Software Automation Holdings, LLC v. Insurance Toolkits, LLC

INTHE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF NORTH CAROLINA

WESTERN DIVISION □

No. 5:23-CV-140-D

SOFTWARE AUTOMATION +)

HOLDINGS, INC., )

)

Plaintiff,

) ORDER

Vv. )

)

INSURANCE TOOLKITS, LLC, et al., )

) .

Defendants. )

_ On March 17, 2023, Software Automation Holdings, Inc. (“Software Automation” or

“plaintiff’) filed an action against Insurance Toolkits, LLC (“Insurance Toolkits”), Frankie

Primerano (“Primerano”), Joseph Wahl (“Wahl”), and John Does 1-10 (“Does”) (collectively,

“defendants”) for (1) breach of contract, (2) tortious interference with contract, (3)

misappropriation of trade secrets in violation of the Defend Trade Secrets Act, 18 U.S.C. § 1836,

(4) misappropriation of trade secrets in violation of North Carolina law, (5) unfair competition in

' violation of 25 U.S.C. § 1125(a), (6) copyright infringement in violation of the Copyright Act, 17

U.S.C. §§ 101, et seq., (7) intentional interference with prospective business advantage, (8) unfair

and deceptive trade practices (“UDTPA”), (9) civil conspiracy, and (10) fraud. See Compl. [D.E.

1, p. 1-22] J] 97-214. On June 12, 2023, defendants moved to dismiss the complaint for lack of

personal jurisdiction over Primerano and in part for failure to state a claim for tortious interference

with contract, misappropriation of trade secrets under the Defend Trade Secrets Act,

misappropriation of trade secrets under North Carolina law, unfair competition, intentional

interference with prospective business advantage, unfair and deceptive trade practices, and civil

conspiracy [D.E. 14] and filed a memorandum in support [D.E. 15]. See Fed. R. Civ. P. 12(b)(2),

(6). On July 21, 2023, Software Automation responded in opposition [D.E. 18]. On August 3,

2023, defendants replied IDE. 20].

On November 17, 2023, after a hearing, the court dismissed Primerano for lack of personal

jurisdiction and dismissed Software Automation’s tortious interference with contract, unfair

competition, intentional interference with prospective business advantage, and civil conspiracy

claims [D.E. 24]. :

On January 8, 2024, defendants answered, filed a third-party complaint against Zachary

Bornheimer (“Bornheimer”), and filed counterclaims against Software Automation and

Bornheimer for (1) libel per se, (2) libel per quod, and (3) unfair and deceptive trade practices.

See Countercl. [D.E. 25, p. 23-32] ff 23-56. On February 12, 2024, Software Automation and

Bornheimer moved to dismiss defendants’ third-party complaint and counterclaims [D.E. 29]. See

Fed. R. Civ. P. 12(b)(2), (6). On March 7, 2024, defendants responded in opposition [D.E. 31)

On April 4, 2024, Software Automation and Bornheimer replied [D.E. 33]. As explained below,

the court dismisses without prejudice Bornheimer for lack of personal jurisdiction and dismisses

without prejudice for failure to state a claim defendants’ libel per quod and UDTPA counterclaims

against Software Automation. Defendants’ libel per se counterclaim against Software Automation

survives.

Software Automation is a limited liability company incorporated in North Carolina with its

principal place of business in Cary, North Carolina. See Countercl. J 3. Software Automation

provides automated underwriting software, creating and selling Best Plan Pro (“BPP”), a pay-to-

use software for life and health insurance marketing. See Compl. 2, 14. BPP provides insurance

>

agents with recommendations for insurance carriers, insurance plans, quotes for insurance, and

plan recommendations using proprietary algorithms, artificial intelligence, and proprietary

databases developed through industry research on insurance carriers’ products and underwriting

criteria. See id. at 18. BPP operates by processing and grouping this data in unique databases

by using proprietary connections between medications and conditions, brand-name medications

and generic medications, and a database of medication misspellings and corrections with a specific

insurance underwriter’s evaluation criteria. See id. at [J 19-21. Based on the user’s input, BPP

makes underwriting risk predictions and product recommendations, and during the data input

stage, it also makes suggestions for inputting other related conditions and medications, creating

tailored results. See id. at ff 22-23.

Primerano and Wahl founded Insurance Toolkits, which also markets underwriting

software programs. See id. at JJ 11-12, 32. Software Automation alleges that Insurance Toolkits

stole Software Automation’s technological elements, promotional slogans, and interface through

improper data procurement with the intent to confuse the consumer and engage in unfair

competition with BPP: See id, at J] 32-36. Software Automation alleges that numerous accounts

with fictitious user information (e.g., names, addresses, emails, and prepaid giftcards with

insufficient funds) were linked to Wahl, and Wahl and various John Does used these accounts to

gain access to the BPP system in violation of the End User Licensing Agreement (“EULA”) to

steal information through data scraping and program duplication for Insurance Toolkits. See id. at

{| 36-77. In 2020, Wahl told Bornheimer he did not copy or extract BPP’s code and explained

the differences between BPP and his software. See Countercl. { 16. Bornheimer responded that

it took ten different coding languages to create BPP and acknowledged that Wah! could not have

accessed BPP’s code. See id. On March 17, 2023, Software Automation filed its complaint. See

[D.E. 1].

