North Carolina Court of Appeals Reverses Order Denying Injunction in Trade Secret and Non-compete Case
On New Year's Eve, the North Carolina Court of Appeals stepped in to reverse an order denying a preliminary injunction to a company seeking to stop a former employee from misappropriating trade secrets and breaching a non-compete agreement. According to the decision, the employee originally worked for TSG Finishing, a fabric finishing company that applies chemical coatings to fabrics for various customer applications. The employee, Keith Bollinger, left TSG to take a job with a competitor at a location just five miles away. At his deposition, Bollinger admitted that he was working with some of the same customers of TSG with his new employer, and that he was responsible for performing some of the same tasks as he had performed at TSG.
TSG sued and asked the North Carolina Business Court to enter a preliminary injunction to prevent Bollinger from misappropriating TSG's trade secrets and working with a direct competitor in violation of his non-compete agreement. The Business Court denied the injunction, concluding that TSG had not presented a sufficient showing of trade secret misappropriation, and that the non-compete agreement (which was subject to Pennsylvania law) had not been properly assigned to TSG following a bankruptcy. TSG appealed.
In a unanimous published decision, the North Carolina Court of Appeals reversed the order, and took the additional step of ordering the trial court to enter the preliminary injunction. In a detailed analysis, the Court of Appeals concluded that TSG had shown a likelihood of succeeding on its trade secret claim, and that injunctive relief was appropriate. In addition, applying Pennsylvania law to its review of the non-compete issues, the Court concluded that the non-compete agreement had been properly assigned to TSG in a prior bankruptcy proceeding, and that the 2-year restriction applying to the textile finishing field in North America was reasonable and enforceable under Pennsylvania law.
The case is TSG Finishing, LLC v. Bollinger, and the Court of Appeals decision can be found here.