NC Law Blog is an online legal magazine by and for North Carolina lawyers. It is sponsored by the North Carolina Bar Association Center for Practice Management.


North Carolina Court of Appeals issues Opinion on Noncompetition Agreements in Employment Contracts

Click for Adam's BlogBy Adam Altman

Originally Posted on Adam Altman, Attorney Law Blog

In Copypro, Inc. v. Musgrove, No. COA13-297 (N.C. App. Feb. 4, 2014), an employer (Plaintiff) sued its former employee (Defendant) for allegedly breaching a noncompetition agreement, also known as a covenant not to compete.

The facts of the case were that the Defendant worked as a salesperson for Plaintiff in the office equipment business.  When he started work, Defendant signed a noncompetition agreement which provided that for three years following Defendant’s termination, he was prohibited from being employed “or connected in any manner with any business of the type and character of the business engaged in by the [Plaintiff]” in any of the 33 eastern North Carolina counties in which Plaintiff did business.  During his employment, 95% of Defendant’s sales calls were made in just two counties in eastern North Carolina.  After Defendant resigned from his employment, he started working for a competitor of Plaintiff’s.  Defendant’s new employer specifically required that Defendant not contact any of Plaintiff’s customers or conduct business within the territory he had been assigned when he worked for Plaintiff.

The Court of Appeals stated that a “noncompetition agreement contained in or associated with an employment agreement is subject to careful scrutiny.”  The court explained that a “valid noncompetition agreement entered into in the employer-employee context must be (1) in writing; (2) reasonable as to time and territory; (3) made a part of the employment contract; (4) based on valuable consideration; and (5) designed to protect a legitimate business interest of the employer.”

Focusing on the fifth requirement, the court noted that “overly broad restrictions are generally not enforceable in the employer-employee context on the grounds that the scope of the restrictions contained in such agreements far exceeds those necessary to protect an employer’s legitimate business interests.”  In this case, the noncompetition agreement prohibited Defendant from working for another company in any capacity, even as a custodian.  The court concluded that the noncompetition agreement prohibited Defendant from working “in a much broader array of activities than is necessary to protect Plaintiff’s legitimate business interests.”  As such, the court ruled that the noncompetition agreement was unenforceable.

The bottom line for employers in North Carolina is that noncompetition agreements, while valid if they comply with certain requirements, may be found to be unenforceable if they are broader than is necessary to protect the employer’s legitimate business interests.


Consumers May Now Dispute Debts Verbally

Click for Matt's BioBy Matt Cordell

Originally Posted on The North Carolina Business and Banking Law Blog

The U.S. Court of Appeals for the Fourth Circuit (which covers North Carolina) has ruled that debt collection notices violate the Fair Debt Collection Practices Act (FDCPA) if they require consumers to submit disputes of debts in writing.  

In Clark v. Absolute Collection Service, Incorporated (4th Circuit, Jan. 31, 2014), the Court ruled that the FDCPA does not require a consumer to dispute the validity of a debt in writing.  

The FDCPA requires that debt collectors send written notices to consumer debtors containing “a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector.”

However, if the consumer notifies the debt collector that he or she disputes the validity of the debt, the debt collector must stop the collection activity until it has mailed a verification of the debt to the consumer. (This is sometimes used as a delay tactic by consumers and their lawyers.)

The Court ruled that any collection notice sent by a creditor that purports to require a consumer to dispute the validity of the debt in writing is incorrect, and the consumer's oral dispute is all that is necessary to stop collection efforts and trigger the verification requirement.  (Furthermore, an incorrect debt collection notice might be deemed invalid even if the consumer does not orally dispute the validity of the debt.)  

The decision of the Fourth Circuit Court of Appeals in this case is now the law of the land in North Carolina, andcreditors and collection agencies in North Carolina will now have to adjust their policies and procedures to accommodate oral disputes from customers.




Click for Lawyers Mutual BlogBy Mark Scruggs

Originally Posted on Lawyers Mutual Blog

As I become firmly ensconced in middle age, I have been thinking more and more about how one grows older well.  I watched my mom and dad age and made notes of pitfalls to avoid and strategies to employ. Here are my top ten “notes to self.” I hope they will be helpful to you.

