MECH. SYS. & SERVS., INC. v. HOWARD, 2021 NCBC 48

STATE OF NORTH CAROLINA
MECKLENBURG COUNTY
IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
21 CVS 4047
MECHANICAL SYSTEMS &
SERVICES, INC.,
Plaintiff,
v.
MATTHEW T. HOWARD; PAUL
DRINKWATER; and CLIMATE
SYSTEMS, LLC,
Defendants.
ORDER AND OPINION ON
DEFENDANTS’ MOTIONS
TO DISMISS
1. 	Matthew Howard and Paul Drinkwater are former employees of Mechanical
Systems & Services, Inc. (“MSS”). They now work for Climate Systems, LLC, which
is one of MSS’s competitors. In this lawsuit, MSS alleges that Howard, Drinkwater,
and Climate Systems are competing unfairly by raiding its employees and using its
trade secrets and other confidential information to solicit customers. 	All three
defendants deny the allegations and have moved to dismiss the amended complaint.
For the following reasons, the Court GRANTS in part and DENIES in part the
motions to dismiss.
Bell, Davis & Pitt, P.A., by Jason B. James and Joshua B. Durham, for
Plaintiff Mechanical Systems & Services, Inc.
Raynor 	Law 	Firm, 	PLLC, 	by 	Kenneth 	R. 	Raynor, 	for 	Defendants
Matthew T. Howard and Climate Systems, LLC.
Robinson Elliott & Smith, by William C. Robinson and Dorothy M.
Gooding, for Defendant Paul Drinkwater.
Conrad, Judge.
Mech. Sys. & Servs., Inc. v. Howard, 2021 NCBC 48.

I.
BACKGROUND
2. 	The Court does not make findings of fact on a motion to dismiss. 	The
following background assumes that the allegations of the amended complaint are
true.
3. 	MSS and its subsidiaries provide an array of maintenance and construction
services. 	(See Am. Compl. ¶¶ 7, 8, ECF No. 29.) 	The company has provided and
serviced HVAC equipment—its largest business segment—for “thousands of facilities
throughout North America.” (Am. Compl. ¶ 9.)
4. 	Howard and Drinkwater once worked for MSS. 	Initially a sales engineer,
Howard rose through the ranks to become president. 	(See Am. Compl. ¶ 18.)
Drinkwater, a sales leader, managed all HVAC sales efforts in the region around
Charlotte, North Carolina, although the “overwhelming majority” of his job related
to two of MSS’s largest client accounts. (Am. Compl. ¶ 19; see also Am. Compl. ¶ 20.)
Both Howard and Drinkwater signed employment agreements with MSS. 	As
relevant, the agreements include restrictive covenants that prohibit the solicitation
of certain customers and employees of MSS and its affiliates as well as restrictions
on the use and disclosure of trade secrets and other proprietary information. 	(See
generally Am. Compl. Exs. A, B, ECF Nos. 29.1, 29.2.) The nonsolicitation covenants
in Howard’s agreement have expired, but the covenants in Drinkwater’s agreement
and the nondisclosure restrictions in both agreements remain in effect. 	(See Am.
Compl. ¶ 26.)

5. 	In 2018, Howard stepped down as president of MSS and left the company.
A little over two years later, he acquired Climate Systems—a competitor of MSS in
the HVAC field. 	(See Am. Compl. ¶ 25.) 	At the time, Climate Systems was on the
verge of bankruptcy and had a depleted workforce. 	After Howard took the reins, it
began filling out its roster by recruiting MSS’s employees. 	(See Am. Compl. ¶¶ 25,
31, 33.)
6. 	Drinkwater was one of the first to join Howard at his new company. By late
2020, Drinkwater planned to leave MSS and had begun recruiting coworkers to do
the same. 	(See Am. Compl. ¶¶ 26, 29.) 	He did not tell MSS of his plans until the
moment he resigned in December 2020. 	(See Am. Compl. ¶¶ 26, 28.) 	MSS alleges
that, had it known what Drinkwater intended, it would not have let him continue to
access company secrets, especially its database containing customer information.
(See Am. Compl. ¶¶ 26, 53.) MSS further alleges that Drinkwater kept a substantial
amount of its proprietary information—including bids, proposals, and customer
orders and preferences—on personal devices in his possession after resigning. 	(See
Am. Compl. ¶ 40.)
7. 	In the short time since Drinkwater joined Howard, Climate Systems has
begun targeting MSS’s customers. 	(See Am. Compl. ¶ 34.) 	As alleged, Drinkwater
has bid for projects in direct competition with MSS and used his knowledge of MSS’s
trade secrets and proprietary information to direct Howard to other customer targets.
(See Am. Compl. ¶¶ 36–38.) 	Climate Systems also continues to mine MSS for new
employees. (See Am. Compl. ¶¶ 34, 39.)

