Hose Co. v. Smith

 Hose Co. v. Smith, 

.


 STATE OF NORTH CAROLINA                 IN THE GENERAL COURT OF JUSTICE
                                             SUPERIOR COURT DIVISION
 MECKLENBURG COUNTY                               24CV050767-590

 THE HOSE COMPANY LLC,

         Plaintiff,

 v.
                                            ORDER AND OPINION ON
                                        DEFENDANT’S MOTION TO DISMISS
 ROBERT M. SMITH,

               Defendant.




   1.      THIS MATTER is before the Court on Defendant’s Motion to Dismiss (the

Motion) filed pursuant to Rule 12(b)(6) of the North Carolina Rules of Civil Procedure

(the Rule(s)), (ECF No. 32).

   2.      The Court, having considered the Motion, the briefs supporting and

opposing the Motion, and the parties’ arguments at a hearing held on 27 February

2025, concludes for the reasons stated below that the Motion should be GRANTED

in part and DENIED in part.

        Robinson, Bradshaw & Hinson, P.A. by Julian Wright and Kelley
        Storey, for Plaintiff.

        Bell, Davis & Pitt, P.A. by Marc Gustafson and Kevin Roak, for
        Defendant.

Earp, Judge.
             I.     FACTUAL AND PROCEDURAL BACKGROUND

   3.     The Hose Company (THC) is a Wyoming corporation with operations in

Union County, North Carolina. (Ver. Compl. ¶ 1, ECF No. 3.) It has operated in the

hose industry for about ten years selling hydraulic, pressure washing, and industrial

hose. In addition to hose, it also sells hose fittings, adapters, accessories, and bundles

of complete, ready-to-install custom hose setups throughout the United States and

Canada. (Ver. Compl. ¶ 3.)

   4.     THC’s hydraulic hose is sold under the brand name Hydrauli-Flex. Its

general-purpose water and chemical hose is called Soft Jet, and its pressure-washing

hose is known as Fierce Jet. (Ver. Compl. ¶¶ 5–7.)

   5.     Robert M. Smith (Smith) worked at THC from approximately September

2016 to January 2024, first as Operations Manager and then as General Manager.

(Ver. Compl. ¶ 8.) He became a shareholder in THC beginning in May 2021 and

continuing until his resignation. (Ver. Compl. ¶ 9.)

   6.     Smith’s duties included management of the design, manufacture, assembly,

and sale of hydraulic, pressure washing, and industrial hose. Further, Smith looked

for, developed, and analyzed potential business partnerships with and acquisitions

by THC of other companies and assets in the hose business. (Ver. Compl. ¶ 8.)

   7.     Based on his position, Smith had access to THC’s confidential information

including pricing; operating costs and expenses; budgeting; supplier data; customer

data, needs and preferences; customer relations; proprietary technology; operational

processes and tools; and market strategy and performance. (Ver. Compl. ¶ 10.)
   8.       On 20 July 2022, Smith signed a Noncompetition Agreement (the

Agreement) in exchange for increased compensation.              (Ver. Compl. ¶ 11.)       The

agreement contained the following noncompetition provision:

         1. Noncompetition.

            (a)     [Smith] agrees that, during the Restricted Period, [Smith]
         shall not accept employment to design, manufacture, assembly [sic], and
         sale [sic] of hydraulic and industrial hose, or to perform any other
         services which are the same as or similar to services [Smith] has
         performed or will perform for [THC], within the Restricted Territory.

(Ver. Compl., Exhibit 1 Noncompetition Agreement [Agreement] § 1(a).)

   9.       The restricted territory and restricted period were defined in the

Agreement as follows:

         (b)  As used herein, the following terms shall have the following
         meanings:

                 “Restricted Territory” means the following: (i) the geographic area
         within a 100-mile radius of [THC’s] facility at 301 Warehouse Drive,
         Matthews, North Carolina; (ii) Mecklenburg County, North Carolina;
         (iii) counties contiguous to Mecklenburg County, North Carolina; (iv) the
         State of North Carolina; (v) states contiguous to the State of North
         Carolina; (vi) the State of South Carolina; (vii) the State of Georgia; (viii)
         the State of Virginia; (ix) the State of Tennessee; (x) the State of Florida;
         (xi) the State of Texas; (xii) the contiguous United States; (xiii) the
         United States; (xiv) or in any geographic area within a 5-mile radius of
         [THC] locations or [THC] customer locations in which the Employee
         exercised responsibility or serviced customers of the Company.

