Opinion

UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF NORTH CAROLINA

CHARLOTTE DIVISION

3:24-CV-00752-MEO-DCK

REV TECH LABS, LLC, AND

CAROLINAS FINTECH

VENTURES, LP,

Plaintiffs,

MEMORANDUM & ORDER

v.

CIRRUS SECURE, INC.,

FRIDESWIDE SQUARE, INC.,

AND DAVID BROOKS,

Defendants.

THIS MATTER is before the Court on Plaintiffs’ Motion for Summary

Judgment as to Defendants’ Amended Counterclaims. (Doc. No. 40). For the reasons

explained below, the Court will grant Plaintiffs’ motion.

I. BACKGROUND

Plaintiffs Rev Tech Labs, LLC, d/b/a Queen City Fin Tech (“Rev Tech”) and

Carolinas Fintech Ventures, LP, d/b/a CFV Ventures (“CFV”) jointly own, host, and

run a business accelerator program (the “Program”) for financial technology

(“fintech”) companies. (Doc. Nos. 11 ¶ 4; 41-16 at 2). The Program consists of a

twelve-week onsite program1 plus nine months of continued support. (Doc. No. 41-16

at 2). The Program makes various products and services available to participants,

including a curated curriculum, guidance on fundraising strategy, and advisory board

1 A majority of the 2020 “onsite” Program was conducted virtually. (Doc. No.

43-2 ¶ 11).

meetings.

At all relevant times, Defendant David Brooks was the President and CEO of

Defendant Frideswide Square, Inc., a Colorado corporation that owned a software

program called “Cirrus” (the “Cirrus Software”). (Doc. Nos. 43-2; Brooks Second Decl.

¶ 2; 41-17 at 4; 11-11 at 2). The Cirrus Software provides a “secure document

collection portal with workflow automation” that “assist[s] banks and other financial

institutions in keeping track of various materials needed to complete loans.” (Doc.

Nos. 43-2 ¶ 2; 41-17 at 4). Defendant Brooks applied for entry into the Spring 2020

Program and was “eager to have some company associated with the [Cirrus] Software

participate in the Accelerator Program.” (Doc. No. 43-2 ¶¶ 2, 3, 5). Defendant Brooks

and the Program director referred to his company as “Cirrus” or “Cirrus Secure”

during the application process. (Doc. No. 41-6 at 2, 4, 8).

Plaintiffs offered Defendant Brooks a spot in the Program in early 2020. (Doc.

No. 43-2 ¶ 7). As a result, Defendant Brooks was to issue a Simple Agreement for

Future Equity (“SAFE”) that granted certain shares of his company’s capital stock to

Plaintiff CFV in exchange for an investment of $40,000. (Doc. Nos. 41-16 at 8; 43-2

¶ 7). Defendant Brooks was also to execute a Participant Agreement that set forth

additional terms, conditions, and covenants in connection with his company’s

participation in the Program. (Doc. Nos. 43-2 ¶ 7; 41-16 at 2). The parties refer to the

Participant Agreement and SAFE collectively as the “Accelerator Agreements.” (Doc.

Nos. 21 ¶ 18; 41 at 4).

On January 16, 2020, Plaintiffs emailed Defendant Brooks draft copies of the

Accelerator Agreements. (Doc. No. 41-9 at 2). The draft Participant Agreement listed

the company name as “Cirrus Secure.” at 3. On January 24, 2020, Defendant

Brooks sent the edited Accelerator Agreements back to Plaintiffs, in which he

changed “Cirrus Secure” to “Cirrus Secure, Inc., a Delaware corporation.” (Doc. Nos.

41-10 at 2, 4, 11; 43-2 ¶ 7). That same day, Defendant Brooks filed the State of

Delaware Certificate of Incorporation for Defendant Cirrus Secure, Inc. (Doc. No. 41-

12 at 2). The parties executed the edited Accelerator Agreements on February 5, 2020.

(Doc. No. 41-16 at 2, 16). The twelve-week portion of the Program began in early

March 2020 and completed in June 2020. (Doc. No. 43-2 ¶¶ 10, 21). The Program’s

continued support pursuant to the Participant Agreement ended in March 2021.

