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You May Want To Give Nondisclosure Provisions Another Look

By Anderson Ellis

Whether in the context of an M&A transaction or the hiring of a key employee, business attorneys often find themselves drafting three standard contractual provisions aimed at protecting the business interests of their clients: noncompetition, nonsolicitation, and nondisclosure. While noncompetition and nonsolicitation provisions have long been scrutinized because of their inherent effect as restraints on trade, nondisclosure provisions have generally been subject to less judicial prejudice. However, a recent North Carolina Business Court decision may cause practitioners to reconsider the purpose and usefulness of nondisclosure provisions as they relate to the business interests their clients wish to protect.

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Trade Creditor Had No Right to Bring Deceptive Trade Practice Claim Against Liability Insurer of Tortfeasor/Insured

By James W. Bryan

On February 20, 2018, the North Carolina Court of Appeals upheld a ruling of the North Carolina Business Court that provides further clarification on whether a claimant with a judgment against the insured may sue the insurer for deceptive trade practices.  USA Trouser, S.A. de C.V. v. Williams, 2018 WL 943639 (N.C.App. 2018).  In this case, Navigators Insurance Co. issued a directors and officers liability insurance policy to the insured International Legwear Group, Inc. (“ILG”).  Plaintiff USA Trouser S.A. de C.V. (“USAT”), a trade creditor of the insured, sold socks on credit to the insured.  In federal court in Charlotte, USAT sued ILG and three of its directors/officers for failing to disclose ILG’s worsening financial condition while continuing to obtain products from USAT upon credit.  USAT obtained a default judgment for $2.0 mil.   USA Trouser later filed the instant action in state court against Navigators asserting claims for, among other things, bad faith claims settlement practices and unfair trade practices pursuant to N.C. Gen. Stat. § 75-1.1.  Navigators moved to dismiss.  In opposing the motion, USAT argued it became a third-party beneficiary to the insurance policy upon entry of the default judgment and obtained the right to payment on the judgment and to sue the insurer directly for its failure to pay.  Business Court Judge Gale granted the motion to dismiss and USAT appealed.

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A 12(b)(6) Motion Asserted As Part Of An Answer Will Not Suffice, At Least Not In The NC Business Court

By Rick Conner

Have you ever included a Rule 12(b)(6) motion to dismiss in your answer, with the intention of filing a more formal motion or submitting a detailed brief later? If so, you should be aware of a recent decision by Judge Michael L. Robinson of the North Carolina Business Court which casts further doubt on the legal legitimacy of this practice.

In New Friendship Used Clothing Collection, LLC v. Katz, 2017 NCBC 71 (N.C. Super. Ct. Aug. 18, 2017), one of the defendants, Katz, filed an answer on the response deadline which indicated that his first defense was a “Motion to Dismiss under Rule 12(b)(6).” Three days later, he filed a more lengthy 12(b)(6) motion with a supporting brief. Plaintiffs contended that Katz’s motion should be denied because the motion, filed after Katz’s answer, was untimely under Rule 12(b).

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