               “Restricted Period” means a period that is two years after the
         termination of [Smith’s] employment with [THC], whether voluntary
         termination by [Smith] or termination for cause by [THC.]

(Agreement § 1(b).)

   10.      On 2 January 2024, Smith submitted his resignation letter, stating in

pertinent part:
         My last working day will be January 19th, 2024, as I have accepted a
         new opportunity as the Director of Integration Business Development
         at Triosim, a paper and pulp manufacturing and servicing company
         based in Appleton, WI.

                                        …

         Additionally, in accordance with my non-competition agreement, my
         new role at Triosim will not involve direct engagement or contact with
         any of The Hose Company's customers, vendors, or employees. I am
         committed to upholding the terms of our agreement and ensuring
         seamless transition.

(Ver. Compl., ¶ 19, Exhibit 2 Resignation Letter [Resignation Letter].)

However, following Smith’s departure from THC, Plaintiff became aware of

Smith’s involvement in the hose business on behalf of Triosim Corporation

(Triosim) and others.

   A. Smith’s Work with Triosim

   11.      After leaving THC, Defendant began working as Director of Integration and

Business Development for Triosim. (Ver. Compl. ¶ 20.) THC believed that Smith

was working in the paper and pulp industry. (Ver. Compl. ¶ 22.)

   12.      After his departure, THC sent Smith a letter reminding him of his

contractual obligations. (Ver. Compl. ¶ 53.) On 9 May 2024, Triosim’s counsel

confirmed that Triosim was aware of THC’s Noncompetition Agreement and that it

was utilizing Smith to perform services that did not compete with THC to ensure that

Smith complied. (Ver. Compl. ¶ 55.) Plaintiff relied on these representations. (Ver.

Compl. ¶¶ 70–71.)

   13.      On 7 August 2024, however, an email inadvertently sent to Smith’s old THC

email address revealed that Smith was engaged in the industrial hose industry in
some capacity for a company called Albany Rubber & Gasket (Albany). (Ver. Compl.

¶ 23; Ver. Compl., Exhibit 3.) THC investigated and determined that Smith was

working for Trident Services, LLC (Trident), a division of Triosim. (Ver. Compl. ¶¶

24–25.) Albany, which sells industrial and hydraulic hose, is a subsidiary of Trident

located in Georgia. (Ver. Compl. ¶ 26.)

   14.   Other subsidiaries of Trident include Montgomery Rubber & Gasket

(Montgomery) located in Alabama, MS Rubber (MS) located in Mississippi, and

Pensacola Rubber & Gasket (Pensacola) located in Florida. (Ver. Compl. ¶ 27.)

Albany sells industrial and hydraulic hose; Montgomery and MS sell hydraulic and

industrial hose and fittings; and Pensacola sells all types of hose products including

industrial, hydraulic, metal, tubing, ducting, and automotive. (Ver. Compl. ¶¶ 29–

33.)

   B. Christoper Inks and Manatee

   15.   Christopher Inks (Inks), Smith’s longtime friend, began working for THC

on or about 29 April 2020. Inks was not required to sign a noncompetition agreement

because Smith vouched for his character. (Ver. Compl. ¶¶ 35–36.)

   16.   THC believes that Inks and Smith began discussing a partnership to

develop and sell hoses and hose-related parts while they were both employed by THC,

but they did not have the capital to do so on their own. (Ver. Compl. ¶ 45.)

   17.   In November 2023, while both were employed by THC, Smith and Inks

traveled to California with individuals from Manatee Pressure Washer Supply and

Repair (Manatee), one of THC’s Fierce Jet hose customers, to identify warehouse
space and discuss a potential joint venture between THC and Manatee. (Ver. Compl.

