Opinion

IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF NORTH CAROLINA

USCONNECT, LLC, )

)

Plaintiff, )

)

v. ) 1:25CV692

)

VENDORS EXCHANGE )

INTERNATIONAL, INC. and )

VENDORS EXCHANGE )

INTERNATIONAL, LLC, d/b/a )

VE SOLUTIONS, )

)

Defendants. )

MEMORANDUM OPINION, ORDER, AND RECOMMENDATION OF

UNITED STATES MAGISTRATE JUDGE

The plaintiff, USConnect, LLC Carolina law (Count Seven), and

(“USConnect”), and the defendant, unjust enrichment (Count Eight).

Vendors Exchange International, Inc.

(“Vendors Exchange”), had a fruitful Before the Court is the defendants’

business partnership for several years Motion to Dismiss Counts Three

in the vending services industry. That through Eight.

relationship then soured. Broadly,

USConnect alleges that Vendors On March 9, 2026, this Court

Exchange misappropriated recommended dismissal of a number

USConnect’s confidential information of USConnect’s claims, including its

to create and sell its own products, unfair and deceptive business

giving rise to claims of breach of practices claims and Lanham Act

contract (Count One), contractual reverse passing off claim. See Mem.

indemnification (Count Two), Op. & R. & R. of U.S. Mag. Judge,

misappropriation of trade secrets Docket Entry 22. USConnect

under North Carolina and federal law objected, directing the Court’s

(Counts Three and Four respectively), attention to case law at odds with the

passing off in violation of the Lanham unfair and deceptive business

Act (Count Five), common law unfair practices determination. The Court

competition (Count Six), unfair and has considered the parties’ arguments

deceptive trade practices under North and hereby withdraws the March 9,

2026 Memorandum Opinion and suite of technology features that

Recommended Ruling. include credit/debit card processing,

hosted balance cards, consumer

Because USConnect has pled facts engagement services, product

sufficient to support the claims promotions[,] and consumer loyalty

alleged in Counts Three and Four and programs (‘USConnect Technology’)

Six through Eight, the Court should that are available as part of the

deny the motion as to those counts. USConnect Network (‘the USConnect

Because USConnect has not pled facts System’).” Id. ¶ 15. This System

establishing that it was the origin of “allows users to access and make

the goods central to its Lanham Act purchases from internet-enabled

passing off claim, the Court should vending machines and micro-market

grant the motion as to Count Five. kiosks that contain within them the

applications that enable and enhance

I. FACTS the user’s interface experience . . . .”

Id. ¶ 16. Users “interfac[e] with text,

Because all well-pled facts are graphics, artwork, logos[,] and

accepted as true and considered in the trademarks (the ‘USConnect

light most favorable to the plaintiff, Intellectual Property and Content’).”

below are the facts as USConnect has Id.

alleged in the Complaint, Docket

Entry 3. See Nemet Chevrolet, Ltd. v. USConnect “maintains a consumer

Consumeraffairs.com, Inc., 591 F.3d loyalty program (the ‘Loyalty

250, 255 (4th Cir. 2009) (citation Program’)” “[a]s part of US Connect

modified). Technology within the USConnect

System.” Id. ¶ 17. This Loyalty

“For more than a decade, USConnect Program “enables consumers to earn

developed and refined a business loyalty points that can then be

model and internet network system to redeemed for various rewards . . . .”

link thousands of internet-enabled Id. The “availability of these

vending machines, micro-market programs increases sales” because the

kiosks, and other point-of-sale (‘POS’) “Loyalty Program is a significant

devices . . . (the ‘USConnect driver of repeat business for the

Network’).” Compl. ¶ 14. USConnect’s Affiliates.” Id. “Through the

Affiliates own the vending machines USConnect Intellectual Property and

and kiosks. Id. ¶ 16. Customers of Content, the kiosk interfaces with the

these Affiliates and end-use- USConnect Account” to reduce the

consumers use a USConnect Account, user’s Account balance while

“enabled through a unique increasing the user’s loyalty points in

USConnect Card or an online the Loyalty Program. Id. ¶ 18. “The

downloadable application (or ‘app’),” USConnect Intellectual Property and

to “facilitate vending telemetry and Content also enables the end-user to

cashless payment systems through a

reload the USConnect Account with any competitive program, product[,]

funds . . . .” Id. or process.” Id.

USConnect was interested in After further negotiations, the parties

“develop[ing] more advanced kiosks entered into a Master Services

that could use the USConnect Agreement (“MSA”) in November

Intellectual Property and Content on 2018, pursuant to which USConnect

and as part of the USConnect System” would afford Vendors Exchange “full

so it began vetting manufacturers in access to USConnect Intellectual

2017. Id. ¶ 20. One of those Property and Content” so that

manufacturers was Vendors Vendors Exchange could “develop (at

Exchange which, at the time, USConnect’s directions and

“designed and manufactured kiosks specifications) and manufacture

for use in unattended retail situations, kiosks that contained and were based

like micro-markets in employee on the USConnect Intellectual

breakrooms,” but “those kiosks were Property and Content for use on and

very basic in their technology-related as part of the USConnect System.” Id.

features.” Id. ¶¶ 21–22. “The kiosks ¶¶ 24–25.

were not user-friendly, had no ability

to track any type of loyalty rewards Under the MSA, “USConnect retained

program, and could not handle Vendors Exchange to aid in the

declining balance requirements.” Id. development, manufacture[,] and sale

¶ 22. of such Integrated Products [that

were based on and contained the

In April 2017, USConnect and USConnect IP and designs as well as

Vendors Exchange entered into a Vendors Exchange’s software written

Confidentiality Agreement (“NDA”) to USConnect’s specifications] to the

“pursuant to which Vendors Affiliates.” Id. ¶ 25.

Exchange agreed to maintain the

confidentiality of USConnect’s While “USConnect continued to own

confidential and proprietary all right, title[,] and interest in and to

information” including, but not the USConnect IP,” it “granted

limited to, “its business methods, Vendors Exchange . . . a non-exclusive

supplier relationship, membership license to use the USConnect IP solely

relationships, technology systems, for purposes of fulfilling its

user experience, proprietary APIs, obligations under the MSA for the life

trade secrets, customer lists, and of the MSA. Id. ¶¶ 26–27. In return,

specifications . . . .” Id. ¶ 23. Vendors Vendors Exchange “expressly agreed

Exchange also agreed “that it would that it would not” do a litany of things

not use such information to develop such as use or modify “any portion of

the USConnect IP separately from the

Integrated Products,” “[u]se the

USConnect IP in any manner except

as permitted by the MSA,” “[c]reate functionality for the consumer kiosk

derivative works based on the interfaces and interface features

USConnect IP,” or “[a]ccess the (including, for example, quick

USConnect’s IP to [] build a checkout or Scan-N-Go),” “customer

competitive product.” Id. ¶ 28. lists, customer contacts, customer

locations, particularities of the

Pursuant to the MSA, Vendors customer’s business (including size,

Exchange was to “manufacture and number of kiosks, kiosk serial

sell the Integrated Products numbers[,] and purchasing

exclusively for and to USConnect and potential), [and] potential

its Affiliates.” Id. ¶ 30. And “the customers,” and the “loyalty rewards

Integrated Products would bear system business model, including

various USConnect trademarks on the details regarding process rates, flow

screens . . . .” Id. Furthermore, “each of funds, redemption protocol,

party was precluded from divulging assignment percentages, data flow,

the other party’s ‘Confidential micro-market vending

Information’ to any third party.” Id. characteristics, scan and go

¶ 31. functionality, and system architecture

and connectivity.” Id.

