Usconnect, LLC v. Sprout Retail, Inc.

USConnect, LLC v. Sprout Retail, Inc., 2017 NCBC 36.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
GUILFORD COUNTY 17 CVS 2554

USCONNECT, LLC,

Plaintiff,

v. ORDER AND OPINION
ON DEFENDANT’S MOTION TO
SPROUT RETAIL, INC., DISMISS OR FOR A MORE
DEFINITE STATEMENT
Defendant.

1. This case involves a dispute between Plaintiff USConnect, LLC, and

Defendant Sprout Retail, Inc. (“Sprout”) over a contract and technology related to a

cashless payment system for food services, vending machines, and unattended kiosks.

USConnect claims that Sprout has breached the parties’ service agreement and is

misappropriating USConnect’s trade secrets. In addition, USConnect seeks a

declaratory judgment that Sprout does not own intellectual property rights to certain

software used by USConnect.

2. Sprout moved to dismiss each cause of action for lack of personal jurisdiction

and failure to state a claim under Rules 12(b)(2) and 12(b)(6) of the North Carolina

Rules of Civil Procedure. Sprout also moved, in the alternative, for a more definite

statement under Rule 12(e).

3. Having considered the motion, the briefs supporting and opposing the

motion, and the parties’ arguments at the hearing on April 12, 2017, the Court

GRANTS in part and DENIES in part Sprout’s motion.
Womble Carlyle Sandridge & Rice, LLP by Charles Burke and Stephen
F. Shaw for Plaintiff.

Thomason Law Office by Charles L. Thomason, and Higgins Benjamin,
PLLC by Gilbert J. Andia, Jr., for Defendant.

Conrad, Judge.
I.
BACKGROUND

4. The Court does not make findings of fact on a motion to dismiss under Rule

12(b)(6). The following factual summary is drawn from relevant allegations in the

complaint and the attached exhibits.

5. USConnect is a North Carolina company that offers “cashless payment

account services and other next-generation vending and food services solutions,

including micro market kiosks, vending machine, cafeteria and related food service

offerings through its network of affiliates, to customers throughout the United

States.” (Compl. ¶ 4.)

6. In April 2013, USConnect entered into the Sprout Service and License

Agreement (“Agreement”) with Sprout, a New Jersey corporation, to develop the

software to support communications between the network-connected vending

machines or kiosks, the network itself, and related hardware. (Compl. ¶¶ 5, 16, Ex.

A.) As part of the Agreement, USConnect and Sprout provided each other with access

to certain confidential information, and Sprout gave USConnect permission to “utilize

the Sprout System for Cashless Equipment, Markets and Foodservice outlets.”

(Compl. Ex. A p.5; see also Compl. ¶ 27.) To enable “affiliates and other developers
to interface” with USConnect’s network, USConnect and Sprout “published aspects”

of the software “to publicly-accessible websites.” (Compl. ¶ 19.)

7. The Agreement includes provisions governing the use of confidential

information. (See Compl. Ex. A pp.5, 9–10.) It also provides that “Sprout shall not

form, participate in or provide services to a similar or competing organization to

[USConnect].” (Compl. Ex. A. p.4.)

8. This Agreement establishes a two-year term unless USConnect and Sprout

agreed otherwise. (Compl. Ex. A. p.2.) Thus, in the absence of an extension, the term

of the Agreement would have expired on April 1, 2015. According to the complaint,

USConnect and Sprout continued to conduct business with each other under the

terms of the Agreement after April 1, 2015. (Compl. ¶ 21.)

9. In early 2016, Sprout sent USConnect a proposal for a new contract. (Compl.

¶ 22.) As part of the negotiation process, the parties signed a letter, dated March 26,

2016, that stated their “mutual intention to complete a new contractual

arrangement.” (Compl. Ex. B; see also Compl. ¶ 23.) The parties aimed to complete

the new agreement by May 1, 2016. (Compl. Ex. B.) The letter further stated that

“[e]ffective with and as part of that New Agreement, the parties will end the terms of

service under the Old Agreement so that it is clear that . . . services [provided] by

Sprout after the transition period will be pursuant to the terms of the New

Agreement.” (Compl. Ex. B.)

