TSG Finishing

NO. COA14-623

NORTH CAROLINA COURT OF APPEALS

Filed: 31 December 2014

TSG FINISHING, LLC,

Plaintiff,

v. Catawba County
No. 14 CVS 104
KEITH BOLLINGER,

Defendant.

Appeal by plaintiff from order entered 20 February 2014 by

Judge Calvin E. Murphy in Catawba County Superior Court. Heard

in the Court of Appeals 3 November 2014.

Law Offices of Matthew K. Rogers, PLLC, by Matthew K.
Rogers, for plaintiff-appellant.

Patrick, Harper & Dixon, LLP, by Michael P. Thomas, for
defendant-appellee.

HUNTER, Robert C., Judge.

TSG Finishing, LLC (“plaintiff” or “TSG”) appeals from an

order denying its motion for a preliminary injunction aimed at

preventing its former employee, Keith Bollinger (“defendant”),

from breaching a non-competition and confidentiality agreement

(“the non-compete agreement”) and misappropriating TSG’s trade

secrets. On appeal, plaintiff contends that the trial court

erred by denying its motion for a preliminary injunction
 -2-
because: (1) it has demonstrated a likelihood of success on the

merits of its claims for breach of contract and misappropriation

of trade secrets; and (2) it would suffer irreparable harm

without issuance of the preliminary injunction.

After careful review, we reverse the trial court’s order

and remand with instructions to issue the preliminary

injunction.

Background

TSG is in the business of fabric finishing. It has three

plants in Catawba County, North Carolina. Rather than

manufacturing fabrics, TSG applies chemical coatings to achieve

whichever result is desired by the customer, such as coloring,

stiffening, deodorizing, and abrasion resistance.

Defendant began working in the field of fabric finishing

for Geltman Corporation after graduating from high school in

1982. He has no formal education beyond high school. TSG,

Incorporated (“TSG, Inc.”)1 acquired Geltman in 1992, and

defendant stayed on to work for TSG, Inc. By the late 1990’s,

defendant was promoted to Quality Control Manager.

Defendant was responsible for assessing a customer’s

finishing needs and developing a finishing protocol for that

1
As will be discussed below, plaintiff is a wholly owned
subsidiary of TSG, Inc.
 -3-
customer. Defendant also helped in the creation of a “style

data card” for each customer. The style data cards contained

information on each step of the finishing process, such as: (1)

the chemical finish compound, 70 percent of which was

proprietary to TSG; (2) “cup weight” density; (3) needle punch

technique; (4) type of machine needed for the needle punch

technique; (5) speed of needle punch; (6) types of needles used;

(7) needle punch depths; (8) method of compound application; (9)

speed of compound application; (10) blade size; (11) fabric

tension; and (12) temperature and type of drying required.

Defendant testified during deposition that some of these

factors required trial and error to achieve a customer’s desired

result. For example, on one of the style data cards used to

explain defendant’s work-related duties during the deposition,

defendant had marked a number of changes to the various factors

listed and signed his initials to the changes. He testified

that he changed the data entered by the customer because

subsequent testing revealed different and more efficient methods

to achieve the result. He also testified that the results of

the trials he conducted and the knowledge he gained regarding

how to achieve these results were not known outside of TSG.

Michael Goldman, the Director of Operations at TSG, filed an
 -4-
affidavit in which he asserted that some of the customer

projects that defendant worked on required over a year’s worth

of trial and error to achieve a customer’s desired result.

TSG expends great effort to keep its customer and finishing

information confidential. Specifically, it uses a code system

in its communications with customers that allows the customer to

identify the type of finish it wants, but does not reveal the

chemicals or processes involved in creating that finish. TSG

has confidentiality agreements in place with many of its

customers. Third parties must sign confidentiality agreements

and receive a temporary identification badge when visiting TSG’s

facilities. TSG’s computers are password protected, with

additional passwords being required to access the company’s

production information.

In 2007, TSG, Inc. and defendant entered into a non-

disclosure and non-compete agreement. In exchange for an annual

increase in compensation of $1,300.00 and a $3,500.00 signing

bonus, defendant agreed not to disclose TSG, Inc.’s confidential

or proprietary trade secrets and further assented to employment

restrictions after his tenure at the company ended.