In February 2020, the parties entered

into an Amended MSA to include USConnect considers the USConnect

“USConnect’s Loyalty Programs Confidential Information to be trade

Bistro to Go!/My Vending Rewards” secrets that give it “a unique

in “the USConnect IP” and add them competitive advantage in the

“to the Integrated Products that marketplace” and which USConnect

Vendors Exchange was to develop, treats “as confidential,” and which “is

manufacture[,] and sell to the not generally known by USConnect

USConnect Affiliates.” Id. ¶¶ 35–36. competitors.” Id. ¶ 40. “[T]o maintain

the confidential nature of the

“As part of the development process, information[,]” “the information is

and pursuant to the NDA, MSA[,] and subject to confidentiality provisions

[Amended] MSA . . ., USConnect set forth in [] Agreements,” it is

shared highly sensitive confidential “password-protected” with access

and propriety information with limited to “employees that have a

Vendors Exchange.” Id. ¶ 34. This need to access the information in

“USConnect Confidential order to perform his/her job,” and, if

Information” included, but was not shared with vendors or suppliers, is

limited to, “the underlying first protected by third-party non-

requirements of the full suite of disclosure agreements. Id. ¶ 41.

technical services and other account

service products that USConnect Despite its agreement with

offers its customers,” “descriptions, USConnect, “upon [USConnect’s]

design specifications[,] and information and belief, in or around

2023, Vendors Exchange began while properly recording such entries

working with [Vendors Exchange in the customer’s account.” Id. ¶ 51. It

International, LLC d/b/a VE also includes USConnect’s “unique”

Solutions (‘VE Solutions’)] to develop ‘Scan-N-Go’ program’ . . . that enabled

its own competitive loyalty program the kiosk to recognize the difference

and declining balance program to between a barcode on merchandize

incorporate into a competing kiosk [sic] and the barcode on the

that they could take directly to USConnect Card, thereby enabling

market.” Id. ¶ 43. The use of the consumer to simply scan the

USConnect’s IP and the USConnect barcode of each item to complete a

Confidential Information purchase without having to touch the

“accelerate[d] the process for touchscreen . . . .” Id.

developing a fully functioning kiosk

that contained many of the features of “Prior to being exposed to and having

the Integrated Products which they access to USConnect IP and the

could then take to market.” Id. ¶ 47. USConnect Confidential Information,

Vendors Exchange was unable to

Indeed, “[t]hese efforts eventually led create the loyalty programs or the

to the VE Product.” Id. ¶ 43. “The VE declining balance programs for use

Product contained or was otherwise with their rudimentary kiosks in the

based on or derived from the manner or in the way that the

USConnect IP and the USConnect USConnect Network handles such

Confidential Information and programs.” Id. ¶ 49. “[U]pon

included many of the features, [USConnect’s] information and belief,

functions[,] and graphics of the had [the defendants] not used the

Integrated Products.” Id. ¶ 44. USConnect IP and the USConnect

“[A]spects” of the VE Product’s “user Confidential Information, it would

interface screens” either “duplicate or have taken [them] much longer and

are substantially similar to those of been more expensive to create the VE

the Integrated Products.” Id. ¶ 45. Product with the functions and

features that it currently has . . . .” Id.

“The VE Product also incorporated a ¶ 50.

loyalty and declining balance

program that was developed based While developing the VE Product, VE

on, derived from, and/or that Solutions “registered a fictitious

otherwise utilized the USConnect IP name, ‘VE Solutions,’” after which the

and the USConnect Confidential defendants “began creating marks

Information.” Id. ¶ 46; see also id. and logos for ‘VE Solutions’ that

¶ 48. In addition, the VE Product has would distinguish the Vendors

USConnect’s “unique” “‘Promotions’ Exchange brand from USConnect.”

program [that] enables the kiosk to Id. ¶ 54. Although the Amended MSA

create, recognize[,] and account for required Vendors Exchange “to

promotions offered to the customer implement the design of the images

dictated by USConnect [including similar loyalty programs and other

USConnect’s marks, logos[,] and features/programs that were then[]

trademarks] into the Integrated offered by USConnect within the

Product’s user interface screens[,]” in Integrated Product.” Id. ¶ 64.

2024 the defendants “began replacing

the USConnect images on the USConnect’s Chief Executive Officer

Integrated Product’s user interface contacted the defendants’ President

screens with the marks and logos of who “admitted that [the defendants]

VE Solutions.” Id. ¶¶ 55–56. “[U]pon had developed the VE Product and

[USConnect’s] information and that, in doing so and by its actions,

belief,” the defendants “hoped . . . that Vendors Exchange had breached the

consumers would associate MSA.” Id. ¶¶ 66–67. But he “denied

Integrated Products with VE that the VE Product used,

Solutions such that, when [the contained[,] or was developed with

defendants] began to roll out their VE the USConnect IP or the USConnect

Product with a user interface screen Confidential Information.” Id. ¶ 68.

that had images and marks of VE

Solutions, the VE Product would Pursuant to the terms of the Amended

seamlessly be accepted by the vending MSA, “[t]he parties met in

market. Id. ¶ 59. Greensboro, North Carolina,” and the

defendants’ President “made it clear

The Amended MSA was set to expire that [the defendants] intended to

in November 2024. Id. ¶ 60. In the compete directly against USConnect

meantime, “Vendors Exchange made with their VE Product.” Id. ¶¶ 69–70.

it appear that it intended to renew the Although he earlier admitted that the

MSA” and, in the spring of that year, defendants approached an Affiliate,

“engaged in discussions with he now “claimed the Affiliate was

USConnect about extending the MSA lying.” Id. ¶ 70.

for another four[-]year term.” Id.