10. Sprout and USConnect were unable to agree to terms for a new contract.

(Compl. ¶ 26.) Sprout has since threatened to terminate USConnect’s payment
services, and as a result, USConnect “independently developed a temporary

replacement gateway payment system,” using “industry-accepted open standards,

publicly-available automated programming interfaces and other standard

terminology.” (Compl. ¶¶ 35–37.) Sprout has claimed that USConnect is

unauthorized to use this temporary system, including publicly available technology

that supports it. (Compl. ¶ 37.)

11. USConnect also alleges that Sprout has violated the Agreement “by

coordinating with a direct competitor of USConnect to offer” competing services.

(Compl. ¶ 28.) It further alleges that Sprout has used USConnect’s confidential

information and trade secrets to develop competing services and to solicit

USConnect’s customers. (See Compl. ¶¶ 29, 30.)

12. USConnect filed this suit on January 5, 2017. Sprout moved to dismiss the

complaint on February 7, 2017, and USConnect filed its response on March 2, 2017.

Sprout did not file a reply. The motion is ripe for determination.

II.
ANALYSIS

A. Personal Jurisdiction

13. Sprout argues, without citing any legal authority, that the complaint should

be dismissed for lack of personal jurisdiction. (See Mem. of Law in Supp. Of Def.’s

Mot. to Dismiss and for More Definite Stmt. 16–17 [“Def.’s Mem.”].) Sprout argues

that it has no presence in North Carolina, that the Court cannot exercise jurisdiction

solely based on the Agreement, and that USConnect pleaded jurisdiction

“formulaically.” (Def.’s Mem. 17.) USConnect responds that Sprout made substantial
and repeated contacts with North Carolina in the course of executing and performing

its obligations under the Agreement. (See Pl.’s Mem. of Law in Opp’n to Def.’s Mot.

to Dismiss or for More Definitive Stmt. 20–22 [“Pl.’s Opp’n.”].) USConnect also

submitted the Affidavit of Jeffrey S. Whitacre in support of its response. Having

reviewed the parties’ evidence and arguments, the Court concludes that it may

exercise personal jurisdiction over Sprout.

14. “A North Carolina court has jurisdiction over a nonresident defendant if

(1) statutory authority for the exercise of jurisdiction under the long-arm statute,

N.C. Gen. Stat. § 1-75.4, exists and (2) the exercise of jurisdiction comports with due

process under federal law.” Soma Tech., Inc. v. Dalamagas, 2017 NCBC LEXIS 26,

at *8 (N.C. Super. Ct. Mar. 24, 2017). As relevant here, North Carolina’s long-arm

statute confers personal jurisdiction when the action “[a]rises out of a promise, made

anywhere to the plaintiff . . ., by the defendant to perform services within this State

or to pay for services to be performed in this State by the plaintiff” or “[a]rises out of

services actually performed for the plaintiff by the defendant within the State, or

services actually performed for the defendant by the plaintiff within this State if such

performance within this State was authorized or ratified by the defendant.” N.C.

Gen. Stat. § 1-75.4(5)(a)–(b).

15. The North Carolina Supreme Court has construed the long-arm statute

liberally “to make available to the North Carolina courts the full jurisdictional powers

permissible under federal due process.” Dillon v. Numismatic Funding Corp., 291

N.C. 674, 676, 231 S.E.2d 629, 630 (1977). Accordingly, “the question of statutory
authority collapses into one inquiry—whether defendant has the minimum contacts

necessary to meet the requirements of due process.” Cambridge Homes of N.C. L.P.

v. Hyundai Constr., Inc., 194 N.C. App. 407, 412, 670 S.E.2d 290, 295 (2008) (quoting

Filmar Racing, Inc. v. Stewart, 141 N.C. App. 668, 671, 541 S.E.2d 733, 736 (2001)).

16. Here, the relevant inquiry is whether the Court has specific jurisdiction,

which “exists when the cause of action arises from or is related to defendant’s contacts

with the forum.” Skinner v. Preferred Credit, 361 N.C. 114, 122, 638 S.E.2d 203, 210

(2006). The focus is “the relationship among the defendants, this State, and the

causes of action.” Tom Togs, Inc. v. Ben Elias Indus. Corp., 318 N.C. 361, 366, 348

S.E.2d 782, 786 (1986). The relationship with the State “must arise out of contacts

that the ‘defendant himself’ creates.” Walden v. Fiore, 134 S. Ct. 1115, 1122 (U.S.

