Davidson County man fights in court after allegedly stealing company secrets for new boss
Corporate or business espionage sounds like something right out of the movies, but it happened right here in Davidson County.
A local businessman is fighting his former employer in North Carolina Business Court after he allegedly violated a settlement agreement after he stole customer and supplier information and provided it to his new boss.
According to North Carolina Supreme Court documents, in 2009, Eric Tutton worked for KNC Technologies, formerly known as Ken-Nect Communications, in Davidson County as a project manager and was responsible for customer accounts and specific projects. The company installs low-voltage integrated systems such as security systems, nurse call systems, fire alarms and intercoms.
As part of his job, Tutton was familiar with contact information of KNC's customers and business needs, according to court documents. He reviewed project plans, design information, bid information and pricing schemes for particular jobs. He created estimates, developed project bids and oversaw the progress and budget of KNC’s various installation jobs.
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According to court documents, in 2013 Tutton was approached by the CEO of Nitor Solutions in Winston-Salem and was offered a job similar to his current position. According to Tutton’s affidavit in a subsequent lawsuit, he was asked to provide Nitor information on KNC’s customers, suppliers and distributors before starting his new position.
Court documents state at that time, Nitor was not a competitor of KNC. The company provided IT support for businesses, including KNC. At the time Tutton was approached, Nitor was creating a new branch of its business to include low-voltage infrastructure similar to KNC.
After signing the employment contract Tutton said in his court affidavit that he received multiple emails from leadership at Nitor requesting information and instruction on setting up partnerships with manufacturers; obtaining software and product information necessary to develop quotes and estimates; setting up a demo lab to show equipment to potential customers and gaining licenses necessary for installation of low voltage infrastructure.
“(Nitor) wanted me to provide as much assistance as possible while I was still employed with KNC, so that by the time I started at Nitor, we would have the foundation in place to begin contacting my customers from KNC and attempt to provide them with low voltage installation services,” said Tutton in the court deposition.
Tutton also said in the court affidavit he was pressured to download files containing confidential information from KNC network before handing in his notice. In particular, emails and customer and supplier contact information, as well as KNC customer files, bids, project designs and pricing schemes. He said he was asked to allow a Nitor technician remote access to his company computer by using a flashdrive, according to court documents.
After Tutton had begun his new position at Nitor, the leadership at KNC discovered Tutton had engaged in multiple violations of his non-compete clause with KNC by providing confidential information to Nitor.
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In 2014, KNC filed a lawsuit in Davidson County Superior Court against Nitor and Tutton. After KNC filed the lawsuits Tutton said the lawyer provided and paid for by Nitor who had been representing him in the case asked him to sign a waiver and said he was no longer representing him, according to court documents. Soon after Tutton left Nitor to work for another company in a similar field.
Afterward, Tutton said he met with lawyers for KNC concerning the case against Nitor and provided an affidavit detailing his involvement with obtaining KNC’s confidential and proprietary business information prior to starting his new job with Nitor.
Both cases were settled out of court in 2014, but the court-approved settlement agreement included an injunction order that prevented Tutton from contacting distributors or customers or soliciting employees of KNC to join a competing business for ten years, which would be 2024. It also included a $25,000 fine for each infraction if he didn't follow the settlement agreement.
According to court documents, in 2015, Tutton created I-Tech Security & Network Solutions. The company’s business included the installation of low-voltage infrastructure, similar to the same business as his former employers.
According to KNC, Tutton as the president of I-Tech was soliciting business from KNC’s customers and suppliers, which was a violation of the consent order included in the settlement. In 2019 they filed an injunction in court against Tutton.
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Court documents state Tutton argued that I-Tech was operating as an independent business in the area, and he had not contacted any of KNC’s current customers. KNC legal filing does not allege Tutton has breached the consent order and settlement agreement by competing in general with KNC, just with its existing customers and suppliers.
KNC also requested the implementation of the $25,000 per infraction which was included in the settlement of the prior lawsuit. Some of these infractions, according to KNC, included phone calls and general inquiries.
Tutton’s legal representation claimed the $25,000 per infraction was “unenforceable” due to the over-broad definitions of the consent order and the 10 year non-compete order was over restrictive, according to court documents.
They argued that the liquidated damages amount of $25,000 per violation “bears no reasonable relationship to the amount of actual damages KNC would suffer in the event of a breach of the restrictive covenants in the consent order” and, therefore, are an “unlawful penalty”.
The Davidson County Superior Court judge ordered the case to be assigned to the North Carolina Business Court, which handles complex and complicated lawsuits pertaining to businesses and corporations.
In 2021, the business court handed down a ruling that granted part of KNC’s petition to enforce the consent order but denied other parts including restricting I-Tech from doing business; the $25,000 in damages per infraction, tortious interference and unfair and deceptive trade practices. Other charges are still being argued in this case in North Carolina Business Court.
In June, KNC appealed the ruling to the North Carolina Supreme Court, but it was temporarily rejected until the remaining charges have been adjudicated. Once all charges have been settled in business court and a judgment has been handed down, KNC can appeal all or some of the rulings.
To read background documents concerning the case, go here.
General news reporter Sharon Myers can be reached at sharon.myers@the-dispatch.com. Follow her on Twitter @LexDispatchSM.
This article originally appeared on The Dispatch: Davidson County man in court after reportedly stealing company secrets