¶¶ 60–61. However, “[w]hile these The Amended MSA expired in

discussions were ongoing, [the November 2024 and, along with it,

defendants] were in the final stages of Vendors Exchange’s license to use

integrating numerous programs” into USConnect’s IP. Id. ¶ 72. But Vendors

the VE Product and “devis[ing] a plan Exchange “continued to market and

to market and sell the VE Product sell the VE Product which, upon

directly to USConnect’s Affiliates.” Id. [USConnect’s] information and belief,

¶ 62. Indeed, “[i]n the Summer of incorporates or is otherwise based

2024, using USConnect’s Affiliate list, on/derived from the USConnect IP

Vendors Exchange approached at and USConnect Confidential

least one . . . USConnect Affiliate and Information.” Id. ¶ 73; see also id.

offered to sell them the VE Product” ¶ 75. “Upon [USConnect’s]

that “would not be connected to the information and belief, [the

USConnect Network but would offer defendants] have generated

thousands of dollars of profits from Atl. Corp. v. Twombly, 550 U.S. 544,

the sale, rental and/or lease of the VE 570 (2007)). Legal conclusions “must

Product.” Id. ¶ 76. be supported by factual allegations”

that amount to more than

II. PROCEDURAL “unadorned, the-defendant-

POSTURE unlawfully-harmed-me

accusation[s].” Iqbal, 556 U.S. at 678

On June 27, 2025, USConnect filed (citing Twombly, 550 U.S. at 555). A

suit against the defendants in plaintiff is not required to prove its

Guilford County Superior Court. See case in the complaint, see, e.g.,

Compl. The Complaint alleges claims Robertson v. Sea Pines Real Est. Cos.,

of breach of contract, contractual 679 F.3d 278, 291 (4th Cir. 2012);

indemnification, misappropriation of Scott v. City of Durham, 2021 WL

trade secrets under state and federal 3856168, at *2 (M.D.N.C. August 27,

law, passing off, unfair competition, 2021), but the complaint’s allegations

unfair and deceptive trade practices, should “allow the court to draw a

unjust enrichment, and breach of reasonable inference that the

implied covenant of good faith and defendant is liable for the misconduct

fair dealing. See generally id. alleged,” Int’l Refugee Assistance

Project v. Trump, 961 F.3d 635, 648

The defendants removed the case to (4th Cir. 2020) (cleaned up).

federal court on July 30, 2025, Docket

Entry 1, and moved one week later to On a motion to dismiss, courts view

dismiss six of USConnect’s claims, see the allegations in the complaint as

Docket Entry 9. true, drawing all inferences in the

plaintiff's favor. See Twombly, 550 at

Specifically, the defendants move to 555–56 (2007); Langford v. Joyner,

dismiss for failure to state a claim as 62 F.4th 122, 124 (4th Cir. 2023). But

to Counts Three and Four alleging courts are not required to “accept as

misappropriation of trade secrets, true ‘legal conclusions drawn from the

Count Five alleging passing off, Count facts’ or any other ‘unwarranted

Six alleging unfair competition, Count inferences, unreasonable conclusions,

Seven alleging unfair and deceptive or arguments.’” Just Puppies, Inc. v.

trade practices, and Count Eight Brown, 123 F.4th 652, 660 (4th Cir.

alleging unjust enrichment. See id. 2024) (quoting Giarratano v.

Johnson, 521 F.3d 298, 302 (4th Cir.

III. DISCUSSION 2008)).

“To survive a motion to dismiss, a

complaint must contain sufficient

factual matter, accepted as true, to

‘state a claim to relief that is plausible

on its face.’” Ashcroft v. Iqbal, 556

U.S. 662, 678 (2009) (quoting Bell

A. USConnect has sufficiently 1:12CV967, 2016 WL 3892416, at *3

alleged misappropriation of (M.D.N.C. July 14, 2016). Both

trade secrets. statutes “define a trade secret in

substantially the same terms[,]” as

USConnect alleges that the well. Sysco Mach. Corp. v. DCS USA

defendants misappropriated its trade Corp., 143 F.4th 222, 228 (4th Cir.

secrets by using them without 2025). A trade secret is information

authorization in the VE Product, in for which a business uses “reasonable

violation of North Carolina General measures to keep” secret and from

Statutes § 66-152, et seq. (North which a business “derives

Carolina Trade Secrets Protection Act, independent economic value[.]” Id.

“NCTSPA”) and 18 U.S.C. § 1836(b) (citations omitted).

(Defend Trade Secrets Act of 2016,

“DTSA”). See Compl. ¶¶ 91-108 As is especially relevant here, the

(Counts Three and Four). Fourth Circuit Court of Appeals has

explained that “[t]he federal and

The defendants argue that pleading North Carolina statutes are similar in

misappropriation of trade secrets another way: both require the

requires more specificity under Rule 8 plaintiff to identify with sufficient

and USConnect’s allegations lack that particularity the trade secret it claims

requisite specificity and otherwise fail has been misappropriated.” Id.

to state a claim. See Defs.’ Am. Br. in (citations omitted). “At the pleading

Supp. of Mot. to Dismiss at 11–20, stage, identifying the trade secret with

Docket Entry 11 (“Am. Br. in Supp.”). sufficient particularity means

USConnect disagrees, argues that describing the trade secret at a level of

there is no applicable heightened detail that enables a defendant to

pleading standard, and contends that delineate that which he is accused of

it has sufficiently pled misappropriating . . . and that enables

misappropriation of trade secrets. See a court to determine whether the

Pl. USConnect’s Resp. in Opp’n to plaintiff has plausibly satisfied the

Defs.’ Mot. to Dismiss at 6–15, Docket reasonable secrecy and independent

Entry 17 (“Resp. Br.”). economic value requirements.” Id.

(internal citations omitted).

A claim for a violation of the NCTSPA

and DTSA requires that the defendant For example, in Sysco Machinery

“knew or should have known of the Corporation, Sysco defined its trade

trade secret” and “had a specific secrets as “‘Sysco’s compilation of

opportunity to acquire it for machinery, software, and confidential

disclosure or use, or has acquired, information,’” “‘Sysco’s proprietary

disclosed, or used it without the and confidential Information,

express or implied consent or including the Copyrighted Works, and

authority of” the plaintiff. RF Micro technical, financial, operations,

Devices, Inc. v. Xiang, No. strategic planning, product, pricing

vendor, and customer information,’” methods, techniques, and

and “‘the technical documents, test processes from which Plaintiffs

videos, statistical data, client derive actual or potential

contracts, and other confidential commercial value from not

information used by Sysco to develop being generally known or

and manufacture’ rotary die cutting readily ascertainable through

machines.” Id. at 228–29 (quoting the independent development or

complaint). Essentially, Sysco was reverse engineering by a

“suggest[ing] that nearly [its] entire persons who can otherwise

business [was] a trade secret.” Id. at obtain economic value from its

229. disclosure or use” and

“confidential and valuable

As a result, the Court explained, “it is technical knowledge,

impossible for DCS to know what it engineering specifications,

has been accused of misappropriating market knowledge, and

or for the court to assess whether intellectual and practical

Sysco has met the reasonable secrecy knowhow relating to,

and independent economic value developed for, and necessary

requirements.” Id. for the design and construction

of cabinetry, such cabinetry

Courts have found the following trade used, in particular in higher-

secret pleadings insufficient: end residences,”1 see Design

Gaps, Inc. v. Hall, No. 3:23-cv-

- “specialized marketing 186-MDC, 2023 WL 8103156,

strategies and materials” and at *9 (W.D.N.C. Nov. 21, 2023);

“Brand Standards Manual”

without further factual - “proprietary training, PHS’s

allegations, see Willett v. proprietary practices, methods,

Window Gant, LLC, No. 3:25- techniques, and pricing

cv-00044, 2026 WL 575903, at models, confidential customer

*7 (W.D. Va. Mar. 2, 2026); databases, including the entire

PHS’s SalesForce database, and

- “business and technical PHS proprietary quote

information, including but not software, confidential sales

limited to formulas, patterns, memos, sales training manuals,

programs, devices, and information concerning

compilations of information, PHS’s relationship with its

1 The plaintiff also alleged that its trade alleged trade secrets “primarily

secrets included “product sources, refer[red] to knowledge Hall would have

products, price lists, advertising plans, gained while working for Plaintiffs.”