2014) (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985)). A

defendant’s contacts with this State will satisfy minimum-contact requirements

when the defendant “purposely avail[s] [himself] of the privilege of conducting

activities within the forum State.” Cambridge Homes, 194 N.C. App. at 413, 670

S.E.2d at 296 (quoting Lulla v. Effective Minds, LLC, 184 N.C. App. 274, 279, 646

S.E.2d 129, 133 (2007)).

17. The relevant facts are undisputed. In April 2013, Sprout entered into the

Agreement with USConnect, a North Carolina company. (Aff. of Jeffery S. Whitacre

¶ 3 [“Whitacre Aff.”].) The Agreement states that its construction and application

shall be governed by “the laws of the State of North Carolina.” (Whitacre Aff. Ex. B

p.12.) As part of Sprout’s performance of the Agreement, Sprout representatives
made dozens of visits to North Carolina, initiated communications with USConnect’s

North Carolina employees nearly every day, and mailed monthly bills to USConnect

in North Carolina for the services Sprout was performing under the Agreement. (See

Whitacre Aff. ¶ 6.) Sprout is also negotiating with one of USConnect’s North Carolina

competitors for a license to networked vending machine technology and soliciting

customers located in North Carolina to use Sprout’s services instead of USConnect’s.

(See Whitacre Aff. ¶ 5.)

18. Sprout has not rebutted this evidence, and it did not file a reply brief. In

addition, at the hearing, Sprout’s counsel conceded that Sprout does not dispute that

its representatives routinely initiated communications and made visits to North

Carolina in carrying out its obligations under the Agreement.

19. The Court concludes, based on the undisputed evidence, that Sprout has

sufficient minimum contacts with North Carolina to warrant the exercise of personal

jurisdiction. Sprout’s contacts with North Carolina are extensive and directly

connected to the causes of action recited in USConnect’s complaint. See B.F. Goodrich

Co. v. Tire King of Greensboro, Inc., 80 N.C. App. 129, 132, 341 S.E.2d 65, 67 (1986)

(personal jurisdiction factors include “(1) quantity of contacts, (2) nature and quality

of contacts, and (3) the source and connection of the cause of action with these

contacts”). By entering into a contract with a North Carolina corporation and

routinely sending representatives to North Carolina to perform contractual services,

Sprout purposefully availed itself of “the privilege of conducting activities” in North

Carolina. Cambridge Homes, 194 N.C. App. at 413, 670 S.E.2d at 296; see also
Centura Bank v. Pee Dee Express, Inc., 119 N.C. App. 210, 213–14, 458 S.E.2d 15, 19

(1995). This conduct also falls squarely within the requirements of the long-arm

statute. See N.C. Gen. Stat. § 1-75.4(5)(a)–(b).

20. Other factors further support the exercise of personal jurisdiction. It is

relevant, for example, that the parties’ Agreement is governed by North Carolina law.

See, e.g., Inspirational Network, Inc. v. Combs, 131 N.C. App. 231, 241–42, 506 S.E.2d

754, 761–62 (1998). In addition, Sprout has not suggested in any way that it would

be “unfairly prejudiced” by litigating the pending claims in North Carolina. Id. at

241. The convenience of resolving these claims in North Carolina therefore outweighs

any inconvenience to Sprout that may stem from litigating in this forum. See Soma

Tech., 2017 NCBC LEXIS 26, at *21.

21. Having weighed all of the factors “in light of fundamental fairness and the

circumstances of the case,” the Court concludes that the exercise of personal

jurisdiction over Sprout comports with traditional notions of fair play and substantial

justice. B.F. Goodrich, 80 N.C. App. at 132, 341 S.E.2d at 67. The Court denies

Sprout’s Rule 12(b)(2) motion to dismiss.

B. Rule 12(b)(6) Motion to Dismiss and
Rule 12(e) Motion for a More Definite Statement

22. The Court, in deciding a Rule 12(b)(6) motion, treats the well-pleaded

allegations of the complaint as true, Sutton v. Duke, 277 N.C. 94, 98, 176 S.E.2d 161,

163 (1970), and views the facts in a light most favorable to the non-moving party.

Ford v. Peaches Entm’t Corp., 83 N.C. App. 155, 156, 349 S.E.2d 82, 83 (1986). The

Court “may properly consider documents which are the subject of a plaintiff’s
complaint and to which the complaint specifically refers.” Oberlin Capital, L.P. v.

