DESIGN GAPS, INC. v. HALL, 2024 NCBC 30

STATE OF NORTH CAROLINA
MECKLENBURG COUNTY
IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
23CV040664-590
DESIGN GAPS, INC.; DAVID
GLOVER, Individually and Officer of
Design Gaps, Inc.; and EVA
GLOVER, Officer of Design Gaps,
Inc.,
Plaintiffs,
v.
JOCELYN HALL, Individually and
Owner Hall Interiors, LLC; HALL
INTERIORS, LLC; PETERS
CUSTOM HOMES, INC.;
NICHOLAS PETERS, Individually
and Owner Peters Custom Homes,
Inc.; PETERS CUSTOM DESIGN,
LLC d/b/a EMERALD & OAK
DESIGN STUDIO; and MIRIAM
PETERS, Individually and Owner
and Manager Peters Custom Design,
LLC,
Defendants.
ORDER AND OPINION
ON MOTIONS TO DISMISS
1. 	Design Gaps, Inc. is an interior-design company owned by David and Eva
Glover. In this lawsuit, Design Gaps and the Glovers have sued a former employee,
Jocelyn Hall, for breach of contract, misappropriation of trade secrets, embezzlement,
and more. 	They have also sued Hall’s new employer and its principals. 	All
defendants have moved to dismiss the complaint. 	For the following reasons, the
Court DENIES the motion to dismiss the embezzlement claim but GRANTS the
motions to dismiss all other claims.
Hess Law, PLLC, by Todd M. Hess, for Plaintiffs Design Gaps, Inc.,
David Glover, and Eva Glover.
Maloney 	Law 	& 	Associates, 	PLLC, 	by 	Margaret 	B. 	Maloney, 	for
Defendants Jocelyn Hall and Hall Interiors, LLC.
Design Gaps, Inc. v. Hall, 2024 NCBC 30.

Shumaker, Loop & Kendrick, LLP, by Lucas D. Garber and Samuel A.
Long, for Defendants Peters Custom Homes, Inc., Nicholas Peters, Peters
Custom Design, LLC d/b/a Emerald & Oak Design Studio, and Miriam
Peters.
Conrad, Judge.
I.
BACKGROUND
2. 	The Court does not make findings of fact on a motion to dismiss made under
Rule 	12(b)(6) 	of 	the North Carolina 	Rules 	of 	Civil Procedure. 	The 	following
background assumes that the allegations in the complaint are true.
3. 	Design Gaps “specializes in high-end residential custom construction and
renovations including fine custom cabinetry that is used throughout the home.” 	It
operates “throughout the Carolinas” and claims to have developed valuable trade
secrets and other intellectual property. (Compl. ¶¶ 1, 12, ECF No. 3.)
4. 	Hall joined Design Gaps in 2018. Her duties, which are reflected in a written
employment agreement, included meeting with prospective clients to determine their
needs, taking measurements for use in designs, maintaining the showroom, and
assisting with a variety of sales and marketing activities. 	Also within Hall’s
employment agreement are provisions that restrict her right to compete against
Design Gaps and solicit its customers during her employment and for another two
years after. 	The noncompetition clause states that Hall “shall not in any manner,
directly or indirectly, anywhere where the Company conducts the Company Business,
(i) 	[sic] 	own, 	manage, 	operate, 	join, 	control, 	or 	participate 	in 	the 	ownership,
management, operation, or control of, or be connected in any manner with, any entity
the business of which competes with the Company Business.” 	“Company Business”

is 	defined 	to 	“mean 	the 	design 	and 	selling 	of 	residential 	cabinetry.” 	The
nonsolicitation clause states that she shall not “directly or indirectly . . . solicit
customers or suppliers of the Company or its affiliates” for her own benefit or for any
other person’s or entity’s benefit. (Compl. ¶¶ 17, 21; Compl. Ex. A [“Empl. Agrmt.”]
§§ 1.3, 1.4, 4.1, 4.2, ECF No. 3.)
5. 	Hall resigned in 2021, ostensibly because she was burned out. She asked to
keep her work laptop after her departure, telling Design Gaps that this would make
it easier for her to answer any questions her replacement might have about ongoing
projects. Design Gaps agreed. A few weeks later, though, Design Gaps learned that
Hall had joined its competitor, Peters Custom Design, LLC (doing business as
Emerald & Oak Design Studio). 	At that point, Design Gaps retrieved Hall’s laptop
and blocked her access to its web-based data. (See Compl. ¶¶ 22–24.)
6. 	This episode led Design Gaps to investigate Hall’s activities further. Design
Gaps now believes that Hall routinely invoiced clients through her personal company,
Hall Interiors, LLC, so that they paid her, not Design Gaps, for products and services.
In one example, a client gave Hall a check made out to Design Gaps for over $5,000.
Rather than convey the check to Design Gaps, Hall destroyed it and directed the
client to pay the sum to Hall Interiors. (See Compl. ¶¶ 30–35.)
7. 	Design Gaps also believes that Hall has given its trade secrets and creative
designs to Peters Custom Design and its proprietor, Miriam Peters, as well as a
related company called Peters Custom Homes, Inc. and its proprietor, Nicholas Peters
(together, “Peters Defendants”). As alleged, the Peters Defendants have since passed