¶¶ 41, 46.) The idea did not progress after the trip. (Ver. Compl. ¶ 47.)

   18.   Approximately three months later, American Pressure Equipment, LLC

(APE), a company affiliated with Manatee, was incorporated in Florida. (Ver. Compl.

¶¶ 38, 40.) APE sells its own line of pressure washing hose under the brand name

Rampage, which competes with THC’s Fierce Jet. (Ver. Compl. ¶ 44.) Plaintiff

alleges that both Smith and Inks approached Manatee and “played roles” in starting

the business. (Ver. Compl. ¶¶ 38, 48.)

   19.   THC alleges that Inks began working for APE and Manatee in early 2024,

while he was still a THC employee. (Ver. Compl. ¶ 49.) During this time, THC

believes that Inks consulted with Smith regarding APE products that compete with

THC’s products. (Ver. Compl. ¶¶ 42–43.) THC also believes Inks coordinated with

Smith to copy THC’s information. (Ver. Compl. ¶ 50.) When THC discovered the

conflict of interest, it terminated Inks’ employment on 24 April 2024. (Ver. Compl. ¶

51.)

   20.   After Inks was terminated, THC learned from one of its customers, L&H

Industrial, that APE had been trying to lure it away. (Ver. Compl. ¶ 52.)

   21.   THC’s Complaint, filed 30 October 2024, alleges claims against Smith for

(1) breach of contract; (2) fraudulent concealment with respect to his work with

Triosim and its affiliates in the hose industry; (3) fraudulent concealment with

respect to his work with Inks, Manatee, and APE to develop a competing product

while he was General Manager of THC; (4) misappropriation of trade secrets (THC’s
customer lists and pricing information); (5) violation of the North Carolina Unfair

and Deceptive Trade Practices Act; and (6) civil conspiracy. (See generally Ver.

Compl.)

   22.    On 6 January 2025, Smith filed this Motion, as well as his Answer to the

Complaint, (ECF No. 34). On 27 February 2025, the Court held a hearing on the

Motion. Both parties appeared and were heard. The Motion is now ripe for decision.

                            II.   LEGAL STANDARD

   23.    A motion to dismiss under Rule 12(b)(6) “tests the legal sufficiency of the

complaint.” Isenhour v. Hutto, 

 (1999) (cleaned up). Dismissal is

proper when “(1) the complaint on its face reveals that no law supports the plaintiff's

claim; (2) the complaint on its face reveals the absence of facts sufficient to make a

good claim; or (3) the complaint discloses some fact that necessarily defeats the

plaintiff's claim.” Corwin v. Brit. Am. Tobacco PLC, 

 (2018) (citation

and quotation marks omitted).

   24.    The Court does not make findings of fact when deciding a motion to dismiss.

It recites below factual allegations from the Verified Complaint that are relevant to

a determination of the Motion. See, e.g., White v. White, 

 (1979)

(stating that the purpose of “a motion to dismiss is to test the law of a claim, not the

facts which support it”).

   25.    In deciding the motion, the Court must treat all well-pleaded allegations

as true and view the facts and permissible inferences in the light most favorable to

the nonmoving party. See, e.g., Sykes v. Health Network Sols., Inc., 

(2019). However, while the allegations are liberally construed, the Court is not

required “to accept as true allegations that are merely conclusory, unwarranted

deductions of fact, or unreasonable inferences.” Good Hope Hosp., Inc. v. N.C. DHHS,

Div. of Facility Servs., 

 (2005) (quoting Veney v. Wyche, 

 (4th Cir. 2002)).

                                    III.    ANALYSIS

   26.     Defendant contends that each of the claims brought by Plaintiff fails as a

matter of law and should be dismissed. (Def. Robert M. Smith’s Br. in Supp. of his

Rule 12(b)(6) Mot. to Dismiss [Def.’s Br.] at 5, ECF No. 33.) The Court addresses each

claim below.

    A. Breach of Contract

   27.     The Court has already addressed THC’s claim for breach of contract in

response to THC’s Motion for Preliminary Injunction. (Order on Pl.’s Mot. for Prelim.

