Caruthers v. Vitex, Inc.

Filing 9

ORDER granting in part and denying in part 6 Motion to Dismiss Defendant's Counterclaim. Signed by Senior Judge Graham Mullen on 6/1/2018. (nvc)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
STATESVILLE DIVISION
NO. 5:17-cv-98

THOMAS M. CARUTHERS, JR.,
Plaintiff,
v.
ORDER
VITEX, INC.,
Defendant.

THIS MATTER is before the Court on the Motion to Dismiss Counterclaims (Doc. No.
6) filed by Plaintiff Thomas Caruthers (“Caruthers”). Defendant Vitex, Inc. (“Vitex”) has
responded, and Plaintiff has filed a reply. This matter is now ripe for adjudication.
For the following reasons, Plaintiff’s Motion is granted in part, denied in part.
I. BACKGROUND
On or about January 21, 2014, Caruthers entered into a contract (the “Master
Agreement”) with Vitex to provide consulting services as an independent contractor. Vitex is in
the business of providing consulting services to banks for the evaluation and negotiation of
contracts for financial technology services.
As an independent contractor, Caruthers was responsible for generating and pursuing
leads, preparing proposals, and finalizing the sale of Vitex services to client banks. For each
aspect of the sale Caruthers completed (lead, proposal, and close), he was entitled to receive a
five percent (5%) commission of the gross revenue received by Vitext from the client. Thus, he
could earn up to fifteen percent (15%) of the revenue from any deal if he completed all three

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aspects of the sale. Once a sale was finalized, Vitex assigned an employee or a contractor to
provide the technology consulting services for the client bank. A consultant performing this
work typically received a forty percent (40%) commission of the gross revenue received by
Vitex for that sale.
On June 13, 2017, Caruthers filed a Complaint against Vitex, alleging that Vitex failed to
provide him the full commission he was owed on two deals: a sale of services to two Mainebased banks (the “Maine Deal”), and both a sale and provision of services to an Alabama-based
bank (the “Alabama Deal”). Caruthers alleges that Vitex unilaterally terminated the Master
Agreement on June 22, 2016, and that Vitex failed to remit the full payment that Caruthers was
owed for the work he previously completed. Accordingly, his Complaint seeks an award of
compensatory damages, among other relief, under two alternative theories: (1) breach of
contract, or (2) unjust enrichment.
On August 18, 2017, Vitex filed an Answer and Counterclaim against Caruthers. Vitex
alleges that while Caruthers was working as an independent contractor with Vitex, he became an
officer of a competing financial technology services corporation, Insite Consulting Services
Group, LLC (“Insite”). Vitex further alleges that Caruthers attended a banking conference and a
Fiserv conference at Vitex’s expense, but failed to provide any lead cards or client information
generated from the conferences. Rather, Vitex claims that Caruthers retained the generated leads
for the benefit of Insite. Further, Caruthers allegedly forwarded Vitex’s confidential proposal
templates to his personal email address and deleted all of his emails on Vitex’s servers. Vitex
alleges that Caruthers then requested to terminate the Master Agreement on June 6, 2016, but
refused to provide his working papers related to the Alabama Deal to Vitex management. After

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failed negotiations, Vitex “confirmed” his request to terminate the Agreement on June 22, 2016.
Thereafter, Caruthers failed to return Vitex property, including a company phone and computer.
Accordingly, Vitex argues that Caruthers resigned his position and therefore forfeited any
outstanding commission pursuant to the terms of the Master Agreement. Vitex also argues that it
is entitled to damages stemming from Caruthers’ actions under two counterclaims: (1) breach of
contract, and (2) a violation of the Unfair and Deceptive Trade Practices Act. Caruthers has
moved to dismiss these two counterclaims.
II. STANDARD OF REVIEW
When faced with a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil
Procedure, the Court must “accept as true all well-pleaded allegations and . . . view the complaint
in a light most favorable to the plaintiff.” Mylan Labs, Inc. v. Matkari, 7 F.3d 1130, 1134 (4th
Cir. 1993). The Court “assume[s] the[] veracity” of these factual allegations, and “determine[s]
whether they plausibly give rise to an entitlement to relief.” Ashcroft v. Iqbal, 556 U.S. 662, 679
(2009). However, the court “need not accept as true unwarranted inferences, unreasonable
conclusions, or arguments.” E. Shore Mkts., Inc. v. J.D. Assocs. LLP, 213 F.3d 175, 180 (4th
Cir. 2000). Thus, to survive a motion to dismiss, the complaint or counterclaim must contain
“sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its
face.’” Iqbal, 556 U.S. at 678 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
III. DISCUSSION
A. Breach of Contract
Vitex first alleges that Caruthers breached the terms of the Master Agreement. Under
North Carolina law, “[t]he elements of a claim for breach of contract are (1) existence of a valid
contract and (2) breach of the terms of that contract.” Poor v. Hill, 530 S.E.2d 838, 843 (N.C.