off some of Design Gaps’ cabinet and closet designs as their own. Faced with what it
believes to be unfair competition, Design Gaps closed its Charlotte, North Carolina
location in 2023. (See Compl. ¶¶ 16, 36, 38–40, 42.)
8. 	Design Gaps and the Glovers sued Hall, Hall Interiors, and the Peters
Defendants in early 2023 in federal court. 	Central to that lawsuit were claims for
false designation of origin under the federal Lanham Act and for misappropriation of
trade secrets under the federal Defend Trade Secrets Act. 	The federal court
dismissed both, concluding that copyright laws preempted the Lanham Act claim and
that the complaint did not adequately identify the alleged trade secrets for purposes
of the Defend Trade Secrets Act. 	Having dismissed these federal-law claims, the
court declined to exercise supplemental jurisdiction over the state-law claims and
dismissed them without prejudice. See generally Design Gaps, Inc. v. Hall, 2023 U.S.
Dist. LEXIS 208773 (W.D.N.C. Nov. 21, 2023).
9. 	This lawsuit followed. Design Gaps and the Glovers have not reasserted any
federal-law claims or any claims based on alleged trademarks, trade dress, or
copyrighted designs. They have, however, reasserted the state-law claims dismissed
in the earlier federal litigation. The complaint includes eight causes of action: breach
of contract (by Design Gaps against Hall); misappropriation of trade secrets (by all
plaintiffs against all defendants); tortious interference with contract (by Design Gaps
against the Peters Defendants); unfair or deceptive trade practices under N.C.G.S.
§ 75-1.1 (by Design Gaps against all defendants); breach of fiduciary duty (by Design

Gaps against Hall); fraud (by all plaintiffs against Hall); embezzlement (by all
plaintiffs against Hall); and constructive fraud (by all plaintiffs against Hall).
10. 	Two motions to dismiss are pending: one by Hall and Hall Interiors and the
other by the Peters Defendants. The motions have been fully briefed, and the Court
held a hearing on 30 April 2024. The motions are ripe for disposition.
II.
LEGAL STANDARD
11. 	A motion to dismiss under Rule 12(b)(6) “tests the legal sufficiency of the
complaint.” Isenhour v. Hutto, 350 N.C. 601, 604 (1999) (citation and quotation marks
omitted). 	The motion should be granted only when “(1) the complaint on its face
reveals that no law supports the plaintiff’s claim; (2) the complaint on its face reveals
the absence of facts sufficient to make a good claim; or (3) the complaint discloses
some fact that necessarily defeats the plaintiff’s claim.” Corwin v. Brit. Am. Tobacco
PLC, 371 N.C. 605, 615 (2018) (citation and quotation marks omitted).
12. 	In deciding the motion, the Court must treat the well-pleaded allegations of
the complaint as true and view the facts and permissible inferences “in the light most
favorable to” the nonmoving party. Sykes v. Health Network Sols., Inc., 372 N.C. 326,
332 (2019) (citation and quotation marks omitted). 	Exhibits to the complaint are
deemed to be part of it and may also be considered, see Krawiec v. Manly, 370 N.C.
602, 606 (2018), but the Court need not accept as true any “conclusions of law or
unwarranted deductions of fact,” Wray v. City of Greensboro, 370 N.C. 41, 46 (2017)
(citation and quotation marks omitted).

