MERZ PHARM., LLC v. THOMAS, 2024 NCBC 35

STATE OF NORTH CAROLINA
WAKE COUNTY
IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
23 CVS 32848
MERZ PHARMACEUTICALS, LLC,
Plaintiff,
v.
ANDREW THOMAS,
Defendant.
ORDER AND OPINION ON
DEFENDANT’S MOTION FOR
PARTIAL SUMMARY JUDGMENT
THIS MATTER is before the Court on Defendant Andrew Thomas’ Motion for
Partial Summary Judgment (“Motion,” ECF No. 63).
THE COURT, having considered the Motion, the briefs of the parties, the
arguments of counsel, and all appropriate matters of record, CONCLUDES that the
Motion should be DENIED for the reasons set out below.
McGuireWoods LLP, by Heidi E. Siegmund, Dana L. Rust, and Zachary
L. McCamey, for Plaintiff Merz Pharmaceuticals, LLC.
Spengler & Agans, PLLC, by Eric Spengler, for Defendant Andrew
Thomas.
Davis, Judge.
INTRODUCTION
1. 	This 	Court 	has 	on 	several 	prior 	occasions 	addressed 	legal 	issues
involving the scenario in which an employee’s restrictive covenants have been
assigned from his original employer to a new employer in conjunction with an asset
purchase agreement between the two entities. 	We have held that when such a
restrictive covenant provides that it will only exist for a specified time period, the
Merz Pharm., LLC v. Thomas, 2024 NCBC 35.

clock begins to run immediately upon the termination of his employment with the
original employer.
2. 	The question raised by the present Motion is whether the same rule
automatically applies when the employee’s change in employer occurs by virtue of an
asset transfer agreement between affiliated entities. The Court concludes that it does
not.
FACTUAL AND PROCEDURAL BACKGROUND
3. 	“The Court does not make findings of fact on motions for summary
judgment; 	rather, 	the 	Court 	summarizes 	material 	facts 	it 	considers 	to 	be
uncontested.” 	McGuire v. Lord Corp., 2021 NCBC LEXIS 4, at **1–2 (N.C. Super.
Ct. Jan. 19, 2021) (cleaned up).
4. 	Plaintiff Merz Pharmaceuticals, LLC (“Merz Pharmaceuticals”) is a
North 	Carolina 	limited 	liability 	company 	registered 	to 	do 	business 	in 	North
Carolina.1 	(Def.’s Br. Supp. Mot. Ex. 3, ECF No. 64.3.) 	In its Verified Complaint,
(“V.C.,” ECF No. 3), Merz Pharmaceuticals is described as “a leading pharmaceutical
company,” 	which 	“markets 	and 	sells 	its 	products 	to 	healthcare 	providers 	for
therapeutic purposes.” (V.C. ¶¶ 8, 11.) At all relevant times, Merz, Inc. was the sole
member of Merz Pharmaceuticals. (Cleef Aff. ¶ 4, ECF No. 74.2.)
1 At the time of organization, Merz Pharmaceuticals was known by a different name, “Merz
Pharmaceuticals/Consumer 	Products, 	LLC.” 	However, 	it 	was 	changed 	to 	“Merz
Pharmaceuticals, LLC” on 1 December 1998. (Def.’s Br. Supp. Mot. Ex. 3; Def.’s Br. Supp.
Mot. Ex 4, ECF No. 64.4.)

5. 	In October 2018, Defendant Andrew Thomas began working at Merz
North America, Inc. (“Merz NA”) as its Director of Government and Federal Accounts.
(V.C. ¶¶ 1, 4.; Thomas Aff. I ¶ 18, ECF No. 19.1.)
6. 	Merz NA is a related entity of Merz Pharmaceuticals.2 	As with Merz
Pharmaceuticals, Merz NA’s sole shareholder at all relevant times was Merz, Inc.
(Cleef Aff. ¶ 4.) Moreover, Merz Pharmaceuticals, Merz NA, and Merz, Inc., are “all
indirect wholly-owned subsidiaries of Merz Pharmaceuticals GmbH, a German
corporation.” 	(Cleef Aff. ¶ 4.) 	Despite this shared ownership, there is no overlap
between the managers of Merz Pharmaceuticals and the officers of Merz NA. 	(See
Def.’s Br. Supp. Mot. Ex. 5, ECF No. 64.5; Def.’s Br. Supp. Mot. Ex. 6, ECF No. 64.6.)
7. 	As a condition of his employment with Merz NA, Thomas was required
to sign a Confidentiality, Nonsolicitation, and Proprietary Rights Agreement (the
“Agreement”), which contained certain restrictive covenants with respect to Merz
NA’s confidential information and trade secrets, as well as a non-solicitation covenant
regarding the customers of Merz NA. (V.C., at Ex. A, ECF No. 3.)
8. 	Although in this litigation Thomas has stated in an affidavit that he
does not recall signing (electronically or otherwise) the Agreement upon beginning
his employment with Merz NA (Thomas Aff. I ¶ 6.), for purposes of this Motion he
does not challenge Merz’ evidence showing that he did, in fact, sign it.
2 The predecessor company of Merz NA was Merz Aesthetics, Inc., which was incorporated
on 12 July 1999 under the laws of Delaware. (Def.’s Br. Supp. Mot. Ex. 1, ECF No. 64.1.) On
1 July 2013, Merz Aesthetics, Inc. was converted via merger to a North Carolina corporation,
with Merz NA as the surviving company. (Def.’s Br. Supp. Mot. Ex. 2, ECF No. 64.2.)