Slavin, 147 N.C. App. 52, 60, 554 S.E.2d 840, 847 (2001). Accordingly, a Rule 12(b)(6)

motion should be granted only “(1) when the complaint on its face reveals that no law

supports plaintiff’s claim; (2) when the complaint on its face reveals the absence of

fact sufficient to make a good claim; and (3) when some fact disclosed in the complaint

necessarily defeats plaintiff’s claim.” Jackson v. Bumgardner, 318 N.C. 172, 175, 347

S.E.2d 743, 745 (1986).

23. The Court, when ruling on a Rule 12(e) motion for a more definite statement,

considers whether the complaint “is so vague or ambiguous that a party cannot

reasonably be required to frame a responsive pleading.” N.C. R. Civ. P. 12(e). Courts

exercise their discretion when deciding whether to grant a motion for a more definite

statement, but the motions are sparingly granted “because pleadings may be brief

and lacking in factual detail.” Ross v. Ross, 33 N.C. App. 447, 454, 235 S.E.2d 405,

410 (1977).

1. Declaratory Judgment

24. The purpose of the Declaratory Judgment Act is to “settle and afford relief

from uncertainty and insecurity, with respect to rights, status, and other legal

relations.” Nationwide Mut. Ins. Co. v. Roberts, 261 N.C. 285, 287, 134 S.E.2d 654,

657 (1964) (quoting Walker v. Phelps, 202 N.C. 344, 349, 162 S.E. 727, 729 (1932)).

“A motion to dismiss for failure to state a claim is seldom appropriate ‘in actions for

declaratory judgments, and will not be allowed simply because the plaintiff may not

be able to prevail.’” Morris v. Plyler Paper Stock Co., 89 N.C. App. 555, 557, 366
S.E.2d 556, 558 (1988) (quoting N.C. Consumers Power, Inc. v. Duke Power Co., 285

N.C. 434, 439, 206 S.E.2d 178, 182 (1974)). Accordingly, the Court must dismiss a

declaratory-judgment claim only “when the complaint does not allege an actual,

genuine existing controversy.” Legalzoom.com, Inc. v. N.C. State Bar, 2012 NCBC

LEXIS 49, at *9 (N.C. Super. Ct. Aug. 27, 2012) (quoting N.C. Consumers Power, 258

N.C. at 439, 206 S.E.2d at 182).

25. USConnect has alleged a genuine controversy. USConnect alleges that it

has “independently develop[ed] a temporary replacement gateway payment system,”

using “industry-accepted open standards, publicly-available automated programming

interfaces and other standard terminology.” (Compl. ¶¶ 36, 37.) Sprout, however,

claims that this software is Sprout’s proprietary technology, that USConnect’s

ongoing use of the software violates Sprout’s intellectual property rights, and that

USConnect is not entitled to use this system. (Compl. ¶¶ 9, 33, 37, 39.) According to

the complaint, Sprout has threatened to take action adverse to USConnect. (Compl.

¶¶ 3, 35.) USConnect therefore seeks a declaration “that Sprout has no exclusive

rights in and to the aspects of the Software used by USConnect in connection with

the temporary gateway payment system, and that Sprout has no lawful grounds

either based upon alleged intellectual property rights or otherwise to restrict or to

threaten to restrict USConnect’s use thereof.” (Compl. ¶ 42.)

26. Sprout’s argument in support of its motion to dismiss is difficult to

understand. Sprout does not appear to refer to USConnect’s temporary gateway

payment system at all, much less deny that it objects to USConnect’s use of the
system. (See Def.’s Mem. 4–6.) Instead, as best the Court can understand, Sprout

contends that USConnect’s requested relief would strip Sprout of its intellectual

property rights—the implication being that Sprout owns rights to the technology

USConnect is using. (Def.’s Mem. 4–5.) This argument seems to confirm, rather than

dispel, the existence of a genuine dispute.

27. Sprout’s remaining argument—that a declaratory judgment is

impermissible because the parties’ Agreement expired in 2015—is equally confusing.

(Def.’s Mem. 5.) The issue raised by USConnect is whether it may use, now and in

the future, certain software that it alleges to be publicly available. The expiration of

the Agreement (which is contested) does not foreclose a declaration on that dispute.

28. USConnect has adequately alleged a genuine dispute. The Court denies

Sprout’s motion with respect to USConnect’s declaratory-judgment claim.