(Doc. No. 41-16 at 2).

In August 2022, Defendant Brooks ran into a Plaintiff CFV representative at

a conference. (Doc. Nos. 41-28 at 3–4; 43-2 ¶ 22). The two discussed the status of

Cirrus Secure, Inc. (Doc. No. 43-2 ¶ 22). In November 2022, the managing partner of

Plaintiff CFV reached out to Defendant Brooks regarding the interaction and the

execution of the Accelerator Agreements. (Doc. No. 41-28 at 2–4). The partner

sought clarification on the entity that signed the Accelerator Agreements.

On August 16, 2024, Plaintiffs filed suit against Defendants Cirrus Secure,

Inc., Frideswide Square, Inc., and David Brooks. (Doc. No. 1). Plaintiffs claim

Defendant Brooks knowingly and intentionally defrauded Plaintiffs and misled

Plaintiffs into believing they were investing in the entity that operated the Cirrus

Software’s business—not “a shell company with no assets, employees, customers, or

other viable business operations.” ¶ 1. Plaintiffs brought claims for violations of

federal and state securities law, common law fraud, fraudulent concealment,

conspiracy to defraud, obtaining property by false pretenses, unjust enrichment, and

unfair and deceptive trade practices. ¶¶ 77–179. On October 21, 2024, Defendants

filed their “Answer & Counterclaim,” asserting causes of action for breach of contract

and declaratory judgment. (Doc. No. 11). Defendants later amended the

counterclaims to assert causes of action for “Breach of Contract/Recoupment” and

declaratory judgment. (Doc. No. 21).

The parties filed cross-motions for summary judgment (Doc. Nos. 36, 40), and

on March 30, 2026, the Court held a hearing on both motions. The Court ruled from

the bench on Defendants’ motion for summary judgment, granting Defendants’

motion as to Plaintiffs’ claims for conspiracy, false pretenses, unjust enrichment, and

unfair and deceptive trade practices, and denying Defendants’ motion as to the

remaining claims sounding in fraud. (Oral Order entered on March 30, 2026). The

Court declined to issue an oral ruling on Plaintiffs’ motion for summary judgment as

to Defendants’ counterclaims. Plaintiffs’ motion is ripe for disposition.

II. LEGAL STANDARD

Under Rule 56(a) of the Federal Rules of Civil Procedure, summary judgment

is appropriate only “if the movant shows that there is no genuine dispute as to any

material fact and the movant is entitled to judgment as a matter of law.”

, 36 F.4th 240, 252 (4th Cir. 2022)

(quoting Fed. R. Civ. P. 56(a));

, 946 F.3d 201, 206 (4th Cir. 2019). A factual dispute is considered genuine

“if the evidence is such that a reasonable jury could return a verdict for the

nonmoving party.” , 477 U.S. 242, 248 (1986). “A fact

is material if it might affect the outcome of the suit under the governing law.”

, 36 F.4th at 252 (quoting , 718 F.3d

308, 313 (4th Cir. 2013)).

The party seeking summary judgment bears the initial burden of

demonstrating the absence of a genuine issue of material fact through citations to the

pleadings, depositions, answers to interrogatories, admissions, or affidavits in the

record. , 477 U.S. 317, 323 (1986) (when the nonmoving

party “has failed to make a sufficient showing on an essential element of [his] claim

with respect to which [he] has the burden of proof,” summary judgment is warranted);

, 36 F.4th

173, 178 (4th Cir. 2022) (same). “If the movant satisfies his initial burden to

demonstrate ‘an absence of evidence to support the nonmoving party’s case,’ the

burden shifts to the nonmovant to ‘present specific facts showing that there is a

genuine issue for trial.’” , 36 F.4th at 252 (quoting

, 790 F.3d 532, 540 (4th Cir. 2015)).

“The mere existence of some alleged factual dispute between the parties will not

defeat an otherwise properly supported motion for summary judgment.”