9. 	The non-solicitation covenant in the Agreement states in pertinent part
as follows:
While employed at Merz and for a period of one (1) year after termination
of your employment for any reason (whether voluntary or involuntary)
you will not, alone or with others, directly or indirectly, solicit or attempt
to solicit, entice or attempt to entice, induce or attempt to induce any
Customer or Supplier (as defined below) of Merz or its Affiliates to cease
doing business with Merz or its Affiliates, or to interfere with any
relationship Merz or its Affiliates may have with a Customer or Supplier
or to become a Customer or Supplier of a Merz competitor.
(Agrmt. § 2(b) (emphasis added).)
10. 	One of the primary drugs manufactured by Merz is Xeomin, which is “a
federally regulated botulinum toxin injection[,]” that can be used for both therapeutic
and aesthetic purposes. (V.C. ¶¶ 9–10.)
11. 	Thomas’ duties 	while 	employed by 	Merz 	NA 	included working 	to
increase Xeomin’s market share in the governmental sector. (V.C. ¶ 9.)
12. 	For the first few years of his employment with Merz NA, “Merz
[Pharmaceuticals] existed, but had no employees[,]” and did not sell Xeomin. (Cleef
Aff. ¶ 3.)
13. 	Merz NA first obtained Food and Drug Administration approval for
certain therapeutic uses of Xeomin in 2010 and for aesthetic uses in 2011. (Cleef Aff.
¶ 3.) However, Merz Pharmaceuticals did not become the entity responsible for the
sale of Xeomin for therapeutic purposes until 1 January 2021. (Cleef Aff. ¶ 3.)
14. 	This change occurred because “[i]n 2020, Merz [Pharmaceuticals] and
[Merz NA] decided to separate [Merz NA]’s therapeutics business division from its
aesthetics business division.” 	(Cleef Aff. ¶ 5.) 	After this separation of business

divisions was effectuated, Merz NA continued to handle the sale of Xeomin for
aesthetic uses while Merz Pharmaceuticals was responsible for the sale of Xeomin for
therapeutic purposes. (Cleef Aff. ¶¶ 3–5.)
15. 	On 30 November 2020, Thomas received a letter (the “30 November
Letter”) stating that “Merz Therapeutics . . . is transferring operations from Merz
North America, Inc. to Merz Pharmaceuticals, LLC, another Merz US affiliate, on
January 1, 2021” and that his “employment will similarly transfer and . . . you will
become an employee with Merz Pharmaceuticals, LLC.” 	(Thomas Aff. II, at Ex. C,
ECF No. 64.7.)
16. 	On 1 January 2021, Merz NA and Merz Pharmaceuticals entered into
an Asset Transfer Agreement (“ATA”), in which Merz NA “transferred substantially
all 	of 	its 	assets 	and 	liabilities 	related 	to 	its 	therapeutics 	division 	to 	Merz
[Pharmaceuticals]. 	This transfer included all employees working in [Merz NA]’s
therapeutics division, including Thomas[.]” 	(Cleef Aff. ¶ 5.) 	Additionally, with
respect to the transferred employees, “the ATA transferred all restrictive covenant,
non-solicitation, 	and 	confidentiality 	agreements 	pertaining 	to 	the 	therapeutics
business from [Merz NA] to Merz [Pharmaceuticals].” (Cleef Aff. ¶ 6.)
17. 	Thomas accepted the transfer of his employment. 	(See Thomas Aff. II,
at Ex. C.) 	Accordingly, from 1 January 2021 onward, Thomas was no longer an
employee of Merz NA and instead became an employee of Merz Pharmaceuticals.
(Thomas Aff. III ¶ 11, ECF No. 70.1.) 	However, his “job duties and title remained
unchanged.” (Cleef Aff. ¶ 10.)

