Exela Pharma Scis., LLC v. Rei Automation, Inc.

Exela Pharma Scis., LLC v. REI Automation, Inc., 2026 NCBC 30.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
CALDWELL COUNTY 24CVS000158-130

EXELA PHARMA SCIENCES, LLC,

Plaintiff,

v. ORDER AND OPINION ON
DEFENDANT’S MOTION FOR
REI AUTOMATION, INC., PARTIAL SUMMARY JUDGMENT
Defendant.

1. This case arises out of a dispute over a contract for the development of an

intravenous (IV) bag filling system. Plaintiff Exela Pharma Sciences, LLC claims

that Defendant REI Automation, Inc. misrepresented its expertise and failed to

design and deliver the system as promised. REI denies the allegations and blames

Exela for the project’s failure. REI’s motion for partial summary judgment is now

pending, as are two related motions to strike certain evidence and to supplement the

record. (See ECF Nos. 61, 81, 105.) For the following reasons, the Court GRANTS

REI’s summary-judgment motion and DENIES as moot its motions to strike and

supplement.

Nelson Mullins Riley & Scarborough LLP, by G. Gray Wilson and Linda
L. Helms, and Chintapalli Law Firm, PLLC, by Satish Chintapalli, for
Plaintiff Exela Pharma Sciences, LLC.

Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, LLP, by Hope
Garber, Christopher G. Smith, and Daniel Harrell, and Orrick,
Herrington & Sutcliffe, LLP, by David P. Fuad, for Defendant REI
Automation, Inc.

Conrad, Judge.
I.
BACKGROUND

2. The Court does not make findings of fact when deciding motions for

summary judgment. The purpose of this background is to give context for the Court’s

analysis and ruling.

3. Exela makes and sells pharmaceuticals. For some products, Exela uses a

post-manufacturing process called terminal sterilization to reduce microbial

contamination. This is done by putting the finished pharmaceutical product into an

autoclave and using a combination of high pressure and high temperature to kill

microbes. For products that cannot survive high temperatures, Exela uses an aseptic

manufacturing process without terminal sterilization. In this context, an aseptic

process broadly means that the pharmaceutical manufacturing process itself is

designed to prevent or mitigate microbial contamination. (See 30(b)(6) Dep. P.

Koneru 17:4–10, 18:9–19:19, 38:3–11, ECF Nos. 62.2, 72.1.)

4. REI describes itself as a builder of special or custom machinery. Its

customers include pharmaceutical makers, as well as other businesses in fields as

varied as the nuclear, automotive, and consumer products industries. (See Dep. M.

Ahring 16:6–24, ECF Nos. 62.5, 72.11.)

5. In the summer of 2021, the parties began discussing a project to design and

build a robotic, aseptic IV bag filler machine. At that time, Exela was seeking

regulatory approval for a new product to be manufactured aseptically and delivered

through IV bags. But its existing IV bag filler was not automated and would not have

been suitable for this product. Ernest Shepard, who was then serving as Exela’s chief
operating officer, had worked with REI in the past and recommended engaging it to

create an aseptic robotic bag filler that could operate at scale. A series of meetings

and communications followed in late July and early August 2021. During these

preliminary discussions, Exela’s representatives toured REI’s facilities, and REI told

Exela that it was in the process of building an aseptic IV bag filling system for another

company. (See 30(b)(6) Dep. P. Koneru 93:6–94:20, 135:2–136:17; Dep. E. Shepard

7:17–8:9, 71:4–72:22, ECF Nos. 62.3, 72.2; Dep. M. Pope 50:3–51:14, ECF Nos. 62.4,

72.5; Aff. E. Shepard ¶¶ 2, 3, ECF No. 72.6.)

6. At the end of October 2021, REI tendered a proposal in which it touted its

“core competencies” as its “ability to develop elegant, robust automation system

designs from fully automatic assembly lines to robotic cells to semi-automatic lean

assembly cells.” The proposal also contains a project description, various conceptual

sketches, price and payment terms, a summary of deliverables, and more. Exela

accepted the proposal and issued a purchase order just a few days later. Together,

the proposal and the purchase order make up the parties’ contract. (Aff. E. Shepard

Ex. A; 30(b)(6) Dep. P. Koneru Ex. 18; Dep. E. Shepard 110:2–7.)

