed.

F. Fraud

64. Plaintiff alleges that Lindley and Kimball have engaged in fraud by telling

Plaintiff’s patients since the fall of 2017 that Dr. Niemeyer was about to be “shut

down” and could no longer treat patients. (Am. Compl. ¶ 54.) The Amended

Complaint alleges that Lindley and Kimball’s statements were false, made with the

intent to deceive patients and solicit them to PPC, and that the false statements did

induce patients to leave Plaintiff’s practice, thereby harming Plaintiff. (Am. Compl.

¶¶ 54–57.)
65. To state a claim for fraud, a complaint must allege “(1) [f]alse

representation or concealment of a material fact, (2) reasonably calculated to deceive,

(3) made with intent to deceive, (4) which does in fact deceive, (5) resulting in damage

to the injured party.” Hudgins v. Wagoner, 204 N.C. App. 480, 486, 694 S.E.2d 436,

442 (2010). “Additionally, any reliance on the allegedly false representations must

be reasonable.” Forbis v. Neale, 361 N.C. 519, 527, 649 S.E.2d 382, 388 (2007).

66. Defendants argue that Plaintiff fails to state a claim for fraud, among other

reasons, because North Carolina has not recognized fraud claims based on false

statements made to a non-party that caused the non-party to take action that harmed

plaintiff. (Defs.’ Br. Supp. 8.) Plaintiff’s brief did not address this argument. At the

hearing, Plaintiff’s counsel argued that the Amended Complaint alleges sufficient

facts to state a claim for constructive fraud based on allegations demonstrating a

relationship of trust and confidence between Plaintiff, on the one hand, and Lindley

and especially Kimball, on the other. The Court rejects this argument. Plaintiff’s

Amended Complaint does not allege a fiduciary relationship between Plaintiff and

any of the Defendants.

67. As to Plaintiff’s fraud claim based on Lindley and Kimball’s alleged false

statements to Plaintiff’s patients, North Carolina courts have not addressed whether

the reliance requirement for a fraud claim may be premised on a defendant’s false

representations to a third party on which the third party relies to plaintiff’s
detriment.1 Furthermore, the Court is unaware of any court that currently permits

common law fraud claims to be established by third-party reliance. Even in New

York, which has the most robust (albeit conflicting) case law discussing the viability

of third-party reliance claims, the law has been less than clear. Jordan v. Mirra,

2017 U.S. Dist. LEXIS 149034, at *56–57 (Dist. Del. Sept. 14, 2017) (unpublished)

(“Federal and state courts in New York are divided as to whether a fraud-based claim

may be predicated on third-party reliance.”). However, it appears that New York, the

jurisdiction most willing to entertain the possibility of third-party reliance claims,

has concluded that allegations of third-party reliance cannot establish a claim for

common law fraud. See, e.g., Pasternack v. Lab. Corp. of Am. Holdings, 27 N.Y.3d

817, 827, 59 N.E.3d 485, 492 (N.Y. Ct. App. 2016) (“[U]nder New York law, such third-

party reliance does not satisfy the reliance element of a fraud claim.”).

68. Of note, the District Court for the Middle District of North Carolina has

suggested that North Carolina law would recognize such a claim in appropriate

circumstances because North Carolina courts recognize that a professional may be

liable for negligently performing a contract that proximately causes foreseeable

1
Apart from the typical fraud claim wherein plaintiff is alleged to have relied on a
false statement that defendant made directly to plaintiff (“first-party reliance”),
courts in this and other jurisdictions have also considered whether a plaintiff may
state a fraud claim where (1) defendant made a false representation to a third party
intending that the information would reach plaintiff and be relied on by plaintiff
(“indirect reliance”), Evercrete Corp. v. H-Cap Ltd., 429 F. Supp. 2d 612, 628 (S.D.N.Y.
2006); Bucci v. Burns, 2018 NCBC LEXIS 37, at *13–17 (N.C. Super. Ct. Apr. 25,
2018), and (2) where defendant made a false representation to a third party on which
the third party relied, thereby causing harm to plaintiff (“third-party reliance”).
Although courts do not use these terms consistently, the designations given in the
preceding sentence will be used here for clarity.
injury to a third person and “it would be surprising if the same were not true in cases

of intentional deception carried out for the purpose of harming a third party.” Bardes

v. Mass Mut. Life Ins. Co., 932 F. Supp. 2d 636, 640 (M.D.N.C. 2013).

69. The Court is doubtful that our appellate courts would recognize fraud

claims premised on third-party reliance. However, even assuming arguendo that

third-party reliance claims were recognized in North Carolina, the Amended

Complaint fails to allege that any patient justifiably relied on Kimball or Lindley’s

allegedly fraudulent statements. The Amended Complaint, therefore, fails to state a

claim for fraud premised on third-party reliance, even were such a claim recognized

in North Carolina.

70. Apart from whether the type of fraud claim alleged by Plaintiff is cognizable

under North Carolina law, Defendants also argue that Plaintiff’s fraud claim is

subject to dismissal because it fails to satisfy the heightened pleading requirements

of Rule 9(b). (Defs.’ Br. Supp. 8–9.) Specifically, Defendants argue that Plaintiff

provides only a vague timeframe of when the alleged fraudulent statements were

made and makes no allegation as to the place where the misrepresentations were

made. (Defs.’ Br. Supp. 8–9.)