III.
ANALYSIS
13. 	These motions present garden-variety disputes that are governed by settled
law.1 The Court begins with the claim for breach of contract.
A. Breach of Contract
14. 	Design 	Gaps 	claims 	that 	Hall 	breached 	the 	noncompetition 	and
nonsolicitation clauses in her employment contract. Restrictive covenants like these
must be “(1) in writing; (2) made part of a contract of employment; (3) based on
valuable consideration; (4) reasonable both as to time and territory; and (5) not
against public policy.” United Labs., Inc. v. Kuykendall, 322 N.C. 643, 649–50 (1988).
“If a contract by an employee in restraint of competition is too broad to be a reasonable
protection to the employer’s business it will not be enforced.” 	Whittaker Gen. Med.
Corp. v. Daniel, 324 N.C. 523, 528 (1989); see also InVue Sec. Prods., Inc. v. Stein,
2017 NCBC LEXIS 115, at *10 (N.C. Super. Ct. Dec. 18, 2017).
15. 	Hall’s noncompetition clause is facially overbroad and unenforceable. 	It
purports to stop her from “directly or indirectly” owning, joining, or being “connected
in any manner with” a competitor for two years following the end of her employment
with Design Gaps. 	(Empl. Agrmt. § 4.2.) 	This sweeping restriction—which would
1 Copyright preemption, which is not a garden-variety issue in this Court, featured
prominently in the earlier federal litigation. The Peters Defendants initially made similar
arguments here out of an abundance of caution, noting that the complaint in this case retains
all the allegations that supported the plaintiffs’ federal-law claims in that case. But Design
Gaps and the Glovers have since confirmed that they are not relying on any allegations
related to trademarks, trade dress, or copyrighted designs and that those allegations are
simply a vestige of the original federal complaint. Thus, there is no need to address copyright
preemption.

prevent Hall from having any association with a competitor, even if unrelated to the
duties she performed for Design Gaps—isn’t remotely tailored to protect Design Gaps’
legitimate business interests. See VisionAIR, Inc. v. James, 167 N.C. App. 504, 508–
09 (2004) (concluding that a noncompetition clause that barred an employee from
“participat[ing] 	in, 	directly 	or 	indirectly, 	any 	business 	similar 	to” 	the 	former
employer’s was unenforceable).2
16. 	Hall’s nonsolicitation clause is facially overbroad for similar reasons. 	It
purports to stop her (again for two years) from “directly or indirectly” soliciting all
“customers” of Design Gaps “or its affiliates”—even those she had no contact with and
did not know. 	(Empl. Agrmt. § 4.1.) 	A restriction on solicitation that “extends to
areas where [the employee] had no connections or personal knowledge of customers”
is unreasonable, especially when it sweeps in customers of affiliated companies for
whom the employee did not work. 	Hejl v. Hood, Hargett & Assocs., Inc., 196 N.C.
App. 299, 307 (2009); see also Prometheus Grp. Enters., 2023 NCBC LEXIS 42, at *13
2 Cases with similar holdings are legion. See, e.g., Med. Staffing Network, Inc. v. Ridgway,
194 N.C. App. 649, 656 (2009) (“[W]e have held that restrictive covenants are unenforceable
where they prohibit the employee from engaging in future work that is distinct from the
duties actually performed by the employee.”); Hartman v. W.H. Odell & Assocs., 117 N.C.
App. 307, 317 (1994) (refusing to enforce a noncompetition covenant that “requires plaintiff
to have no association whatsoever with any business that provides actuarial services”);
Prometheus Grp. Enters., LLC v. Gibson, 2023 NCBC LEXIS 42, at *13 (N.C. Super. Ct. Mar.
21, 2023) (“North Carolina courts have repeatedly warned the drafters of restrictive
covenants about the dangers of using the phrase ‘directly or indirectly’ when defining the
scope of a non-compete.”); Power Home Solar, LLC v. Sigora Solar, LLC, 2021 NCBC LEXIS
55, at *25 (N.C. Super. Ct. June 18, 2021) (“North Carolina courts have routinely refused to
enforce noncompete provisions that prohibit former employers from ‘indirectly’ working for a
competitor or similar business.”); Aeroflow Inc. v. Arias, 2011 NCBC LEXIS 21, at *17–18
(N.C. Super. Ct. July 5, 2011) (“The plain language of the non-competition provision, drafted
by Aeroflow, would prevent Arias working for a competitor in a position wholly outside the
scope of his employment with Aeroflow.”).

