Box Company of America, LLC v. William V.Bostick was a case in North Carolina state court concerning a noncompete clause that the defendant claimed was overly broad.
Bostick was an employee of CorTek for 13 years before it was purchased by Box Company of America (“Box”). The asset purchase agreement covered all assets of the previous company, which included Bostick’s non-compete agreement. Bostick agreed to continue working at Box and did so for another year before resigning and accepting a job at Box’s competitor, Opus Packaging Group (“Opus”). Counsel for Opus approached Box asking for a waiver of claims in relation to Bostick’s non-compete agreement, asserting that they didn’t intend to breach any non-compete agreement. Box sought to enshrine this in a confirmation letter which it requested Opus and Bostick to sign.
When Opus’s representative and Bostick declined to sign the document, Box investigated Bostick’s new employment, obtaining photographs of its former clients’ products on display at Opus. It subsequently alleged that Bostick had successfully poached some of Box’s customers. Box subsequently sued Bostick for breach of contract, quantum meruit/implied contract, fraud, misappropriation of trade secrets, and unfair and deceptive trade practices. Here, the court addressed a motion to dismiss brought by Bostick.
In its analysis, the court found that CorTek’s original non-compete agreement was overly broad. Its provisions restricted defendant from owning an interest in, or being employed by, any business that competed with Box/CorTek within a 300-mile radius of the company’s location in Alamance County, North Carolina. For example, if taken at face value, it prevented defendant from participating in a mutual fund that included any firm that competed with Box — or working in any capacity for a company that was related to the packaging industry.
The North Carolina court found these clauses ran contrary to other North Carolina cases holding that claims of this kind were too broad. The court specifically noted a decision in which the restrictive covenant sought to prevent an employee from even working as a custodian for an entity that provided services in the same industry. Secondly, the court said an agreement that restricts an employee’s ability to own an interest in any business of a certain industry is unenforceable.
The plaintiff then asked the court to consider some documents outside of the contract, pursuant to the parole evidence rule. Box also claimed that despite the wording of the agreement, all parties knew it was essentially intended only to prevent Bostick from obtaining a similar employment position with a direct competitor. The court declined Box’s request to consider such extrinsic evidence because the contract was not ambiguous (so, to some extent, the plaintiff was hoisted on its own petard). The court said that such over-breadth prevented it from being enforceable.
The plaintiff’s complaint had also asked the court to “blue pencil” (delete) any provisions that were unenforceable. The court said the blue pencil rule does not allow the court to rewrite an otherwise unenforceable non-compete agreement because it would result in a materially different contract. So the breach of contract claim based on the non-compete agreement was dismissed with prejudice.
Box also claimed that there was a breach of confidentiality — despite the absence of any confidentiality agreement. A confidentiality agreement would have needed to indicate enough specificity so that the employee could understand what they were alleged to have breached.
Plaintiff also threw in some “kitchen sink” attempts to resurrect its claim, like implied covenant of good faith and fair dealing. The court rejected these attempts because there could be no breach of good faith or a breach of an implied contract when there was an enforceable contract — although not enforceable in all the ways the plaintiff had wanted.
Box also failed to allege how defendant actually misappropriated any trade secrets. It simply alleged that defendant must have misappropriated them because of the products it photographed at Opus’s location. It didn’t allege any specificity showing how the defendant accessed, disclosed, or even used the alleged trade secrets.
Plaintiff then (rather desperately) tried to assert that defendant committed fraud by affirming that he would stay employed at Box when it bought CorTek, but the court said an alleged unfulfilled promise could not be the basis for fraud — rather, that would be a breach of contract claim.
In this case, CorTek may have used an off-the-shelf agreement, which featured important-sounding provisions in them, many of which turned out to be unenforceable. Instead of a document that covered everything, they ended up with something that covered nothing. A former employer can’t quash competition with a contract that unreasonably prevents someone from being able to make a living. The beter thing that Box could have done was a non-solicitation agreement, which is much more limited in scope. (“Thou shall not take my clients with whom you worked while working here.”)
And in an age where AI-written contracts are going to be all the rage, customization will continue to be important.