designs and materials, technical Design Gaps, Inc., 2023 WL 8103156, at

drawings,” and more, but the court found *10. Such knowledge of an employee is

this definition failed because these not a trade secret. Id. (citing cases).

suppliers and vendors” without confidential service agreements

“specific information about the between the previous business

unique nature of its customer owner and customers, and

identification and targeted pricing templates,” see Omni

marketing practices, including Logistics, LLC v. Wells, No.

how this information is 1:25-cv-00023-MR-WCM,

developed, ascertained, and 2025 WL 4036404, at *3

protected,” see Power Home (W.D.N.C. Dec. 22, 2025),

Solar, LLC v. Sigora Solar, adopted, 2026 WL 95428

LLC, No. 3:20-cv-00042, 2021 (W.D.N.C. Jan. 13, 2026);

WL 3856459, at *10 (W.D. Va.

Aug. 30, 2021); and - “financial business, scientific,

technical and engineering

- “the ‘structure and design of the information, client lists, and

Ventures VRX Simulators’ that vendor lists,” see Townsend v.

are the ‘subject of pending Advanced Energy Machs.,

patent applications’,” VRX LLC, No. 24-cv-2520-ABA,

USA, LLC v. VRX Ventures, 2025 WL 2659834, at *6 (D.

Ltd., No. 3:20CV409-GCM, Md. Aug. 29, 2025); and

2020 WL 7229672, at *7

(W.D.N.C. Dec. 8, 2020). - the plaintiff’s “business model

and the development and

On the other hand, courts have processing of certain SAP

deemed the following trade secret Products, including Plaintiff’s

allegations sufficient: pricing and Financials for those

products, and ‘customers’

- “flat-rate job pricing formula” technical specifications’”

and “lead-tracking system, because “[b]ased on the alleged

including leads from the call relationship between Plaintiff

center” where the plaintiff and [one of the defendants,]

further defined the flat-rate Barefoot, and the subsequent

pricing formula as “provid[ing] involvement between [the two

larger profit margins than jobs defendants], the . . . Plaintiff’s

done on a T&M (time and identification of the claimed

materials) basis,” see Willett, trade secrets enables

2026 WL 575903, at *7; Defendants to delineate what

they are accused of

- “business methods, techniques, misappropriating,” see Chase

processes, . . . lists of actual or Corp. v. Barefoot, No.

potential customers or 1:24CV351, 2025 WL 641932,

suppliers[,] . . . key account at *11 (M.D.N.C. Feb. 27, 2025),

contacts and customer lists, adopted, 2025 WL 969359

insurance requirements and (Mar. 31, 2025).

rudimentary kiosks in the manner or

Here, USConnect’s allegations are in the way that the USConnect

more akin to those in Omni Logistics, Network handles such programs.” Id.

LLC, Townsend, and Chase ¶ 49. But, once exposed to

Corporation where the courts found USConnect’s protected information,

the trade secret allegations the defendants developed the VE

sufficiently particular, especially Product which incorporates “a loyalty

when read in the context of and declining balance program”

USConnect’s other allegations. which is “an attempt to replicate the

USConnect alleges that the USConnect Network and the

USConnect Confidential Information USConnect System” using protected

are trade secrets. See Compl. ¶ 40. It information. Id. ¶ 46.

then alleges that the defendants

misappropriated at least a portion of Despite their argument otherwise, the

the USConnect Confidential defendants can “delineate that which

Information related to its loyalty [they are] accused of

rewards program: its “costs and misappropriating,” and the Court can

pricing rates and structures for loyalty assess whether USConnect has also

reward systems and kiosks[,]” its alleged the secrecy and independent

“customers and potential customers economic value of the trade secrets.

for loyalty reward systems and kiosks, See Sysco Mach. Corp., 143 F.4th at

including customer names, locations, 228.

contact information, size, number of

kiosks, kiosk serial numbers[,] and The defendants also argue that some

purchasing potential[,]” and its of the alleged trade secrets are not

“loyalty rewards system business secret at all. This includes “cost and

model, including details regarding pricing information” and “customer

processing rates, flow of funds, information” that are “readily

redemption protocol, assignment available to the public.” Am. Br. in

percentages, data flow, micro-market Supp. at 14–15. But USConnect’s

vending characteristics, scan and go allegations are not so basic. A

functionality, and system architecture USConnect Affiliate may very well

and connectivity.” Id. ¶¶ 94, 104. know how much it pays USConnect,

but it would not necessarily know

Earlier in the Complaint, USConnect USConnect’s “costs and pricing rates

describes its Loyalty Program and and structures for the loyalty reward

how “the kiosk interfaces with the systems and kiosks[.]” See Compl.

USConnect Account” as part of its ¶ 34. Similarly, while the identity of

Loyalty Program. Id. ¶¶ 17–19. Until USConnect’s existing customers may

it worked with USConnect, “Vendors be public because they have a kiosk

Exchange was unable to create the with USConnect’s marks, other

loyalty programs or the declining customer information such as

balance programs for use with their customer “purchasing potential[]”

and “potential customers for loyalty Torts § 757 cmt. a (Am. Law Inst.

rewards systems and kiosks” are not 1939)).

necessarily publicly available. See id.

Relying on Sysco Machinery

Furthermore, USConnect alleges that Corporation, the defendants contend

its trade secrets are password- that whatever trade secrets they are

protected and only available to alleged to have used to develop the VE

employees who require the Product, “USConnect deliberately and

information to perform their jobs, and voluntarily provided [those trade

third parties that receive protected secrets] . . . to Vendors Exchange[]

information must enter into non- under the parties’ agreement.” Am.

disclosure agreements. Id. ¶ 41. At Br. in Supp. at 19. The problem in

least for this pleading stage, Sysco Machinery Corporation was

USConnect has sufficiently alleged Sysco’s failure to “allege that, prior to

that the information was confidential the activity at issue, it ever informed

and it took reasonable measures to [the defendant] that such information

maintain its secrecy. contained trade secrets” so the

“information [the defendant]

The defendants also challenge what possessed about Sysco appear[ed] to

they characterize as conclusory have been acquired lawfully as part of

allegations that they misappropriated the parties’ ordinary manufacturer-

or used trade secrets. See Am. Br. in distributor relationship.” Id.

Supp. at 17.