, 1 F.4th 297, 302 (4th Cir. 2021) (emphasis omitted) (quoting , 477

U.S. at 247–48). Rather, the nonmoving party must establish that a material fact is

genuinely disputed by, , “citing to particular parts of the materials in the

record,” Fed. R. Civ. P. 56(c)(1)(A), and cannot rely only on “conclusory allegations,

mere speculation, the building of one inference upon another, or the mere existence

of a scintilla of evidence.” , 36 F.4th at 252 (quoting

, 731 F.3d 303, 311 (4th Cir. 2013)).

Still, summary judgment is not intended to be a substitute for a trial of the

facts. , 477 U.S. at 255. In determining if summary judgment is

appropriate, “courts must view the evidence in the light most favorable to the

nonmoving party and refrain from weigh[ing] the evidence or mak[ing] credibility

determinations.” , 888 F.3d 651, 659

(4th Cir. 2018) (citation modified). “Summary judgment cannot be granted merely

because the court believes that the movant will prevail if the action is tried on the

merits.” , 780 F.3d 562, 568–69 (4th Cir. 2015)

(quoting 10A Wright & Miller’s Federal Practice & Procedure § 2728 (3d ed. 1998)).

Overall, the relevant inquiry on summary judgment is “whether the evidence

presents a sufficient disagreement to require submission to a jury or whether it is so

one-sided that one party must prevail as a matter of law.” , 477 U.S. at 251–

52.

III. DISCUSSION

Defendants bring counterclaims for “Breach of Contract/Recoupment” and for

declaratory judgment. (Doc. No. 21 ¶¶ 126–147). Plaintiffs move for summary

judgment on both counterclaims.2 (Doc. No. 40 ¶ 4). For the reasons explained below,

the Court will grant Plaintiffs’ motion.

A. “Breach of Contract/Recoupment”

Defendants originally brought a counterclaim for breach of contract, seeking

the remedy of rescission. (Doc. No. 11 ¶¶ 119–129). Plaintiffs filed a motion to dismiss,

raising a statute of limitations issue as to the counterclaim. (Doc. Nos. 15; 16 at 1–2,

7–10). Defendants then filed amended counterclaims. (Doc. No. 21). Defendants

amended the breach of contract counterclaim to assert a counterclaim for “Breach of

Contract/Recoupment.” at 21. Defendants still seek rescission through the

amended counterclaim. ¶¶ 137, 139.

The North Carolina Supreme Court has defined recoupment as “a defen[s]e by

which a defendant, when sued for a debt or damages, might recoup the damages

suffered by himself from any breach by the plaintiff of the same contract ”

, 91 N.C. 399, 404–05 (1884) (emphasis omitted). Recoupment has also been

defined by other North Carolina courts as a “[r]eduction of a plaintiff’s damages

because of a demand by the defendant arising out of the same transaction ”

, No. 21 CVS 3201, 2022 WL 798335,

at *12 (N.C. Super. Ct. Mar. 16, 2022) (emphasis omitted) (quoting

2 Plaintiffs also move for summary judgment on Plaintiffs’ first, second, and fourth

affirmative defenses to Defendants’ amended counterclaims. (Doc. Nos. 25 at 18–19;

40 ¶ 4). The Court addresses Plaintiffs’ first and second affirmative defenses through

the issuance of this Order. As to their fourth affirmative defense, Plaintiffs argue that

the counterclaims are barred by the doctrine of laches. (Doc. No. 25 at 19). However,

Plaintiffs failed to make a substantive laches argument. (Doc. No. 41).

Therefore, the Court will not address it at length. The Court does not find the doctrine

of laches applies based on the evidence before the Court.

, No. 15 CVS 1648, 2016 WL 4163928, at *7 (N.C. Super. Ct. July 22,

2016)). A defendant may bring recoupment as a defense or a counterclaim.

, No. 15 CVS 1852, 2016 WL 6270257, at *6

(N.C. Super. Ct. Oct. 5, 2016) (“North Carolina has long recognized recoupment as a

valid counterclaim under the proper circumstances.”).

“Rescission is an equitable contract remedy that . . . treats both parties as if

there were no contract.” , 788 S.E.2d 154, 161 (N.C.