18. 	The Agreement was assigned from Merz NA to Merz Pharmaceuticals
per the terms of the ATA.3
19. 	For reasons unrelated to the present Motion, Merz Pharmaceuticals
terminated Thomas’ employment on 31 July 2023. (V.C. ¶ 35; Thomas Aff. I ¶ 25.)
20. 	On 3 August 2023, just a few days after his firing, Thomas began
communicating with a representative from a company called Revance Therapeutics,
Inc. (“Revance”) about the possibility of him obtaining a job at Revance. (V.C. ¶ 42.)
“Revance, like Merz, markets and sells injectables to healthcare professionals for
aesthetic and therapeutic purposes[,]” and is a “direct competitor of Merz in the
pharmaceutical industry.” (V.C. ¶¶ 17–18.)
21. 	Thomas ultimately accepted a position with Revance on or about 21
August 2023 as its “National Account Director, Market Access.” (Thomas Aff. I ¶ 38–
40; see also Thomas Aff. I, at Ex. 4.)
22. 	On 8 September 2023, Merz Pharmaceuticals learned that Thomas had
begun working for Revance and proceeded to send both Thomas and Revance cease-
and-desist letters “raising concerns about [Thomas’s] misappropriation of Merz
[Pharmaceuticals’] 	trade 	secrets 	and 	potential 	communications 	with 	Merz
[Pharmaceuticals’] customers.” (V.C. ¶¶ 51, 55.)
23. 	Merz 	Pharmaceuticals 	initiated 	this 	lawsuit 	by 	filing 	a 	Verified
Complaint in Wake County Superior Court on 16 November 2023 in which Merz
asserted claims against Thomas for (1) breach of contract; (2) misappropriation of
3 Although Thomas initially disputed that a valid assignment of the Agreement between Merz
NA and Merz Pharmaceuticals actually occurred, he has now conceded this fact.

trade secrets under the North Carolina Trade Secrets Protection Act (“NCTSPA”); (3)
conversion; (4) breach of fiduciary duty; and (5) violation of the North Carolina Unfair
and Deceptive Trade Practices Act. (V.C. ¶¶ 64–101.)
24. 	This case was designated as a complex business case and assigned to the
undersigned on 17 November 2023. (ECF Nos. 1, 2.)
25. 	On 29 March 2024, Thomas filed the present Motion in which he seeks
summary judgment on Merz Pharmaceuticals’ claim for breach of contract based on
his alleged violation of the non-solicitation covenant of the Agreement. Specifically,
he contends that Merz Pharmaceuticals’ deadline for seeking to enforce the covenant
expired one year after his employer switched from Merz NA to Merz Pharmaceuticals.
(Mot., at 1.)
26. 	A hearing was held on 6 May 2024 at which all parties were represented
by counsel, and the Motion is now ripe for resolution.
LEGAL STANDARD
27. 	It is well established that “[s]ummary judgment is proper ‘if the
pleadings, depositions, answers to interrogatories, and admissions on file, together
with the affidavits, if any, show that there is no genuine issue as to any material fact
and that any party is entitled to a judgment as a matter of law.’ ” Morrell v. Hardin
Creek, Inc., 371 N.C. 672, 680 (2018) (quoting N.C. R. Civ. P. 56(c)). 	“[A] genuine
issue is one which can be maintained by substantial evidence.” 	Kessing v. Nat’l
Mortg. Corp., 278 N.C. 523, 534 (1971). 	“Substantial evidence is such relevant
evidence as a reasonable mind might accept as adequate to support a conclusion and

means more than a scintilla or a permissible inference.” 	Daughtridge v. Tanager
Land, LLC, 373 N.C. 182, 187 (2019) (cleaned up).
28. 	On a motion for summary judgment, “[t]he evidence must be considered
‘in a light most favorable to the non-moving party.’ ” McCutchen v. McCutchen, 360
N.C. 280, 286 (2006) (quoting Howerton v. Arai Helmet, Ltd., 358 N.C. 440, 470
(2004)). 	“[T]he party moving for summary judgment ultimately has the burden of
establishing the lack of any triable issue of fact.” 	Pembee Mfg. Corp. v. Cape Fear
Constr. Co., 313 N.C. 488, 491 (1985).
29. 	The party moving for summary judgment may satisfy its burden by
proving that “an essential element of the opposing party’s claim does not exist, cannot
be proven at trial, or would be barred by an affirmative defense, . . . or by showing
through discovery that the opposing party cannot produce evidence to support an
essential element of [the] claim[.]” Dobson v. Harris, 352 N.C. 77, 83 (2000). “If the
moving party satisfies its burden of proof, then the burden shifts to the non-moving
party to ‘set forth specific facts showing that there is a genuine issue for trial.’ ” Lowe
v. Bradford, 305 N.C. 366, 369–70 (1982) (quoting N.C. R. Civ. P. 56(e)). 	If the
nonmoving 	party 	does 	not 	satisfy 	its 	burden, 	then 	“summary 	judgment, 	if
appropriate, shall be entered against [the nonmovant].” United Cmty. Bank (Ga.) v.
Wolfe, 369 N.C. 555, 558 (2017) (quoting N.C. R. Civ. P. 56(e)).
ANALYSIS
30. 	Although 	Thomas 	has 	forecast 	his 	belief 	that 	the 	non-solicitation
covenant is unenforceable for other reasons as well, the only ground he has asserted