TSG, Inc. filed for bankruptcy in 2009. By a plan approved

by the United States Bankruptcy Court on 1 May 2011, TSG, Inc.
 -5-
transferred its interests to plaintiff, a wholly owned operating

subsidy of TSG, Inc., which remained in operation. According to

defendant, every aspect of his day-to-day job remained the same

after bankruptcy reorganization.

In July 2013, defendant and a direct competitor of TSG,

American Custom Finishing, LLC (“ACF”), began negotiations

regarding defendant’s potential to leave TSG and work for ACF.

According to TSG, defendant resigned from his position on 21

November 2013 and announced that he was leaving to become plant

manager for ACF at a plant five miles away from TSG. Defendant

claims that he gave TSG two weeks’ notice on 21 November 2013

but was terminated immediately and escorted off of the premises.

Defendant began working for ACF the following Monday, on 25

November 2013. During his deposition, defendant testified that

TSG and ACF shared certain customers, and that defendant is

responsible for performing similar customer evaluations for ACF

as he did at TSG.

TSG filed suit against defendant on 16 January 2014,

alleging claims for breach of contract, misappropriation of

trade secrets, and unfair and deceptive practices. TSG also

moved for a preliminary injunction to prevent defendant from

breaching the non-compete and misappropriating TSG’s trade
 -6-
secrets. A confidential hearing was held on plaintiff’s motion,

and by order entered 20 February 2014, the trial court denied

the motion for preliminary injunction. Plaintiff filed timely

notice of appeal.

Grounds for Appellate Review

We must first address the interlocutory nature of

plaintiff’s appeal. Orders granting or denying preliminary

injunctions are “interlocutory and thus generally not

immediately reviewable. An appeal may be proper, however, in

cases, including those involving trade secrets and non-compete

agreements, where the denial of the injunction deprives the

appellant of a substantial right which he would lose absent

review prior to final determination.” VisionAIR, Inc. v. James,

167 N.C. App. 504, 507, 606 S.E.2d 359, 361 (2004) (citations

and internal quotation marks omitted).

[W]here time is of the essence, the
appellate process is not the procedural
mechanism best suited for resolving the
dispute. The parties would be better
advised to seek a final determination on the
merits at the earliest possible time.
Nevertheless, [where a] case presents an
important question affecting the respective
rights of employers and employees who choose
to execute agreements involving covenants
not to compete, we have determined to
address the issues.
 -7-
A.E.P. Indus., Inc. v. McClure, 308 N.C. 393, 401, 302 S.E.2d

754, 759 (1983). Citing the rule in A.E.P. Indus., Inc., this

Court has held that “the same reasoning applies to agreements

between an employer and employee regarding protection of the

employer’s alleged trade secrets.” Horner Intern. Co. v. McKoy,

__ N.C. App. __, __, 754 S.E.2d 852, 855 (2014). Accordingly,

because both a non-compete and the potential misappropriation of

trade secrets are implicated by this case, we conclude that

plaintiff has succeeded in demonstrating how a substantial right

may be lost without immediate appellate review; thus, we will

reach the merits of the appeal.

Discussion

I. Misappropriation of Trade Secrets

Plaintiff first argues that the trial court erred by

concluding that it has not demonstrated a likelihood of success

on the merits of its claim for trade secret misappropriation.

After careful review, we agree.

As a general rule, a preliminary
injunction is an extraordinary measure taken
by a court to preserve the status quo of the
parties during litigation. It will be
issued only (1) if a plaintiff is able to
show likelihood of success on the merits of
his case and (2) if a plaintiff is likely to
sustain irreparable loss unless the
injunction is issued, or if, in the opinion
of the Court, issuance is necessary for the
 -8-
protection of a plaintiff’s rights during
the course of litigation.

A.E.P. Indus., Inc., 308 N.C. at 401, 302 S.E.2d at 759-60

(citations and internal quotation marks omitted). The standard

of review from a denial of a preliminary injunction is

“essentially de novo,” VisionAIR, Inc., 167 N.C. App. at 507,

606 S.E.2d at 362, wherein this Court is not bound by the

factual findings of the trial court, but may review and weigh

the evidence and find facts for itself, A.E.P. Indus., Inc., 308

N.C. at 402, 302 S.E.2d at 760. “Nevertheless[,] a trial

court’s ruling on a motion for preliminary injunction is

presumed to be correct, and the party challenging the ruling

bears the burden of showing it was erroneous.” VisionAIR, Inc.,

167 N.C. App. at 507, 606 S.E.2d at 362.

The Trade Secrets Protection Act (“TSPA”) allows for a

private cause of action where a plaintiff can prove the

“acquisition, disclosure, or use of a trade secret of another

without express or implied authority or consent, unless such

trade secret was arrived at by independent development, reverse

engineering, or was obtained from another person with a right to

disclose the trade secret.” N.C. Gen. Stat. §§ 66-152(1), -153

(2013).

