When Precedent Isn’t Enough: The Importance of the Grounds for Appellate Review in Substantial Right Appeals of Interlocutory Orders
A story as old as time. Employee meets employer. Employee signs non-compete. Employee works for employer. Employee quits working for employer. Employee goes to work for employer’s competitor. Employer sues employee and competitor for breach of the non-compete.
And after a court denies the employer’s motion for a preliminary injunction seeking to prevent the employee from continuing with the competitor, the employer appeals. After all, if the employee continues working for the competitor, that’s the whole ballgame. Absent an appeal, the employee could work for the competitor for the length of the litigation, defeating the purpose of the non-compete.
But in today’s case, Mecklenburg Roofing, Inc. v. Antall, our Court of Appeals reminded prospective appellants that just reciting the story isn’t enough to bestow appellate jurisdiction. They must explain, in detail, the reasons why the loss of the preliminary injunction is the whole ballgame. When the appellants in Mecklenburg Roofing failed to do that, the Court of Appeals decided not to hear their interlocutory appeal.
At its core, Mecklenburg Roofing is our same old story. In May 2019, Mecklenburg Roofing (or MRI) hired Jeremy Antall as a roofing contractor. In July 2021, it promoted Mr. Antall to estimator, where he worked closely with MRI’s customers and estimated projects using “MRI’s pricing strategies” and other internal information; ultimately, he estimated over $64 million worth of roofing projects before leaving MRI.
When he was promoted, Mr. Antall and MRI entered into an “Employment Covenants Agreement” which had a non-competition clause. That clause prohibited Mr. Antall from working to provide estimating or selling commercial roofing services within a 100-mile radius for up to two years after he left MRI’s employ.
In August 2022, Mr. Antall left MRI and went to work for Johnson’s Roofing Services, Inc., about ten miles away.
MRI Sued and the Trial Court Denies a Motion for Preliminary Injunction
Two months later, MRI sued Mr. Antall and Johnson’s Roofing in Mecklenburg County Superior Court, asserting claims for misappropriation of trade secrets and tortious interference. MRI also moved for the entry of a preliminary injunction supported by an affidavit from its vice president, Alexander Ray, claiming that MRI and Johnson’s Roofing bid against each other constantly and were direct competitors. Defendants opposed the motion and submitted affidavits from Mr. Antall and Drew Brashear, the owner of Johnson’s Roofing, contradicting MRI’s claims. Mr. Antall averred that he was unaware of any jobs he worked on for MRI that Johnson’s Roofing also bid on, and Mr. Brashear explained that of the projects MRI claimed both companies worked on, Johnson’s Roofing only bid on one, and Mr. Antall did not work on that bid.
The trial court heard arguments, reviewed the written submissions, and denied the motion. MRI then appealed.
The Court of Appeals Explains How Appellate Jurisdiction Works in Substantial Right Appeals of Interlocutory Orders
As it must, the Court of Appeals started (and in this case, ended) its discussion with whether it had jurisdiction over the appeal. MRI conceded that the denial of the preliminary injunction was an interlocutory order but argued that jurisdiction was proper because the denial affected a substantial right. From MRI’s point of view, absent an injunction, its business would be harmed as its former employee would continue working for MRI’s competitor while the case wound its way through litigation.
And this brings us back to the beginning. The Court of Appeals noted that it can exercise jurisdiction over an appeal from an interlocutory order if the order “affects some substantial right” and emphasized the “substantial right” test is nebulous and more easily stated than applied. Quoting its earlier decision in Doe v. City of Charlotte, the court indicated that “the appellant must include in its opening brief, in the statement of the grounds for appellate review, sufficient facts and argument to support appellate review on the ground that the challenged order affects a substantial right.”
As discussed below, the appellant failed to do that here.
A quick detour – Doe v. City of Charlotte is worth reading on its own merit, as the Court of Appeals recounts a “series of avoidable mistakes” that deprived the court of jurisdiction, including (1) the notice of appeal was untimely, (2) the Rule 54(b) certification was defective, (3) the statement of grounds for appellate review was inadequate, (4) and the appellant failed to properly petition the court for a writ of certiorari. Nevertheless, Doe exercised its discretion to reach the merits and reversed because the issues were meritoriousness and included “wide-reaching issues of justice and liberty.” The court said that its opinion in Doe “should serve as a warning to future litigants” regarding the proper method to establish jurisdiction in an interlocutory appeal.
MRI’s Statement of Grounds for Appellate Review
Returning to Mecklenburg Roofing, MRI included almost two pages in its opening brief under the heading “Statement of the Grounds for Appellate Review.” MRI started by saying that “MRI has a valid employment agreement structured to be no broader than necessary to protect its legitimate business interests. The denial of the preliminary injunction below, however, permits Jeremy Antall to violate the employment agreement while working for a competitor within the narrow geographic limits proscribed in the agreement.”
MRI continued by citing an earlier case where the Court of Appeals exercised jurisdiction over an interlocutory order involving a non-compete agreement, Pinehurst Surgical Clinic, P.A. v. Dimchele-Manes. MRI quoted Pinehurst Surgical Clinic for the proposition that “In cases involving an alleged breach of a non-competition agreement, . . . North Carolina appellate courts have routinely reviewed interlocutory orders both granting and denying preliminary injunctions, holding that substantial rights have been affected.” MRI concluded by noting that Pinehurst Surgical Clinic accepted jurisdiction over an appeal involving a two-year non-compete agreement, and the relief MRI sought could be mooted if Mr. Antall was permitted to continue competing with MRI at his new job.
The Court of Appeals Rejects MRI’s Statement of Grounds for Appellate Review
The Court of Appeals found this statement of grounds for review wanting in several respects.
First, it pointed out that mere citation to precedent is generally insufficient to invoke interlocutory jurisdiction. Quoting the Doe case, the court said that a fixation on cases that the appellant believes are controlling is “a mistake our Court has warned against for years.” Instead, the appellant must explain why the facts of that particular case demonstrate that the challenged order affects a substantial right. The court also added a footnote that warned against relying on unpublished non-precedential cases, as MRI did in citing Pinehurst Surgical Clinic.
Second, the court found that MRI had failed to present more than bare assertions that the order affected a substantial right. Instead, MRI made only “general and hypothetical allegations” about what information Mr. Antall might disclose to Johnson’s Roofing, and Mr. Antall had submitted an affidavit that he was doing different things for Johnson’s Roofing and serving different clientele. Johnson’s Roofing argued to the trial court that what Mr. Antall was doing was just math, which couldn’t be a trade secret, and MRI did not make any specific showing to the contrary. There were also disagreements in the affidavits about whether Johnson’s Roofing was bidding on the same jobs as MRI. In short, even if MRI had included this information in its statement for grounds, the court would have found it insufficient.
And lastly, the court cautioned that arguments made elsewhere in the brief itself are insufficient to carry this burden. The explanation to justify jurisdiction must be included in the statement of the grounds for appellate review.
The Court of Appeals could not have been more clear, emphasizing with italics: “[T]he appellant bears the burden in every case to ‘include in the statement of the grounds for appellate review an explanation of how the challenged order would . . . affect a substantial right based on the particular facts of that case.”
Any practitioner appealing an interlocutory order based on the substantial right doctrine should pay heed to this warning, and make sure that their statement of grounds for appellate review is sufficiently robust to avoid dismissal.