# Opinion

> District Court, M.D. North Carolina · May 22, 2026

URL: https://www.frixlaw.com/law-library/cases/11331079

## Case

- **Full name:** USConnect, LLC v. Vendors Exchange International, Inc. and Vendors Exchange International, LLC, d/b/a VE Solutions
- **Court:** District Court, M.D. North Carolina
- **Decided:** May 22, 2026
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/11331079

## How later opinions describe it (automated extraction)

- 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

## Opinion text

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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/11331079. Public record. Not legal advice.