Inj., ECF No. 58.)       The claim is based solely on Smith’s alleged breach of a

noncompetition provision in an agreement with THC that Smith signed while

employed. Because the Court has concluded that the noncompetition provision at

issue is unenforceable as a matter of law, the Motion shall be GRANTED, and THC’s

claim for breach of contract is dismissed with prejudice. 1




1 “The decision to dismiss an action with or without prejudice is in the discretion of the trial

court.” First Fed Bank v. Aldridge, 

 (2013).
    B. Fraudulent Concealment

   28.      THC brings two fraudulent concealment claims against Smith. The first

alleges that he fraudulently concealed the fact that, after leaving THC, his

employment with Triosim would involve working, identifying, and acquiring

companies and assets in the industrial hose industry, including Albany, Montgomery,

MS, and Pennsacola. (Ver. Compl. ¶¶ 65–66.) The second alleges that during his

employment with THC, Smith fraudulently concealed his work with Inks, Manatee,

and APE to develop a competing business. (Ver. Compl. ¶ 75.)

   29.      “[F]raudulent concealment or fraud by omission is, by its very nature,

difficult to plead with particularity.” Lawrence v. UMLIC-Five Corp., 

, at **9 (N.C. Super. Ct. June 18, 2007) (quoting Breeden v. Richmond Cmty.

Coll., 

 (M.D.N.C. 1997)). THC must plead:

         (1) the relationship [between the plaintiff and defendant] giving rise to
         the duty to speak; (2) the event or events triggering the duty to speak
         and/or the general time period over which the relationship arose and the
         fraudulent conduct occurred; (3) the general content of the information
         that was withheld and the reason for its materiality; (4) the identity of
         those under a duty who failed to make such disclosures; (5) what [the
         defendant] gained by withholding information; (6) why [the] plaintiff's
         reliance on the omission was both reasonable and detrimental; and (7)
         the damages proximately flowing from such reliance.

Breeden, 171 F.R.D. at 195–96 (adopted by Lawrence, 

, at

**10).

   30.      To plead fraudulent concealment there must be a duty to disclose. Such a

duty arises when: (1) a fiduciary relationship exists between the parties to the

transaction; (2) a party has taken affirmative steps to conceal material facts from the

other; or (3) one party has knowledge of a latent defect in the subject matter of the
negotiations about which the other party is both ignorant and unable to discover

through reasonable diligence. See, e.g., Hardin v. KCS Int'l, Inc., 

 (2009).

   31.    Smith contends that both fraudulent concealment claims fail because he

was under no obligation to make disclosures to THC. He argues that THC has not

pled either (1) that while employed as a manager, he exercised sufficient dominance

and control over THC to be required to make disclosures as its de facto fiduciary or

(2) that when he left THC, he took affirmative steps to conceal material facts

regarding his job with Triosim. (Def.’s Br. at 17–20.)

   32.    “North Carolina recognizes two types of fiduciary relationships: de jure, or

those imposed by operation of law, and de facto, or those arising from the particular

facts and circumstances constituting and surrounding the relationship.” Hager v.

Smithfield E. Health Holdings, LLC, 

 (2019) (citing Lockerman

v. S. River Elec. Mbrshp. Corp., 

, 635 (2016)).

   33.    THC argues that it has adequately pled that Smith was THC’s fiduciary

because it has alleged that, as General Manager, Smith was a “company official” and

company officials owe fiduciary duties to their companies as a matter of law. (Pl.’s

Opp. to Def.’s Mot. to Dismiss [Pl.’s Opp] at 18–20, ECF No. 48, citing N.C.G.S. § 57D-

3-23.) But that is not what the Verified Complaint actually says. THC has alleged

only that Smith’s duty to disclose arose from his status as a THC employee and

shareholder, not as a manager or other official of this limited liability company. (Ver.