  1. Delete the phrase "I wish" from your vocabulary. Stop wishing that things could be as they used to be. They cannot. Accept the things that cannot be changed; change the things you can; move on.
  2. Stay engaged with technology. Subscribe to Wired magazine. Become a "gamer." Do not let the world pass you by.  Nothing marks you as "old" (well, almost nothing) more than technological impotence.
  3. Exercise. This is critical. Start now. If you wait until you are old, you may not start. But having said that, it is never too late to start.
  4. Cardiovascular exercise is not enough. Do not rely on walking, running, swimming, etc. alone. Weight bearing exercise like weight lifting is increasingly important as we age. Increased muscle strength and improved mobility and range of motion will serve us well as we age. You might even avoid a broken hip when you fall if you have the upper body strength to catch yourself before you hit the ground.
  5. Stave off cognitive decline.  Learn a new skill that stimulates the growth of new neuron-pathways. Learn to play a musical instrument. Learn a foreign language. Try anything that stimulates your brain in ways it has not been stimulated before. Also, see number 3. Research shows that exercise is also beneficial to the brain and can help prevent or at least delay dementia.
  6. Focus on the people who are still in your life, not those who have passed on.  My mother had lost every family member save me, her only child. It was natural to WISH (see number 1) those loved ones were still around, but that is not likely to happen. (On this mortal coil at least.)
  7. Create new friendships to support you as you age. Create "cross-generational" friendships if you can.  Strengthen your existing friendships. Build and strengthen your social network. Try "reverse mentoring." Find a younger person you can mentor, and who can mentor you in the things you may not be up to speed on, like technology for example.
  8. Plan for the time when you may not be able to drive or live alone. This is so important. Resistance to change increases as one gets older. Plan for change and implement change before change is thrust upon you. Change is more palatable when it is your idea. If you live in the burbs, think about moving to the city where public transport will help you stay mobile when you can no longer drive. Think about moving to a continuing care community when you are young enough to enjoy it and every level of care is available to you.
  9. Work on your flexibility and balance. (I am talking about your physical body now, but the suggestion applies equally well to your emotional and mental life.) I watched a 70 something man in an aerobics class at the gym the other day. Kudos to him for doing it, but sadly, he could not lift his arms above shoulders height.  Take a yoga class or a ballet class. Improving your balance will help you avoid falls and maintaining your flexibility will help you with the everyday activities of life (like taking an aerobics class when you are 70).
  10. Read Max Ehrmann’s poem “Desiderata” once a month.  http://en.wikipedia.org/wiki/Desiderata (Remember Les Crane’s spoken-word recording of “Desiderata” in 1971?) Honestly, the poem is a roadmap for a successful life. On the subject of aging, Max Ehrmann says: “Take kindly the counsel of the years, gracefully surrendering the things of youth.”  The cosmetic industry would be out of business, but we would all probably be better off.

Age Well, my friends

Mark Scruggs is a claims attorney with Lawyers Mutual specializing in litigation, workers compensation and family law matters. You can reach Mark at 800.662.8843 or at mscruggs@lawyersmutualnc.com.


Publicity vs. Advertising

Click for Tom's Blog

By Tom Kane

Originally Posted on Legal Marketing Blog

It is not a bad idea to remind ourselves once and awhile about the differences between advertising and publicity. I’ve written on the topic several times and reference a couple of them with links below.  It’s important to keep in mind that (good) publicity is more effective than advertising, because someone else is quoting you and/or writing about you.

Advertising, on the other hand, is controlled by you, and thus less credible because you are “writing” or otherwise providing information about yourself and your firm.  Not objective nor without self-aggrandizement, I think most would agree.

Accordingly, almost everyone would agree that publicity is the better of the two.  Advertising is not a bad thing.  It’s just that, as I have preached previously, it is not the most effective way to develop business for your firm.  It has a role but not in my mind until other more effective marketing and business development tactics have been put into action.

What brought this to mind is today’s meditation in 365 Marketing Meditations: Daily Lessons for Marketing and Communications Professionalsby Larry Smith and Richard Levick with Levick Strategic Communications. It states:

“Publicity is far less controllable and takes more time to work than advertising, but has far greater credibility. If I read it, it must be true.”

Well, we all know it doesn’t mean it’s true, but media coverage that has a quote or other positive things to say about you/your firm certainly is more believable.

Bottom line: make friends with the media so they will get to know you, and hopefully, talk about you and your practice.  It will be far more effective than any self-serving ad in producing more legal work for your firm.


You Need to Schedule Worthless Trademarks

Click for Pam's Blog

By Pam Chestek

Originally Posted on Property Intangible 

Thanco Products and Imports, Inc. v. Kontos is a case that intrigues me. It’s an adversarial proceeding in a bankruptcy, not having to do with who owns the trademarks exactly, but what happens when one lies about it.