Those facts thus differ from the ones

The definitions of “misappropriation” USConnect alleges. USConnect only

in the DTSA and NCTSPA are disclosed its trade secrets to Vendors

“substantially identical.” Sysco Mach. Exchange because Vendors Exchange

Corp., 143 F.4th at 229. Those entered into the NDA, MSA, and

statutes instruct that Amended MSA and legally bound

“[m]isappropriation involves itself to the terms of those

‘acquisition,’ ‘disclosure,’ or ‘use’ of a agreements, including maintaining

trade secret by ‘improper means’ or the “confidentiality of . . . trade

without consent.” Id. In other words, secrets[.]” Compl. ¶23. USConnect

“‘the core’ of a misappropriation claim explicitly alleges that it “shared highly

is a ‘breach of a duty of trust or sensitive confidential and propriety

confidentiality.’” Id. (citation information [that included the trade

omitted). But “‘[a]part from breach of secrets identified in Counts Three and

contract, abuse of confidence[,] or Four] with Vendors Exchange”

impropriety in the means of “pursuant to the NDA, MSA[,] and

procurement, trade secrets may be MSA as amended . . . .” Id. ¶ 34

copied as freely as devices or (emphasis added).

processes which are not secret.’” Id. at

230 (quoting Restatement (First) of

USConnect also sufficiently alleges sets forth unfair competition causes of

that the defendants misappropriated action for false association and false

or used the trade secrets to develop advertising . . . .” Belmora LLC, 819

the VE Product as a competitor to the F.3d at 706.

Integrated Product. As alleged, the

defendants necessarily employed In this case, USConnect has alleged

USConnect’s trade secrets to create “‘reverse passing off,’ which occurs

and execute the VE Product because when a ‘producer misrepresents

Vendors Exchange was otherwise someone else’s goods or services as

incapable of doing so on its own. his own.’” Universal Furniture Int’l,

Inc. v. Collezione Europa USA, Inc.,

At this stage of litigation, USConnect 618 F.3d 417, 438 (4th Cir. 2010)

has sufficiently alleged that the (quoting Dastar Corp., 539 U.S. at 28

defendants misappropriated its trade n.1).

secrets in violation of North Carolina

and federal law. The Court should Reverse passing off “occurs when

deny the defendants’ motion to either (1) ‘the wrong doer [sic]

dismiss Counts Three and Four. removes the name or trademark on

another party’s product and sells that

B. USConnect’s “reverse passing product under a name chosen by the

off” claim fails as a matter of wrongdoer’ or (2) ‘the wrongdoer . . .

law. removes or otherwise obliterates the

name of the manufacturer or source

USConnect alleges that the and sells the product in an unbranded

defendants’ removal of USConnect’s state.’” Siler v. Lejarza, 415 F. Supp.

trademark images on the Integrated 3d 687, 699 (M.D.N.C. 2019) (quoting

Product’s user screen and Rutledge v. High Pt. Reg’l Health

replacement with the VE Solutions Sys., 558 F. Supp. 2d 611, 620

trademark violated the Lanham Act, (M.D.N.C. 2008)).

15 U.S.C. § 1125, et seq. Compl.

¶¶ 110–115. To state a claim for reverse passing

off, a plaintiff must sufficiently allege:

“While much of the Lanham Act “‘(1) that the work at issue originated

addresses the registration, use, and with the plaintiff; (2) that origin of the

infringement of trademarks and work was falsely designated by the

related marks, § 43(a) . . . goes beyond defendant; (3) that the false

trademark protection.” Dastar Corp. designation of origin was likely to

v. Twentieth Century Fox Film Corp., cause consumer confusion; and (4)

539 U.S. 23, 28–29 (2003), quoted in that the plaintiff was harmed by the

Belmora LLC v. Bayer Consumer defendant’s false designation of

Care AG, 819 F.3d 697, 706 (4th Cir. origin.’” Id. at 701 (quoting Universal

2016). “Written in terms of the Furniture Int'l, Inc., 618 F.3d at 438).

putative defendant’s conduct, § 43(a)

Regarding the first element, “[i]f the Here, per the Complaint:

defendant supplies a product it

manufactured, even if copied from a - Vendors Exchange “was to

competitor, a reverse passing off develop (at USConnect’s

claim generally will not attach.” John directions and specifications)

Bean Techs. Corp. v. B GSE Grp., and manufacture kiosks that

LLC, 480 F. Supp. 3d 1274, 1306 (D. contained and were based on

Utah 2020). To that end, the Supreme the USConnect Intellectual

Court has held that “[origin] refers to Property and Content for use

the producer of the tangible goods on and as a part of the

that are offered for sale, and not to the USConnect System,” Compl.

author of any idea, concept, or ¶ 24;

communication embodied in those - “The Integrated Products were

goods.” Dastar Corp., 539 U.S. at 37. based on and contained the

This is because the Lanham Act was USConnect IP and designs as

“not designed to protect originality or well as Vendors Exchange’s

creativity”—that is the province of software written to

copyright. See id. USConnect’s specifications,” id.

¶ 25;

The Dastar Corp. Court also - “USConnect granted Vendors

recognized that “[t]he concept [of the Exchange a non-exclusive

origin of goods] might be stretched . . . license to use the USConnect IP

to include not only the actual solely for purposes of fulfilling

producer, but also the trademark its obligations under the MSA

owner who commissioned or assumed for the life the of the MSA,” id.

responsibility for (‘stood behind’) ¶ 27;

production of the physical product.” - Vendors Exchange

Id. at 31-32. See also DJ Direct, Inc. v. “manufacture[d] and s[old] the

Margaliot, 512 F. Supp. 3d 396, 415- Integrated Products exclusively

17 (E.D.N.Y. 2021) (applying Dastar for and to USConnect and its

Corp. and Universal Furniture Int’l, Affiliates,” id. ¶ 30; and

Inc. and finding that the plaintiff - “[T]he Integrated Product

established a likelihood of success (for would bear various USConnect

purposes of an injunction) that it was trademarks on the screens to

the origin of the karaoke machines designate to Affiliates and their

even though it did not manufacture customers that the Integrated

the machines); Universal Furniture Products were USConnect’s

Int’l, Inc., 618 F.3d at 424–25, 438 kiosks operating on the

(applying Dastar Corp. and finding USConnect System,” id.

that the plaintiff was the origin of the

furniture even though it did not Thus, as to origin (as pled), the

manufacture the furniture). question is who is the origin of the

Integrated Product from which

Vendors Exchange removed all of the furniture in the EMC

USConnect’s images and replaced line is initially distributed

with VE Solutions’ marks and logos? through Plaintiff. Accordingly,

The answer is clear. Vendors Plaintiff is the producer of the

Exchange is the origin of the EMC furniture line and will be

Integrated Product. It manufactured considered the “origin” despite

the tangible product while USConnect the fact that it is not the direct

contributed the intellectual property, manufacturer.

and the Lanham Act does not protect

such a contribution. Id. at *13.

USConnect cites to DJ Direct, Inc, 512 The district court in DJ Direct, Inc.