_ Bornheimer is the CEO of Software Automation. See Countercl. fj 4, 7; [D.E. 25-1] 2.

He lives in Saint Petersburg, Florida. See Countercl. ¢ 4. On March 22, 2023, he acquired the

website toolkitfraudsuit.com (“website”). See id. at] 11. On April 11, 2023, Software Automation

issued a press release concerning Software Automation’s allegations against Insurance Toolkits.

See id. at J 12; [D.E. 25-4] 2-3. The same day, Bornheimer announced on his personal Facebook

account that Software Automation was suing Insurance Toolkits. See Countercl. ¥ 13; [D.E. 25-5]

The Facebook post states: □

The truth always comes out. [BPP] is suing Insurance Toolkits “[Software

Automation] alleges Insurance Toolkits and its founders, [Wahl] and [Primerano],

knowingly: created fake user accounts using fictitious names and credit card

information to gain access to the [BPP] software[,] and, over several months,

utilized these fake accounts to extract source code and data from [BPP’s]

databases[.]” It is said that [i]f it mattes to you, you should speak up. Fight for the

little guy. Well, this matters to me[,] and I want the truth known. I’m just grateful

today that good always wins[,] and the truth always comes out. Now I am very

excited to share a little bit more about my story and the journey of [BPP] throughout

_ the year as we put all efforts into making it easier for agents to make more money

and find the right coverage faster. (Lawsuit Article in comments)[.]

[D.E. 25-5] 3 (emphasis omitted). After posting, Bornheimer responded to various comments,

expounding on his position when various commenters disputed the lawsuit’s merits. See

Countercl. J] 14-15; [D.E. 25-5] 4-7. Additionally, Bornheimer alleges that defendants

“admitted” to the “wrongdoing.” [D.E. 25-5] 5; see Countercl. § 18. On April 18, 2023,

Bornheimer posted the complaint’s allegations on the website and a statement from Software

Automation’s managing director. See Countercl. | 11; [D.E. 25-3] 2. On December 18, 2023,

Software Automation and Bornheimer revised the website, eliminating the statement that Wahi

““extracted’ or otherwise copied... BPP’s ‘source code,”” only accusing Insurance Toolkits of

4 \

extracting data from BPP. Countercl. J 17; compare [D.E. 25-3] 2, with [D.E. 25-6] 2. Defendants

allege that Software Automation and Bornheimer’s conduct created distress, embarrassment,

injury to moral character, and injury to professional, business, and personal reputations. See

Countercl. J 21. =.

I.

Software Automation and Bornheimer move to dismiss defendants’ counterclaims for lack

of personal jurisdiction over Bornheimer. See [D.E. 29]; Fed. R. Civ. P. 12(b)(2). Personal

jurisdiction over a nonresident defendant must comport with North Carolina’s long-arm statute

and the Fourteenth Amendment’s Due Process Clause. See, e.g., Mitrano v. Hawes, 377 F.3d 402,

. 406 (4th Cir. 2004). North Carolina’s long-arm statute extends personal jurisdiction over a

nonresident defendant consistent with the Fourteenth Amendment’s Due Process Clause. See

Christian Sci. Bd. of Dirs. v. Nolan, 259 F.3d 209, 215 (4th Cir. 2001). Thus, the statutory inquiry

"merges with the constitutional inquiry. See id.; Atl. Corp. of Wilmington, Inc. v. TBG Tech Co.,

565 F. Supp. 3d 748, 759 (E.D.N.C. 2021).

Due process requires a defendant to have “certain minimum contacts with the forum such

that the maintenance of the suit does not offend traditional notions of fair play and substantial

justice.” Helicopteros Nacionales de Colom., S.A. v. Hall, 466 U.S. 408, 414 (1984) (alteration

and quotations omitted). The minimum contacts analysis considers “the relationship among the

defendant, the forum, and the litigation.” Walden v. Fiore, 571 U.S. 277, 284 (2014) (quotation

omitted); see Ford Motor Co. v. Mont. Eighth Jud. Dist. Ct., 592 US. 351, 358-60 (2021); Bristol-

Myers Squibb Co. v. Super. Ct., 582 U.S. 255, 264 (2017). This analysis ensures that a defendant

is not haled into a court’s jurisdiction “solely as a result of random, fortuitous, or attenuated _

contacts.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985) (quotations omitted); see

Ford Motor Co., 592 U.S. at 359.

The minimum contacts analysis focuses on whether a defendant “purposefully directed his

activities at residents of the forum” and whether the causes of action arise out of or relate to those

activities. Burger King, 471 U.S. at 472 (quotation omitted); see Ford Motor Co., 592 U.S. at 359;

Bristol-Myers Squibb, 582 U.S. at 262; ALS Scan, Inc. v. Digit. Serv. Consultants, Inc., 293 F.3d

707, 712 (4th Cir. 2002); Atl. Corp., 565 F. Supp. 3d at 760. If a defendant’s contacts with the

state are the basis for the counterclaim, specific jurisdiction may exist. See ALS Scan, 293 F.3d

at 712. In determining specific jurisdiction, the court considers: “(1) the extent to which the

defendant purposefully availed itself of the privilege of conducting activities in the State; (2)

whether the plaintiffs’ claims arise out of those activities directed at the State; and (3) whether the

exercise of personal jurisdiction would be constitutionally reasonable.” id (alteration and

quotations omitted). Thus, the “constitutional touchstone” of specific personal jurisdiction

“remains whether the defendant purposefully established minimum contacts in the forum State.”

