Elliot v. Hancock

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STATE OF MAINE SUPERIOR COURT

CUNBERLAND, ss. - -. ' C,NIL ACTION

DOCKETNO. CV-05-280

DEBBIE ELLIOT, INC.,

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v.

Plaintiff

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" ORDER

SARAH HANCOCK, *

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4&

Defendant *

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This case comes before the Court on Defendant's Motion to Dismiss Count

I1 of Plaintiff's Complaint allegng Tortious,Interferencewith Advantageous

Business Relations. If the Court grants the Motion, Plaintiff has asked the Court

for Leave to Amend its Complaint to allege Fraud with particularity.

FACTS

Plaintiff Debbie Elliot, Inc. alleges the following facts. On March 29,2000,

Elliott the owner of Debbie Elliot Salon and Day Spa (the "Spa), hred Defendant

Sarah Hancock initially as a nail techrucian. On April 21,2001, the parties

entered into a Confidentiality and Noncompetition Agreement (the "Agreement).

The Agreement prohbits Hancock, in part, from using or disclosing trade

secrets. The Agreement also prohbits Hancock from competing with the Spa

indirectly or directly w i h n a ten-mile radius from the Spa for a period of twelve

months after the termination of her employment. On March 8,2005, Hancock

terminated her employment with the Spa. The following month Hancock began

worlung for Paradiso as a stylist. Paradiso is within a ten-mile ra&us of the Spa.

The owner of Paradiso, Kandace Wagner, was aware of the Agreement. Clientele

of the Spa have cancelled appointments in order to schedule appointments with

Hancock at Paradiso.

On May 18,2005, the Spa filed a complaint seelung an Injunction and

damages for Breach of Contract (Count I), Tortious Interference with

Advantageous Business Relations against Hancock and Paradiso (Count 11), Civil

Conspiracy (Count III), Violation of Maine's Uniform Trade Secrets Act (Count

IV),and Constructive Trust (Count V). On May 17,2005, the Court denied the

Spa's request for injunctive relief. On June 6,2005, Hancock filed an Answer and

counterclaimed against the Spa for Fraud (Count I), and violation of the Uniform

Trade Secrets Act (Count 11). On the same day, Hancock filed a Motion to

Dismiss Count I1 of the Spa's complaint.

DISCUSSION

When a court decides a motion to dismiss made pursuant to M.R. Civ. P.

12(b)(6),"the material allegations of the complaint must be taken as admitted."

Moody v. State Liquor & Lottery Comm'n, 2004 ME 20,¶ 7; 843 A.2d 43,47 (quoting

Livonia v. Town of Rome, 1998 ME 39, P5,707 A.2d 83, 85). The complaint must

then be examined "in the light most favorable to the plaintiff to determine

whether it sets forth elements of a cause of action or alleges facts that would

entitle the plaintiff to relief pursuant to some legal theory."' Napieralski v. United

Church of Greater Portland, 2002 ME 108, 9 4, 802 A.2d 291,392.

Hancock supports t h s motion with the following arguments. First,

pursuant to the economic loss doctrine, the Spa is barred from suing in tort for an

economic loss due to a breach of contract. Second, an element of tortious

interference with a business relationship is fraud. As such, because the Spa did

not plead fraud with particularity, t h s claim should be dismissed pursuant M.R.

Civ. P. 9 (b).

a. Tort Recoverv for Breach of Contract

Hancock argues that Maine adopted the economic loss doctrine in Oceanside

at Pine Point Coizdominium Owners Ass'n v. Peachtree Doors, Inc., 659 A.2d 267,270

(Me. 1995), to broadly prohbit tort recovery for pure economic losses when the

relationship between the parties is governed by a contract. Although Oceanside

does recognize the economic loss doctrine, it does so in the context of product

liability when a defective product does not cause personal injury or damage to

other property. Id. at 270-71.

Furthermore, Hancock's contention that tort recovery cannot be had for a

breach of contract is inconsistent with Restatement (Second) of Torts § 768. This

section provides tort recovery for intentional and improper interference with

prospective contractual relations between a h r d party and another who is a

competitor.' See C.N. Brown Co. v. Gillen, 569 A.2d 1206,1210 (Me. 1990)

(addressing tortious interference of a contract by fraud). Arguably, Hancock's

violation of the noncompetition agreement is an improper interference with

prospective contractual relations. Restatement 5 768 Comment (i).

b. Fraud

Whether the Spa can make out a claim of tortious interference will turn on

1

768 Competition as Proper or Improper Interference

(1) One who intentionally causes a third person not to enter into a prospective contractual

relation with another who is his competitor or not to continue an existing contract terminable at

will does not interfere improperly with the other's relation if

(a) the relation concerns a matter involved in the competition between the actor and the

other and

(b) the actor does not employ wrongful means and

(c) h s action does not create or continue an unlawful restraint of trade and

(d) h s purpose is at least in part to advance his interest in competing with the other.

(2) The fact that one is a competitor of another for the business of a third person does not prevent

his causing a breach of an existing contract with the other from being an improper interference if

the contract is not terminable at will.

whether it can make a showing that Hancock engaged in fraud to interfere with

the Spa's prospective economic advantage. Barnes v. Zaypia, 658 A.2d 1086,1090

(Me. 1995). The central issue in tb_ls context is whether the Spa's allegation of

fraud was pled with particularity in the complaint. M.R. Civ. P. 9(b).

The elements of interference by fraud are as follows: "(1)makng a false

representation (2) of a material fact (3) with knowledge of its falsity or in reckless

disregard of whether it is true or fake (4) for the purpose of inducing another to

act or refrain from acting in reliance on it, and (5) the other person justifiably

relies on the representation as true and acts upon it to the damage of the

plaintiff." Grover v. Minette-Mills Znc., 638 A.2d 712, 716 (Me. 1994); see also Shaw

v. Soufhern Aroostook Community School Disk-ict, 683 A.2d 502, 503-04 (Me. 1996)

(holding that allegations that a school official attempted to force plaintiff to

resign by fabricating grounds for dismissal resulting in economic harm and

emotional distress were sufficient to survive a motion to dismiss).

In t h s case, the Spa alleges that Hancock and Paradiso knowingly used

misappropriated trade secrets and solicited the Spa's clients without informing

them of the Agreement proscribing t h s particular conduct. (Complaint ¶¶ 29,

30). As a result, the Spa's clients have cancelled appointments in order to

schedule appointments with Paradiso. (Complaint ql18). The Spa further

asserts that the loss of clientele has resulted in damage. (Complaint 99 27/36).

Based on these allegations, the Spa has clearly asserted fraud with particularity

to satisfy M R . Civ. P. 9(b).

The Motion to Dismiss is DENIED.

DATE: L7,z ~ S

>OLIRTS

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REBECCA WEBBER ESQ

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GERALD COPE ESQ

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PETER BENNETT ESQ

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