“Trade secret” means business or technical
 -9-
information, including but not limited to a
formula, pattern, program, device,
compilation of information, method,
technique, or process that:

a. Derives independent actual or potential
commercial value from not being generally
known or readily ascertainable through
independent development or reverse
engineering by persons who can obtain
economic value from its disclosure or use;
and

b. Is the subject of efforts that are
reasonable under the circumstances to
maintain its secrecy.

N.C. Gen. Stat. § 66-152(3) (2013). To determine what

information should be treated as a trade secret for the purposes

of protection under the TSPA, the Court should consider the

following factors:

(1) the extent to which the information is
known outside the business;

(2) the extent to which it is known to
employees and others involved in the
business;

(3) the extent of measures taken to guard
secrecy of the information;

(4) the value of the information to business
and its competitors;

(5) the amount of effort or money expended
in developing the information; and

(6) the ease or difficulty with which the
information could properly be acquired or
duplicated by others.
 -10-

Area Landscaping, L.L.C. v. Glaxo-Wellcome, Inc., 160 N.C. App.

520, 525, 586 S.E.2d 507, 511 (2003).

“[A]ctual or threatened misappropriation of a trade secret

may be preliminarily enjoined during the pendency of the action

and shall be permanently enjoined upon judgment finding

misappropriation[.]” N.C. Gen. Stat. § 66-154(a) (2013).

Misappropriation of a trade secret is prima
facie established by the introduction of
substantial evidence that the person against
whom relief is sought both:

(1) Knows or should have known of the trade
secret; and

(2) Has had a specific opportunity to
acquire it for disclosure or use or has
acquired, disclosed, or used it without the
express or implied consent or authority of
the owner.

N.C. Gen. Stat. § 66-155 (2013).

Here, the trial court determined that plaintiff failed to

demonstrate likelihood of success on the merits of its

misappropriation of trade secrets claim for the following

reasons: (1) plaintiff asserted that its finishing process “as a

whole” was the trade secret for which it sought protection, and

under the holding of Analog Devices, Inc. v. Michalski, 157 N.C.

App. 462, 468, 579 S.E.2d 449, 453 (2003), general processes are

too vague to receive TSPA protection; and (2) defendant’s
 -11-
familiarity with customer preferences was “more akin to general

knowledge and skill acquired on the job than any trade secret

maintained by [p]laintiff.” For the following reasons, we

disagree with the trial court’s conclusions.

First, contrary to the trial court’s assessment of the

preliminary injunction hearing, plaintiff did not “continually

assert” that it was the “combination of [the] components,” or

the “process as a whole,” for which it sought protection.

Although TSG’s Chief Executive Officer Jack Rosenstein

(“Rosenstein”) did say that the entire equation of processes was

a trade secret in and of itself, he also testified that the

particular steps in the process were also trade secrets. As an

example, Rosenstein highlighted the needle punch technique on a

style data card that defendant had worked on during his time at

TSG. The customer initially requested that the fabric be put

through the needle punch machine one time at a specific setting.

Through trial and error, defendant discovered that the

customer’s desired result could not be accomplished by running

the needle punch machine one time at this setting, so he changed

the process after experimenting with varying settings.

Rosenstein testified the needle punch research for this client,

in addition to the similar types of experimentation done to
 -12-
various processes throughout the finish equation, were trade

secrets. Specifically, he testified as follows:

[ROSENSTEIN]: That’s all part of the trade
secrets. That’s all part of what
[defendant], in his own mind when he’s
looking at a new fabric, needs to determine
– which Latex should be used, what density
needs to be used, whether it needs to be
needle punched or not and then within that
which – which needle punch, what depth of
penetration – exactly what the parameters
are. Then he needs to determine what range
it needs to go on, what speed needs to be
run, what the finish is. . . .

Q: And so each one of those variables
impacts the other variables in the equation?

[ROSENSTEIN]: Yes.