Burger King, 471 U.S. at 474 (quotation omitted); see Bristol-Myers Squibb, 582 U.S. at 264-66;

Walden, 571 U.S. at 284-91.

First, in analyzing the extent to which a defendant purposefully availed itself of the

privilege of conducting activities within a State, a court examines “various non-exclusive factors”

including:

(1) whether the defendant maintained offices or agents in the State; (2) whether the

defendant maintained property in the State; (3) whether the defendant reached into

the State to solicit or initiate business; (4) whether the defendant deliberately

engaged in significant or long-term business activities in the State; (5) whether a

choice of law clause selects the law of the State; (6) whether the defendant made

in-person contact with a resident of the State regarding the business relationship;

(7) whether the relevant contracts required performance of duties in the State; and

. 6

(8) the nature, quality, and extent of the parties? communications about the business □□

being transacted.

UMG Recordings, Inc. v. Kurbanov, 963 F.3d 344, 352 (4th Cir. 2020) (quotation omitted); see

Consulting Eng’rs Corp. v. Geometric Ltd., 561 F.3d 273, 278 (4th Cir. 2009); Atl. Corp., 565 F.

Supp. 3d at 760.

Second, the claims must have arisen out of or relate to those activities that the defendant

directed at the state. See Ford Motor Co., 592 US. at 361-71 ; UMG Recordings, 963 F.3d at 354—

55; Atl. Corp., 565 F. Supp. 3d at 760.

Third, the court must analyze whether the exercise of personal jurisdiction is

constitutionally reasonable. See Ford Motor Co., 592 U.S. at 368; Bristol-Myers Squibb, 582 U.S.

at 262-65; Burger King, 471 U.S. at 476-78; World-Wide Volkswagen Corp. v. Woodson, 444

USS. 286, 292 (1980); Consulting Eng’rs, 561 F.3d at 279; Atl. Corp., 565 F. Supp. 3d at 760-61. -

This analysis “permits a court to consider additional factors to ensure the appropriateness of the

forum once it has determined that a defendant has purposefully availed itself of the privilege of

doing business there.” Consulting Eng’rs, 561 F.3d at 279. Such factors include:

(1) the burden on the defendant of litigating in the forum; (2) the-interest of the

forum state in adjudicating the dispute; (3) the plaintiffs interest in obtaining

convenient and effective relief; (4) the shared interest of the states in obtaining

efficient resolution of disputes; and (5) the interests of the states in furthering

substantive social policies.

Sometimes a non-resident defendant’s communications may create personal jurisdiction.

State may, consistent with due process, exercise judicial power over a person outside of the

State when that person (1) directs electronic activity into the State, (2) with the manifested intent .

of engaging in business or other interactions within the State, and (3) that activity creates, in a

person within the State, a potential cause of action cognizable in the State’s courts.” ALS Scan,

293 F.3d at 714. “[TJhe likelihood that personal jurisdiction can be constitutionally exercised is

directly proportionate to the nature and quality of commercial activity that an entity conducts over

the Internet.” Zippo Mfz. Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119, 1124 (W.D. Pa. 1997);

see ALS Scan, 293 F.3d at 713-14. “A passive [website] that does little more than make

information available to those who are interested in it is not grounds for the exercise [of] personal

jurisdiction.” Zippo Mfg., 952 F. Supp. at 1124; see Carefirst of Md., Inc. v. Carefirst Pregnancy

Ctrs., Inc., 334 F.3d 390, 398-401 (4th Cir. 2003); Young v. New Haven Advoc., 315 F.3d 256,

260-63 (4th Cir. 2002); ALS Scan, 293 F.3d at 713-14. Websites or social media profiles that are

not specifically tailored for an audience in North Carolina do not support personal jurisdiction in

the United States District Court for the Eastern District of North Carolina. See, e.g., Carefirst of

Md., Inc., 334 F.3d at 398-401; Young, 315 F.3d at 260-63; ALS Scan, 293 F.3d at 712-15

(collecting cases); Epic Games, Inc. v. Shenzhen Tairuo Tech. Co., 593 F. Supp. 3d 233, 239-44

(E.D.N.C. 2022); Baumgarten v. Belsky, No. GJH-19-374, 2020 WL 3447753, at *3 (D. Md. June

24, 2020) (unpublished); FireClean, LLC v. Tuohy, No. 1:16-CV-294, 2016 WL 3952093, at *4—

7 (E.D. Va. July 21, 2016) (unpublished); Pathfinder Software, LLC v. Core Cashless, LLC, 127

Supp. 3d 531, 540-44 (M.D.N.C. 2015); Rao v. Era Alaska Airlines, 22 F. Supp. 3d 529, 537-

40 (D. Md. 2014).

Generally, “the contacts of a company are not attributed to a corporate agent for

_ jurisdictional purposes.” ¢Plus Tech., Inc. v. Aboud, 313 F.3d 166, 177 (4th Cir. 2002). Rather,

corporate officers are subject to personal jurisdiction only if they have “sufficient contacts” with □

the state, even if those contacts are made on behalf of the corporation. Id. Thus, if the allegations

against a non-resident individual defendant rest on “nothing more than” that he is an “officer or

employee,” personal jurisdiction does not exist over the corporate officer. Columbia Briargate Co.