7. REI began working on the project soon after but never completed it. The

parties now blame each other for its failure. According to Exela, a third-party

consulting firm assessed REI’s progress and determined that its work was shoddy

and beyond salvaging. What this shows, Exela says, is that REI lacked the necessary

expertise and bit off more than it could chew. REI’s answer to that charge is that it

takes two to tango. As REI tells it, Exela derailed the project by withholding crucial
input, repeatedly making design changes, and either firing or failing to retain most

of the staff members responsible for coordinating with REI. Whatever the true reason

may have been, it is undisputed that Exela terminated the project in 2023. (Compare,

e.g., Decl. W. McKinney ¶¶ 2, 3, ECF No. 72.7; Dep. M. Ahring 20:13–16, with, e.g.,

30(b)(6) Dep. P. Koneru 176:6–9, 191:16–192:4; Dep. G. Phillips 19:19–23, ECF No.

62.8.)

8. Exela then filed this action, complaining that it had paid REI more than $3

million with nothing to show for the effort. The complaint claims that REI breached

the parties’ contract and seeks damages and declaratory relief, as well as rescission

as an alternative remedy. The complaint also asserts claims for fraud and unfair or

deceptive trade practices under N.C.G.S. § 75-1.1 based on the allegation that REI’s

October 2021 “budget proposal . . . was false and fraudulent” because REI “knew that

it lacked the expertise to fabricate” the bag filler system “in a timely manner and

actively concealed . . . that it had never manufactured such products before.” By

counterclaim, REI asserts that Exela breached the parties’ contract. (See, e.g., Compl.

¶¶ 6–8, 11, 13, 16, 21, 23, ECF No. 3; Ans. & Countercl., ECF No. 7.)

9. Discovery is now closed. REI has moved for partial summary judgment on

Exela’s fraud and section 75-1.1 claims. During briefing on the summary-judgment

motion, REI also filed a motion to strike certain evidence attached to Exela’s response

brief, primarily on the ground that Exela had obtained the documents from a

nonparty and then neglected to produce them to REI during discovery.
10. Once briefing on these motions was complete, the Court held a hearing on

10 February 2026. Afterward, REI moved to supplement the record, contending that

Exela had mischaracterized certain evidence during the hearing. Briefing related to

the motion to supplement ended on 9 March 2026.

11. REI’s motions are now ripe for resolution.

II.
LEGAL STANDARD

12. Summary judgment is proper when the record “show[s] that there is no

genuine issue at to any material fact and that any party is entitled to a judgment as

a matter of law.” N.C. R. Civ. P. 56(c). The Court must view the evidence in the light

most favorable to the nonmoving party and draw all inferences in its favor. See Vizant

Techs., LLC v. YRC Worldwide, Inc., 373 N.C. 549, 556 (2020); N.C. Farm Bureau

Mut. Ins. Co v. Sadler, 365 N.C. 178, 182 (2011).

III.
ANALYSIS

13. REI’s motion targets Exela’s fraud claim. REI also contends that Exela’s

section 75-1.1 claim is predicated on the fraud claim, so that the two claims rise or

fall together.

14. Fraud has five “essential elements”: (a) a false representation or

concealment of a material fact, (b) calculated to deceive, (c) made with intent to

deceive, (d) that did in fact deceive, and (e) that resulted in damage to the injured

party. Rowan Cnty. Bd. of Educ. v. U.S. Gypsum Co., 332 N.C. 1, 17 (1992). The

plaintiff must show not only that it actually relied on the misrepresentation or
omission but also that its reliance was reasonable. See Forbis v. Neal, 361 N.C. 519,

527 (2007).

15. Because “silence is fraudulent only when there is a duty to speak,” a claim

based on “concealment or nondisclosure” requires the plaintiff to show that the

defendant “had a duty to disclose material information.” Lawrence v. UMLIC-Five

Corp., 2007 NCBC LEXIS 20, at *8 (N.C. Super. Ct. June 18, 2007) (citing Griffin v.

Wheeler-Leonard & Co., 290 N.C. 185, 198 (1976)). A duty to disclose arises when the

parties are in a fiduciary relationship, when one party “has taken affirmative steps

to conceal material facts from the other,” or when “one party has knowledge of a latent

defect in the subject matter of the negotiations about which the other party is both

ignorant and unable to discover through reasonable diligence.” Harton v. Harton, 81

N.C. App. 295, 297–98 (1986).

16. Simple notice pleading is insufficient for fraud claims; particularity is

required. See N.C. R. Civ. P. 9(b). If the claim is based on a misrepresentation, the

plaintiff must allege the “time, place and content” of the misrepresentation, the

“identity of the person making the representation,” and “what was obtained as a

result.” Terry v. Terry, 302 N.C. 77, 85 (1981). If the claim is based on concealment,

the plaintiff must allege:

(1) the relationship between plaintiff and defendant giving rise to the
duty to speak; (2) the event or events triggering the duty to speak and/or
the general time period over which the relationship arose and the
fraudulent conduct occurred; (3) the general content of the information
that was withheld and the reason for its materiality; (4) the identity of
those under a duty who failed to make such disclosures; (5) what the
defendant gained by withholding information; (6) why plaintiff’s
reliance on the omission was both reasonable and detrimental; and (7)
the damages proximately flowing from such reliance.