F. Supp. 3d at 415 for the proposition came to the same conclusion where

that it, as the commissioner of the the defendants passed off karaoke

goods, originated them. See Resp. Br. machines as their own that the

at 16. But those facts are inapposite plaintiff’s supplier had manufactured.

from the facts pled here. To that end,

the district court’s opinion in Although . . . Plaintiff’s supplier

Universal Furniture International, manufactured the tangible

Inc. v. Collezione Europe USA, Inc. is goods offered for sale in this

illustrative. See No. 1:04CV977, 2007 case, the fact that Plaintiff

WL 2712926 (M.D.N.C. Sept. 14, ordered the machines in

2007), aff’d, 618 F.3d 417. There, the question to be built to its

court found that the plaintiff was the specifications and to bear the

“origin” of a furniture line that the KaraoKing mark, and that it

defendant passed off as its own even provided customer service and

though the plaintiff did not support through its website . . .

manufacture the furniture itself. , supports the conclusion that

Plaintiff commissioned the

In this case, Plaintiff is not the machines and stood behind

actual manufacturer of the their production. . . .

furniture in question, but can Accordingly, because the

be viewed as its producer. Supreme Court has

Plaintiff’s sister company, contemplated that the phrase

Lacquercraft, manufactures the “origin of goods” might be

EMC line exclusively for stretched to include the

Plaintiff. Plaintiff, in turn, trademark owner who

holds the copyrights for all the commissioned the goods and

designs and manages and stood behind their production,

markets the furniture line. The Plaintiff has shown at least a

badging and branding of the serious question going to the

furniture is solely the merits on this point, if not a

responsibility of Plaintiff, and likelihood of success.

unreasonable conclusions, or

512 F. Supp. 3d at 415. arguments’”) (quoting Giarratano,

521 F.3d at 302).

But those are not the facts alleged

here. USConnect did not manufacture The claim here is akin to a licensing

the Integrated Product. It contracted misrepresentation, which courts have

with Vendors Exchange to do so. In rejected as giving rise to a Lanham Act

that relationship, USConnect reverse passing off claim. For

provided Vendors Exchange with example, in Micro/sys, Inc. v. DRS

USConnect Intellectual Property and Technologies, Inc., No. CV 14-3441

Content for use on and as a part of the DMG (CWX), 2015 WL 12748631, at

USConnect System. Vendors *1 (C.D. Cal. Feb. 18, 2015), the

Exchange then manufactured the district court dismissed such a claim

Integrated Product which was based where the defendant sold computer

on and contained the USConnect boards to the United States Postal

Intellectual Property and designs as Service that included an unlicensed

well as Vendors Exchange’s software version of the plaintiff’s software. In

written to USConnect’s specifications. so doing, the court noted that the

“sole factual predicate for Micro/sys’s

Although the Dastar Court Lanham Act claims is that DRS

recognized that “[t]he concept [of the misrepresented to USPS that it had

origin of goods] might be stretched . . acquired all necessary rights to the

. to include not only the actual XDOS software,” which was

producer, but also the trademark insufficient as “false designation of

owner who commissioned or assumed origin or association.” See id. at *3.

responsibility for (‘stood behind’) See also Agence France Presse v.

production of the physical product,” Morel, 769 F. Supp. 2d 295, 307

539 U.S. at 32 (emphasis added), (S.D.N.Y. 2011) (rejecting Lanham

there is no need to do so to reach the Act reverse passing off claim where

facts of this case. the harm was misrepresentation of

sourcing and authorship).

And USConnect cannot clear that

origin hurdle with the conclusory, The allegations in the Complaint here

legal assertion in its Complaint, belied are that Vendors Exchange “began

by its other facts pled, that the creating marks and logos for ‘VE

Integrated Products “originated with Solutions’ . . . .” Compl. ¶ 54. Then,

USConnect.” See Resp. Br. at 17 “in 2024, [they] began replacing the

(citing Compl. ¶¶ 55, 112). See Just USConnect images on the Integrated

Puppies, Inc., 123 F.4th at 660 Product’s user interface screens with

(explaining that courts are not the marks and logos of VE Solutions.”

required to “accept as true ‘legal Id. ¶ 56. At the same time, the

conclusions drawn from the facts’ or defendants had been developing their

any other ‘unwarranted inferences, own kiosk, the VE Product, to

compete with the Integrated Product. 1. Unfair or deceptive trade

Id. ¶¶ 4, 43–46, 53–54, 62. “In the practices defined.

Summer of 2024, using USConnect’s

Affiliate list, Vendors Exchange “To state a claim for unfair and/or

approached at least one . . . deceptive trade practices, the

USConnect Affiliate and offered to sell plaintiffs must allege that (1) the

them the VE Product.” Id. ¶ 64. defendants committed an unfair or

deceptive act or practice, or an unfair

While both Micro/sys, Inc. and method of competition, (2) in or

Agence French Presse involved affecting commerce, (3) which

allegations of copyright infringement, proximately caused actual injury to

which this matter does not, the fact the plaintiff or to the plaintiffs’

remains that Vendors Exchange business.” Walker v. Sloan, 529

allegedly acted as the defendants did S.E.2d 236, 243 (N.C. Ct. App. 2000).

in both of those cases: representing

authorized access to and/or Courts analyze a claim for common

ownership of a good, the USConnect law unfair competition the same way

System, contained within a tangible as they analyze a claim for unfair and

product, the VE Product (kiosk), that deceptive trade practices under North

Vendors Exchange actually produced. Carolina General Statute § 75-1.1

(“UDTPA” and “UTPA”). Distrib. Co.

Because USConnect has failed to LLC v. Mood Prod. Grp. LLC, No.

allege sufficiently a claim for passing 24CVS000619-100, 2024 WL

off, the Court should grant the 4298296, at *6 (N.C. Super. Ct., Bus.

defendants’ motion as to Count Five. Ct. Sept. 26, 2024).

C. USConnect’s claims regarding “It has been said that because ‘[p]roof

unfair and deceptive business of unfair or deceptive trade practices

survive the pleading stage. entitles a plaintiff to treble damages,’

a UTPA count ‘constitutes a

USConnect alleges that the boilerplate claim in most every

defendants’ “replacing [of] the complaint based on a commercial or

USConnect Trademark images on the consumer transaction in North

Integrated Product’s user interface Carolina.’” Broussard v. Meineke

screens with the marks and logos of Disc. Muffler Shops, Inc., 155 F.3d

VE Solutions” is unfair competition in 331, 347 (4th Cir. 1998) (quoting and

violation of North Carolina common citing Allied Distribs., Inc. v. Latrobe

law. Compl. ¶ 117. USConnect also Brewing Co., 847 F. Supp. 376, 379

alleges that the defendants’ “wrongful (E.D.N.C. 1993)). “To correct this

conduct” constituted unfair and tendency, and to keep control of the

deceptive trade practices. Id. ¶ 120. extraordinary damages authorized by

the UTPA, North Carolina courts have

repeatedly held that ‘a mere breach of

contract, even if intentional, is not Cir. 1997) (quoting Marshall v.

sufficiently unfair or deceptive to Miller, 276 S.E.2d 397, 403 (N.C.

sustain an action under [the UTPA,] 1981)). See also McGriff Ins. Servs.,

N.C.G.S. § 75-1.1.’” Broussard, 155 LLC v. Wilson, No. 1:23-CV-295, 2025

F.3d at 347 (citing cases) (alteration WL 69073, at *15 (M.D.N.C. Jan. 10,

in original). 2025) (citing Garlock v. Henson, 435

S.E.2d 114, 115–16 (N.C. Ct. App.

