Hose Co. v. Smith, 2025 NCBC 17.
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, 350 N.C. 601, 604 (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, 371 N.C. 605, 615 (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, 296 N.C. 661, 667 (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., 372 N.C. 326, 332 (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., 174 N.C. App. 266, 274 (2005) (quoting Veney v. Wyche, 293
F.3d 726, 730 (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, 230 N.C. App. 187, 191 (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., 2007 NCBC
LEXIS 20, at **9 (N.C. Super. Ct. June 18, 2007) (quoting Breeden v. Richmond Cmty.
Coll., 171 F.R.D. 189, 195 (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, 2007 NCBC LEXIS 20, 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., 199 N.C. App. 687,
696 (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, 264 N.C. App. 350, 355 (2019) (citing Lockerman
v. S. River Elec. Mbrshp. Corp., 250 N.C. App. 631, 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, 353 N.C. 647, 651–52 (2001) (quoting Abbitt v. Gregory, 201
N.C. 577, 598 (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., 2023 NCBC LEXIS 95, at **14–15 (N.C. Super. Ct. Aug. 7,
2023) (citing Reichhold Chems., Inc. v. Goel, 146 N.C. App. 137, 155 (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,
2007 NCBC LEXIS 33, 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, 2015 NCBC LEXIS 82, 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, 110 N.C. App. 28, 37 (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, 273 N.C. 340, 343 (1968) (citing Johnson v. Owens, 263 N.C. 754, 756 (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., 190 N.C. App. 315, 326 (2008) (quoting Analog Devices, Inc. v. Michalski,
157 N.C. App. 462, 468 (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, 2012 NCBC LEXIS 9, at **7 (N.C.
Super. Ct. Feb. 6, 2012) (citing Washburn, 190 N.C. App. at 327).
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, 147 N.C. App. 362, 369–70 (2001); accord Wilmington
Star-News, Inc. v. New Hanover Reg’l Med. Ctr., Inc., 125 N.C. App. 174, 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., 2012 NCBC LEXIS 9, 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, 370 N.C. 602,
611 (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, 370 N.C. at 611 (quoting Arthur Murray
Dance Studios of Cleveland, Inc. v. Witter, 105 N.E.2d 685, 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, 2021 NCBC LEXIS 69, 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., 2018 NCBC LEXIS 41, 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., 160 N.C. App. 520, 525 (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, 2022 NCBC LEXIS 148, at **27 (N.C. Super. Ct. Dec. 5,
2022) (same); Edgewater Servs. v. Epic Logistics Inc., 2009 NCBC LEXIS 21, 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., 108 N.C.
App. 169, 172 (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, 353 N.C. at 657 (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., 380 N.C. 116, 121 (2022) (“The
internal operations of a business entity are not within the purview of the Act”); White
v. Thompson, 364 N.C. 47, 48 (2010) (“The General Assembly did not intend for the
[UDTPA] to regulate purely internal business operations.”); Bhatti v. Buckland, 328
N.C. 240, 245–46 (1991) (the Act regulates unfair and deceptive conduct in
interactions between market participants); Alexander v. Alexander, 250 N.C. App.
511, 516 (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, 2018 NCBC LEXIS 38, 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, 351 N.C. 27 (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., 351 N.C. at 33. 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, 2018
NCBC LEXIS 104, at **18 (N.C. Super. Ct. Oct. 9, 2018) (citing Toomer v. Garrett,
155 N.C. App. 462, 483 (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, 242 N.C. 408, 414–15 (1955) (quoting 11 Am. Jur. 577, 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., 2018
NCBC LEXIS 104, at **18–19 (quoting Piraino Bros., LLC v. Atl. Fin. Grp., Inc., 211
N.C. App. 343, 350 (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, 310 N.C. 75, 87 (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, 85 N.C. App. 292, 301 (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