8. 	Claiming unfair competition, MSS brought this suit in March 2021 against
Howard, Drinkwater, and Climate Systems (together “Defendants”). 	The amended
complaint includes claims for breach of the nonsolicitation and nondisclosure clauses
in Drinkwater’s agreement and the nondisclosure clause in Howard’s agreement.
There are also claims for misappropriation of trade secrets, tortious interference with
contract, and unfair or deceptive trade practices under N.C.G.S. § 75-1.1.
9. 	Defendants have moved to dismiss all claims under Rule 12(b)(6) of the
North Carolina Rules of Civil Procedure. (ECF Nos. 31, 33.) The motions are ripe for
disposition.1
II.
ANALYSIS
10. 	A motion to dismiss under Rule 12(b)(6) “tests the legal sufficiency of the
complaint.” Isenhour v. Hutto, 350 N.C. 601, 604 (1999) (citation and quotation marks
omitted). 	The motion should be granted only when “(1) the complaint on its face
reveals that no law supports the plaintiff’s claim; (2) the complaint on its face reveals
the absence of facts sufficient to make a good claim; or (3) the complaint discloses
some fact that necessarily defeats the plaintiff’s claim.” Corwin v. Brit. Am. Tobacco
PLC, 371 N.C. 605, 615 (2018) (citation and quotation marks omitted).
11. 	In deciding the motion, the Court must treat the well-pleaded allegations of
the complaint as true and view the facts and permissible inferences “in the light most
1 An outbreak of COVID-19 in Mecklenburg County required cancellation of a scheduled
hearing on these motions. Because the motions are fully briefed and further delay would not
serve the interests of the case, the Court elects to rule without a hearing. See Business Court
Rule 7.4.

favorable to” the nonmoving party. Sykes v. Health Network Sols., Inc., 372 N.C. 326,
332 (2019) (citation and quotation marks omitted). 	Exhibits to the complaint are
deemed to be part of it and may also be considered, see Krawiec v. Manly, 370 N.C.
602, 606 (2018), but the Court need not accept as true any “conclusions of law or
unwarranted deductions of fact,” Wray v. City of Greensboro, 370 N.C. 41, 46 (2017)
(citation and quotation marks omitted).
A. Misappropriation of Trade Secrets
12. 	The Court begins with the claim for misappropriation of trade secrets.
Defendants 	contend 	that 	the 	claim 	must 	be 	dismissed 	because 	MSS 	has 	not
adequately described its trade secrets or alleged acts of misappropriation.
13. 	“To plead misappropriation of trade secrets, a plaintiff must identify a trade
secret with sufficient particularity so as to enable a defendant to delineate that which
he is accused of misappropriating and a court to determine whether misappropriation
has or is threatened to occur.” Krawiec, 370 N.C. at 609 (citation and quotation marks
omitted). 	By statute, a trade secret means “business or technical information” that
“[d]erives independent actual or potential commercial value from not being generally
known 	or 	readily 	ascertainable 	through 	independent 	development 	or 	reverse
engineering by persons who can obtain economic value from its disclosure or use” and
is “the subject of efforts that are reasonable under the circumstances to maintain its
secrecy.” N.C.G.S. § 66-152(3).
14. 	MSS alleges that its trade secrets include “customer lists; the terms of MSS’s
contracts with such customers; the needs of each customer; pricing information;