71. Our Rules require that a pleading setting forth a fraud claim state “the

circumstances constituting fraud . . . with particularity.” N.C. Gen. Stat. § 1A-1, Rule

9(b). “[I]n pleading actual fraud the particularity requirement is met by alleging

time, place and content of the fraudulent representation, identity of the person

making the representation and what was obtained as a result of the fraudulent acts
or representations.” S.N.R. Mgmt. Corp. v. Danube Partners 141, LLC, 189 N.C. App.

601, 610, 659 S.E.2d 442, 449 (2008) (emphasis omitted) (quoting Terry v. Terry, 302

N.C. 77, 85, 273 S.E.2d 674, 678 (1981)).

72. Plaintiff alleges that, beginning in the fall of 2017, Lindley and Kimball told

Plaintiff’s patients that Dr. Niemeyer was about to be “shut down” and would no

longer be able to treat patients. (Am. Compl. ¶ 54.) Plaintiff further alleges that

these misstatements were intended to solicit Plaintiff’s patients to PPC and that they

deceived Plaintiff’s patients into leaving Plaintiff’s medical practice, thereby harming

Plaintiff. (Am. Compl. ¶¶ 55–57.)

73. The allegations reveal that Plaintiff has stated with particularity the

content of the fraudulent representation, identity of the persons making the

representation, and what was obtained as a result of the fraudulent representations.

Although the time of the representations is given only as a broad range, the Court

concludes that such an allegation is sufficient, on the facts alleged, to satisfy Rule

9(b). “A requirement of specificity is not a requirement of perfect and complete

specificity.” Hudgins, 204 N.C. App. at 487, 694 S.E.2d at 443.

74. However, Plaintiff makes no allegation as to where or how these

representations were made to Plaintiff’s patients. Although in some instances a

failure to state the place a misrepresentation was made may be forgiven, the Court

concludes that the Amended Complaint’s failure to allege the place where Kimball

and Lindley’s alleged misrepresentations were made runs afoul of Rule 9(b)’s

specificity requirement. Id. at 489 n.7, 694 S.E.2d at 444 n.7 (concluding that failure
to allege the exact place the fraudulent misrepresentation was made or whether it

occurred in a face-to-face conversation or over telephone was not fatal where

defendants’ answer admitted that the conversation occurred on the date alleged).

75. Based on the foregoing, the Court concludes that the face of the Amended

Complaint reveals an absence of facts sufficient to state a good fraud claim and fails

to satisfy Rule 9(b)’s particularity requirement. Therefore, Plaintiff’s fraud claim is

dismissed.

G. Punitive Damages

76. Defendants also request that the Court strike Plaintiff’s request for

punitive damages because only Plaintiff’s breach of contract claim against Lindley

should survive dismissal and punitive damages are not permissible in ordinary

breach of contract actions. (Defs.’ Br. Supp. 9.)

77. Plaintiff’s request for punitive damages is named in the Amended

Complaint as Count VI and does not clearly identify the claims for which Plaintiff

seeks punitive damages. (Am. Compl. ¶¶ 44–45.) Instead, the Amended Complaint

alleges only that Lindley and Kimball’s conduct “has been willful, wanton, malicious,

and fraudulent[.]” (Am. Compl. ¶ 45.)

78. A request for punitive damages is not a separate cause of action but is a

type of relief that may be awarded in appropriate circumstances. Holley v. Hercules,

Inc., 86 N.C. App. 624, 627, 359 S.E.2d 47, 49 (1987) (“[T]here is no cause of action

for punitive damages . . . . Causes of action are the vehicles by which legal rights and

remedies are enforced, but no one has a legal right to punitive damages.” (emphasis
omitted)). Punitive damages may be an appropriate remedy “to punish a defendant

for egregiously wrongful acts and to deter the defendant and others from committing

similar wrongful acts.” N.C. Gen. Stat. § 1D-1. However, such damages may only be

awarded if the claimant, in addition to proving that the defendant is liable for

compensatory damages, also proves the presence of fraud, malice, or willful or wanton

conduct. Id. § 1D-15. Generally, a party cannot recover punitive damages for breach

of contract. Richardson v. Bank of Am., N.A., 182 N.C. App. 531, 558, 643 S.E.2d 410,

427 (2007).

79. Having concluded that all of Plaintiff’s claims are subject to dismissal, save

for Plaintiff’s breach of contract claim against Lindley, the Court further concludes

that Plaintiff’s request for punitive damages should be stricken from the Amended

Complaint. A review of the Amended Complaint reveals that Plaintiff fails to allege

any aggravating factor that could support a punitive damages award premised solely

on Lindley’s alleged breach of contract.

80. Therefore, the Motion as to Plaintiff’s request for punitive damages is

granted.

V. CONCLUSION

81. For the foregoing reasons, the Court ORDERS as follows:

A. The Court GRANTS the Motion as to Plaintiff’s claim for breach of

contract against Kimball and PCC and Plaintiff’s claim for tortious

interference with contract and tortious interference with prospective
economic advantage, and these claims are dismissed without

prejudice.

B. The Court GRANTS the Motion as to Plaintiff’s claims for

misappropriation of trade name, breach of the duty of loyalty, UDTP,

and fraud, and these claims are dismissed with prejudice.

C. The Court GRANTS the Motion as to Plaintiff’s request for punitive

damages, and the request for punitive damages is dismissed without

prejudice.

SO ORDERED, this the 14th day of August, 2018.

/s/ Michael L. Robinson
Michael L. Robinson
Special Superior Court Judge
for Complex Business Cases