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Ct. App. 2000). Because it is incorporated into the pleadings and there is no dispute as to the
authenticity of the document, the Court may consider the Master Agreement in its analysis. See
Sec’y of State for Def. v. Trimble Navigation Ltd., 484 F.3d 700, 705 (4th Cir. 2007).
Here, there is no dispute that the Master Agreement is a valid contract. Caruthers does
argue, however, that Vitex has failed to allege sufficient conduct to rise to the level of stating a
plausible breach of the Master Agreement. Vitex alleges that Caruthers breached the Master
Agreement by competing against Vitex, “both during and after his relationship with Vitex;” by
diverting Vitex opportuntities to “Insite, himself, or others;” by using Vitex confidential
information “for the benefit of Insite, himself, or others;” and by refusing to return Vitex
company property. (Answer & Countercl., 5).
The Court does not need to address all of the issues of contract interpretation raised by
the parties at this time because the Court finds that Vitex has clearly alleged sufficient factual
support for the final allegation listed in its breach of contract claim: that Caruthers refused to
return Vitex company property. The Master Agreement states,
“Upon termination of this agreement, by lapse of time or otherwise, Contractor will
surrender to the Company and its clients all Company or client property and documents
in his or her possession, specifically including but not limited to all documents marked
confidential and all files, records, documents, client lists, equipment and similar items
relating to the business of the Company and its clients.”
(Compl., Ex. A, ¶ 8(c)). Vitex alleges that Caruthers deleted “all of his emails on Vitex’s
servers” and turned over “only about 100 of the deleted emails” after Vitex’s repeated requests.
Vitex further alleges that Caruthers “refused to provide his working papers related to the
Alabama Deal or the financial model necessary to determine what amount should be invoiced.”
And finally, Vitex alleges that Caruthers refused to return “his company phone and computer”
after the termination of the Master Agreement.

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In his memorandum, Caruthers argues that as an independent contractor, he retained
complete control over his own work and record-keeping practices under the terms of the Master
Agreement. Caruthers further argues that the Master Agreement required him to provide his own
computer and phone, and thus Vitex cannot claim entitlement to property that it refused to
provide. While the Master Agreement does grant Caruthers the right to control his own recordkeeping (Id., ¶ 1), it clearly requires that “all files, records, documents, client lists, equipment
and similar items relating to the business of the Company and its clients” be returned upon
termination (Id., ¶ 8(c)). Further, the Master Agreement only states that Caruthers had to provide
his own equipment “as required” (Id., ¶ 6), but again, required him to surrender all Vitex-owned
equipment upon termination. Vitex clearly alleges that Caruthers has failed to turn over all
relevant documents and all Vitex-owned equipment. Thus, assuming the truthfulness of Vitex’s
claims to a property interest in these items, Vitex has sufficiently stated a claim for breach of
contract under the Master Agreement.
Caruthers’ Motion to Dismiss must accordingly be denied with respect to this claim.
B. Unfair and Deceptive Trade Practices Act
Vitex next alleges that Caruthers violated the North Carolina Unfair and Deceptive Trade
Practices Act ("UDTPA”), N.C. Gen. Stat. § 75–1.1, et. seq. “To state a claim under the
UDTPA, [a] plaintiff must show (1) an unfair or deceptive act or practice (2) in or affecting
commerce (3) which proximately caused actual injury to the plaintiff or to his business.” Kelly v.
Georgia-Pacific LLC, 671 F. Supp. 2d 785, 798 (E.D.N.C. 2009).
Caruthers argues that Vitex has not alleged sufficient facts to show that he committed an
unfair or deceptive act or practice. “The determination of whether an act or practice is an unfair
or deceptive practice that violates N.C.G.S. § 75–1.1 is a question of law for the court.” Gray v.

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N.C. Ins. Underwriting Ass’n, 529 S.E.2d 676, 681 (N.C. 2000). A trade practice is unfair if it
“is immoral, unethical, oppressive, unscrupulous, or substantially injurious to consumers,” and it
is deceptive if it “has the capacity or tendency to deceive.” Branch Banking & Trust Co. v.
Thompson, 418 S.E.2d 694, 700 (N.C. Ct. App. 1992) (internal citations omitted).
“North Carolina courts have repeatedly held that ‘a mere breach of contract, even if
intentional, is not sufficiently unfair or deceptive to sustain an action under [UDPTA].’”
Broussard v. Meineke Discount Muffler Shops, Inc., 155 F.3d 331, 347 (4th Cir. 1998) (quoting
Branch Banking, 418 S.E.2d at 700). Rather, a plaintiff must show additional “substantial
aggravating circumstances attending the breach to recover under the Act.” Branch Banking, 418
S.E.2d at 700 (adopting the Fourth Circuit’s interpretation in Bartolomeo v. S.B. Thomas, Inc.,
889 F.2d 530 (4th Cir. 1989)). “The type of conduct that has been found sufficient to constitute
a substantial aggravating factor has generally involved forged documents, lies, and fraudulent
inducements.” Stack v. Abbott Labs., Inc., 979 F. Supp. 2d 658, 668 (M.D.N.C. 2013). On the
other hand, UDPTA claims stemming solely from alleged violations of contractual obligations
are “out of place.” Broussard, 155 F.3d at 347.
Here, Vitex alleges in its Counterclaim that Caruthers’ conduct was deceptive because he
“misrepresented leads,” “retained other leads for the benefit of himself, Insite, or others,”
“deleted emails to conceal his conduct,” “concealed his relationship with Insite from Vitex,” and
“concealed his communications with client prospects from Vitex.” (Answer & Countercl., 6).
None of these allegations amount to an unfair or deceptive trade practice because they all arise
out of the same facts as Vitex’s breach of contract claim and they all relate to obligations arising
out of the Master Agreement. Thus, Vitex has failed to allege any additional “substantial
aggravating circumstances” that would allow it to recover under the UDPTA.

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Caruthers’ Motion to Dismiss must accordingly be granted with respect to this claim.
IV. CONCLUSION
For the foregoing reasons, the Court orders that Plaintiff’s Motion to Dismiss
Defendant’s Counterclaims (Doc. No. 6) is GRANTED IN PART, DENIED IN PART.
Defendant’s claim under the North Carolina Unfair and Deceptive Trade Practices Act is hereby
dismissed with prejudice.
SO ORDERED.

Signed: June 1, 2018

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