2. Misappropriation of Trade Secrets

29. An owner of a trade secret “shall have remedy by civil action for

misappropriation” of the trade secret. N.C. Gen. Stat. § 66-153. The North Carolina

Trade Secrets Protection Act defines a trade secret to include “business or technical

information,” including a “compilation of information,” that satisfies certain

conditions. N.C. Gen. Stat. § 66-152(3). The information must “[d]erive[]

independent actual or potential commercial value from not being generally known or

readily ascertainable through independent development or reverse engineering by

persons who can obtain economic value from its disclosure or use.” Id. In addition,
the information must be “the subject of efforts that are reasonable under the

circumstances to maintain its secrecy.” Id.

30. Sprout argues that USConnect’s trade-secret claim fails for two reasons:

(1) the claim is barred by the economic loss rule; and (2) the complaint fails to specify

the alleged trade secrets with sufficient particularity. (Def.’s Mem. 15–16.) Sprout

alternatively requests a more definite statement as to the alleged trade secrets.

31. The economic loss rule “denote[s] limitations on the recovery in tort when a

contract exists between the parties that defines the standard of conduct and which

the courts believe should set the measure of recovery.” Akzo Nobel Coatings, Inc. v.

Rogers, 2011 NCBC LEXIS 42, at *47–48 (N.C. Super. Ct. Nov. 3, 2011). This rule

exists because “the open-ended nature of tort damages should not distort bargained-

for contractual terms.” Artistic Southern Inc. v. Lund, 2015 NCBC LEXIS 113, at

*25 (N.C. Super. Ct. Dec. 9, 2015). The economic loss rule does not bar a claim when

there is a dispute over the validity of the contract, the existence of a contractual duty,

or the expiration of a contractual duty. See, e.g., id.; RCJJ, LLC v. RCWIL Enters.,

LLC, 2016 NCBC LEXIS 46, at *21 n.61 (N.C. Super. Ct. June 20, 2016).

32. Although Sprout contends that the parties’ “Agreement specified their

duties,” it has also raised factual disputes over the scope and validity of the

Agreement. (Def.’s Mem. 15.) Sprout contends, for example, that the Agreement

protects only Sprout’s trade secrets and may not be enforced because it expired in

2015. (See Def.’s Mem. 11.) Given these disputes regarding the application of the

contract to the alleged wrongdoing, the Court cannot conclude that the economic loss
rule applies to the claim for trade secret misappropriation. See, e.g., Artistic

Southern, 2015 NCBC LEXIS 113, at *25, 33 (rejecting application of economic loss

rule where contractual duties did not exist or expired); RCJJ, 2016 NCBC LEXIS 46,

at *21 n.61 (rejecting application of economic loss rule where disputes of fact existed

over enforceability of contract).1

33. Whether USConnect has identified its alleged trade secrets with sufficient

particularity is a closer question. The North Carolina Court of Appeals has held that

“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.” VisionAIR, Inc.

v. James, 167 N.C. App. 504, 510–11, 606 S.E.2d 359, 364 (2004) (quoting Analog

Devices, Inc. v. Michalski, 157 N.C. App. 462, 468, 579 S.E.2d 449, 453 (2003)). A

complaint fails to state a claim if it “makes general allegations in sweeping and

conclusory statements, without specifically identifying the trade secrets allegedly

1 It is noteworthy that Sprout cites no case applying the economic loss rule to bar a claim for

misappropriation of trade secrets. (See Def.’s Mem. 15–16.) The Court is not aware of any
North Carolina precedent on point, but a number of courts in other jurisdictions have held
that statutory claims for trade-secret misappropriation are not barred by the economic loss
rule. See Vizant Techs. LLC v. Whitchurch, No. 16-1178, 2017 U.S. App. LEXIS 688, at *13–
14 & n.11 (3d Cir. Jan. 13, 2017) (non-precedential) (applying Delaware law); Electrology
Lab., Inc. v. Kunze, 169 F. Supp. 3d 1119, 1155 (D. Colo. 2016) (applying Colorado law); KDH
Elec. Sys. v. Curtis Tech. Ltd., 826 F. Supp. 2d 782, 801–02 (E.D. Pa. 2011) (applying
Pennsylvania law); Veritas Operating Corp. v. Microsoft Corp., No. C06-0703-JCC, 2008 U.S.
Dist. LEXIS 8166, at *11–14 (W.D. Wa. Feb. 4, 2008) (applying Washington law); Wolfe Tory
Med., Inc. v. C.R. Bard, Inc., No. 2:07-CV-378 TS, 2008 U.S. Dist. LEXIS 13867, at *9–10 (D.
Utah Feb. 25, 2008) (applying Utah law); New Lenox Indus. v. Fenton, 510 F. Supp. 2d 893,
909 (M.D. Fla. 2007), adopted by 510 F. Supp, 2d 893 (M.D. Fla. 2007) (applying Florida law);
Bell Helicopter Textron, Inc. v. Tridair Helicopters, Inc., 982 F. Supp. 318, 321–23 (D. Del.
1997) (applying Delaware law).
misappropriated.” Washburn v. Yadkin Valley Bank & Trust Co., 190 N.C. App. 315,