Compl. ¶¶67, 76.)
   34.    A fiduciary relationship can also arise de facto and “extends to any

possible case in which a fiduciary relationship exists in fact, and in which there is

confidence reposed on one side, and resulting domination and influence on the

other.” Dalton v. Camp, 

, 651–52 (2001) (quoting Abbitt v. Gregory, 

 (1931)). THC argues that it has pled as much because Smith held a job

of “significant responsibility.” (Pl.’s Opp. at 19.)

   35.    Smith is correct that employees, even those holding high-level managerial

positions, typically do not owe a fiduciary duty to their employers. “North Carolina's

courts have consistently held that such a position does not give rise to fiduciary

responsibilities absent allegations of extraordinary facts that, if proven, would

establish that the employee controlled his employer to the point of domination.”

Langley v. Autocraft, Inc., 

, at **14–15 (N.C. Super. Ct. Aug. 7,

2023) (citing Reichhold Chems., Inc. v. Goel, 

 (2001) (no

fiduciary duty for company vice president because “[a] managerial position alone does

not demonstrate the requisite domination and influence on the other required to

create a fiduciary obligation”); Battleground Veterinary Hosp., P.C. v. McGeough,

, at **16 (N.C. Super. Ct. Oct. 1, 2007) (“Even when an

employee is entrusted with substantial managerial authority, a fiduciary relationship

will not exist absent evidence that such authority led to the employer being

subjugated to the 'improper influences or domination of [its] employee.’ ” (citation

omitted)); Southeast Air Charter, Inc. v. Stroud, 

, at **16 (N.C.
Super. Ct. Aug. 17, 2015) (“Where an employee is neither an officer nor a director,

extraordinary circumstances are necessary to impose a fiduciary duty[.]”)). 2

   36.    Even though THC attributes the performance of important duties to Smith,

it does not sufficiently allege that he dominated and controlled the company.

Consequently, THC has failed to plead the existence of a de facto fiduciary duty to

support its first claim for fraudulent concealment. See Lockerman, 250 N.C. App. at

636 (“The standard for finding a de facto fiduciary relationship is a demanding one:

Only when one party figuratively holds all the cards—all the financial power or

technical information, for example—have North Carolina courts found that the

special circumstance of a fiduciary relationship has arisen.”).

   37.    Because THC has not pled that Smith was its fiduciary, the Motion shall be

GRANTED with respect to Count III of the Verified Complaint, THC’s claim for

fraud that occurred while Smith was employed, and this claim is dismissed without

prejudice.

   38.    As for Smith’s post-employment activity on behalf of Triosim, THC argues

that Smith’s decision to word his resignation letter as he did amounted to an

affirmative step to conceal the true nature of his activity in the hose industry. (Pl.’s

Opp. at 20–21.) Interpreting the allegations in the Verified Complaint in the light

most favorable to THC, the Court agrees that THC has sufficiently alleged that Smith



2 Likewise, the fact that Smith was a THC shareholder is not enough to create a de facto

fiduciary relationship. “As a general rule, shareholders do not owe a fiduciary duty to each
other or to the corporation.” Freese v. Smith, 

 (1993) (citing Russell M.
Robinson, II, North Carolina Corporation Law, § 11.4 (1990))
intentionally misled THC by wording his resignation letter to conceal the true nature

of his new job. Given the liberal standard the Court must employ at this stage, the

Motion shall be DENIED with respect to Count II of the Verified Complaint, THC’s

claim for Smith’s alleged fraudulent concealment relating to his work for Triosim. 3

   C. Misappropriation of Trade Secrets

   39.     THC alleges that Smith misappropriated its “customer lists and pricing

information,” both of which it asserts are trade secrets. Smith responds that THC

has not identified its alleged trade secrets with sufficient particularity and further

that THC’s customer list is comprised of publicly available information. (Def.’s Br. at

21.) Similarly, Smith argues that THC’s reference to “pricing information” is not

specific and that there is no indication that THC took steps to keep its prices

confidential. (Def.’s Br. at 24.)

   40.     THC responds that courts have regularly held that these two types of

information are trade secrets. (Pl.’s Opp. at 22.) THC argues that, even if publicly

available information is included, its allegation that it built its customer lists

throughout its 10 years of operation is sufficient to allege a compilation trade secret.