2016). “Rescission is not merely a termination of contractual obligation. It is

abrogation or undoing of it from the beginning.” “A party may pursue rescission

only if ‘there is a material breach of the contract going to the very heart of the

instrument.’” In sum, “[a] party may pursue rescission only when a material

breach occurs all legal remedies fall[] short of compensating the injured party for

its loss.”

Defendants’ amended counterclaim is certainly creative. However, it amounts

to an attempt to Frankenstein three legal doctrines—breach of contract, recoupment,

and rescission—into a counterclaim that, in essence, seeks to revive a breach of

contract claim that had been marked for death. As argued in Plaintiffs’ initial motion

to dismiss, any claim for breach of contract would have been barred by the statute of

limitations.3 (Doc. No. 16 at 1–2, 7–10). So Defendants instead attempt to use

3 To the extent Defendants seek any claim for breach of contract, that claim is

time-barred by the applicable statute of limitations. Under North Carolina law, the

statute of limitations for breach of contract is three years. N.C. Gen. Stat. §§ 1-46, 1-

52. The statute of limitations for breach of contract begins to run once a plaintiff “has

knowledge that a wrong has been inflicted upon him” or once the “injury becomes

apparent” or “should reasonably become apparent.” , 855 S.E.2d

recoupment, which they argue is not subject to that statute of limitations, to get

rescission—a remedy that assumes a material breach of contract. (Doc. Nos. 21 ¶¶

137, 139; 43 at 12).

Ultimately, Defendants’ counterclaim fails because the Court cannot grant

rescission as a “method of recoupment” under North Carolina law as argued by

Defendants. (Doc. No. 21 ¶ 4). Instead, recoupment, by definition, involves the

affirmative relief of money damages. , 91 N.C. at 404–05;

, 2022 WL 798335, at *12. Defendants have not cited any

binding case law where a party seeks rescission through a recoupment claim, nor is

the Court aware of any. To support their argument that rescission is a remedy for

recoupment, (Doc. No. 43 at 11), Defendants rely on , a case where

the plaintiff sued to recover possession of a bay mare mule (named Nell). 76 S.E.

8, 9 (N.C. 1912).4 The Court disagrees. discusses remedies a party may have

when that party has been fraudulently induced to enter into a contract. at 9–10.

And if that party is “sued upon the contract, he may set up the fraud as a defense, or

173, 188 (N.C. 2021). Defendants allege “Plaintiffs breached the Accelerator

Agreements by failing to abide by and deliver the various items that were identified

and promised in the Accelerator Agreements.” (Doc. No. 21 ¶ 133). But the injury

Defendants complain of would have been apparent more than three years prior to

Defendants filing their counterclaims. Under the Participant Agreement, Plaintiffs

were to provide services for one year, that is, from March 2020 through March 2021.

(Doc. No. 41-16 at 2). Defendants would have, therefore, known of any breach by

March 2021—more than 3 years prior to Defendants’ filing of their amended

counterclaims on November 26, 2024. (Doc. No. 21).

4 Defendants also cite two cases that do not apply North Carolina law—

, 451 A.2d 1080, 1081–83 (Vt. 1982); and , 503

So.2d 1237, 1239–42 (Fla. 1987). The Court does not find these cases persuasive.

as a basis of a claim for damages by way of recoupment or counterclaim.” at 10.

goes on to say that a “defrauded party may be entitled to the equitable

remed[y] of rescission,” , but the case far from holds that rescission is available as

a remedy for a recoupment counterclaim. Instead, the case specifically lists

recoupment as a claim for damages, , which Defendants do not seek through their

recoupment counterclaim. (Doc. No. 21 ¶¶ 126–140). For these reasons, the “Breach

of Contract/Recoupment” counterclaim fails, and summary judgment is granted in

favor of Plaintiffs on Defendants’ counterclaim.5

B. Declaratory Judgment

Defendants also assert a counterclaim for declaratory judgment. (Doc. No. 21

¶¶ 141–47). Specifically, Defendants ask the Court to:

declare the rights and responsibilities of the parties that

are owed and expected among and between the parties

arising from the Accelerator Agreements, including but not

limited to: [1] the proper interpretation of the Accelerator

Agreements; [2] whether Plaintiffs reasonably relied on

any statements from [Defendant] Brooks prior to entering

into the Accelerator Agreements; and [3] whether Plaintiffs

exercised reasonable diligence in relation to the statements

they claim were misleading.