Therefore, it was not just the process as a whole, but the

specific knowledge defendant gained as to each discrete step in

the process, that TSG sought to protect.

Based on Analog Devices, Inc., the trial court concluded

that plaintiff had failed to “put forward enough facts to

support trade secret protection over the process as a whole or

any particular component such that the [trial court] would be

justified in granting the injunction sought.” However, the

Analog Devices, Inc. Court upheld the denial of a preliminary

injunction in part because the differences between the

defendant’s former and new employers “render[ed] the alleged
 -13-
trade secrets largely non-transferable.” Analog Devices, Inc.,

157 N.C. App. at 467, 579 S.E.2d at 453. Furthermore, the Court

determined that the plaintiff did not carry its burden of

producing evidence specifically identifying the trade secrets it

sought to protect. Id. at 469, 579 S.E.2d at 454. The evidence

before the Court showed that some of the plaintiff’s production

techniques were “easily and readily reverse engineered,” while

others were “either generally known in the industry, are process

dependent so as to preclude misappropriation, or are readily

ascertainable by reverse engineering.” Id. at 470, 579 S.E.2d

at 454. Finally, regarding the processes used by the plaintiff,

the Court found that there was substantial differences between

the products of the two companies that would “require new

experimentation and development of new ways to effectively

identify efforts that will lead to successful development.” Id.

Thus, the Court affirmed the trial court’s denial of the

preliminary injunction. Id. at 472, 579 S.E.2d at 455.

The facts of this case are readily distinguishable from

Analog Devices, Inc., and they demonstrate that TSG would likely

prevail on the merits of its claim for misappropriation of trade

secrets. Using the factors enunciated by Area Landscaping,

L.L.C., 160 N.C. App. at 525, 586 S.E.2d at 511, TSG presented
 -14-
sufficient evidence on its specific trade secrets to warrant

protection. First, Rosenstein testified that the company spends

$500,000.00 per year on research and development in order to

create unique finishes and applications for his customers.

Defendant testified that the results of his experimentation at

TSG regarding specific process refinements were not known

outside of TSG. Rosenstein also testified that defendant’s work

was not something that anyone else in the industry would know

without years of trial and error by experienced technicians.

Security measures were in place such that only top-level

employees were familiar with the proprietary information

defendant was in charge of developing. The trial court

acknowledged in its order that TSG “maintains significant

security measures over its finishing process.” Indeed, TSG made

its employees, customers, and facility visitors sign

confidentiality forms to protect this information.

Additionally, Rosenstein testified that defendant’s disclosure

of the trade secrets would give ACF the opportunity to save

“untold amounts of hours, days, weeks, and months to come up

with these finishes and these applications.” Rosenstein

testified that defendant could help ACF achieve their customers’

desired results, which they sometimes shared with TSG, without
 -15-
spending the money on research and development that TSG

invested. Defendant admitted as much in his deposition when he

testified that he performs many of the same duties for ACF for

some of the same customers that he formerly served at TSG.

Therefore, unlike in Analog Devices, Inc., there was significant

evidence showing that TSG’s trade secrets were transferrable to

ACF. Over the past two decades, TSG invested millions of

dollars to develop and protect the information defendant

compiled through his years of employment. The director of

operations at TSG testified in deposition that defendant would

sometimes work for more than a year on a process in order to

achieve a desired result. There is no indication in the record

that these process are able to be “reverse engineered” like

those in Analog Devices, Inc., and it is undisputed that they

are not generally known throughout the industry.

In sum, each of the factors identified by the Area

Landscaping, L.L.C. Court weigh in plaintiff’s favor. Plaintiff

specifically identified the production factors for which it

claims trade secret protection. Defendant acknowledged during

his deposition that he performed research and development for

these factors during his time at TSG and was responsible for

keeping customer- and fabric-specific proprietary information
 -16-
regarding these processes on the style data cards. Therefore,

we conclude that plaintiff has carried its burden of presenting

evidence sufficient to identify the specific trade secrets

protected by the TSPA.

Additionally, we hold that plaintiff presented prima facie

evidence of misappropriation of its trade secrets. “Direct

evidence . . . is not necessary to establish a claim for

misappropriation of trade secrets; rather, such a claim may be

proven through circumstantial evidence.” Medical Staffing

Network, Inc. v. Ridgway, 194 N.C. App. 649, 658, 670 S.E.2d

321, 329 (2009). Defendant testified that he is being asked to

perform similar duties for ACF that he did at TSG, including

evaluating customer needs and organizing production processes.