in the present Motion is the alleged expiration of the applicable one-year period
during which the covenant remained in effect. 	Therefore, this Opinion does not
address any additional issues relating to the enforceability of the non-solicitation
covenant.
31. 	To prevail on a breach of contract claim, a claimant must show: “(1)
existence of a valid contract; and (2) breach of the terms of that contract.” 	Poor v.
Hill, 138 N.C. App. 19, 26 (2000) (cleaned up).
32. 	Relying on a line of prior cases from this Court, Thomas argues that the
one-year period contained in the non-solicitation covenant began to run as soon as
the ATA became effective. 	He contends that it is “well-established under North
Carolina law that when a non-solicitation covenant is assigned—for example, through
an asset purchase agreement—the period of the restrictive covenant begins to run at
the 	time 	of 	the 	assignment 	because 	the 	employment 	relationship 	has 	been
terminated.” (Def.’s Br. Supp. Mot., at 8–9 (emphasis in original).)
33. 	In 	response, 	Merz 	Pharmaceuticals 	contends 	that 	“the 	change 	in
Thomas’ employer was one of form, not substance” and that “[b]ecause Merz’s
business and its employment relationship with Thomas continued unchanged after
the transfer, his restrictive covenants did not begin to run until July 31, 2023, when
Merz [Pharmaceuticals] fired him[.]” (Pl.’s Br. Opp. Mot., at 2, ECF No. 74.) It argues
“that a purely administrative change in an employer’s form should not impact or limit
the successor employer’s rights to enforce a restrictive covenant.” (Pls.’ Br. Opp. Mot.,
at 14.) Accordingly, Merz Pharmaceuticals asserts, the restrictions contained in the

non-solicitation covenant would not expire until 31 July 2024—a year after Thomas’
termination from Merz Pharmaceuticals. (Pl.’s Br. Opp. Mot., at 2.)
34. 	Before addressing the extent to which Thomas’ job did (or did not)
change following the ATA, the Court deems it appropriate to discuss in some detail
the prior cases that form the basis for Thomas’ argument.
35. 	The line of cases from this Court relied upon by Thomas consists of
Better Bus. Forms & Prods., Inc. v. Craver (“Craver”), 2007 NCBC LEXIS 34 (N.C.
Super. Ct. Nov. 1, 2007); Covenant Equip. Corp. v. Forklift Pro, Inc. (“Covenant”),
2008 NCBC LEXIS 12 (N.C. Super. Ct. May 1, 2008); Artistic S. Inc. v. Lund (“Lund”),
2015 NCBC LEXIS 113 (N.C. Super. Ct. Dec. 9, 2015); and MarketPlace 4 Insurance,
LLC v. Vaughn (“Vaughn”), 2023 NCBC LEXIS 31 (N.C. Super. Ct. Feb. 24, 2023).
36. 	This issue was first addressed in Craver. 	In that case, the defendant
was originally an employee of a company called BBF. 	The defendant’s employment
agreement 	with 	BBF 	contained 	a 	non-competition 	covenant 	prohibiting 	the
defendant from competing with BBF for a period of one year after the termination of
his employment. Craver, 2007 NCBC LEXIS 34 at **3.
37. 	Approximately 	five 	years 	later, 	another 	company, 	GDX 	“acquired
substantially all of BBF’s assets in an asset purchase transaction[,]” and “[a]s a part
of the transaction BBF assigned its contract rights between BBF and its employees
to GDX.” 	Id. at **4. 	On the same day as the asset purchase transaction, the
defendant’s employment with BBF was terminated. 	Id. 	He accepted employment

with GDX and continued working in the same job that he had with BBF. Id. at **5.
The defendant did not sign a new employment agreement with GDX. Id.
38. 	A few years later, as a result of GDX’s filing of a voluntary bankruptcy
petition, the plaintiff purchased all of the assets of GDX, including contractual rights
between GDX and its employees. 	Id. 	On the same day that the purchase of GDX’s
assets 	by 	the 	plaintiff 	was 	approved 	by 	court 	order, 	the 	defendant 	accepted
employment with another company, where he performed the same job functions as
he had at GDX and BBF. Id. at **5–6.
39. 	The plaintiff subsequently brought suit against the defendant for breach
of the non-competition covenant contained in his original employment agreement
with BBF, arguing that the covenant remained valid and enforceable because it
survived both the first assignment to GDX and the subsequent assignment to the
plaintiff 	as 	a 	result 	of 	the 	asset 	sale 	in 	connection 	with 	GDX’s 	bankruptcy
proceedings. Id. at **6, 8–9. In response, the defendant argued that the restrictive
covenant was no longer enforceable by the time the plaintiff purchased GDX’s assets
because the “rights regarding the restrictive covenant, which GDX acquired from
BBF in the asset purchase transaction, expired one year” after the defendant’s
employment with BBF terminated and his employment with GDX began. Id. at **9.
40. 	This Court noted that although the original restrictive covenant at issue
was initially valid and enforceable at the time it was agreed upon, “[n]ew issues of
assignability . . . arose when the restrictive covenant was transferred, first to GDX,