recruiting 	strategies; 	sales 	proposals 	and 	quotes 	for 	potential 	customers; 	and
correspondence with potential customers regarding their needs.” (Am. Compl. ¶ 49.)
It further alleges that this information took “many years of effort” to develop, is
housed in a computerized database, could not be duplicated by competitors, and is
protected by both confidentiality agreements and layers of data security measures.
(Am. Compl. ¶¶ 11, 13.) These allegations, which must be taken as true, satisfy the
particularity requirement. See, e.g., Bite Busters, LLC v. Burris, 2021 NCBC LEXIS
26, at *21–22 (N.C. Super. Ct. Mar. 25, 2021); NFH, Inc. v. Troutman, 2019 NCBC
LEXIS 66, at *47–48 (N.C. Super. Ct. Oct. 29, 2019); USConnect, LLC v. Sprout
Retail, Inc., 2017 NCBC LEXIS 37, at *16–17 (N.C. Super. Ct. Apr. 21, 2017).
15. 	The allegations of misappropriation are also adequate. Misappropriation is
the “acquisition, disclosure, or use of a trade secret of another without express or
implied authority or consent,” unless independently developed or obtained through
other lawful means. 	N.C.G.S. § 66-152(1). 	Here, Drinkwater allegedly accessed
MSS’s trade secrets after deciding to join a competitor, kept them in his possession
after resigning, and then used them to solicit MSS’s customers on behalf of his new
employer. (See Am. Compl. ¶¶ 26, 38, 40.) Drinkwater also allegedly used the trade
secrets to “direct Howard toward” MSS’s customers. (Am. Compl. ¶ 38.) This Court
has 	treated 	similar 	allegations 	as 	minimally 	sufficient 	to 	state 	a 	claim 	for
misappropriation. 	See, e.g., Power Home Solar, LLC v. Sigora Solar, LLC, 2021
NCBC LEXIS 55, at *40–42 (N.C. Super. Ct. June 18, 2021); Wells Fargo Ins. Servs.

USA, Inc. v. Link, 2018 NCBC LEXIS 42, at *40–42 (N.C. Super. Ct. May 8, 2018),
aff’d per curiam, 372 N.C. 260 (2019).
16. 	For these reasons, the Court denies the motions to dismiss MSS’s claim for
misappropriation of trade secrets.
B. Breach of Contract
17. 	MSS asserts its claim for breach of contract against Drinkwater and
Howard. 	The 	Court 	first 	addresses 	the 	customer 	nonsolicitation 	clause2 	in
Drinkwater’s 	agreement 	before 	turning 	to 	the 	nondisclosure 	clauses 	in 	both
agreements.
18. 	Nonsolicitation 	clause. 	Drinkwater 	contends 	that 	the 	customer
nonsolicitation 	clause 	in 	his 	agreement 	with 	MSS 	is 	facially 	overbroad 	and
unenforceable. The Court agrees.
19. 	A restrictive covenant must be “(1) in writing; (2) made part of a contract of
employment; (3) based on valuable consideration; (4) reasonable both as to time and
territory; and (5) not against public policy.” 	United Labs., Inc. v. Kuykendall, 322
N.C. 643, 649–50 (1988). 	“If the covenant is wider in scope than is necessary to
protect the business of the employer, ‘it will not be enforced.’ ” InVue Sec. Prods., Inc.
v. Stein, 2017 NCBC LEXIS 115, at *10 (N.C. Super. Ct. Dec. 18, 2017) (quoting
VisionAIR, Inc. v. James, 167 N.C. App. 504, 508 (2004)).
2 The amended complaint also includes allegations that might support a breach of the
employee nonsolicitation clause in Drinkwater’s agreement, but neither side addressed the
enforceability of that clause or any alleged breach. The Court therefore does not address it
either.

