373 N.C. 409
N.C.2020Background
- SciGrip (formerly IPS) employed chemist Samuel Osae as its sole formula chemist; Osae signed confidentiality, invention-assignment, and stock‑option agreements.
- Osae left SciGrip (2008) to work for competitor Scott Bader, then later formed Engineered Bonding; a North Carolina consent order prohibited Osae from disclosing SciGrip proprietary information and limited Scott Bader’s competitive activity.
- Scott Bader filed a European patent application for its Crestabond formulations; SciGrip commissioned reverse‑engineering and later sued for trade‑secret misappropriation, unfair/deceptive trade practices (UDTP), breach of the consent order, and punitive damages.
- At summary judgment the trial court: applied lex loci for the trade‑secret choice‑of‑law question; dismissed SciGrip’s trade‑secret, UDTP, and punitive‑damages claims; granted SciGrip summary judgment against Osae for breach during his Scott Bader employment; denied summary judgment on the breach claim arising from Engineered Bonding; and deemed two proffered experts moot.
- The North Carolina Supreme Court affirmed the trial court’s order in all respects.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Choice of law for trade‑secret claims | Use the Restatement/most significant relationship test for flexibility | Lex loci (place of last wrong) governs tort‑type claims under NC law | Lex loci applies to trade‑secret misappropriation claims in NC |
| Whether NC law governs the trade‑secret claim | Misappropriation/last act occurred in NC (consent‑order breach; Osae remained NC resident; patent publication harmed NC business) | Misappropriation/use occurred outside NC (UK/Ohio/Florida); patent filed/published in Europe | NC law does not apply; summary judgment for defendants on trade‑secret claim |
| UDTP (need for substantial aggravating circumstances) | Breaches of consent order were immoral/aggravating and caused significant harm | Intentional breach alone is insufficient to support UDTP; SciGrip failed to preserve other theories | SJ for defendants; breach alone did not show required aggravation |
| Punitive damages | Defendants’ conduct was malicious and supports punitive awards | Punitive damages are not recoverable for breach of contract absent a separate tort | SJ for defendants; no separate identifiable tort proven |
| Breach of consent order re: Crestabond (Scott Bader period) | SciGrip: proprietary components were used in Crestabond, violating the consent order | Defs: components were publicly known/equivalent or not proprietary | Court affirmed summary judgment for SciGrip against Osae on breach during Scott Bader employment |
| Breach re: Engineered Bonding (Acralock) | SciGrip: Osae used an equivalent proprietary component at Engineered Bonding | Osae: components not equivalent; factual disputes exist | Genuine issue of material fact exists; SJ denied for both parties on this claim |
| Admissibility of plaintiff’s experts | Experts’ opinions relevant to breach and damages claims | Experts primarily addressed trade‑secret issues; with trade‑secret claim dismissed their testimony is moot | Court held exclusion motions moot; expert testimony not material to surviving breach claims |
Key Cases Cited
- Boudreau v. Baughman, 322 N.C. 331 (N.C. 1988) (endorses lex loci for tort conflict‑of‑law issues)
- Braxton v. Anco Electric, Inc., 330 N.C. 124 (N.C. 1991) (lex loci applies to tort rights of litigants)
- Harco Nat’l Ins. Co. v. Grant Thornton LLP, 206 N.C. App. 687 (N.C. Ct. App. 2010) (explains lex loci delicti test)
- Henry v. Henry, 291 N.C. 156 (N.C. 1976) (sets out Restatement factors for most significant relationship test)
- Dalton v. Camp, 353 N.C. 647 (N.C. 2001) (elements required for a UDTP claim)
- Mitchell v. Linville, 148 N.C. App. 71 (N.C. Ct. App. 2001) (an intentional breach alone cannot support UDTP)
- Newton v. Standard Fire Ins. Co., 291 N.C. 105 (N.C. 1976) (punitive damages require an identifiable tort)
- Potter v. Hileman Labs., Inc., 150 N.C. App. 326 (N.C. Ct. App. 2002) (discusses unjust enrichment and remedies tied to consent orders)