327, 660 S.E.2d 577, 585–86 (2008).

34. USConnect’s complaint identifies the alleged trade secrets in two different

ways. In the section stating the claim for relief, USConnect alleges that its trade

secrets include “sales, pricing and customer information, customer contacts and

existing sales relationships,” and “information regarding current and anticipated

technology, pricing, sales and business strategy.” (Compl. ¶ 51.) In earlier sections

reciting factual background, USConnect alleges that the trade secrets include “the

underlying requirements of the full suite of technical services and other account

service products provided by USConnect, as well as USConnect’s service pricing

information, customer proposals, historical costs, sales data, customer lists, key

person relationships, and anticipated service upgrades and price increases.” (Compl.

¶ 30.) USConnect further alleges that this information satisfies the statutory

requirements for trade-secret protection, including being subject to reasonable efforts

to maintain the secrecy of the information. (See Compl. ¶ 53.)

35. Construing the complaint liberally, the Court concludes that these

allegations, though meager, survive scrutiny under Rule 12(b)(6). Most of the alleged

trade secrets—for example, “pricing information, customer proposals, historical costs,

sales data, customer lists, key person relationships, and anticipated service upgrades

and price increases”—are indistinguishable from allegations this Court has found

sufficient in prior cases. See, e.g., Bldg. Ctr., Inc. v. Carter Lumber, Inc., 2016 NCBC

LEXIS 79, at *11–13 (N.C. Super. Ct. Oct. 21, 2016) (collecting cases); S. Fastening
Sys. v. Grabber Constr. Prods., 2015 NCBC LEXIS 42, at *11 (N.C. Super. Ct. Apr.

28, 2015) (“customer contact information and customer buying preferences and

history”; “confidential freight information, sales reports, prices and terms books, sales

memos, sales training manuals, commission reports, and information concerning

SFS’s relationship with its vendors”); Le Bleu Corp. v. B. Kelley Enters., 2014 NCBC

LEXIS 66, at *12–13 (N.C. Super. Ct. Dec. 9, 2014) (“customer lists, pricing

information, transaction histories, key contacts, and customer leads”); Koch

Measurement Devices, Inc. v. Armke, 2013 NCBC LEXIS 45, at *8 (N.C. Super. Ct.

Oct. 14, 2013) (“customer lists including names, contact persons, addresses and phone

number[s]”; “ordering habits, history and needs of . . . customers”; and “pricing and

inventory management strategies”). These allegations are not so generalized as to

fall below the standards for notice pleading.

36. Although USConnect’s allegations meet the bare minimum required by Rule

12(b)(6), the Court holds, in its discretion, that a more definite statement is

appropriate for three reasons.

37. First, although parties need not use identical phrasing to describe their

trade secrets throughout the complaint, the differing recitations of the alleged trade

secrets here do create some ambiguity. (Compare Compl. ¶ 30, with Compl. ¶ 51.)

For example, in reciting background facts, paragraph 30 of the complaint discusses

customer proposals and pricing data associated with anticipated service upgrades. It

is unclear if these categories are included in the anticipated technology, business

strategy, or customer information categories contained in paragraph 51, where
USConnect asserts its claim for relief. Clarification is appropriate to enable Sprout

to frame its responsive pleading.

38. Second, although USConnect’s allegations as to business information mirror

allegations held to be sufficient in other cases, its allegations as to technical

information are far more vague. USConnect seeks protection for “information

regarding current and anticipated technology” and “the underlying requirements of

the full suite of technical services and other account service products.” (Compl. ¶¶ 30,

51.) Standing alone, these generalized allegations might not survive a motion to

dismiss. In light of the fact that USConnect has sufficiently identified some alleged

trade secrets, the Court exercises its discretion to permit USConnect to provide a

more definite statement as to these additional, technical trade secrets.