Defendant acknowledged that TSG and ACF share customers and that

he is currently working with multiple customers for ACF that he

served at TSG. Specifically, he admitted that he had done

independent research and experimentation for TSG on the needle

punch, finish, and heating processes for one specific customer

that he now serves at ACF, and that he talks about the various

components of the TSG style data cards with ACF management

personnel. This is precisely the type of threatened

misappropriation, if not actual misappropriation, that the TSPA
 -17-
aims to prevent through issuance of a preliminary injunction.

See N.C. Gen. Stat. § 66-154(a) (2013) (“[A]ctual or threatened

misappropriation of a trade secret may be preliminarily enjoined

during the pendency of the action and shall be permanently

enjoined upon judgment finding misappropriation . . . .”); see

also Horner Intern. Co., __ N.C. App. at __, 754 S.E.2d at 859

(“Courts have upheld grants of a preliminary injunction where

plaintiffs have presented some evidence that former employees

have or necessarily will use trade secrets.”).

Based on the foregoing, we conclude that plaintiff

demonstrated a likelihood of success on the merits of his claim

for trade secret misappropriation.

II. Breach of Contract

Plaintiff next argues that the trial court erred by

concluding that it failed to present a likelihood of success on

the merits of its claim for breach of the non-compete. We

agree.

Due to a choice of law provision in the agreement,

Pennsylvania law governs enforcement of the non-compete.

“[R]estrictive covenants are not favored in Pennsylvania and

have been historically viewed as a trade restraint that prevents

a former employee from earning a living.” Hess v. Gebhard & Co.
 -18-
Inc., 808 A.2d 912, 917 (Pa. 2002). However, “restrictive

covenants are enforceable if they are incident to an employment

relationship between the parties; the restrictions imposed by

the covenant are reasonably necessary for the protection of the

employer; and the restrictions imposed are reasonably limited in

duration and geographic extent.” Id. Thus, in assessing

whether to enforce a non-compete agreement, Pennsylvania law

requires the court to balance “the employer’s protectable

business interests against the interest of the employee in

earning a living in his or her chosen profession, trade or

occupation, and then balance[e] the result against the interest

of the public.” Id. at 920.

Here, the trial court rejected plaintiff’s argument that

the non-compete was enforceable for three reasons: (1) the

agreement does not contain an explicit “assignability” clause

that would allow defendant to be bound to the contract after

bankruptcy reorganization, wherein all of the company’s assets

and contracts were transferred from TSG, Inc. to its

subsidiaries; (2) even if there were an assignability clause,

there is no indication in the record that the non-compete was

actually assigned from TSG, Inc. to plaintiff; and (3) even if

the court concluded that there was an effective assignment, the
 -19-
balancing of the equities would require the trial court to find

the non-compete unenforceable.

First, defendant relies on Hess for the proposition that an

explicit assignability clause was necessary for plaintiff to

enforce the non-compete. In Hess, the Pennsylvania Supreme Court

determined that employment contracts are “personal to the

performance of both the employer and the employee.” Hess, 808

A.2d at 922. Thus, if an employer with a valid non-compete in

an employment contract is later acquired by a separate entity,

it does not necessarily follow that “the employee would be

willing to suffer a restraint on his employment for the benefit

of a stranger to the original undertaking.” Id. Thus, the Hess

Court held that “a restrictive covenant not to compete,

contained in an employment agreement, is not assignable to the

purchasing business entity, in the absence of a specific

assignability provision, where the covenant is included in a

sale of assets.” Id.

The situation in this case is not one where plaintiff was a

“stranger to the original undertaking.” Unlike the sale of

assets between two companies at arms’ length, like the

transaction that took place in Hess, the assignment in this case

took place in the context of a bankruptcy reorganization, where
 -20-
the same company policies and management were retained.

Plaintiff is a wholly owned subsidiary of TSG, Inc., with whom

defendant entered into the non-compete. As Rosenstein testified

at the hearing, “[i]t’s not a new entity. . . . it’s basically

the same company it was.” According to defendant, every aspect

of his job remained unchanged after the assignment. Therefore,

the facts here are more analogous to those cases where

Pennsylvania courts have declined to make assignability

provisions a requirement, such as with a stock sale or merger,

because the contract rights are not given to a completely new

entity. See J.C. Ehrlich Co., Inc. v. Martin, 979 A.2d 862,

865-66 (Pa. 2009) (holding that where an employee’s obligations

and duties did not change in any material way after a stock

purchase, a non-compete agreement was enforceable by the company

with whom the agreement was made without an explicit

assignability clause). Accordingly, we reject the trial court’s

conclusion that the non-compete is unenforceable because it did

not contain a specific assignability provision.