and then to Plaintiff[,]” and that resolution of those issues was “ultimately a question
of public policy[.]” Id. at **10.
41. 	We 	concluded that 	although 	the original 	restrictive 	covenant 	was
enforceable by GDX, it was not enforceable by the plaintiff. Id. at **11. In so holding,
the Court explained its rationale as follows:
In the current case, the covenant might become a more restrictive
covenant with, for example, a wider area and/or different market than
initially agreed upon, because the employment agreement is transferred
to a different employer--first to GDX then to Plaintiff--without being
renegotiated. 	This transfer might put the employee in the situation of
being under a restrictive covenant he did not agree to, one that may
impose restrictions he in fact never would have agreed to in his initial
employment agreement. 	To impose wider or different restrictions is
unfair to 	the 	employee. 	To 	protect 	the 	employee, 	the 	restrictive
covenant 	should 	have 	been 	renegotiated. 	The 	argument 	that 	the
covenant 	is 	assignable 	because 	it 	protects 	the 	employer’s 	capital
investment in its employee . . . 	is not a valid argument after the first
assignment, when the business itself did not undertake to renegotiate
the covenant. 	To let the restrictive covenant be transferable and
enforceable in the first place protects the initial employer’s capital
interest in its employee. Presumably, BBF was paid for its investment
in the employee, and the new employer received the benefit of being able
to enforce the covenant. 	When GDX hired Defendant Craver it should
have renegotiated the restrictive covenant. 	The employee would have
been able to negotiate the terms of employment, including the restrictive
covenant, instead of just having the old covenant transferred to a new
employer. The termination of employment and failure to renegotiate the
terms 	of 	the 	new 	employment, 	including 	the 	restrictive 	covenant,
triggered 	the 	one-year 	restrictive 	term 	and 	made 	the 	restrictive
covenant unenforceable a year into Craver’s employment with GDX.
GDX would have had to enter into a new restrictive covenant with
Defendant Craver if it wanted to extend the one-year restriction after
Defendant 	Craver’s 	employment 	with 	GDX 	began. 	There 	are 	no
allegations in the pleadings that this was done. Thus, there was no valid
restrictive covenant left which could be assigned to Plaintiff. Had GDX
purchased BBF the entity instead of the entity’s assets, GDX could have
enforced the agreement.
. . .

Under Plaintiff’s theory, there would be no limit to the number or nature
of the subsequent purchasers of the covenant. Employees would be left
with no bargaining power in accepting new employment. 	Permitting
repeated reassignments of restrictive covenants, especially where they
are purchased in a bankruptcy auction, requires an employee to either
accept employment with a new employer without any negotiation of the
terms and conditions of employment or be forced to change jobs.
Id. at **15–18.
42. 	We revisited this issue in Covenant. In that case, the defendant and his
original 	employer 	entered 	into 	an 	employment 	agreement 	that 	contained 	a
noncompetition covenant with a duration of two years following the termination of
the defendant’s employment with that employer. 	Covenant, 2008 NCBC LEXIS 12
at **3. Subsequently, the defendant’s employer and the plaintiff entered into an asset
purchase agreement. Id. at **2. As a result of this agreement (and as of the date of
its execution), the defendant ceased to work for his original employer and instead
became an employee of the plaintiff. Id. at **21.
43. 	The defendant’s employment with the plaintiff ended in July 2007, and
the defendant began working for a competitor of the plaintiff shortly thereafter. Id.
The plaintiff brought a claim against the defendant for breach of the noncompetition
covenant. 	Id. at **5. 	In response, the defendant contended that the restrictive
covenants 	contained 	in 	his 	employment 	agreement 	had 	expired 	because 	the
covenants began to run at the time his employment with his original employer
ended—that is, at the time the original employer and the plaintiff entered into the
asset purchase agreement. Id. at **20–21.
44. 	This Court ruled that the covenants at issue had expired because the
defendant’s alleged breach took place more than two years after the end of his

employment with his former employer. 	Id. 	at **25. 	Relying on Craver, we stated
the following:
This Court has recently found that a noncompetition agreement that has
been sold as part of an asset sale, as opposed to the sale of a business,
gives the buyer the right to enforce the noncompetition agreement as of
the date of the sale but not to enforce the noncompetition agreement as
if it had been entered into originally by the buyer. Better Bus. Forms &
Prods., Inc. v. Craver, 2007 NCBC 34 P 33 (N.C. Super. Ct. Nov. 1, 2007)
[(URL 	omitted)]. 	In 	other 	words, 	the 	buyer 	of 	a 	noncompetition
agreement does not step fully into the shoes of the original employer
because the buyer is a new employer. Instead, the buyer can either
enforce 	the 	noncompetition 	agreement 	or 	enter 	into 	a 	new
noncompetition agreement.
In this case, Plaintiff entered into an Asset Purchase Agreement with
[his] original employer, Wholesale Fork Lifts, Inc. 	Nowhere in the
pleadings is it asserted that Plaintiff renegotiated the Employment
Agreement between Wholesale Fork Lifts, Inc. and [the defendant] or
entered into a new noncompetition agreement with [the defendant]
when he began his employment with Plaintiff. Plaintiff has the right to
enforce the Employment Agreement, including the Covenants Against
Competition covenant, from the point of the asset sale on June 3, 2004.
[The defendant] left the employment of Plaintiff on or about July 6,
2007, 	and 	began 	his 	employment 	with 	[the 	plaintiff’s 	competitor]
immediately or shortly afterwards. The Covenants Against Competition
covenant of [the defendant]’s Employment Agreement expired two years
after his employment with Wholesale Fork Lifts, Inc. was terminated--
June 	3, 	2006. 	Regardless 	of 	whether 	the 	Covenants 	Against
Competition covenant was enforceable, it has since expired.
This holding, as the holding in the Craver case, provides buyers who
choose to purchase assets rather than stock with the ability to enforce
covenants against employees of the selling company. It also requires the
buyer, if it chooses to do so, to negotiate a new restrictive covenant with
the 	employee, 	the 	consideration 	for 	which 	would 	be 	the 	new
employment. This policy is fair because the buyer may have a business
which substantially changes the nature and scope of the restriction
originally agreed to by the employee.
Covenant, 2008 NCBC LEXIS 12, at **23–26.