Lawrence, 2007 NCBC LEXIS 20, at *9 (citation and alterations omitted).

17. Exela’s complaint pleads both misrepresentations and concealment. REI

allegedly misrepresented its “design and manufacturing expertise” and its ability to

provide an IV bag filling system “in several months.” (Compl. ¶ 6.) REI also allegedly

concealed that “it had never attempted to build an aseptic bag filling system.”

(Compl. ¶ 7.) These allegations define and delimit the scope of the fraud claim. (See

Compl. ¶ 16 (alleging fraud on the grounds that REI “knew that it lacked the

expertise to fabricate such products in a timely manner and actively concealed from

plaintiff that it had never manufactured such products before”).)

18. REI contends that these allegations lack particularity, thus entitling it to

summary judgment. Exela’s response brief says nothing about particularity and

makes no attempt to show that the complaint’s allegations satisfy Rule 9(b). Asked

to address the issue at the hearing, Exela’s counsel argued that insufficient

particularity in the complaint is not a valid basis for summary judgment.

19. Thus, a threshold question arises: is summary judgment appropriate if a

complaint does not state a claim for fraud with particularity?

20. Yes, it is. Appellate precedent is crystal clear on this point. A complaint

must allege fraud “with particularity,” and “[i]f it does not, summary judgment is

proper.” Trull v. Cent. Carolina Bank & Tr. Co., 117 N.C. App. 220, 224 (1994); see

also, e.g., Leake v. Sunbelt Ltd. of Raleigh, 93 N.C. App. 199, 205 (1989) (affirming

grant of summary judgment due to failure to allege fraud with particularity); In re
Se. Eye Center-Pending Matters, 2019 NCBC LEXIS 29, at *47 (N.C. Super. Ct. May

7, 2019) (collecting cases holding that “summary judgment is appropriate . . . where

a plaintiff has failed to plead fraud with particularity”).

21. This leads to a second question: does Exela’s complaint allege fraud with the

particularity required by Rule 9(b)?

22. No, it does not. Starting with the allegations of fraudulent concealment, the

complaint does not allege, even in a conclusory way, that REI had a duty to speak.

Nor does it allege facts that might give rise to a duty to speak, such as affirmative

acts of concealment. This is a glaring defect, especially so given the usual rule that

parties negotiating a commercial transaction at arm’s-length have no duty of

disclosure. See, e.g., Comput. Decisions, Inc. v. Rouse Office Mgmt. of N.C., Inc., 124

N.C. App. 383, 389 (1996) (observing that parties had “no duty of disclosure” when

negotiating a commercial transaction). REI is therefore entitled to summary

judgment as to the allegations of fraudulent concealment.

23. The allegations of fraudulent misrepresentation are also deficient. To be

sure, the complaint does say when and where the misrepresentations were

supposedly made (“a budget proposal dated October 12, 2021”), as well as who made

them (REI’s “employee, Graham Chapman”). (Compl. ¶ 6.) But it does not

adequately allege a fraudulent representation in other respects.

24. Consider, first, the allegation that REI misrepresented its “design and

manufacturing expertise” in the proposal. (Compl. ¶ 6.) What did REI say about its

expertise? The complaint provides no detail. As our Supreme Court has made clear,
“[t]here is a requirement of specificity as to the element of a representation made by

the alleged defrauder.” Rowan Cnty. Bd. of Educ., 332 N.C. at 17. Were it otherwise,

courts could not distinguish “mere puffing” and other nonactionable statements from

true “misrepresentations of material facts.” Id. The complaint’s vague allegation

that REI misrepresented its expertise is not “definite and specific” and therefore

cannot support a fraud claim. See Charlotte Motor Speedway, LLC v. Cnty. of

Cabarrus, 230 N.C. App. 1, 10 (2013) (concluding that defendant’s alleged

representation about its “ability to fund the promised amounts” was not “definite and

specific”).

25. Rather than defend the claim as alleged, Exela shifts gears in its response

brief and offers a new theory. According to Exela, REI represented in a slide deck in

August 2021 that it had “expertise in designing and building a turnkey aseptic IV Bag

filler” and that it “had already designed and built an aseptic IV bag filler for another

customer.” (Resp. Br. 11, ECF No. 72 (emphases added).) Note the material

differences in time, place, and content. This is not what Exela alleged in its

complaint, and the Court will not entertain a novel theory presented for the first time

at summary judgment. See, e.g., Fund 19-Miller, LLC v. Isbill, 2021 N.C. App. LEXIS