In 2006 and 2007 Debtor George Kontos filed six trademark applications that ultimately registered, for GREEK AMERICAN PRINCESSGOT OUZO?GREEK BY MARRIAGEGREEK TIMEWHAT HAPPENS AT THE GREEK FESTIVAL … STAYS AT THE GREEK FESTIVAL,* and OFFICIAL MEMBER GREEK MAFIA. The were all registered for apparel and Kontos had a business selling T-shirts at festivals run by Greek Orthodox Churches.

Plaintiff Thanco Products also sold shirts at the same venues displaying “got ouzo?”, and so petitioned to cancel Kontos’ registration at the PTO. The dispute ultimately ended up in federal court in the Southern District of Texas, Kontos defaulted, the registration for GOT OUZO? was cancelled, and Kontos was ordered to pay Thanco $30,843 in treble damages. Thanco then brought proceedings in North Carolina, where Kontos lived, to collect on the judgment. In response, Kontos filed a Chapter 7 bankruptcy but didn’t list the remaining five registrations as assets. Thanco Products filed an adversarial action claiming that Kontos should be denied discharge of his bankruptcy under §727(a)(4)(A)because he made a false statement about ownership of the trademarks.

Kontos had a very fluid tale about why he didn’t make a false statement on his petition. First, he claimed at the 341 meeting of creditors on March 2, 2012 that he had sold them in October, 2009 to a Greek company called BGA Hellas, but he didn’t know who they were. Oh wait, when testifying in June, 2012 Kontos remembered that BGA Hellas was owned by Kick Yiannakopoulos, who was like a father to him. But Kontos hadn’t seen Yiannakopoulos since 2009 or early 2010. Oh wait, when testifying at the trial on October, 2013, Kontos remembered that he had gone to Greece in December of 2011 (a mere three months before the 341 meeting) and learned Yiannakopoulos had died. At that time, he found Yiannakopoulos’ daughter and had the daughter assign the trademarks to Kontos’ mother’s company, Buy Greek Art. There’s much more detail in the decision,** but, as you can imagine, none of that sat too well with the court:

The court is satisfied that the foregoing testimony by the defendant regarding alleged transfers to and from a purported entity named BGA Hellas is untrue and that the purported transfers are a fabrication created by the defendant to hide and shield the trademarks from creditors.

And, thus satisfied, the court denied Kontos’ discharge of the bankruptcy.

As entertaining as the story is, what intrigues me is why Thanco took it this far. I’m not a bankruptcy lawyer, so I could be missing something simple. Is Thanco’s next step to try to generate some income through selling the trademarks? But that seems like a fool’s errand to me: the registrations are for banal phrases that were printed on T-shirts. They likely wouldn’t have stood up to challenge (as Kontos’ GOT OUZO registration didn’t withstand Thanco Products’ challenge) before the bankruptcy. Now, given their history, they are entirely worthless, or certainly not worth whatever Thanco paid in attorney’s fees to bring the adversarial action, much less the $30,000 award in the Texas action.

Or was the strategy simply to avoid the discharge and the failure to list the trademarks just the vehicle for the attack? Konstos listed these assets in his bankruptcy: “a small checking account balance, an Ipod, CDs, DVDs, personal pictures, clothing, shoes, a pistol and a malpractice claim against his attorney in the Texas Proceeding.” It doesn’t look like Kontos is going to be in any shape to pay $30,000 anytime soon. Or was forcing him to acknowledge ownership of the trademarks a way to force an income stream to him based on royalties from the sales of goods currently being sold at his mother’s site buygreekart.com?***

Anyone have any ideas?

In re KontosNo. 12–50156C–7W (Bankr. M.D.N.C. Jan. 13, 2014).

*You can guess what ultimately happened to this one. Yup, the Las Vegas Convention and Visitors Authority petitioned to cancel the registration and it was ultimately assigned to the Convention Authority.

**This is one of my favorites: “In most instances the defendant was unable or unwilling to provide any information concerning BGA Hellas, disclaiming any familiarity with the company. Yet, when the defendant was asked whether the ‘BGA’ in BGA Hellas stood for ‘Buy Greek Art’ (a name tied to the defendant) the defendant was quick to respond that it stood for ‘Being Greek Always’ despite his avowed lack of familiarity with the company.”

***I wonder was the Las Vegas Convention and Visitors Authority thinks about the sale of the “What Happens at the Greek Festival … Stays at the Greek Festival” shirt on the site.