Second, we find that the trial court erred by concluding

that there is insufficient evidence in the record of an

assignment between TSG, Inc. and plaintiff. The Bankruptcy

Court order makes implicit mention of plaintiff as an “operating
 -21-
subsidiary” and of the assignability of the non-compete as an

“executory contract.” Specifically, the order contains the

following:

As of the Effective Date, all Executory
Contracts that are not designated to be
rejected by the Debtor in the Plan
Supplement shall be deemed assumed. Any
assumed Executory Contract to which the
Debtor is a party shall be, as of the
Effective Date, deemed assumed by the
Reorganized Debtor and assigned to the TSG
Real Estate Subsidiary or the TSG Operating
Subsidiary, as the case may be. Entry of
this Order shall constitute, pursuant to
Section 365 of the Bankruptcy Code, approval
of the assumptions and assignments described
herein as of the Effective Date. The Debtor
shall not be required to obtain any third
party consents to affect such assignment.

At the hearing, Rosenstein specifically testified that the non-

compete between TSG, Inc. and defendant was assigned to

plaintiff. We conclude that Rosenstein’s testimony, in addition

to the Bankruptcy Court’s approval of the executory contract

assignments in its order, was sufficient to find that the non-

compete was assigned to plaintiff in the course of the

bankruptcy reorganization.

Additionally, we believe that the restrictions imposed in

the non-compete are reasonable. Under Pennsylvania law, the

burden is on the employee to show how a non-compete is

unreasonable in order to prevent its enforcement. John G.
 -22-
Bryant Co., Inc. v. Sling Testing & Repair, Inc., 369 A.2d 1164,

1169 (Pa. 1977). The non-compete provided that upon

termination, defendant would be prevented from participating in

the field of “textile finishing” for two years in the prohibited

territory, which was defined, in part, as all of North America.

Specifically, the non-compete prevents defendant from:

[E]ngaging, as an employee or contractor, in
the performance of Textile Finishing,
engaging in the manufacture of Textile
Finishing machinery or equipment, including
but not limited to a jobber, reseller, or
dealers of used textile machinery or
equipment or engaging in sales, marketing or
managerial services for any individual or
entity that competes with TSG directly or
indirectly within the Prohibited Territory.

In contrast to unenforceable non-competes restricting “any work”

competitive to the employer, Zimmerman v. Unemployment

Compensation Bd. Of Review, 836 A.2d 1074, 1081 (2003), the non-

compete here permissibly restricts defendant from engaging in

the specific industrial practices that could harm the legitimate

business interests TSG seeks to protect.

Furthermore, defendant has failed to carry his burden of

demonstrating that the time and geographic restrictions are

unreasonable and render the non-compete unenforceable.

Pennsylvania courts have consistently enforced non-compete

agreements restricting employment for two or more years. See
 -23-
John G. Bryant Co., Inc., 369 A.2d at 1170 (holding that a

three-year restriction was reasonably necessary for the

protection of the employers to strengthen customer contact after

a principal sales representative stopped working for the

employer). Additionally, Pennsylvania courts have established a

correlation between reasonableness of a geographic restriction

and the employer's verifiable market. See Volunteer Firemen’s

Ins. Servs., Inc. v. CIGNA Prop. & Cas. Ins. Agency, 693 A.2d

1330, 1338 (Pa. Super. 1997). Specifically, Pennsylvania

federal courts have upheld covenants restricting competition

nationwide or throughout the region of North America, where

appropriate. See Quaker Chem. Corp. v. Varga, 509 F.Supp.2d

469, 476 (E.D.Pa. 2007). TSG presented evidence that it serves

customers throughout at least 38 states, in addition to Canada

and Mexico. Defendant claims that TSG failed to explain how the

geographic restrictions are reasonable, and also argues that the

cases TSG cites in support of the time restriction are

inapposite. However, the burden is not on TSG to establish that

the restrictions in the non-compete are reasonable; rather, the

burden rests with defendant to show that they are unreasonable

and that the contract he signed is unenforceable. See John G.
 -24-
Bryant Co., Inc., 369 A.2d at 1169. Defendant has failed to

carry that burden here.