624, at *11 (N.C. Ct. App. 2021) (unpublished) (“Litigants are unable to assert new

theories of recovery that were not alleged in the complaint at summary judgment

. . . .”); Window World of Baton Rouge, LLC v. Window World, Inc., 2024 NCBC LEXIS

153, at *114 (N.C. Super. Ct. Nov. 26, 2024) (concluding that it “would be

fundamentally unfair” to allow a party to raise a “new theory . . . at this late date”);
B&D Software Holdings, LLC v. Infobelt, Inc., 2024 NCBC LEXIS 103, at *17–18

(N.C. Super. Ct. Aug. 1, 2024) (“A basic tenet of our civil justice system is that a

claimant’s initial pleading must adequately inform the responding party of what it is

alleged to have done wrong so that it can defend itself accordingly.”).

26. That leaves the allegation that REI promised that it could finish the job “in

several months.” (Compl. ¶ 6.) “An unfulfilled promise is not actionable fraud . . .

unless the promisor had no intention of carrying it out at the time of the promise.”

McKinnon v. CV Indus., Inc., 213 N.C. App. 328, 338 (2011); see also Trull, 117 N.C.

App. at 225 (“A promissory misrepresentation will not normally support an allegation

of fraud.”). Nowhere does the complaint allege with particularity that REI had no

intention of fulfilling its obligations on time. See Leake, 93 N.C. App. at 205 (“Since

plaintiffs . . . failed to allege defendants’ intent at the time the representations were

made, we affirm that portion of the trial court’s order granting summary judgment

for defendants on the fraudulent misrepresentation of recreational facilities claim.”).

And in any event, Exela’s response brief does not discuss or rely on this alleged

misrepresentation, suggesting that it has been abandoned.

27. In sum, Exela did not plead its fraud claim with the particularity required

by Rule 9(b). As a result, summary judgment as to this claim is appropriate. See,

e.g., Gvest Real Est., LLC v. JS Real Est. Invs., LLC, 2023 NCBC LEXIS 110, at *21

(N.C. Super. Ct. Sept. 12, 2023) (granting summary judgment because claimant failed

to plead fraud claim with adequate particularity).
28. For similar reasons, REI is entitled to summary judgment as to Exela’s

section 75-1.1 claim. Indeed, this claim is predicated entirely on Exela’s allegations

of fraud and breach of contract. (See Compl. ¶ 21 (stating generally that the

“misconduct alleged herein constitutes unfair and deceptive acts or practices”).) It is

elementary that “a mere breach of contract, even if intentional, is not sufficiently

unfair or deceptive to sustain an action under N.C.G.S. § 75-1.1.” Post v. Avita Drugs,

LLC, 2017 NCBC LEXIS 95, at *10 (N.C. Super. Ct. Oct. 11, 2017) (quoting Branch

Banking & Tr. Co. v. Thompson, 107 N.C. App. 53, 62 (1992)). There must be some

additional, aggravating circumstance. Fraud would usually suffice, but Exela has

not adequately alleged fraud. Nor has it alleged any other conduct that could be

considered an aggravating circumstance. Accordingly, the section 75-1.1 claim fails

on its face. See, e.g., Brown v. Roth, 133 N.C. App. 52, 56 n.3 (1999) (“Because we

hold there is no evidence of fraud, it follows the unfair and deceptive trade practices

claim also must fail.”); Whalen v. Tuttle, 2024 NCBC LEXIS 146, at *14–16 (N.C.

Super. Ct. Nov. 19, 2024) (granting motion to dismiss a “catchall” section 75-1.1 claim

predicated on a deficient fraud claim and related claim for breach of contract).

29. In an attempt to save its section 75-1.1 claim, Exela again belatedly

introduces a new theory, this time based on REI’s supposed bad faith during

settlement negotiations that took place before this litigation began. It is doubtful

whether the asserted conduct—which is bound up with the parties’ perceived

contractual rights and obligations—could support a section 75-1.1 claim even if Exela

had included the allegations in its complaint. Regardless, Exela did not, and it may
not revamp its claim at summary judgment. See, e.g., Fund 19-Miller, 2021 N.C. App.

LEXIS 624, at *11.

30. Accordingly, the Court grants REI’s motion for partial summary judgment

as to Exela’s fraud and section 75-1.1 claims. It follows that REI’s motion to strike

and motion to supplement are moot.

IV.
CONCLUSION

31. For all these reasons, the Court GRANTS REI’s motion for partial summary

judgment. Exela’s claims for fraud and violations of section 75-1.1 are DISMISSED

with prejudice.

32. The Court also DENIES as moot REI’s motion to strike and motion to

supplement the record.

SO ORDERED, this the 2nd day of April, 2026.

/s/ Adam M. Conrad
Adam M. Conrad
Special Superior Court Judge
for Complex Business Cases