(Doc. No. 21 ¶ 147). It is unclear from the amended counterclaim whether Defendants

seek declaratory relief pursuant to the federal Declaratory Judgment Act, 28 U.S.C.

§§ 2201–2202, or the North Carolina Declaratory Judgment Act, N.C. Gen. Stat. § 1-

5 Defendants contend that even if Plaintiffs’ motion for summary judgment is granted

as to the “Breach of Contract/Recoupment” counterclaim, “declaratory judgment

would still be needed to address whether Defendants’ affirmative defense of rescission

is viable.” (Doc. No. 43 at 20–21). The Court takes no position on that issue at this

time. Defendants may argue their affirmative defenses at trial.

253 Regardless, “[f]ederal standards guide the inquiry as to the propriety of

declaratory relief in federal courts, even when the case is under the court’s diversity

jurisdiction.” , 913 F.2d 165, 167(4th Cir. 1990). For the

reasons explained below, the Court will grant summary judgment as to Defendants’

declaratory judgment counterclaim.

Under the federal Declaratory Judgment Act, a district court in a case or

controversy otherwise within its jurisdiction, “may declare the rights and other legal

relations of any interested party seeking such declaration, whether or not further

relief is or could be sought.” 28 U.S.C. § 2201(a). “Over the years, [the Fourth Circuit]

has enumerated several factors that the district court should consider in deciding

whether to dismiss a declaratory judgment action.” , 699 F.3d

778, 788 (4th Cir. 2012). Factors enumerated by the Fourth Circuit, in pertinent part,

include, “that the declaratory relief sought: (1) will serve a useful purpose in

clarifying and settling the legal relations in issue, and (2) will terminate and afford

relief from the uncertainty, insecurity, and controversy giving rise to the proceeding.”

, 139 F.3d 419, 422 (4th Cir. 1998) (citation

modified).6

As Defendants conceded in their brief, whether Plaintiffs reasonably relied on

statements from Defendant Brooks or exercised reasonable diligence is duplicative

6 Other factors the Fourth Circuit has “articulated to guide a district court in

determining whether to exercise jurisdiction over a declaratory judgment action”

include “federalism, efficiency, and comity” as well as “whether the declaratory

judgment action is being used merely as a device for procedural fencing.”

, 139 F.3d at 422. Consideration of these other factors does not alter the

Court’s conclusion.

because Plaintiffs’ fraud claims are proceeding to trial. (Doc. No. 43 at 20). These

issues will be decided in the normal course of litigation, so “the declaratory judgment

claim serves no independent, useful purpose and will not help terminate the

uncertainty giving rise to this proceeding.” We CBD, LLC v. Planet Nine Priv. Air,

LLC, No. 3:21-cv-00352, 2022 WL 2334984, at *4 (W.D.N.C. June 28, 2022).

Additionally, the Court has granted summary judgment as to the “Breach of

Contract/Recoupment” counterclaim, so interpreting the Accelerator Agreements

would serve no useful purpose. See Hanback v. DRHI, Inc., 647 F. App’x 207, 209-10

(4th Cir. 2016) (per curiam) (concluding a declaratory judgment would serve no useful

purpose in clarifying and settling the legal relations at issue when the district court

properly dismissed the breach of contract claim). Accordingly, the Court will grant

summary judgment in favor of Plaintiffs on Defendants’ counterclaim for declaratory

judgment.

IV. CONCLUSION

IT IS, THEREFORE, ORDERED that Plaintiffs’ Motion for Summary

Judgment (Doc. No. 40) is GRANTED. This case will proceed toward trial on the

merits in the absence of a voluntary resolution among the parties.

SO ORDERED.

Signed: July 2, 2026

Matthew E. Orso Wy

United States District Judge ey

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