Beverage Systems of the Carolinas, LLC v. Associated Beverage Repair, LLC, 368 N.C. 693

In 2009 Beverage Systems purchased two Statesville businesses (Elegant and Imperial) and obtained a Non-Competition, Non-Solicitation and Confidentiality Agreement signed by Loudine and his parents prohibiting competition in North and South Carolina until Oct. 1, 2014; $10,000 consideration was paid for the covenant.
Cheryl Dotoli (not a signatory) formed Associated Beverage Repair, LLC in 2011 and began servicing beverage equipment in parts of NC and SC; some former customers (e.g., Bunn-O-Matic) shifted business to Associated Beverage.
Beverage Systems sued Loudine, Cheryl, and Associated Beverage for breach of the non-compete, tortious interference (contract and prospective economic advantage), and unfair/deceptive practices; defendants moved for summary judgment.
Trial court granted summary judgment for defendants (finding the covenant unenforceable and no viable tort claims); Court of Appeals reversed and remanded, concluding the trial court should have rewritten the overbroad territorial restriction per the Agreement.
Supreme Court reversed the Court of Appeals: the geographic restriction (all of NC and SC) was unreasonably broad, the covenant could not be blue-penciled or judicially rewritten despite a contractual clause permitting revision, and summary judgment for defendants on all claims was affirmed.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Enforceability of territorial scope of non-compete	Covenant (NC & SC, 5 years) is valid and paragraph 6 allows court to revise overbroad limits	Territory (entire NC & SC) is unreasonably broad and unenforceable; paragraph 6 cannot give court power to rewrite	Geographic scope unreasonable; covenant unenforceable; court cannot rewrite term despite paragraph 6
Applicability of blue-pencil doctrine	Court can sever or enforce reasonable portions of the covenant	Covenant contains no reasonable sub-territory to salvage; blue-pencil unavailable	Blue-pencil inapplicable because striking unreasonable portions leaves nothing to enforce
Tortious interference with contract	Plaintiff had implied-in-fact contracts/customer obligations transferred on sale	No express contracts; only expectancies/business relationships — insufficient to establish contract	No genuine issue of material fact: no enforceable implied contracts; summary judgment proper
Tortious interference with prospective economic advantage & unfair/deceptive practices	Defendants intentionally stole customers; harmed plaintiff’s prospective business; §75.1 claim follows from breach	Defendants competed legitimately (covenant unenforceable); no evidence of malicious interference or lost contract; §75.1 claim fails without contract breach	No evidence a contract would have resulted but for defendants; interference was legitimate competition; §75.1 claim fails; summary judgment proper

Welcome Wagon Int’l, Inc. v. Pender, 255 N.C. 244 (1961) (describing the blue-pencil doctrine and limits on judicial revision of covenants)
Whittaker Gen. Med. Corp. v. Daniel, 324 N.C. 523 (1989) (courts will not rewrite overly broad covenants; unenforceable covenants are simply not enforced)
Jewel Box Stores Corp. v. Morrow, 272 N.C. 659 (1968) (elements for enforcing covenants in sale-of-business context: protect purchaser’s interest, reasonable time/territory, public interest)
Noe v. McDevitt, 228 N.C. 242 (1947) (territorial restriction unreasonable where business lacked presence in covered area)
United Labs., Inc. v. Kuykendall, 322 N.C. 643 (1988) (elements of tortious interference with contract)
Dalton v. Camp, 353 N.C. 647 (2001) (mere expectation of future business insufficient for tortious interference with prospective economic advantage)
Embree Constr. Grp., Inc. v. Rafcor, Inc., 330 N.C. 487 (1992) (interference justified when motivated by legitimate business purpose; competitors may interfere lawfully)
A.E.P. Indus., Inc. v. McClure, 308 N.C. 393 (1983) (purpose of covenants is to protect seller/buyer interests for defined time/space)