(Pl.’s Opp. at 22.) Similarly, THC contends that it has sufficiently identified the

pricing information as pertaining to its dealer network. (Pl.’s Opp. at 22.)




3 Ultimately, to succeed on this claim, THC will be required to prove that Smith’s concealment

led to actual damage, an essential element for a fraud claim. See, e.g., Speller v. Speller, 

 (1968) (citing Johnson v. Owens, 

 (1965) (holding that, to be
actionable, fraud must result in loss, damage or injury)).
   41.      “To plead misappropriation of trade secrets, ‘a plaintiff must identify a

trade secret with sufficient particularity so as to enable a defendant to delineate that

which he is accused of misappropriating and a court to determine whether

misappropriation has or is threatened to occur.’ ” Washburn v. Yadkin Valley Bank

& Tr. Co., 

 (2008) (quoting Analog Devices, Inc. v. Michalski,

 (2003)). “[A] complaint that makes general allegations in

sweeping and conclusory statements, without specifically identifying the trade

secrets allegedly misappropriated, is insufficient to state a claim for misappropriation

of trade secrets.” Aecom Tech. Corp. v. Keating, 

, at **7 (N.C.

Super. Ct. Feb. 6, 2012) (citing Washburn, 

).

   42.      The North Carolina Trade Secrets Protection Act (NCTSPA) defines a trade

secret as “business or technical information, including but not limited to a formula,

pattern, program, device, compilation of information, method, technique, or process”

that both:

         a. [d]erives 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. [i]s the subject of efforts that are reasonable under the circumstances
         to maintain its secrecy.

N.C.G.S. § 66-152(3).

   43.      Six factors assist the Court to determine whether particular information is

actually a trade secret:

         (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 the secrecy of
         the information; (4) the value of information to the 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.

Combs & Assocs. v. Kennedy, 

, 369–70 (2001); accord Wilmington

Star-News, Inc. v. New Hanover Reg’l Med. Ctr., Inc., 

, 180–81

(1997).

   44.      It is not the case, as THC appears to argue, that pricing information and

customer lists are, ipso facto, trade secrets. Whether they are depends on the context

in which these terms are used. It is up to the plaintiff to define that context. See,

e.g., Aecom, Tech. Corp., 

, at **8 (Plaintiffs’ allegation that

Defendants misappropriated confidential information including “customer lists,

customer contract information, pricing information, and product information” was too

sweeping and conclusory to identify a trade secret); Krawiec v. Manly, 

 (2017) (Plaintiffs claim identifying its trade secret only as “customer lists and

contact information” was insufficient.)

   45.      As our Supreme Court observed, “[l]ike the Ohio Court of Common Pleas in

an often cited case involving a dispute between a dance studio and its former

employee, we recognize that ‘[t]here is no presumption that a thing is a secret,’ and

emphasize the shortcomings of ‘general allegations’ in making a case for

misappropriation of trade secrets.” Krawiec, 

 (quoting Arthur Murray

Dance Studios of Cleveland, Inc. v. Witter, 

, 709–10 (Ohio Ct. Com. Pl.

1952)).
   46.    Here, THC alludes to a compiled list of customers but does not identify the

information included in the list or describe the effort and cost it incurred to put the

list together. More information is necessary to allege a compilation trade secret. See,

e.g., Mech. Sys. & Servs. v. Howard, 

, at *6–7 (N.C. Super. Ct.

Aug. 11, 2021) (customer list that included contract terms, customer needs, pricing

information, recruiting strategies, sales proposals and quotes, and correspondence

with potential customers that took “many years of effort” to develop satisfied the

particularity requirement to plead a trade secret.); Red Valve, Inc. v. Titan Valve,

Inc., 

, at **27–28 (N.C. Super. Ct. Apr. 17, 2018) (compilation

of customer purchasing preferences and order histories, as well as customer requests

and complaints received over many years had competitive value and was recognized

as a trade secret).