Thus, a practice is “unfair [under 1993)) (“[A] breach of contract may

UDTPA] if it offends established give rise to an unfair and deceptive

public policy, is immoral, unethical, trade practice when accompanied by

oppressive, unscrupulous, or egregious or aggravated

substantially injurious to consumers, circumstances.”).

or amounts to an inequitable

assertion of . . . power or position.” USConnect objected, directing the

Rahamankhan Tobacco Enters. Pvt. Court’s attention to a handful of

Ltd. v. Evans MacTavish Agricraft, North Carolina intermediate court

Inc., 989 F. Supp. 2d 471, 477 opinions, specifically Medical

(E.D.N.C. 2013) (internal quotation Staffing Network, Inc. v. Ridgway,

and citation omitted) (citing cases). 670 S.E.2d 321, 329 (2009), wherein

The circumstances must be the North Carolina Court of Appeals

“egregious or aggravating.” Id. at 478. held, without further analysis, that

“Whether an act or practice is unfair “[a] violation of the Trade Secrets

or deceptive under the UDTPA is a Protection Act constitutes an unfair

question of law for the court.” Kelly v. act or practice under N.C. Gen. Stat.

Ga.–Pac., LLC, 671 F.Supp.2d 785, § 75–1.1.” (citing N.C. Gen. Stat. § 66–

799 (E.D.N.C. 2009) (collecting 146 (2007)).

cases).

USConnect argues that by sufficiently

2. Parallels between unfair trade alleging a violation of the Trade

practice and theft of trade Secrets Protection Act, it has de facto

secret claims under state law. done the same for its unfair and

deceptive practices claim.

In its withdrawn R&R, the Court

found that the defendants’ alleged 3. Federal courts’ treatment of the

conduct did not meet the first prong overlap between the two

of an unfair trade practice claim, as it claims.

was not alleged in the Complaint to

“‘offend[] established public policy,’” At least two federal courts disagree.

nor constitute conduct “‘immoral, Specifically, in Qorvo, Inc. v. Akoustis

unethical, oppressive, unscrupulous, Techs., Inc., No. 1:21-CV-01417-JPM,

or substantially injurious to 2024 WL 5334785, at *1 (D. Del. Oct.

consumers.’” See Canady v. Crestar 15, 2024), a jury found the defendants

Mortg. Corp., 109 F.3d 969, 975 (4th liable for violating the federal Defend

Trade Secrets Act (“DTSA”) and the In so doing, it noted that the “highest

North Carolina Trade Secrets court in North Carolina has not

Protection Act (“NCTSPA”). But the determined whether

jury found the defendants did not misappropriation of trade secrets is

violate the North Carolina UDTPA. Id. an ‘unfair or deceptive’ act or practice

The plaintiff moved the district court as a matter of law,” and while the

to amend the judgment to reflect a appellate court in Medical Staffing

finding of liability on the UDTPA Network, Inc. (the case the plaintiff

claim, arguing that “that the jury’s cited in support) so found, the district

findings on the DTSA and NCTSPA— court noted that “the Court of Appeals

different laws with different cited section 66-154(b) of the North

elements—entitle them to the same Carolina General Statute for this

verdict under the UDTPA given the proposition, which addressed

distinguishable findings of three violations under Article 23—not

North Carolina Courts[,]” see id. at *2, Article 24 where NCTSPA is codified.”

effectively the same argument Id. at *16.

USConnect advances here.

The district court disagreed, finding To that end, in Drouillard v. Keister

that violation of the NCTSPA and Williams Newspaper Services, Inc.,

DTSA did not, per se, compel the 423 S.E.2d 324, 326 (N.C. Ct. App.

finding that the conduct met the 1992), the court found that “[i]f the

second and third elements of an violation of the Trade Secrets

UDTPA violation – affecting Protection Act satisfies [the] three

interstate commerce and causation. prong test, it would be a violation of

Id. at *3. N.C. Gen. Stat. § 75-1.1.” (emphasis

added). “Drouillard, thus, suggests

In Legacy Data Access, LLC v. that there is no per se rule that a

MediQuant, Inc., No. 3:15-CV- violation of the NCTSPA is an unfair

00584-FDW-DSC, 2017 WL 6001637, or deceptive act or practice under N.C.

at *15 (W.D.N.C. Dec. 4, 2017), a jury Gen. Stat. § 75-1.1(a).” Legacy Data

found the defendant liable for Access, LLC, 2017 WL 6001637, at

violating the NCTSPA; the plaintiff *16.

moved the court, post-verdict, to

amend the judgment to reflect a The district court in Legacy Data

finding of liability on its unfair and Access, LLC did not rely wholly upon

deceptive practices claim, as well, this line of reasoning, though. Rather,

arguing that a violation of the former it then examined the (few) instances

was a violation of the latter “as a where the North Carolina Supreme

matter of law.” The district court, Court determined that “a violation of

sitting in diversity and applying North another North Carolina statute

Carolina law, disagreed. constitutes a violation of section 75-

1.1 as ‘a matter of law.’” See id. at *16

(discussing cases). These cases summary judgment on the UDTPA

“involved regulatory statutes that did claim because of “substantial

not create private causes of actions evidence of fraud” and noting that

but specifically defined unfair or “fraud is usually sufficient to support

deceptive trade practices in the a conclusion that an action was unfair

applicable industry or disallowed or deceptive as is a violation of the

conduct to protect the consuming TSPA”); Dental Care Leasing, LLC v.

public.” Id. (citing Winston Realty Co. Miller, No. 7:19-CV-46-BO, 2019 WL

v. G.H.G., Inc., 331 S.E.2d 677, 681 3822511, at *5 (E.D.N.C. Aug. 14,

(N.C. 1985) and Pearce v. Am. 2019) (finding without specific

Defender Life Ins. Co., 343 S.E.2d analysis of the UDTPA factors that

174, 179 (N.C. 1986)). because the plaintiffs plausibly

alleged that the defendant “breached

This led the Legacy Data Access, LLC the redemption agreement, infringing

court to conclude that, contrary to the any trademarks, [and]

plaintiff’s assertion, “there is no per se misappropriated any trade secrets,”

rule that a violation of the NCTSPA is they had sufficiently alleged a UPDTA

an unfair or deceptive act or practice violation).

under N.C. Gen. Stat. § 75-1.1,” and so

that court declined to adopt one. Id. 4. USConnect’s allegations.

The Fourth Circuit affirmed this

aspect of the judgment: that is, that Ultimately, though, the issue

the plaintiffs had not proven the presented is whether the Complaint

interstate commerce element of alleges facts that meet the elements of

UDTPA. See Legacy Data Access, LLC an unfair and deceptive practice

v. Cadrillion, LLC, 889 F.3d 158, 170– claim, not a Trade Secrets Protection

71 (4th Cir. 2018). Act claim: (1) the defendants

committed a deceptive practice (2) in

And this makes sense: the North or affecting commerce that (3)

Carolina Supreme Court has not proximately caused actual injury to

weighed in on the issue, nor have its USConnect’s business. See Walker,

appellate courts uniformly made such 529 S.E.2d at 243.

a finding.