. First Nat’] Bank in Dall., 713 F.2d 1052, 1064 (4th Cir. 1983); see Thousand Oaks Barrel Co.

v. Deep S. Barrels LLC, 241 F. Supp. 3d 708, 718 (E.D. Va. 2017) (holding that personal

jurisdiction was not imputed to owners of a company simply because they were owners); Ibekwe

v. Blood Oranges, LLC, No. 3:18-CV-89, 2018 WL 2434069, at *4 (W.D.N.C. May 30, 2018)

(unpublished).

_ Bornheimer resides in Saint Petersburg, Florida, not North Carolina. See Countercl. { 4.

Insurance Toolkits argues that Bornmheimer made contacts with North Carolina as an agent of

Software Automation because he held himself out as speaking for Software Automation on its

website and in his personal Facebook posts. See [D.E. 31] 26. Software Automation and

Bornheimer respond that someone at Software Automation posted about the lawsuit on Software

Automation’s website with Bornheimer as the contact, someone at Software Automation issued a

press release about the lawsuit, and Bormheimer posted on his personal Facebook account about

the lawsuit. See Countercl. J 12—13; [D.E. 33] 6-7. According to Software Automation and _

Bornheimer, these facts do not create personal jurisdiction over Bornheimer.

Defendants fail to plausibly allege that Bornheimer had the minimum contacts with North

Carolina necessary to exercise personal jurisdiction over Bornheimer. Defendants fail to plausibly

allege that Bornheimer purposefully availed himself, either in his personal capacity or as the CEO

of Software Automation, to doing business in North Carolina. For example, defendants fail to

plausibly allege that Bornheimer solicited or initiated business in North Carolina or made an in-

person contact with a North Carolina resident concerning BPP’s purchase or use.

In opposition to this conclusion, defendants argue that North Carolina residents liked

Bormheimer’s Facebook status concerning the lawsuit and that Bomheimer’s business solicitation

posts in internet forums that North Carolina residents viewed created personal jurisdiction. See

[D.E. 31] 29-30; see also [D.E. 31-1, 31-3]. Defendants fail to plausibly allege, however, that

Bornheimer directed this activity to North Carolina. Rather, they only allege that Software

Automation is based in North Carolina, which does not establish personal jurisdiction over

Bornheimer. See, e.g., Epic Games, Inc., 593 F. Supp. 3d at 244; Baumgarten, 2020 WL 3447753,

at *3; FireClean, 2016 WL 3952093, at *4~7; Pathfinder Software, 127 F. Supp. 3d at 540-44;

Rao, 22 F. Supp. 3d at 537-40. Moreover, defendants fail to plausibly allege that Bornheimer

intended to engage in business or other interactions within North Carolina. Instead, Bornheimer

used his personal Facebook account to share the lawsuit’s allegations and his personal opinion of

the lawsuit indiscriminately with the Internet. See Countercl. ff] 11-13; [D.E. 25-3] 2; [D.E. 25-

4] 2-3; [D.E. 25-5] 2-7; [D.E. 25-6] 2; see, ¢.g., Carefirst of Md., Inc., 334 F.3d at 398-401;

Young, 315 F.3d at 260-63; ALS Scan, 293 F.3d at 713-14; Zippo Mfg. Co., 952 F. Supp. at 1124.

Defendants fail to plausibly allege that this court has personal jurisdiction over

Bornheimer. Accordingly, the court dismisses without prejudice Bornheimer from this action. _

I.

A motion to dismiss under Rule 12(b)(6) tests the complaint’s legal and factual sufficiency.

See Ashcroft v. Iqbal, 556 U.S. 662, 677-80 (2009); Bell Atl Corp. v. Twombly, 550 U.S. 544,

554-63 (2007); Coleman v. Md. Ct. of Appeals, 626 F.3d 187, 190 (4th Cir. 2010), aff'd, 566 U.S.

30 (2012); Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir. 2008). To withstand a Rule 12(b)(6)

motion, a pleading “must contain sufficient factual matter, accepted as true, to state a claim to.

relief that is plausible on its face.” Iqbal, 556 U.S. at 678 (quotation omitted); see Twombly, 550

U.S. at-570; Giarratano, 521 F.3d at 302. In considering the motion, the court must construe the

facts and reasonable inferences “in the light most favorable to [the nonmoving party].” Massey Vv.

Ojaniit, 759 F.3d 343, 352 (4th Cir. 2014) (quotation omitted); see Clatterbuck v. City of

10

Charlottesville, 708 F.3d 549, 557 (4th Cir. 2013), abrogated on other grounds by Reed v. Town of

Gilbert, 576 U.S. 155 (2015). A court need not accept as true a complaint’s legal conclusions,

“unwarranted inferences, unreasonable conclusions, or arguments.” Giarratano, 521 F.3d at 302 |

(quotation omitted); see Iqbal, 556 U.S. at 678-79. Rather, a party’s factual allegations must

“nudge[] [its] claims,” Twombly, 550 U.S. at 570, beyond the recin of “mere possibility” into

“plausibility.” Iqbal, 556 U.S. at 678-79.

“Determining whether a complaint states a plausible claim for relief . . . [is] a context

specific task that requires the reviewing court to draw on judicial experience and common sense.”