39. Third, whether business information (including pricing and customer

information) is subject to trade-secret protection depends on the content of the

information. A price list, for example, “may constitute a trade secret where it

contains pricing information, market forecasts, and feasibility studies, but may not if

it consists of raw information without any methodology.” Le Bleu, 2014 NCBC LEXIS

66, at *13. Similarly, customer lists and contact information may not constitute

protectable trade secrets if the information is easily accessible through public

information. These concerns are particularly relevant because the parties’

Agreement appears to give Sprout the right to use and disclose at least some of

USConnect’s confidential information to third parties. (See Def.’s Mem. 13; Compl.

Ex. A p.5.) In the circumstances of this case, a more definite statement is required,
and a determination about whether the content of USConnect’s trade secrets is

entitled to protection is “better made when the claim is more definitely pleaded.” Le

Bleu, 2014 NCBC LEXIS 66, at *13–14.

40. Accordingly, USConnect shall file a more definite statement of its trade

secret claim. USConnect should clarify its allegations, describe the contents of the

allegedly confidential information, and explain why the information is subject to

trade-secret protection. To enable the parties to adhere to their agreed schedule for

discovery and briefing of USConnect’s pending motion for preliminary injunction, the

Court directs USConnect to file its more definite statement within seven days of this

Order.

3. Breach of Contract

41. A party states a breach-of-contract claim when (1) a valid contract exists,

and (2) a term of the contract is breached. See Poor v. Hill, 138 N.C. App. 19, 26, 530

S.E.2d 838, 843 (2000). USConnect alleges that the parties’ Agreement remains valid

and in force and that Sprout has breached its non-competition provision, its

confidentiality provisions, and several other service and reporting provisions. ( See

Compl. ¶¶ 44–46.)

42. Sprout first asserts that there is no valid contract because the Agreement

expired in 2015 or was otherwise terminated. (See Def.’s Mem. 6–8.) Sprout also

raises scattered challenges to some, but not all, of USConnect’s allegations that

Sprout breached various terms of the Agreement. (See, e.g., Def.’s Mem. 13–14.)
43. The Court concludes that USConnect has adequately alleged the existence

of a valid contract. The Agreement states that it “may be extended for additional

periods upon written consent by both parties under mutually agreeable terms”

(Compl. Ex. A p.2), and USConnect has alleged that the parties extended the terms

of the Agreement in a letter dated March 26, 2016. (Compl. ¶ 24, Ex. B.) The letter’s

language is somewhat imprecise, but it is signed by both parties and states that “the

parties will end the terms of service under the” Agreement only upon execution of a

new agreement, which has not occurred. (Compl. Ex. B.) Furthermore, the complaint

contains allegations that the parties continued to interact as if their relationship was

controlled by the Agreement after April 2015. (Compl. ¶ 21.) USConnect contends

that these allegations state alternative theories of express or implied contract. (Pl.’s

Opp’n. 6, 9.)

44. Sprout’s briefing does not address the existence of an implied contract,

contending only that the March 26 letter is an unenforceable letter of intent. The

Court concludes that the determination of whether the parties reached a valid

agreement, either expressly or by conduct, is a question of fact, not appropriate for

resolution on Rule 12(b)(6). See Blythe v. Bell, 2013 NCBC LEXIS 7, at *36 (N.C.

Super. Ct. Feb. 4, 2013) (“As a general proposition, where a party presents adequate

facts that an agreement was reached, whether an agreement was actually reached so

as to form a binding contract is a question of fact for the jury.”).

45. The Court therefore denies Sprout’s motion to dismiss the claim for breach

of contract. Sprout’s arguments regarding the Agreement’s confidentiality provisions
substantially concern the identification of USConnect’s trade secrets, which the Court

has addressed above. The Court has considered Sprout’s remaining arguments and

finds them unpersuasive.

III.
CONCLUSION

46. For all these reasons, the Court DENIES Sprout’s motion to dismiss for lack

of personal jurisdiction under Rule 12(b)(2) and its motion to dismiss for failure to

state a claim under Rule 12(b)(6).

47. The Court GRANTS Sprout’s alternative motion for a more definite

statement. USConnect shall file its amended complaint within seven days of the

entry of this order.

This the 21st day of April, 2017.

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