Contract claim survives while trade secret claims fail in restaurant concept dispute

A former employee defeated most claims in a suit accusing him of using confidential business information to help replicate a Tex-Mex restaurant concept in Missouri, but the plaintiff’s breach of contract claim will move forward.

The North Carolina Business Court held that the complaint plausibly alleged a valid confidentiality and non-disclosure agreement and a breach of that agreement through disclosure of nonpublic information. The plaintiff, which operates a North Carolina restaurant, alleged the defendant was a senior employee who later used confidential information involving recipes, operations and supplier relationships to assist a competing venture in Missouri. The court found those allegations were sufficient at the pleading stage because the agreement’s definition of confidential information was broader than statutory trade secrets and could cover nonpublic business information even if it did not qualify for trade secret protection.

The court dismissed the trade secrets claim, however, after concluding Missouri law governed the alleged misappropriation under North Carolina’s lex loci delicti rule. According to the complaint, the misuse occurred in Missouri when the defendant allegedly implemented the copied concepts there. Because the plaintiff pleaded that count solely under North Carolina’s Trade Secrets Protection Act, the claim could not stand as pleaded.

The court also found the trade secrets allegations too vague. The complaint identified broad categories such as recipes, business plans and supplier relationships, but did not describe the alleged trade secrets with enough specificity to show what was actually protectable or what had been misappropriated. It further noted that some identified items, including menus and food presentation, were publicly visible and therefore not trade secrets. The court also rejected any theory resting on inevitable disclosure, which North Carolina does not recognize.

Because the unfair and deceptive trade practices and common law unfair competition claims largely depended on the deficient trade secrets allegations, those claims were also dismissed. The court held the complaint likewise failed to allege the substantial aggravating circumstances needed to turn a contract dispute into an unfair trade practices claim.

The 22 page opinion is Mezcalito Apex Inc. v. Murillo, Lawyers Weekly No. 020-014-26.