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North Carolina Companies May Want to Revisit Their Nondisclosure and Confidentiality Agreements

Earlier this year, the North Carolina Business Court rendered a decision that may affect how businesses can enforce their nondisclosure agreements. In Duo-Fast Carolinas, Inc. v. Scott’s Hill Hardware & Supply Co., 2018 NCBC 2 (January 2, 2018) the court found for the Defendant in a case that involved a former employer’s client list. A salesman for a hardware company discovered after he was fired (and turned in his company phone) that the default synching features of his business phone had put company customer contact information into his personal contact book. He then used this information to solicit business for his new employer.

 

His former employer sued. While the nondisclosure agreement (NDA) he signed with his prior employer (the Plaintiff) specifically indicated he could not use or disclose confidential or proprietary information, including “the contents of any customer lists”, the court refused to enforce the noncompete and nondisclosure restrictions.

 

In particular – and these are the key takeaways -- the court found that because the NDA lacked any time or geographical limitations, it was unenforceable. The Court also found that the customer contact lists could be gathered by going to customers’ construction sites, i.e., that it was “readily ascertainable”, so it wasn’t confidential enough to enforce the agreement as written. The “readily ascertainable” aspect of the finding may provide some hope for companies that have customized approaches to gathering customer and prospect data. Employers should heed this decision as a cautionary note about how they structure their NDAs and noncompete agreements. 

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