Vitaform, Inc. v. Aeroflow, Inc.
2020 NCBC 80
| N.C. Bus. Ct. | 2020Background
- Plaintiff Vitaform, Inc. (d/b/a Body After Baby) designs and sold maternity compression garments and claims it pioneered insurance‑covered postpartum products and a related business model.
- In July 2018 Aeroflow’s business‑development director (Israel) spoke with Vitaform’s founder (Francisco) and—according to Vitaform—promised confidentiality and a collaborative national distribution arrangement; Vitaform disclosed its product designs, insurance coding, white papers, and business process.
- Vitaform alleges Aeroflow (and its subsidiary Motif Medical) secretly copied Vitaform’s products and used Vitaform’s business plan to manufacture and sell competing garments, including buying Vitaform products from Amazon to reverse‑engineer them.
- Vitaform sued Aeroflow and Motif asserting: joint venture and breach of implied covenant of good faith; constructive fraud; trade secret misappropriation; fraud and fraudulent concealment; unfair/deceptive trade practices (including Lanham Act reverse‑passing‑off); and unjust enrichment.
- Defendants moved to dismiss under Rule 12(b)(6); the court granted in part and denied in part: key dismissals were joint venture and constructive fraud (with prejudice), while trade secret, implied covenant, unjust enrichment, and limited fraud/UDTPA/Lanham Act claims survived.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Existence of a joint venture | Parties agreed (July 19 call) to jointly open markets and share profits from the venture | Relationship was a manufacturer–buyer/distributor arrangement with price/volume negotiations, not profit‑sharing | No joint venture; joint‑venture claim dismissed with prejudice |
| Breach of implied covenant of good faith | Aeroflow promised confidentiality and then misused Vitaform’s materials to compete | Claim rises or falls with joint venture; should be dismissed if no joint venture | Claim survives; court finds sufficient contractual relationship and denies dismissal |
| Constructive fraud (fiduciary duty) | Aeroflow’s relationship of trust made it fiduciary and it abused that trust | No joint venture or de jure fiduciary relationship; no basis for fiduciary duty | Dismissed with prejudice to the extent based on alleged joint‑venture fiduciary duty; no independent fiduciary pleaded |
| Trade secret misappropriation (NCTSPA) | Vitaform’s business process/model (combination of designs, codes, process) is a trade secret and Aeroflow misappropriated it | Alleged information was publicly known or easily ascertainable; Vitaform did not take reasonable secrecy measures | Claim survives; plaintiff adequately pleaded a trade secret and reasonable efforts (oral confidentiality promises suffice at pleading stage) |
| Fraud / fraudulent concealment | Aeroflow falsely promised confidentiality (esp. July 19 Call) and concealed intent to copy/compete | Fraud not pled with particularity; no cognizable injury; no duty to disclose | Most fraud claims dismissed for lack of particularity, except fraud/omission claims tied to the July 19 Call (those survive) |
| UDTPA / common law unfair competition | Defendants misled Vitaform to obtain confidential info and reverse‑passed off products | UDTPA/unfair‑competition claims mirror fraud and should be dismissed where fraud is deficient; reverse‑passing off allegations lack consumer‑confusion harm | UDTPA/unfair‑competition and common‑law claims dismissed except: reverse‑passing‑off claim survives where defendants allegedly sold Vitaform’s actual inventory as their own |
| Lanham Act (reverse passing off) | Defendants falsely designated origin by selling Vitaform’s products as Motif/Aeroflow | Copying and selling knockoffs is not Lanham Act violation; need actual false designation of origin and likelihood of confusion | Claims based on mere copying/knockoffs dismissed; claim survives to the extent defendants sold Vitaform’s goods as their own (false designation) |
| Unjust enrichment | Vitaform conferred non‑gratuitous benefit (business plan, training) that defendants accepted and used | Defendants only received paid products; any extra information was gratuitous or not wrongful | Claim survives; plaintiff pleaded benefit, conscious acceptance, and inducement allegations |
Key Cases Cited
- Sykes v. Health Network Sols., Inc., 372 N.C. 326 (2019) (elements of a joint venture require agreement to share profits and equal control)
- Corwin v. British Am. Tobacco PLC, 371 N.C. 605 (2018) (pleading standard: allegations accepted as true if they state a viable claim)
- Christenbury Eye Ctr., P.A. v. Medflow, Inc., 370 N.C. 1 (2017) (Rule 12(b)(6) view of pleadings in favor of nonmoving party)
- Krawiec v. Manly, 370 N.C. 602 (2018) (efforts to maintain secrecy must be pleaded; mere expectation of confidentiality is insufficient absent acts to preserve secrecy)
- Bicycle Transit Auth. v. Bell, 314 N.C. 219 (1985) (implied covenant of good faith and fair dealing in every contract)
- Head v. Gould Killian CPA Grp., P.A., 371 N.C. 2 (2018) (constructive fraud requires a relationship of trust and circumstances showing abuse of that trust)
- Se. Shelter Corp. v. BTU, Inc., 154 N.C. App. 321 (2002) (constructive‑fraud/fiduciary claims arising from an alleged joint venture fail if no joint venture exists)
- Wal‑Mart Stores, Inc. v. Samara Bros., Inc., 529 U.S. 205 (2000) (design copying/knockoffs are not protected under Lanham Act trade dress in the absence of secondary meaning)
- Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23 (2003) (Lanham Act does not create a general anti‑plagiarism right; false designation requires misrepresenting origin)