Iqbal, 556 U.S. at 679. “[W]here the well-pleaded facts do not permit the court to infer more than

the mere possibility of misconduct,” the complaint does not suffice. Id,

When evaluating a motion to dismiss, a court considers the pleadings and any materials

“attached or incorporated into the complaint.” E.I. du Pont de Nemours & Co. v. Kolon Indus.,

Inc., 637 F.3d 435, 448 (4th Cir. 2011); see Fed. R. Civ. P. 10(c); Goines v. Valley Cmty. Servs.

Bd., 822 F.3d 159, 165-66 (4th Cir. 2016); Thompson v. Greene, 427 F.3d 263, 268 (4th Cir. 2005).

A court also may consider a document submitted by a moving party if it is “integral to the

complaint and there is no dispute about the document’s authenticity” without converting the

motion into one for summary judgment. Goines, 822 F.3d at 166. “[I]n the event of conflict

between the bare allegations of the complaint and any exhibit attached... , the exhibit prevails.”

Id. (quotation omitted); see Fayetteville Invs. v. Com. Builders, Inc., 936 F.2d 1462, 1465 (4th Cir.

1991). Additionally, a court may take judicial notice of public records. See, e.g., Fed. R. Evid.

201; Tellabs, Inc. v. Makor Issues & Rts., Ltd., 551 U.S. 308, 322 (2007); Philips v. Pitt Cnty.

Mem’! Hosp., 572 F.3d 176, 180 (4th Cir. 2009).

For these three counterclaims, this court must predict how the Supreme Court of North

11

- Carolina would rule on any disputed state-law issue. See Twin City Fire Ins. Co. v. Ben Amold-

Sunbelt Beverage Co., 433 F.3d 365, 369 (4th Cir. 2005). First, the court looks to opinions of the

Supreme Court of North Carolina. See Stahle v. CTS Corp., 817 F.3d 96, 100 (4th Cir. 2016). If

there are no governing opinions from that court, this court may consider the opinions of the North

Carolina Court of Appeals, treatises, and “the practices of other states.” Twin City Fire Ins. Co.,

433 F.3d at 369 (cleaned up). In predicting how the highest court of a state would address an issue,

this court must “follow the decision of an intermediate state appellate court unless there is

persuasive data that the highest court would decide differently.” Town of Nags Head v. Toloczko,

728 F.3d 391, 398 (4th Cir. 2013) (quotation omitted); see Hicks ex rel. Feiock v. Feiock, 485 U.S.

624, 630 & n.8 (1988). Moreover, in predicting how the highest court of ‘a state would address an

issue, this court “should not create or expand a [s]tate’s public policy.” Time Warner Ent.-

Advance/Newhouse P’ship v. Carteret-Craven Elec. Membership Corp., 506 F.3d 304, 314 (4th

Cir. 2007) (cleaned up); see Day & Zimmermann, Inc. v. Challoner, 423 U.S. 3, 4 (1975) (per

curiam); Wade v. Danek Med., Inc., 182 F.3d 281, 286 (4th Cir. 1999).

A.

Defendants allege that Software Automation made statements constituting libel per se and

libel per quod. See Countercl. f] 23-51. To establish a defamation claim under North Carolina

law, a “plaintiff must allege and prove that the defendant made false, defamatory statements of or

concerning the plaintiff, which were published to a third person, causing injury to the plaintiff’s

reputation.” Griffin v. Holden, 180 N.C. App. 129, 133, 636 S.E.2d 298, 302 (2006) (quotation

omitted); see Desmond v. News & Observer Publ’g Co., 375 N.C. 21, 41-44, 846 S.E.2d 647,

661-62 (2020); Hendrix v. Town of W. Jefferson, 273 N.C. App. 27, 32, 847 S.E.2d 903, 907

(2020); Boyce & Isley, PLLC v. Cooper, 211 N.C. App. 469, 478, 710 S.E.2d 309, 317 (2011);

12

Craven v. Cope, 188 N.C. App. 814, 816, 656 S.E.2d 729, 732 (2008); Smith-Price v. Charter

Behav, Health Sys., 164.N.C. App. 349, 356, 595 S.B.2d 778, 783 (2004); see also Johnson v. Town

of Smithfield, No. 5:23-CV-349, 2024 WL 1336466, at *28 (E.D.N.C. Mar. 28, 2024)

(unpublished); Syngenta Crop Prot., LLC v. Atticus, LLC, No. 5:19-CV-509, 2022 WL 842938, at

*6 (E.D.N.C. Mar. 21, 2022) (unpublished). A statement is defamatory if it, either directly or by

implication, ascribes dishonesty, fraud, lack of integrity, or reprehensible conduct to the subject of

the statement. See Flake v. Greensboro News Co., 212 N.C. 780, 785-86, 195 S.E. 55, 60 (1938);

Donovan v. Fiumara, 114 N.C. App. 524, 526, 442 S.E.2d 572, 574 (1994); Beane v. Weiman Co.,

5 NC. App. 276, 277, 168 S.E.2d 236, 237 (1969). A defamatory statement “‘tend[s] to prejudice

another in his reputation, office, trade, business, or means of livelihood.” Donovan, 114 N.C. App.