   47.    As for pricing information, THC alleges only that it is referring to pricing

that applies to its dealer network. It does not explain how this information, once

released externally, is kept secret. Clearly, its dealers know what they are charged,

and there is nothing in the pleading to indicate that THC’s dealers cannot themselves

use this information to negotiate better deals with THC’s competitors. It is up to

THC to plead the existence of a trade secret with particularity. Further, its general

allegations regarding only internal security measures do not suffice.        Cf. Area

Landscaping, LLC v. Glaxo-Wellcome, Inc., 

 (2003) (concluding

at the summary judgment stage that plaintiff failed to present adequate evidence of

security measures with respect to pricing); Campbell Sales Grp., Inc. v. Niroflex by
Jiufeng Furniture, LLC, 

, at **27 (N.C. Super. Ct. Dec. 5,

2022) (same); Edgewater Servs. v. Epic Logistics Inc., 

, at **14

(N.C. Super. Ct. Aug. 11, 2009) (same).

   48.    The Court concludes that THC has failed to allege the identity of a trade

secret with sufficient particularity to support its claim, and its allegations regarding

the security measures it used to keep its pricing information secret are lacking.

Accordingly, the Motion as to Count IV, Misappropriation of Trade Secrets, is

GRANTED, and this claim is dismissed without prejudice.

     D. Unfair and Deceptive Trade Practice

   49.    Under North Carolina’s Unfair and Deceptive Trade Practices Act (UDTPA)

“[u]nfair methods of competition in or affecting commerce, and unfair or deceptive

acts or practices in or affecting commerce, are declared unlawful.” N.C.G.S. § 75-

1.1(a).

   50.    Three elements are needed to maintain a cause of action under this statute:

“(1) an unfair or deceptive act or practice, or an unfair method of competition, (2) in

or affecting commerce, (3) proximately causing actual injury to defendant or

defendant business.” Drouillard v. Keister Williams Newspaper Servs., Inc., 

 (1992).

   51.    Smith argues that the unfair and deceptive trade practices claim must be

dismissed because the claims underlying it fail. (Def.’s Br. at 27.) THC relies on both

its fraud and its misappropriation of trade secrets claims, (Pl.’s Opp. at 25), but says

that, regardless of those claims, it has alleged that Smith acted in an unethical or
unscrupulous manner by deceiving THC about his work at Triosim, consulting with

Inks to develop Rampage, and concealing his work with Inks and APE. (Pl.’s Opp. at

26.)

   52.    To the extent THC refers to Smith’s conduct while employed, the Court

observes that most employer-employee disputes do not affect commerce and are

therefore beyond the scope of the UDTPA. See Dalton, 

 (recognizing

that the UDTPA “does not normally extend to run-of-the-mill employment disputes”).

   53.    In addition, the only fraud claim still standing, fraudulent concealment

resulting from the wording of Smith’s resignation letter, is wrongful conduct that

occurred internally. See, e.g., Nobel v. Foxmoor Grp., 

, 121 (2022) (“The

internal operations of a business entity are not within the purview of the Act”); White

v. Thompson, 

 (2010) (“The General Assembly did not intend for the

[UDTPA] to regulate purely internal business operations.”); Bhatti v. Buckland, 

, 245–46 (1991) (the Act regulates unfair and deceptive conduct in

interactions between market participants); Alexander v. Alexander, 

 (2016) (UDTPA not implicated when “the unfairness of [Defendant’s]

conduct did not occur in his dealings with [other market participants]” (citation

omitted)); Wheeler v. Wheeler, 

, at *12 (N.C. Super. Ct. Apr. 25,

2018) (“Section 75-1.1 does not apply to the internal conduct of individuals within a

single market participant. Rather, the General Assembly intended section 75-1.1 to

apply to interactions between market participants.” (cleaned up)).
   54.      THC turns unsuccessfully to the Supreme Court’s opinion in Sara Lee Corp.

v. Carter, 

 (1998), for support.         In Sara Lee, the Supreme Court

determined that the wrongdoer, Carter, was more than just an employee acting to

harm his own employer. He was also a vendor who had engaged with the company

in commercial transactions in the marketplace. In this unusual fact scenario, the

Court held that Carter’s status as an employee could not be used as a shield against

his liability as a vendor. Sara Lee Corp., 

. Unlike Carter in Sara Lee,

Smith was not THC’s vendor. THC alleges that Smith’s acts were wrongful because

they violated its expectations of him in the employment context.