45. 	In 	Lund—the 	third 	case 	relied 	upon 	by 	Thomas—the 	defendant
employee executed an employment agreement with SSNC on 10 October 2001 and
began working for SSNC as an outside sales representative on 29 October 2001.
Lund, 2015 NCBC LEXIS at **4–5. 	The employment agreement contained various
restrictive covenants remaining in effect for either one or two years after the
defendant’s employment ended. 	Id. at **13. 	At the time the defendant and SSNC
executed the employment agreement, SSNC was a wholly owned subsidiary of SSI.
Id. at **4.
46. 	In June 2009, SSI sold all, or substantially all, of its assets to the
plaintiff. 	Id. at **5. 	In connection with this sale, the defendant’s employment
agreement with SSNC was assigned to the plaintiff. Id. at **6. No new employment
agreement was executed. Id. at **6.
47. 	Lund ultimately resigned from his employment with the plaintiff in
April 2012, so that he could begin working for a competing company, which he helped
create. Id. at **6–8. After the defendant’s departure, the plaintiff sued the defendant
for breach of the restrictive covenants in the employment agreement. Id. at **11–13.
48. 	The defendant argued “that the one- and two-year post-employment
restrictions expired in June 2010 and June 2011, respectively[,]” because “under
North 	Carolina 	law, 	his 	employment 	under 	the 	Employment 	Agreement 	was
terminated on the date of the asset sale, i.e., in June 2009.” Id. at **13. In addressing
this argument, this Court held as follows:
The North Carolina courts have held that the acquisition of another
company through an asset purchase — as opposed to a purchase of

ownership 	interests—terminates 	the 	seller’s 	existing 	employment
relationships.
. . .
This Court has therefore held that “when an employer sells its assets,
including its right to enforce a restrictive covenant in an employment
contract, the period of the restrictive covenant begins to run because the
employment 	relationship 	has 	been 	terminated.” . . . Thus, “a
noncompetition agreement that has been sold as part of an asset sale
. . . gives the buyer the right to enforce the noncompetition agreement
as of the date of the sale but not to enforce the noncompetition
agreement as if it had been entered into originally by the buyer.” . . .
The facts pleaded here establish that Plaintiff purchased substantially
all of SSNC’s assets in June 2009. As a result, [defendant]’s employment
under the Employment Agreement was terminated at that time as a
matter of North Carolina law, and the time periods for the post-
employment restrictions in the Employment Agreement began to run.
As Craver and Covenant make clear, Plaintiff had the option of either
enforcing the restrictions as of the date of the asset sale or entering into
a new agreement with [defendant]. 	Although Plaintiff attempted to
negotiate 	an 	agreement 	with 	[defendant] 	containing 	new 	post-
employment 	restrictions, 	[defendant] 	never 	agreed 	to 	any 	such
restrictions. 	Plaintiff therefore was left with the right to enforce the
post-employment restrictions contained in [defendant]’s Employment
Agreement with SSNC.
Based on [defendant]’s June 2009 termination, the one-year prohibition
on [defendant]’s solicitation of customers, prospects, and employees
expired in June 2010. 	Because Plaintiff alleges that [defendant]’s
purported breach of these restrictions did not occur, at the earliest, until
April 2011, Plaintiff’s claims for alleged breach of these restrictions
should therefore be dismissed.
Id. at **13–17.
49. 	Finally, 	in 	Vaughn, 	a 	company 	called 	MarketPlace 	4 	Insurance
(“MarketPlace”) entered into an asset purchase agreement with a separate entity—
the Gilliam Agency—on 13 November 2020. Vaughn, 2023 NCBC LEXIS 31 at **2–
3. As a result of the transaction, MarketPlace acquired the Gilliam Agency’s assets,