Finally, we turn to the trial court’s determination that

the equities weighed against enforcing the non-compete.

“Fundamental . . . to any enforcement determination is the

threshold assessment that there is a legitimate interest of the

employer to be protected as a condition precedent to the

validity of a covenant not to compete.” Hess, 808 A.2d at 920.

“Generally, interests that can be protected through covenants

include trade secrets, confidential information, good will, and

unique or extraordinary skills.” Id. “[T]he issue of

enforceability is one to be determined on a case-by-case basis,”

Missett v. Hub Intern. Pennsylvania, LLC, 6 A.3d 530, 539 (Pa.

Super. 2010), wherein the Court is to consider all relevant

facts and circumstances, Insulation Corp. of America v.

Brobston, 667 A.2d 729, 734 (Pa. Super. 1995) (also noting that

“[a] restrictive covenant found to be reasonable in one case may

be unreasonable in others”).

Among the important factors that Pennsylvania courts

consider in assessing the enforceability of a non-compete are:

(1) the circumstance under which the employment relationship was

terminated; (2) the employee’s skills and capacity; (3) the
 -25-
length of time of the previous employment; (4) the type of

consideration paid to the employee; (5) the effect of restraint

on the employee’s life; and (6) circumstantial economic

conditions. See Brobston, 667 A.2d at 737.

It bears noting that there is a significant
factual distinction between the hardship
imposed by the enforcement of a restrictive
covenant on an employee who voluntarily
leaves his employer and that imposed upon an
employee who is terminated for failing to do
his job. The salesman discharged for poor
sales performance cannot reasonably be
perceived to pose the same competitive
threat to his employer’s business interests
as the salesman whose performance is not
questioned, but who voluntarily resigns to
join another business in direct competition
with the employer. . . . [O]nly when the
novice has developed a certain expertise,
which could possibly injure the employer if
unleashed competitively, will the employer
begin to think in terms of a restrictive
covenant[.]

Id. at 735-36 (citation and quotation marks omitted).

Based on the record before us, we believe that these

notions weigh in favor of enforcement of the non-compete.

Defendant worked at TSG for 27 years and became one of its most

trusted and skilled managers. Throughout his tenure he

developed valuable expertise in the field of textile finishing

through trial-and-error and industrial experimentation that was

highly guarded by TSG and not known throughout the industry. In
 -26-
exchange for his assent to the non-compete, defendant was

offered an annual increase of $1,300.00 to his regular salary

and a signing bonus of $3,500.00; defendant considered TSG’s

offer for at least two weeks before eventually agreeing to the

non-compete and accepting this increase in compensation. Rather

than being terminated for poor work, defendant was specifically

recruited and voluntarily left TSG to work for a direct

competitor at a plant five miles away without giving prior

notice or asking for a raise from TSG. ACF did not require

defendant to provide a resume or interview for the position;

defendant was hired after meeting with an ACF representative one

time. Given that defendant possessed advanced expertise in the

field of textile finishing and abruptly and voluntarily left his

position at TSG after 27 years of service to work for a direct

competitor, we find that he poses a significant competitive

threat to TSG’s legitimate business interests should the non-

compete be unenforceable.

Despite these factors, defendant argues, and the trial

court agreed, that enforcement of the non-compete essentially

renders him unemployable for two years because he has “no

experience outside of textile finishing, rudimentary computer

skills, and no college education.” We are unpersuaded.
 -27-
Defendant argued in his brief that ACF hired him for “his

management skills in dealing with employees, human resources

issues, equipment dealers, customer complaints and suppliers,

not for any trade secrets or other confidential information

which he might know from his time at TSG[.]” Skill in

management and human resources is desirable in many fields, not

just textile finishing. Although the non-compete does restrict

defendant from working as an employee for any company that

competes with TSG “in sales, marketing or managerial services,”

TSG’s competitors only comprise a small subset of companies and

industries where such skills are valuable. Defendant admitted

that before leaving TSG for ACF, he did not look for other

employment. TSG presented evidence of multiple job openings

within 25 miles of Hickory, N.C., that were not competitive to

TSG and listed experience in plant management and manufacturing

as desirable traits. Therefore, we disagree with the trial

court’s conclusion that enforcement of the non-compete would

effectively prevent defendant from attaining employment anywhere

in North America.