526, 442 S.E.2d at 574 (quotation omitted); see West v. King’s Dep’t Store, Inc., 321 N.C. 698,

703, 365 S.E.2d 621, 624 (1998); Flake, 212 N.C. at 786, 195 SE. at 60.

Defamation can be either libel or slander. See, e.g., Craven, 188 N.C. App. at 816, 656

S.E.2d at 732; Tallent v. Blake, 57 NC. App. 249, 251, 291 S.E.2d 336, 339 (1982); cf. Renwick

v. News & Observer Publ’g Co., 310 Nc. 312, 323-24, 312.S.E.2d 405, 412-13 (1984).

Generally, libel is written and slander is oral. See Aycock v. Padgett, 134 N.C. App. 164, 165, 516

S.E.2d 907, 909 (1999); Tallent, 57 N.C. App. at 251, 291 S.E.2d at 338; cf. Bell v. Simmons, 247

NAC. 488, 494, 101 S.E.2d 383, 388 (1958). North Carolina recognizes three classes of libel—

libel per se, libel per quod, and libel by “publications susceptible of two interpretations one of

which is defamatory and the other not.” Renwick, 310 N.C. at 316, 312 S.E.2d at 408 (quotation

omitted): see Arnold v. Sharpe, 296 N.C. 533, 537, 251 S.E.2d 452, 455 (1979); Flake, 212 N.C.

at 785, 195 S.E. at 59; Clark v, Clark, 280 N.C. App. 384, 398, 867 S.E.2d 743, 754 (2021); see

13

also Swinney v. Frontier Airlines, Inc., No. 1:19-CV-808, 2020 WL 3868831, at *5 (M.D.N.C. July

9, 2020) (unpublished).

Libel per se is a false written statement communicated to a third party that “tends to

impeach a person in that person’s trade or profession [or] otherwise tends to subject one to ridicule,

contempt or disgrace.” Renwick, 310 N.C. at 317, 312 SE2d at 408-09; see Syngenta Crop Prot.,

2022 WL 842938, at *6; Flake, 212 N.C. at 782, 195 S.E. at 59-60. In evaluating whether a

publication constitutes libel per se, a court must analyze whether the publication is defamatory

when “stripped of all insinuations, innuendo, colloquium, and explanatory circumstances.”

Griffin, 180 N.C. App. at 134, 636 S.E.2d at 303; see, e.g., Nucor Corp. v. Prudential Equity □□□□□

LLC, 189 N.C. App. 731, 736, 659 S.E.2d 483, 487 (2008). Whether a statement is defamatory

per se is a question of law. See, e.g., Ellis v. N. Star Co., 326 N.C. 219, 224, 388 S.E.2d 127, 130

(1990). When a plaintiff alleges that statements are defamatory per se, the statements “must be

susceptible of but one meaning and of such nature that the court can presume as a matter of law

that they tend to disgrace and degrade the party or hold him up to-public hatred, contempt or

ridicule, or cause him to be shunned and avoided.” Boyce & Isley, PLLC v. Cooper, 153 N.C.

_ App. 25, 30-31, 568 S.E.2d 893, 898-99 (2002); see, e.g., Eshelman v. Puma Biotechnology, Inc.,

2 F.4th 276, 281-82 (4th Cir. 2021); Renwick, 310 N.C. at 317-18, 312 S.E.2d at 409; Oates v.

Wachovia Bank & Tr. Co., 205 N.C. 14, 16, 169 S.E.2d 869, 871 (1933).

. “When examining an allegedly defamatory statement, the court must view the words within

their full context and interpret them as ordinary people would understand them.” Boyce & Isley,

153 N.C. App. at 31, 568 S.E.2d at 899 (quotation omitted); see Renwick, 310 N.C. at 318, 312

S.E.2d at 409. However, “a statement must state or imply a defamatory fact to be actionable.”

Daniels v. Metro Mag. Holding Co. L.L.C., 179 N.C. App. 533, 539, 634 S.E.2d 586, 590 (2006);

14

see Craven, 188 N.C. App. at 817, 656 S.E.2d at 732. Thus, a statement that is rhetorical hyperbole

or “a pure expression of opinion is protected because it fails to assert an actual fact.” Daniels, 179

N.C. App. at 539, 634 S.E.2d at 590; see Craven, 188 N.C. App. at 817, 656 S.E.2d at 732.

A statement constitutes libel per quod if it is “not obviously defamatory” but becomes

jibelous “when considered in connection with cei colloquium, and explanatory

circumstances.” Flake, 212 N.C. at 785, 195 S.E. at 59; see Ellis, 326 N.C. at 223, 388 S.E.2d at

130; Skinner v. Reynolds, 237 N.C. App. 150, 157, 764 S.E.2d 652, 657 (2014).

In considering a motion to dismiss, a court must “credit the plaintiff's allegation of the

factual falsity of a statement.” Chapin v. Knight-Ridder. Inc., 993 F.2d 1087, 1092 (4th Cir. 1993);

see Gilmore v. Jones, 370 F. Supp. 3d 630, 671 (W.D. Va. 2019). A plaintiff, however, cannot

merely allege falsity in “vague, conclusory terms.” Chapin, 993 F.2d at 1092; cf. Mayfield v.