including the noncompetition covenants in effect between the Gilliam Agency and its
current and former employees. 	Id. 	As a result, certain employees previously
employed by the Gilliam Agency became employees of MarketPlace, including the
defendant. 	Id. at **3. 	The defendant had a pre-existing noncompetition covenant
with the Gilliam Agency, which was to last for one year. Id.
50. 	After the asset purchase agreement took effect, the defendant continued
working for MarketPlace until he resigned on or around 30 June 2021. 	Id. at **5.
Approximately two months later, the defendant began working for another insurance
agency. 	Id. 	MarketPlace then brought a claim for breach of the noncompetition
covenant against the defendant. Id. at **12.
51. 	Based on the cases discussed above, this Court stated that “when an
asset purchase agreement is executed that purports to transfer a former employer’s
rights 	under a restrictive covenant to a new 	employer, 	the prescribed period
contained within the covenant begins to run from the date of the execution of the
agreement.” 	Id. at **15. 	Applying this rule, we concluded that “any time-based
covenants contained in [the defendant]’s Agreement with the Gilliam Agency began
to run when the [asset purchase agreement] was executed on 13 November 2020.” Id.
at **17. As a result, we ruled that “any actionable breach of those covenants alleged
to have been committed by Vaughn must have occurred prior to 13 November 2021—
that is, one year from the date the APA was executed.” Id.
52. 	Here, Thomas asserts that Craver, Covenant, Lund, and Vaughn stand
for the proposition that as long as there is a change in employers from one legal entity

to another—without the need for consideration of any other factors—the result
reached by this Court in those cases must logically follow such that the time period
contained in the restrictive covenant at issue begins to run as soon as the employee
stops working for the original employer.
53. 	The Court is unable to agree. The rule applied in Craver and its progeny
is clearly applicable when the original employer of an employee subject to a restrictive
covenant sells its assets to an unrelated entity who becomes the employee’s new
employer. 	However, neither the parties’ briefs nor the Court’s own research has
disclosed any North Carolina cases in which this rule has been applied where the
switch in employers is more akin to an administrative transfer of an employee
between two affiliated entities.
54. 	Merz Pharmaceuticals argues that this distinction is critical to the
result here, contending that the reasoning of our Court of Appeals in TSG Finishing
LLC v. Bollinger (“Bollinger”), 238 N.C. App. 586 (2014), is instructive. 	Although
Bollinger concerned the issue of whether a restrictive covenant had been validly
assigned by an original employer to a subsequent employer (rather than the question
of whether the covenant at issue had expired), we nonetheless agree with Merz
Pharmaceuticals that the logic underlying the decision in that case is fully applicable
here.
55. 	In 	Bollinger, 	the 	defendant 	was 	a 	former 	employee 	of 	TSG, 	Inc.
Approximately fifteen years into his employment with that company, the defendant
entered into a non-disclosure and non-competition agreement with TSG, Inc. in

exchange for a bonus and an increase in pay. 	Bollinger, 238 N.C. App at 589. 	Two
years later, TSG, Inc. filed for bankruptcy and, as a result, transferred its interests
to plaintiff TSG Finishing, LLC (“TSG Finishing”), “a wholly owned operating
subsidiary of TSG, Inc., which remained in operation.” 	Id. 	Despite the transfer of
interests, “[a]ccording to defendant, every aspect of his day-to-day job remained the
same after bankruptcy reorganization.” Id.
56. 	A few years after the bankruptcy reorganization, the defendant left TSG
Finishing to work for a direct competitor. 	Following his departure, TSG Finishing
filed suit against the defendant for, among other things, breach of contract and sought
a preliminary injunction to prevent him “from breaching the non-compete and
misappropriating TSG [Finishing]’s trade secrets.” Id. at 589. The trial court denied
the preliminary injunction motion and held that the noncompetition agreement was
unenforceable because it did not contain an express assignability covenant. Id.
57. 	The Court of Appeals reversed the trial court’s order, holding that the
noncompetition agreement had, in fact, been validly assigned to TSG Finishing as a
result of the bankruptcy reorganization. Id.
The situation in this case is not one where plaintiff was a “stranger to
the original undertaking.” 	Unlike the sale of assets between two
companies at arms’ length, . . . the assignment in this case took place in
the context of a bankruptcy reorganization, where the same company
policies and management were retained. 	Plaintiff is a wholly owned
subsidiary of TSG, Inc., with whom defendant entered into the non-
compete. As Rosenstein testified at the hearing, “[i]t’s not a new entity
. . . it’s basically the same company it was.” 	According to defendant,
every aspect of his job remained unchanged after the assignment.
Therefore, the facts here are more analogous to those cases where . 	. .
courts have declined to make assignability covenants a requirement,
such as with a stock sale or merger, because the contract rights are not