   55.      Because the conduct at issue was internal and not “in or affecting

commerce,” the Motion shall be GRANTED, and Count V, the claim for violation of

the UDTPA, is dismissed without prejudice.

    E. Civil Conspiracy

   56.      “Civil conspiracy is not an independent cause of action in North Carolina.

Rather, liability for civil conspiracy must be alleged in conjunction with an underlying

claim for unlawful conduct.” Glob. Textile All., Inc. v. TDI Worldwide, LLC, 

, at **18 (N.C. Super. Ct. Oct. 9, 2018) (citing Toomer v. Garrett,

 (2002)). As observed by our Supreme Court:

         Accurately speaking, there is no such thing as a civil action for
         conspiracy. The action is for damages caused by acts committed
         pursuant to a formed conspiracy, rather than by the conspiracy itself;
         and unless something is actually done by one or more of the conspirators
         which results in damage, no civil action lies against anyone. The gist of
         the civil action for conspiracy is the act or acts committed in pursuance
         thereof – the damage – not the conspiracy or the combination. The
         combination may be of no consequence except as bearing upon rules of
         evidence or the persons liable.

Reid v. Holden, 

, 414–15 (1955) (quoting 

, Conspiracy, §

45).

   57.      To support allegations of civil conspiracy “a plaintiff must allege ‘(1) an

agreement between two or more individuals; (2) to do an unlawful act or to do a lawful

act in an unlawful way; (3) resulting in injury to plaintiff inflicted by one or more of

the conspirators; and (4) pursuant to a common scheme.’ ” Glob. Textile All., Inc., 

, at **18–19 (quoting Piraino Bros., LLC v. Atl. Fin. Grp., Inc., 

 (2011)). As stated above, however, proof of a civil conspiracy “does

no more than associate the defendants together . . . The gravamen of the action is the

resultant injury, and not the conspiracy itself.” Henry v. Deen, 

 (1984)

(citation omitted). Therefore, in addition to an agreement, to state a claim there must

be an allegation of a wrongful act that causes damage in furtherance of the

agreement. Fox v. Wilson, 

 (1987).

   58.      Smith argues that because the claims for misappropriation of trade secrets,

fraudulent concealment while he was employed, and UDTPA claims fail, there is no

viable allegation that a wrongful act was taken in furtherance of any agreement with

Inks, Manatee, and APE to violate the law. (Def.’s Br. at 28.) Therefore, Smith

contends, the conspiracy claim fails.

   59.      The Court agrees. Because the claims alleging conduct that involved Smith,

Inks, Manatee, and APE, have been dismissed, the conspiracy theory based on those
claims has no application. Accordingly, the Court GRANTS the Motion with respect

to Count VI, civil conspiracy, and dismisses this count without prejudice.

                                IV.   CONCLUSION

   60.      WHEREFORE, the Court hereby GRANTS in part and DENIES in part

the Motion and ORDERS as follows:

         a. With respect to the First Cause of Action (Breach of Contract), the Motion

is GRANTED, and the claim is dismissed with prejudice.

         b. With respect to the Second Cause of Action (Fraud – Work with Albany

Rubber & Gasket), the Motion is DENIED.

         c. With respect to the Third Cause of Action (Fraud – Work with Mr. Inks,

Manatee, and APE), the Fourth Cause of Action (Misappropriation of Trade Secrets),

the Fifth Cause of Action (Violation of the North Carolina Unfair and Deceptive Trade

Practices Act), and the Sixth Cause of Action (Civil Conspiracy), the Motion is

GRANTED, and these claims are dismissed without prejudice.


         SO ORDERED, this the 28th day of March 2025.




                                          /s/ Julianna Theall Earp
                                          Julianna Theall Earp
                                          Special Superior Court Judge
                                            for Complex Business Cases