In its Complaint, USConnect

That being said, courts in this Circuit specifically identifies one offending

have found a sufficient overlap act – the defendants’ replacement of

between misappropriation of trade USConnect’s marks with their VE

secrets and a violation of UDTPA to Solutions mark. See Compl. ¶ 117.

allow both claims to proceed if one That conduct merely supported a

can survive a dispositive motion. See breach of contract allegation. See

McGriff Ins. Servs., LLC v. Wilson, Canady, 109 F.3d at 975 (finding that

No. 1:23-CV-295, 2025 WL 69073, at a “breach of contract, even if

*15 (M.D.N.C. Jan. 10, 2025) (denying intentional, is not sufficient[]” to state

a claim for unfair and deceptive trade “engag[ing] in discussions with

practices under North Carolina law). USConnect about extending the MSA

for another four (4) year term,” id.

In its objections to the original R&R, ¶ 61. “While those discussions were

though, USConnect argues that it also ongoing, [the defendants] were in the

pled the defendants’ knowing final stages of integrating numerous

concealment of its breach to prevent programs into [the VE Product].” Id.

USConnect from taking steps to ¶ 62. At the same time, they also

protect its intellectual property. See “devised a plan to market and sell the

Pl. USConnect, LLC’s Objs. to the VE Product directly to USConnect’s

Mem. Op. & R. & R., Docket Entry 24, Affiliates[.]” Id.

at 5; see also Resp. Br. at 19–20. And,

indeed, in the UDTPA context, As to the second and third elements of

“[e]xamples of such aggravating and a UDTPA claim, USConnect alleges in

egregious behavior include: (1) lying summary fashion that the conduct is

and concealing a breach combined in or affecting commerce and caused

with acts to deter further injury. See Compl. ¶¶ 120, 122.

investigation; and (2) intentional

deception for the purpose of In light of the generous pleading

continuing to receive the benefits of standard, within-district precedent

an agreement.” Foodbuy, LLC v. finding that the fraud giving rise to

Gregory Packaging, Inc., 987 F.3d NCTSPA violations supports UDTPA

102, 121 (4th Cir. 2021). See also violations, and binding precedent

Garlock v. Henson, 435 S.E.2d 114, suggesting this form of lulling can be

115 (N.C. Ct. App. 1993) (finding the a deceptive trade practice,

defendant’s actions “sufficiently USConnect’s UDTPA claim may move

aggravating” to show unfair and forward to the discovery stage.

deceptive practices where, for three

years, he “repeatedly denied the sale And the economic loss doctrine does

of the bulldozer when he knew it had not bar that. “In general, the doctrine

been sold” and he “forged a bill of sale provides that a mere breach of

in an attempt to extinguish [the] contract does not ordinarily give rise

plaintiff’s ownership interest in the to a tort action by promisee against

bulldozer”). promisor.” ITW Charlotte, LLC v.

ITW Com. Constr., N. Am., No. 3:17-

Specifically, USConnect alleges that cv-00473-FDW-DCK, 2017 WL

“in or around 2023” Vendors 6542511, at *3 (W.D.N.C. Dec. 21,

Exchange began devising its plan to 2017) (citing Severn Peanut Co. v.

create a competing product using Indus. Fumigant Co., 807 F.3d 88, 94

USConnect trade secret information, (4th Cir. 2015)). “North Carolina’s

Compl. ¶ 43, and, in “the Spring of economic loss doctrine . . . prohibits

2024,” Vendors Exchange attempted recovery for purely economic loss in

to conceal its wrongdoing by tort when a contract, a warranty, or

the UCC operates to allocate risk.” information pursuant to its alleged

Severn Peanut Co., 807 F.3d at 94 trade secret status, as well as the

(internal quotations and citations aforementioned lulling conduct. See

omitted). Thus, “[t]o state a tort claim Compl. ¶¶ 61–62; 93–108; 120–21. As

and breach of contract claim arising alleged, the lulling in and of itself can

from the same actions, a plaintiff constitute willful behavior on the part

must allege a duty owed him by the of the defendant.

defendant separate and distinct from

any duty owed under a contract.” The Court should deny the

Schumacher Immobilien Und defendants’ motion to dismiss Counts

Beteiligungs AG v. Prova, Inc., No. Six and Seven.

1:09cv00018, 2010 WL 3943754, at

*2 (M.D.N.C. Oct. 7, 2010) (internal D. USConnect has appropriately

quotation and citation omitted) alleged unjust enrichment in

(citing cases). the alternative.

However, the doctrine is not an USConnect alleges that it “conferred

automatic bar to any tort claim arising benefits upon [the defendants] in the

from conduct that also breached a form of the USConnect IP and

contract between parties. See USConnect Confidential

Broussard, 155 F.3d at 346 (“In Information,” the defendants

recognition of the fundamental “consciously accepted those benefits,”

difference between tort and contract and USConnect did not confer them

claims, . . . North Carolina has gratuitously. Compl. ¶¶ 125–26. The

recognized an ‘independent tort’ defendants argue that the presence of

arising out of breach of contract only express contracts dooms this claim.

in ‘carefully circumscribed’ Am. Br. in Supp. at 26. They

circumstances.”). The “tortious recognize, though, that an unjust

conduct must also be accompanied, enrichment claim and a breach of

however, by a sufficient aggravating contract claim may be alleged in the

element such as fraud, malice, alternative. Id. The defendants assert,

reckless indifference, oppression, “Here, neither party disputes the

insult, or willfulness.” ITW Charlotte, validity of the MSA.” Id. Because

LLC, 2017 WL 6542511, at *3 (citing there is no dispute about the existence

cases). of a contract, they argue that the

plaintiff should not be able to pursue

Here, USConnect alleges breach of its unjust enrichment claim. Id.

contract based on Vendor Exchange’s

improper use and dissemination of “The fact that a plaintiff cannot

information provided pursuant to simultaneously recover damages for

three written contracts. See Compl. both breach of an express contract

¶¶ 78–85. Its UDTPA claim relies and unjust enrichment does not

upon the specific value of that preclude the plaintiff from pleading

both theories in [its] complaint.” Hill its breach of contract’ claim.

v. AQ Textiles LLC, 582 F. Supp. 3d Therefore, at this stage, the Court

2907, 322 (M.D.N.C. 2022) (citations should deny the defendants’ motion

omitted). “Until the existence of an as to Count Eight.

express contract is proven, [a

plaintiff] is allowed to plead quantum IV. CONCLUSION

meruit and unjust enrichment as

alternative theories of recovery [to It is therefore ORDERED that the

breach of contract].” Performance Memorandum | Opinion and

Sales & Mktg., LLC v. Lowe’s Cos., Recommendation of United States

9294323, at *5 (W.D.N.C. June 4, dated March 9, 2026, □□□□

2010). WITHDRAWN.

Here, the defendants merely admit It is further RECOMMENDED that

the plaintiff sufficiently alleged a the Court grant in part and deny m

breach of contract and, through part the defendants’ Motion to

counsel, state in their brief that Dismiss, in that the Court should

“neither party disputes the validity of grant in part the Motion to Dismiss as

the MSA.” But more is needed for the to Count Five, dismissing that claim,

plaintiff ultimately to recover under and otherwise deny the Motion.

J a Gibson McFadden

United States Magistrate Judge

May 22, 2026

Durham, North Carolina

23