20. 	The 	clause 	at 	issue 	provides 	that, 	for 	one 	year 	after 	leaving 	MSS,
Drinkwater may not “attempt to sell to any Restricted Customer in the Restricted
Territory any goods or services competitive with those offered for sale by the
Company during the twelve (12) months prior to” the end of his employment. 	(Am.
Compl. Ex. B § 1(a)(i).) 	“Company” means not only MSS but also “its subsidiaries”
and “all other affiliates.” 	(Am. Compl. Ex. B at 1.) 	“Restricted Customer” broadly
includes actual customers of MSS or an affiliate during the year before Drinkwater’s
resignation, anyone with whom Drinkwater dealt during that same period, and
anyone to whom MSS or an affiliate proposed to sell goods or services during the six
months before his resignation. 	(Am. Compl. Ex. B § 4(d).) 	In addition, “Restricted
Territory” includes a few specified counties in North Carolina and any county in
North Carolina or another State in which MSS or an affiliate did business during
Drinkwater’s employment. (Am. Compl. Ex. B § 4(g).)
21. 	This is facially unreasonable. As alleged, Drinkwater’s duties were limited
to the HVAC field, and he spent the “overwhelming majority” of his time managing
two client accounts in the Charlotte, North Carolina area. (Am. Compl. ¶ 19; see also
Am. Compl. ¶ 20.) Yet the nonsolicitation clause purports to bar him from soliciting
customers and potential customers in any field, whether or not he had any knowledge
of them or contact with them. 	The clause also covers customers and potential
customers of MSS’s affiliates, which engage in businesses unrelated to HVAC
services. 	(See Am. Compl. ¶ 7.) 	And it prohibits him from doing so anywhere MSS

or its affiliates do business, which, as alleged, includes “thousands of facilities
throughout North America.” (Am. Compl. ¶ 9.)
22. 	As 	our 	appellate 	courts 	have 	stressed, 	when 	a 	nonsolicitation 	clause
“reaches not only clients, but potential clients, and extends to areas where [the
employee] 	had 	no 	connections 	or 	personal 	knowledge 	of 	customers,” 	it 	is
unreasonable. Hejl v. Hood, Hargett & Assocs., Inc., 196 N.C. App. 299, 307 (2009);
accord Aesthetic Facial & Ocular Plastic Surgery Ctr., P.A., v. Zaldivar, 264 N.C. App.
260, 272–73 (2019); Bite Busters, 2021 NCBC LEXIS 26, at *14. This is especially so
when the clause also prohibits solicitation of customers and potential customers of
affiliated companies for whom the employee did not work. 	See, e.g., Med. Staffing
Network, Inc. v Ridgway, 194 N.C. App. 649, 655–57 (2009); NFH, 2019 NCBC LEXIS
66, at *36–37; Wells Fargo, 2018 NCBC LEXIS 42, at *25–26.
23. 	The customer nonsolicitation clause in Drinkwater’s agreement is overbroad
and unenforceable. 	The Court therefore grants his motion to dismiss the claim for
breach of the clause.
24. 	Nondisclosure clauses. Howard and Drinkwater do not contend that the
nondisclosure clauses in their employment agreements are unenforceable. 	Rather,
they argue that MSS has failed to allege a breach of their nondisclosure obligations.
After careful review, the Court concludes that the allegations are adequate to state a
claim.
25. 	The nondisclosure clauses in the two agreements are essentially the same.
Howard and Drinkwater promised not to use or otherwise disclose MSS’s “Proprietary

Information” 	during 	and 	after 	their 	employment. 	As 	relevant, 	“Proprietary
Information” 	means 	information 	that 	“is 	private 	or 	confidential 	and 	derives
independent actual or potential commercial value from not being generally known or
available to the public.” (Am. Compl. Ex. A § 4(e)(ii); Am. Compl. Ex. B § 4(e)(ii).)
26. 	The 	same 	allegations 	that 	support 	the 	claim 	for 	trade-secret
misappropriation also tend to support the claim for breach of the nondisclosure
clauses. 	Among other things, the amended complaint alleges that Drinkwater
obtained trade secrets and other Proprietary Information through his employment,
failed to return that information when he left, and has disclosed it to Howard and
Climate Systems to compete against MSS. (See Am. Compl. ¶¶ 21, 26, 35, 36, 38, 40.)
The amended complaint further alleges that Howard has wrongfully used and
disclosed information about MSS’s hiring and recruiting strategies. (See Am. Compl.
¶¶ 32–34.)
27. 	Howard and Drinkwater object that MSS has not alleged other facts, such
as when the breaches occurred and whether the commercial value of the information
has dissipated over time. 	But “a claim for breach of contract is not subject to
heightened pleading standards.” 	AYM Techs., LLC v. Rodgers, 2018 NCBC LEXIS
14, at *52 (N.C. Super. Ct. Feb. 9, 2018). 	MSS’s allegations suffice to give Howard
and Drinkwater notice of the claim. 	Whether the information at issue is, in fact,
confidential and valuable is an evidentiary question for a later stage. 	See, e.g.,
Barbarino v. Cappuccine, Inc., 2012 N.C. App. LEXIS 305, at *6–9 (N.C. Ct. App.