(collecting cases); Mech. Sys. & Servs. v. Howard, 2021 NCBC LEXIS 69, at *9–10
(N.C. Super. Ct. Aug. 11, 2021) (same).
17. 	Because 	the 	noncompetition 	and 	nonsolicitation 	clauses 	in 	Hall’s
employment contract are overbroad and unenforceable, the Court grants her motion
to dismiss the claim for breach of contract.
B. Misappropriation of Trade Secrets
18. 	Design Gaps and the Glovers assert their claim for misappropriation of trade
secrets against all defendants. “To plead misappropriation of trade secrets, a plaintiff
must identify a trade secret with sufficient particularity so as to enable a defendant
to delineate that which he is accused of misappropriating and a court to determine
whether misappropriation has or is threatened to occur.” 	Krawiec, 370 N.C. at 609
(citation and quotation marks omitted).
19. 	The complaint doesn’t come close to satisfying this standard. In vague and
conclusory fashion, it identifies the trade secrets to include “customer lists, pricing
formulas, and bidding formulas,” as well as “product sources, products, price lists,
advertising plans, designs and materials, technical drawings, services, pricing points,
methods of sales and business contracts and training methods as well as . . .
customers’ pricing programs, unit sales, dollar volume, models, financial information,
product roadmaps, channelization and sales strategies.” 	(Compl. ¶¶ 69, 70.) 	As in
Krawiec, there is “no further detail about these” customer lists, formulas, plans,
materials, 	methods, 	information, 	roadmaps, 	and 	strategies 	“sufficient 	to 	put
defendants on notice as to the precise information allegedly misappropriated.” 	370

N.C. at 611 (concluding that identification of trade secrets as “original ideas and
concepts for dance productions, marketing strategies and tactics, as well as student,
client 	and 	customer 	lists 	and 	their 	contact 	information” 	was 	insufficiently
particular).3
20. 	Accordingly, 	the 	Court 	grants 	the 	motions 	to 	dismiss 	the 	claim 	for
misappropriation of trade secrets.
C. Tortious Interference with Contract
21. 	Design Gaps claims that the Peters Defendants tortiously interfered with
Hall’s employment agreement by causing her to terminate the agreement and to
breach its noncompetition and nonsolicitation clauses. 	To state a claim for tortious
interference with contract, the plaintiff must allege that a valid contract exists
between it and a third person and that the defendant knew of the contract,
intentionally induced the third person not to perform the contract, did so without
justification, and caused actual damage. See Embree Constr. Grp., Inc. v. Rafcor, Inc.,
330 N.C. 487, 498 (1992).
22. 	Hall’s noncompetition and nonsolicitation clauses are unenforceable. 	As a
result, they “cannot support [Design Gaps’] claim for tortious interference with
3 This Court has routinely granted motions to dismiss claims for misappropriation of trade
secrets based on similarly vague and generalized identifications of the alleged trade secrets.
See, e.g., Power Home Solar, 2021 NCBC LEXIS 55, at *34 (identifying trade secrets generally
as “proprietary practices, methods, techniques, and pricing models” was not sufficiently
particular); Bite Busters, LLC v. Burris, 2021 NCBC LEXIS 26, at *20–21 (N.C. Super. Ct.
Mar. 25, 2021) (identifying trade secrets generally as “processes” and “procedures” was
insufficiently particular); AECOM Tech. Corp. v. Keating, 2012 NCBC LEXIS 9, at *8 (N.C.
Super. Ct. Feb. 6, 2012) (identifying trade secrets generally as “customer lists, customer
contract information, pricing information and product information” was insufficiently
particular).

contract.” 	Phelps Staffing, LLC v. C.T. Phelps, Inc., 226 N.C. App. 506, 512 (2013);
see also Power Home Solar, 2021 NCBC LEXIS 55, at *45.
23. 	Moreover, the complaint on its face shows that the Peters Defendants were
legally justified in offering Hall a new job and, by extension, causing her to end her
employment agreement with Design Gaps. 	As our Supreme Court has explained,
“competition in business constitutes justifiable interference in another’s business
relations and is not actionable so long as it is carried on in furtherance of one’s own
interests and by means that are lawful.” Peoples Sec. Life Ins. Co. v. Hooks, 322 N.C.
216, 221 (1988). In addition, “everyone has the right to offer better terms to another’s
employee, so long as the latter is free to leave.” 	Id. at 222. 	Here, the Peters
Defendants and Design Gaps are competitors, (see Compl. ¶¶ 14, 23), and Hall’s
employment agreement allowed her to terminate it on thirty-days’ notice, (Empl.
Agrmt. § 3.1).
24. 	Design Gaps argues that the Peters Defendants acted without justification
because their goal was to misappropriate trade secrets rather than to engage in
legitimate competition. 	As discussed, though, the complaint does not adequately
allege misappropriation.
25. 	The Court therefore grants the motion to dismiss the claim for tortious
interference with contract. 	See Peoples Sec. Life Ins., 322 N.C. at 220 (“A motion
under 	Rule 	12(b)(6) 	should 	be 	granted 	when 	the 	complaint 	reveals 	that 	the
interference was justified or privileged.”).