NASCAR, Inc., 674 F.3d 369, 377 (4th Cir. 2012) (observing that “the usual standards of notice

pleading apply in defamation cases” (quotation omitted)); Hatfill v. N.Y. Times Co., 416 F.3d 320,

329 (4th Cir. 2005); Jolly v. Acad. Collection Serv., Inc., 400 F. Supp. 2d 851, 861 (M.D.N.C.

2005).

Defendants plausibly allege that Software Automation made statements on its website and

in its press release to third parties. See Cannon v. Peck, 36 F.4th 547, 559 (4th Cir. 2022);

_ Countercl. Ff 24-25, 28-33; [D.E. 25-3, 25-4; 25-6].! Software Automation stated that defendants

“created fake user accounts using fictitious names and credit card information” to “extract source

1 Defendants allege that Software Automation and Bornheimer “wrote, printed, caused to

be printed, and possessed in printed form the Facebook [c]omments” for a post concerning

defendants. See Countercl. § 26. There are only Facebook comments from Bornheimer with no

allegations linking those posts to Software Automation. See [D.E. 25-5]. Accordingly, any

allegations concerning Bornheimer’s Facebook comments and Software Automation fail to state a

claim.

15

code and data” from BPP’s databases to “improperly create arid sell their own software.” [D.E.

25-3] 2; see [D.E. 25-4] 2; [D.E. 25-6] 2. The “single interpretation” of these statements is that

defendants, who are software developers, duplicitously copied source code and data from Software

Automation, a competitor. Cannon, 36 F.4th at 560 (quotation omitted); see [DE. 25-3] 2; [D.E.

25-4] 2; [D.E. 25-6] 2. Defendants plausibly allege that these statements are false. See Countercl.

| 15-17. Moreover, these statements “tend[] to impeach” defendants in their “trade or

profession.” Cannon, 36 F.4th at 561 (quotation omitted); see Eshelman, 2 F.4th at 281-82;

Renwick, 310 N.C. at 317, 312 S.E.2d at 409; Badame v. Lampke, 242 N.C. 755, 757, 89 S.E.2d

466, 468 (1955) (statements accusing a competitor of engaging in “shady deals” were libel per se).

Accordingly, defendants plausibly allege libel per se.

Software Automation initially responds that absolute privilege protects its ccememes See

[D.E. 29-1] 20-22. “Absolute privilege appropriately protects statements asserted in a pleading

filed with the trial court and invoking judicial process.” Topping v. Meyers, 270 N.C. App. 613,

624, 842 S.E.2d 95, 103 (2020); see Bouvier v. Porter, 900 S.E.2d 838, 847 (N.C. 2024).

“Statements made outside the proceeding to the public or media representatives at a press

conference, even those averments that ‘mirror’ allegations made in a filed complaint,” however,

do not fall under this absolute privilege. Topping, 270 N.C. App. at 624, 842 S.E.2d at 103; see

Bouvier, 900 S.E.2d at 847.

Although some of Software Automation’s corres merely summarize legal pleadings,

Software Automation made anes other statements about the defendants outside the “due course

of a judicial .. . proceeding.” Bouvier, 900 S.E.2d at 847; see [D.E. 25-3] 2; [D.E. 25-4] 2. Thus,

absolute privilege does not protect those statements. See, e.g., Bouvier, 900 S.E.2d at 847;

Topping, 270 N.C. App. at 624, 842 S.E.2d at 103.

: 16

Alternatively, Software Automation argues that qualified privilege protects those

statements. See [D.E. 29-1] 22. “[Q]ualified or conditional privilege arises in circumstances

where (1) a communication is made in [g]ood faith, (2) the subject and scope of the communication

is one in which the party uttering it has a valid interest to uphold, or in reference to which he has

a legal right or duty, and (3) [t]he communication is made to a person or persons having a

corresponding interest, right, or duty.” Presnell v. Pell, 298 N.C. 715, 720, 260 S.E.2d 611, 614

(1979). The counterclaim itself must describe “an occasion of qualified privilege.” Id., 260 S.E.2d

at 614. :

Software Automation shared its press release and website indiscriminately. Thus, Software

Automation fails to plausibly allege a qualified privilege. See id., 260 S.E.2d at 614.

As for Software Automation’s statements causing injury to defendants, defendants allege

_ they “have suffered presumed and actual damages in excess of [$75,000], proximately caused by

[Software Automation], as a result of their defamation of [defendants], in a specific amount to be

proven” at trial. Countercl. {35. Defendants allege that Software Automation’s statements caused

defendants “actual damages” and “distress, embarrassment, injury to moral character, and injury

to reputation” and “impugned” defendants’ profession and business and thereby entitles them to

an award of presumed damages. Id. at J 21. .

“When an unauthorized publication is libelous per se, malice and damage are presumed

from the fact of publication and no proof is required as to any resulting injury.” Flake, 212 N.C.

at 785, 195 S.E. at 59. Thus, defendants plausibly allege libel per se. See id., 195 S.E. at 59;

- Eshelman, 2 F.4th at 283-85; Eli Rsch, Inc. v. United Comme’ns Grp., LLC, 312 F. Supp. 2d 748,

761 (M.D.N.C. 2004) (holding that libel per se “‘obviate[es] the need for the plaintiff to plead and

prove special damages”). In contrast, “[t]o state a claim for libel per quod, a party must specifically

□□□ 17

allege .. . special damages as to each plaintiff.” Skinner, 237 N.C. App. at 157, 764 S.E.2d at 658

(quotation omitted). Defendants’ conclusory allegations do not plausibly allege special damages.

