Relation Insurance, Inc. and Relation Insurance Services of North Carolina, Inc. v. Pilot Risk Management Consulting, LLC, Pilot Financial Brokerage, Inc. d/b/a Pilot Benefits, Kyle Smythe, Robert Capps, Lynette Kinney, Edward Miles Gurley, Sean Kelly, Tyler Crooker, Michelle Linthicum, Linda Michelle Sneed, Toni King, and Johnathan Lancaster

Summary

The Supreme Court of North Carolina reviews interlocutory summary-judgment and related orders in a dispute between Relation Insurance and former employees and competing insurance businesses. The court affirms the finding that defendants intentionally spoliated evidence but remands for clarification of the scope and application of the resulting adverse inference. It also addresses trade-secret claims involving client lists and reverses or affirms portions of the Business Court’s rulings as specified in the opinion.

Holdings

1. The interlocutory orders were immediately appealable because they dismissed some claims against certain defendants and created a possibility of separate trials and inconsistent verdicts, thereby affecting a substantial right.
2. The Business Court did not err in finding that plaintiffs were entitled to an adverse inference based on intentional destruction or failure to preserve potentially relevant evidence, but it failed to specify how the inference applied to each claim.
3. Summary judgment was improper because genuine issues of material fact existed as to whether both client-list compilations satisfied the statutory requirements for trade-secret protection.
4. A prima facie case under N.C.G.S. § 66-155(2) requires substantial evidence of both a specific, discrete opportunity to acquire the trade secret and an absence of the owner's express or implied consent or authority at the time of that opportunity.
5. The evidence cited on appeal did not independently establish misappropriation merely from Crooker's possession of a paper copy, but the trade-secret claim had to be reversed and remanded because the Business Court's adverse inference could affect the evidentiary analysis.
6. The Smythe Order did not collaterally estop plaintiffs from seeking enforcement of the Former Employees' nonsolicitation provisions because the prior action ended in settlement and the settlement did not clearly incorporate the earlier unenforceability determination.
7. The Business Court's summary judgment ruling concerning enforceability of the nonsolicitation provisions could not stand because the record contained unresolved evidentiary disputes concerning the size and scope of Relation and its affiliates, matters central to determining whether the provisions were reasonable.
8. North Carolina's strict blue-pencil doctrine does not permit courts to surgically delete or rewrite numerous portions of an otherwise overbroad restrictive covenant; only separable or divisible unreasonable provisions may be stricken while reasonable provisions are enforced.
9. The grant of summary judgment on plaintiffs' claim for breach of the Settlement Agreement's employee-nonsolicitation clause was reversed and remanded because the adverse inference could affect the factual analysis.
10. Summary judgment for defendants on plaintiffs' unjust-enrichment claim was affirmed because plaintiffs alleged that defendants took or wrongfully retained clients, employees, and confidential information, not that plaintiffs conferred a benefit on defendants.
11. Summary judgment for defendants on the CFAA claims was reversed and remanded. Plaintiffs presented sufficient evidence for a jury to consider whether King accessed Relation's vendor portal without authorization after a cease-and-desist letter and whether Crooker exceeded authorized access by accessing a database allegedly off limits to producers.
12. The Clarifying Order's summary-judgment rulings were reversed and remanded because the Business Court granted summary judgment under Rule 56 without issuing the written opinion required by N.C.G.S. § 7A-45.3.

Questions Presented

1. Whether the interlocutory Business Court orders were immediately appealable because they affected a substantial right.
2. Whether the Business Court properly granted plaintiffs an adverse inference based on defendants' spoliation and properly applied that inference to the summary-judgment rulings.
3. Whether genuine issues of material fact existed as to whether Gurley's Customer List and the Client Renewal List were trade secrets under the federal Defend Trade Secrets Act and the North Carolina Trade Secrets Protection Act.
4. What a plaintiff must establish under N.C.G.S. § 66-155(2) to make a prima facie showing of misappropriation under the North Carolina Trade Secrets Protection Act.
5. Whether the evidence supported summary judgment on the trade-secret claim concerning Crooker's Production Analysis.
6. Whether the prior Smythe Order and subsequent settlement collaterally estopped plaintiffs from enforcing the employee nonsolicitation provisions.
7. Whether the employee nonsolicitation provisions were enforceable and whether their reasonableness could be resolved on the existing summary-judgment record.
8. Whether North Carolina's strict blue-pencil doctrine permitted plaintiffs' requested deletions or revisions to the nonsolicitation provisions.
9. Whether spoliation required reversal and remand of the Settlement Agreement breach claim.
10. Whether plaintiffs' unjust-enrichment claim failed because defendants allegedly took or retained benefits rather than receiving benefits conferred by plaintiffs.
11. Whether the former employees were entitled to summary judgment on plaintiffs' Computer Fraud and Abuse Act claims.
12. Whether the Business Court violated N.C.G.S. § 7A-45.3 by granting summary judgment in the Clarifying Order without issuing a written opinion.

Disposition

reversed_and_remanded