We also find TSG’s policy arguments in this case

persuasive. TSG employs around 160 people. According to

Rosenstein, the customers that defendant now serves at ACF could
 -28-
account for up to forty percent of TSG’s business, and some of

the customer relationships that TSG has had for many years are

now “strained” due to defendant’s transition from TSG to ACF.

In weighing the equities, we are permitted to consider the

effect that breach of a non-compete may have on an employer’s

protectable business interests. Hess, 808 A.2d at 920. Among

these, we consider the potential harm done to other TSG

employees should defendant be permitted to retain employment at

ACF in contravention of the non-compete. The significant risk

that defendant’s actions pose to TSG’s competitive advantage

indirectly threaten the job security of many others who work for

TSG. Thus, in balance, we find that the equities favor

enforcement of the non-compete.

In sum, we hold that the non-compete was validly assigned

to plaintiff through bankruptcy reorganization, the non-compete

itself is reasonable to protect TSG’s legitimate business

interests, and the equities weigh in favor of enforcement under

these facts. Therefore, because it is undisputed that defendant

is in breach of the non-compete by working for ACF, a direct

competitor of TSG, we hold that TSG has demonstrated a

likelihood of success on the merits of its claim for breach of

contract.
 -29-
III. Irreparable Loss

Having set out that TSG has demonstrated a likelihood of

success on the merits of its claims, we must now turn to whether

it has shown irreparable loss should the injunction fail to

issue. See A.E.P. Indus., Inc., 308 N.C. at 401, 302 S.E.2d at

759-60. This Court has recognized that “[i]ntimate knowledge of

the business operations or personal association with customers

provides an opportunity to [a] . . . former employee . . . to

injure the business of the covenantee.” QSP, Inc. v. Hair, 152

N.C. App. 174, 178, 566 S.E.2d 851, 854 (2002) (internal

quotation marks omitted). Both the QSP, Inc. and A.E.P. Indus.,

Inc. Courts have “emphasized that this potential harm warrants

injunctive relief,” Id. Specifically, in QSP, Inc., the Court

held that the plaintiff company was likely to sustain

irreparable loss unless a preliminary injunction was issued

where the evidence showed that: (1) the defendant violated a

non-compete agreement by soliciting customers for a rival

company, (2) the defendant misappropriated the plaintiff

company’s confidential information for the rival company, and

(3) the plaintiff would continue to suffer injury should the

defendant not be restrained from further violating a

confidentiality and non-compete agreement. QSP, Inc., 152 N.C.
 -30-
App. at 179, 566 S.E.2d at 854. Here, the evidence shows that:

(1) defendant has the opportunity to misappropriate the

confidential information and trade secrets that he developed for

TSG; (2) ACF could benefit by having defendant’s knowledge of

TSG’s trade secrets because it could produce similar products

without expending resources on research and development; (3)

defendant performs similar work at ACF for some of the same

customers that he served at TSG; (4) Rosenstein testified that

those customers could amount to as much as forty percent of

TSG’s business; (5) TSG had relationships with these customers

for decades; and (6) TSG’s relationships with these customers

became “strained” once defendant left TSG to work for ACF. Like

in QSP, Inc., it is clear here that TSG has demonstrated that it

is likely to suffer irreparable loss unless the injunction is

issued, because TSG is at risk of losing its long-held customers

and whatever competitive advantage it may have had in the

textile finishing industry. See also John G. Bryant Co., Inc.,

369 A.2d at 1167 (“[A non-compete] is designed to prevent a

disturbance in the relationship that has been established

between [the employer] and their accounts through prior

dealings. It is the possible consequences of this unwarranted
 -31-
interference with customer relationships that is unascertainable

and not capable of being fully compensated by money damages.”).

Conclusion

For the foregoing reasons, we conclude that the trial court

erred by denying plaintiff’s motion to issue a preliminary

injunction. Plaintiff has demonstrated a likelihood of success

on the merits for its claims of trade secret misappropriation

and breach of contract and has shown irreparable loss absent the

issuance of the preliminary injunction. Accordingly, we reverse

the trial court’s order and remand with instructions to issue

the preliminary injunction.

REVERSED AND REMANDED.

Chief Judge McGEE and Judge BELL concur.