See, e.g., id., 764 S.E.2d at 658. Accordingly, the court dismisses without prejudice defendants’

libel per quod claim against Software Automation but denies Software Automation’s motion to

dismiss defendants’ libel per se claim.

In opposition to this conclusion concerning their libel per quod claim, defendants. cite

Johnson v. Bollinger, 86 N.C. App. 1, 11-12, 356 S.E.2d 378, 385 (1987). See [D.E. 31] 21-22.

In Johnson, the plaintiff alleged damage to his trade or business and loss of business income “in

the sum of $20,000.” Johnson, 86 N.C. App. at 11, 356 S.E.2d at 385 (emphasis removed). In

contrast, defendants’ allegations are nothing “more than . . . unadorned, the-defendant-unlawfully-

harmed-me accusation[s]” paired with the jurisdictional minimum amount-in-controversy. Iqbal,

556 U.S. at 678. Accordingly, defendants fail to plausibly allege libel per quod.

B. .

Defendants allege that Software Automation engaged in unfair and deceptive trade

practices. See Countercl. [7 52-56. To state a UDTPA claim, defendants must plausibly allege:

(1) an unfair or deceptive act or practice, (2) in or affecting commerce, and (3) which proximately

caused injury to the defendants. See Barbour v. Fid. Life Ass’n, 361 F. Supp. 3d 565, 573

(E.D.N.C. 2019); Kelly v. Georgia-Pac. LLC, 671 F. Supp. 2d 785, 798 (E.D.N.C. 2009); SciGrip,

Inc. v. Osae, 373 N.C. 409, 426, 838 S.E.2d 334, 347 (2020); Walker v. Fleetwood Homes of □□□□□□

Inc., 362 N.C. 63, 71-72, 653 S.E.2d 393, 399 (2007). “[W]hether an act or practice is an unfair

or deceptive practice . . . is a question of law for the court.” Gray v. N.C. Ins. Underwriting Ass’n,

352 N.C. 61, 68, 529 S.E.2d 676, 681 (2000); see ABT Bldg. Prods. Corp. v. Nat’] Union Fire Ins.

Co. of Pittsburgh, 472 F3d 99, 123 (4th Cir. 2006). “[A] practice is deceptive if it has the tendency

18

to deceive. ... [A] practice is unfair when it offends established public policy as well as when the

practice is immoral, unethical, oppressive, unscrupulous, or substantially injurious to consumers.”

Gray, 352 N.C. at 68, 529 S.E.2d at 681 (quotation omitted); see Marshall v. Miller, 302 N.C. 539,

548, 276 S.E.2d 397, 403 (1981).

Defendants incorporate by reference Software Automation’s alleged libel as an unfair or

deceptive trade practice. See Countercl. | 53. “In a business setting, libel per se is an unfair or

deceptive act in or affecting commerce in violation of N.C.G.S. § 75-1.1, which will justify an

award of damages under N.C.G.S. § 75-16 for injuries proximately caused.” Brown v. Brown, No.

3:23-CV-230, 2023 WL 6367669, at *8 (W.D.N.C. Sept. 29, 2023) (unpublished) (quotation

omitted); see Ellis, 326 N.C. at 225-26, 388 S.E.2d at 131. “To recover, however, a plaintiff must

have suffered actual injury as a proximate result of defendant’s deceptive statement or

misrepresentation.” Ellis, 326 N.C. at 226, 388 S.E.2d at 131 (quotation omitted). In other words,

libel per se fulfills just the first two elements of a plaintiff’s prima facie UDTPA claim. A plaintiff

still must allege damages, and presumed damages do not suffice. See, e.g., Taylor v. United States,

No. 7:11-CV-268, 2012 WL 5928269, at *5 (E.D.N.C. Nov. 26, 2012) (unpublished); Exclaim

Mktg., LLC v. DIRECTV, Inc., No. 5:11-CV-684, 2012 WL 3023429, at *9 (E.D.N.C. July 24,

2012) (unpublished); Mkt. Am., Inc. v. Christman-Orth, 135 N.C. App. 143, 157, 520 S.E.2d 570,

580 (1999); Ausley v. Bishop, 133 N.C. App. 210, 216-17, 515 S.E.2d 72, 77 (1999) (holding that

slander per se is an unfair and deceptive trade practice, then considering whether the plaintiff

established “actual injury to himself or his business proximately caused by the unfair or deceptive

act or practice”).

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As discussed, defendants plausibly allege libel per se. Defendants, however, do not

plausibly allege injury to themselves. Accordingly, the court dismisses without prejudice

defendants’ UDTPA counterclaim.

IV.

In sum, the court GRANTS IN PART and DENIES IN PART the motion to dismiss of

Software Automation and Zachary Bornheimer [D.E. 29], DISMISSES WITHOUT PREJUDICE

Bornheimer from the action for lack of personal jurisdiction, and DISMISSES WITHOUT

PREJUDICE for failure to state a claim upon which relief can be granted defendants’ libel per

quod and UDTPA counterclaims against Software Automation. Defendants’ libel per se

counterclaim against Software Automation survives. □

SO ORDERED. This 3 day of July, 2024,

. United States District Judge

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