given to a completely new entity. . . . Accordingly, we reject the trial
court’s conclusion that the non-compete is unenforceable because it did
not contain a specific assignability covenant.
Id. at 596–97.
58. 	The above-quoted portion of Bollinger aptly contrasts, on the one hand,
the type of arm’s length transactions that existed in Craver and its progeny with, on
the other hand, the sort of transfer of assets between affiliated companies existing
within the same corporate umbrella that occurred here.4
59. 	Although not by itself dispositive, we note that the ATA between Merz
NA and Merz Pharmaceuticals was termed an Asset Transfer Agreement rather than
an Asset Purchase Agreement—thereby suggesting that this transaction was akin to
an administrative transfer between affiliates. 	Such a characterization is further
supported by the fact that no money changed hands between the two entities as a
result of the ATA. (Cleef Aff. ¶ 8.)
60. 	Moreover, the record reveals the significant extent to which the nature
of Thomas’ job remained the same after the ATA was executed. 	The Human
Resources Business Partner of Merz Pharmaceuticals, Hannah Cleef, testified on this
issue as follows:
After the ATA, Thomas’ job duties and title remained unchanged.
Thomas continued to oversee and develop Merz [Pharmaceuticals’]
federal strategies, and he was still responsible for calling on the same
federal agencies, including top federal customers the Department of
Veterans’ 	Affairs 	(“VA”) 	and 	the 	Department 	of 	Defense 	(“DoD”).
Thomas did not have any new obligations or responsibilities as a result
of the transfer.
4 Although the Court of Appeals in Bollinger was applying Pennsylvania law, there is nothing
about its discussion of this issue that is in any way inconsistent with North Carolina law.

After the transfer, all Merz [Pharmaceuticals] employees (including
Thomas) continued to receive many of their benefits through [Merz NA].
For example, Merz [Pharmaceuticals] employees remained enrolled in
[Merz NA] insurance plans until summer 2023. 	To this day, Merz
[Pharmaceuticals] and [Merz NA] employees still share a 401(k) plan.
In addition, Merz [Pharmaceuticals] employees continued to receive
other [Merz NA] employee perks, such as discounts on [Merz NA]
skincare product Neocutis. 	Merz [Pharmaceuticals] also adopted all
[Merz NA] employment policies, so the same policies continued in effect
after the transfer.
Merz 	[Pharmaceuticals] 	also 	gave 	Thomas 	and 	other 	transferred
employees “credit” for their years of service with [Merz NA] when
evaluating seniority and accrual of paid time off.
“Thomas 	(like 	other 	employees 	that 	transferred 	to 	Merz
[Pharmaceuticals]) did not have to apply for employment with Merz
[Pharmaceuticals] or undergo any background checks to become a Merz
[Pharmaceuticals] employee. 	There was no transition period during
which the transferred [Merz NA] employees were not working. 	The
transferred employees simply began receiving paychecks from Merz
[Pharmaceuticals], instead of [Merz NA]; as a practical matter, nothing
changed.”
(Cleef Aff. ¶¶ 10–13.)
61. 	Indeed, the 30 November Letter informing Thomas that his employment
would transfer from Merz NA to Merz Pharmaceuticals stated that his “position will
continue to be Director, Government and Federal Accounts, reporting to Kari
Escobar, Vice President, US Sales[,]” and that “[a]ll elements of [his] compensation
and benefits package remain unchanged.” 	(Thomas Aff. II, at Ex. C.) 	The 30
November 	Letter 	also 	provided 	that 	Merz 	Pharmaceuticals 	was 	“adopting 	all
documented policies of Merz [NA].” (Thomas Aff. II, at Ex. C.)

62. 	To be sure, as Thomas notes, some aspects of his job changed. His place
of work changed to a different office (albeit one across the street from his prior office),5
and Thomas received a new employee handbook issued by Merz Pharmaceuticals.
(Thomas Aff. II ¶¶ 14, 16.) 	In addition, Thomas “no longer reported to the CEO of
[Merz NA] and [he] began to report to the CEO of Merz Therapeutics located in
Germany.” (Thomas Aff. II ¶ 17.)
63. 	But the Court does not believe that these very limited changes alter the
conclusion that Thomas’ switch in employers between different Merz entities fails to
invoke the rule first articulated in Craver. 	To the contrary, a holding that Thomas’
non-solicitation covenant expired within one year after he ceased to be an employee
of Merz NA can be reached only by a rote application of the Craver rule that is wholly
divorced from the above-described public policy considerations that gave rise to that
rule in the first place.
64. 	In short, a holding that the non-solicitation covenant continued to apply
to 	Thomas 	as 	if 	it 	had 	originally 	been 	agreed 	to 	between 	him 	and 	Merz
Pharmaceuticals simply does not result in the type of unfairness that this Court was
concerned about in Craver, Covenant, Lund, and Vaughn.
65. 	Accordingly, the Court holds that the applicable one-year period began
to run not at the time Thomas ceased to be an employee of Merz NA but rather as of
the date of the termination of Thomas’ employment at Merz Pharmaceuticals on 31
5 The fact that his office moved is largely irrelevant considering that “[b]oth before and after
the transfer to Merz [Pharmaceuticals], Thomas worked remotely full-time from his home in
South Carolina, and only occasionally visited Merz’s offices[.]” (Cleef Aff. ¶ 16.)

July 2023. For this reason, the non-solicitation covenant will not expire until 31 July
2024.
CONCLUSION
For the reasons set out above, Thomas’ Motion is DENIED.
SO ORDERED, this the 22nd day of May, 2024.
/s/ Mark A. Davis
Mark A. Davis
Special Superior Court Judge for
Complex Business Cases