D. Section 75-1.1
26. 	The section 75-1.1 claim is predicated entirely on the claims for breach of
contract, misappropriation of trade secrets, and tortious interference with contract.
Having dismissed those claims, the Court dismisses the section 75-1.1 claim for the
same reasons.
E. Breach of Fiduciary Duty & Constructive Fraud
27. 	Design Gaps alleges that Hall breached fiduciary duties arising from her
employment with the company. 	(See Compl. ¶¶ 88, 89, 115.) 	As Hall correctly
observes, though, employees who are not officers or directors typically do not owe
their employers fiduciary duties. 	See Dalton v. Camp, 353 N.C. 647, 652 (2001)
(“[T]he 	relation 	of 	employer 	and 	employee 	is 	not 	one 	of 	those 	regarded 	as
confidential.” (citation and quotation marks omitted)). 	The rare exception is when
the employee “exercise[s] dominion” over the employer. 	Id.; see also Reichhold
Chems., Inc. v. Goel, 146 N.C. App. 137, 155 (2001) (“A managerial position alone does
not demonstrate the requisite domination and influence on the other required to
create a fiduciary obligation.” (cleaned up)). Nothing in the complaint suggests that
Hall exercised dominion over Design Gaps.
28. 	Accordingly, Design Gaps has not adequately alleged that a fiduciary
relationship exists. 	The Court therefore dismisses its claims for breach of fiduciary
duty and constructive fraud. 	See Azure Dolphin, LLC v. Barton, 371 N.C. 579, 599
(2018) (holding that a claim for constructive fraud arises only when “a confidential or
fiduciary relationship exists” (citation and quotation marks omitted)); Dalton, 353

N.C. at 651 (“For a breach of fiduciary duty to exist, there must first be a fiduciary
relationship between the parties.”).
F. Fraud
29. 	The claim for fraud is also deficient. A “false representation . . . of a material
fact” is essential to fraud. Rowan Cnty. Bd. of Educ. v. U.S. Gypsum Co., 332 N.C. 1,
17 (1992). Equally essential, the plaintiff who claims fraud must have relied on and
been deceived by the misrepresentation. See id. Although the complaint alleges that
Hall 	misled 	customers, 	there 	are 	no 	allegations 	that 	she 	made 	any 	false
representations to Design Gaps or the Glovers. 	(See Compl. ¶¶ 93, 95.) 	Indeed, the
complaint alleges that Design Gaps and the Glovers did not find out about, much less
rely on, the supposedly false statements to customers until after her resignation. (See
Compl. ¶ 100.) 	The Court therefore dismisses the fraud claim. 	See Bucci v. Burns,
2018 NCBC LEXIS 37, at *15 (N.C. Super. Ct. Apr. 25, 2018) (“It goes without saying
that an individual cannot be defrauded by a misrepresentation he never sees, hears,
or even knows about.”).
G. Embezzlement
30. 	Design Gaps and the Glovers allege that Hall embezzled money belonging
to them during her employment. 	It is unlawful for an agent of a corporation to
“[e]mbezzle or fraudulently or knowingly and willfully misapply or convert to his own
use” the corporation’s “money, goods or other chattels.” N.C.G.S. § 14-90; see also id.
§ 1-538.2(a), (c) (authorizing civil action for embezzlement). 	Hall contends that the
allegations in the complaint, even if taken as true, show that the money at issue

belonged to her, not Design Gaps. This is unpersuasive. Viewing the allegations in
the light most favorable to Design Gaps and the Glovers, Hall received at least one
check from a customer made out to Design Gaps that she destroyed. 	She then told
the customer to pay her directly. (See Compl. ¶ 34.) That is sufficient to allege that
Hall knowingly misapplied or converted to her own use money belonging to Design
Gaps. 	Accordingly, the Court denies Hall’s motion to dismiss the embezzlement
claim.
IV.
CONCLUSION
31. 	For all these reasons, the Court DENIES Hall’s motion to dismiss the
embezzlement claim. 	The Court GRANTS the remainder of her motion and
GRANTS the Peters Defendants’ motion. 	Plaintiffs’ claims for breach of contract,
misappropriation of trade secrets, tortious interference with contract, violations of
section 	75-1.1, 	breach 	of 	fiduciary 	duty, 	constructive 	fraud, 	and 	fraud 	are
DISMISSED with prejudice.
SO ORDERED, this the 1st day of May, 2024.
/s/ Adam M. Conrad
Adam M. Conrad
Special Superior Court Judge
for Complex Business Cases