Mar. 6, 2012) (unpublished); NFH, 2019 NCBC LEXIS 66, at *43 n.12; Vanguard Pai
Lung, LLC v. Moody, 2019 NCBC LEXIS 39, at *10 (N.C. Super. Ct. June 19, 2019).
28. 	For these reasons, the Court denies the motions to dismiss MSS’s claim for
breach of the nondisclosure clauses.
C. Tortious Interference with Contract
29. 	MSS asserts a claim for tortious interference with contract against Howard
and Climate Systems. 	Its allegation is that they intentionally induced Drinkwater
to breach his nonsolicitation and nondisclosure obligations. (See Am. Compl. ¶ 60.)
30. 	To state a claim for tortious interference with contract, the plaintiff must
allege that a valid contract exists between it and a third person and that the
defendant knows of the contract, intentionally induced the third person not to
perform the contract, did so without justification, and caused actual damage. 	See
United Labs., 322 N.C. at 661. Inducement generally requires purposeful conduct by
the defendant. 	See, e.g., Gallaher v. Ciszek, 2020 NCBC LEXIS 124, at *16 (N.C.
Super. Ct. Oct. 16, 2020).
31. 	Drinkwater’s customer nonsolicitation clause is unenforceable. As a result,
it “cannot support plaintiff’s claim for tortious interference with contract.” 	Phelps
Staffing, LLC v. C.T. Phelps, Inc., 226 N.C. App. 506, 512 (2013); see also Power Home
Solar, 2021 NCBC LEXIS 55, at *45.
32. 	As to the nondisclosure clauses, Howard and Climate Systems argue that
MSS has not alleged any facts to show that they intentionally induced a breach by
Drinkwater. 	Not so. 	Liberally construed, the amended complaint alleges that

Howard 	and 	Climate 	Systems 	knew 	Drinkwater 	was 	subject 	to 	a 	duty 	of
nondisclosure, encouraged him to divulge proprietary information, benefitted “by
having [him] use such information to solicit” customers, and intentionally induced
him to breach his agreement with MSS. 	(Am. Compl. ¶¶ 38, 54, 59, 60.) 	These are
at 	least 	minimally 	sufficient 	allegations 	of 	purposeful 	conduct 	to 	satisfy 	the
inducement element.
33. 	Howard and Climate Systems also argue that any interference was justified.
It is true that “competition in business constitutes justifiable interference in another’s
business relations and is not actionable so long as it is carried on in furtherance of
one’s own interests and by means that are lawful.” Peoples Sec. Life Ins. Co. v. Hooks,
322 N.C. 216, 221 (1988). 	But the amended complaint alleges that the means of
competition used by Howard and Climate Systems—misappropriation of trade
secrets, 	for 	example—were 	not 	lawful. 	This 	is 	sufficient 	to 	allege 	a 	lack 	of
justification.
34. 	For these reasons, the Court dismisses the claim for tortious interference to
the extent premised on the customer nonsolicitation clause but otherwise denies the
motions to dismiss the claim.
D. Section 75-1.1
35. 	MSS’s claim for unfair or deceptive trade practices under section 75-1.1 is
predicated on its underlying allegations of trade-secret misappropriation and tortious
interference with contract. 	Because these predicate claims survive, so too does the
section 75-1.1 claim. 	The Court therefore denies the motions to dismiss this claim.

In addition, the Court need not and does not consider Defendants’ remaining
arguments as to whether MSS has alleged a standalone claim under section 75-1.1.
III.
CONCLUSION
36. 	For all these reasons, the Court GRANTS in part the motions to dismiss.
The claims for breach of contract and tortious interference 	with contract are
DISMISSED with prejudice to the extent predicated on the customer nonsolicitation
clause in the agreement between MSS and Drinkwater. 	In all other respects, the
Court DENIES the motions to dismiss.
SO ORDERED, this the 11th day of August, 2021.
/s/ Adam M. Conrad
Adam M. Conrad
Special Superior Court Judge
for Complex Business Cases