Hart v. DWM Advisors, LLC, 2026 NCBC 28.
STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION MECKLENBURG COUNTY 21CVS015763-590
STEVEN C. HART,
Plaintiff, ORDER AND OPINION GRANTING MOTION FOR DEFAULT JUDGMENT v. AGAINST JOSEPH P. DAVIS, III AND DWM ADVISORS, LLC DWM ADVISORS, LLC and JOSEPH P. DAVIS, III,
Defendants.
1. This matter is before the Court on Plaintiff’s motion for entry of a default
judgment against defendants Joseph P. Davis, III and DWM Advisors, LLC pursuant
to Rule 55 of the North Carolina Rules of Civil Procedure, (ECF No. 96).
2. Having considered all appropriate matters of record, the Court
GRANTS the motion and enters a default judgment accordingly.
Mauney PLLC, by Gary V. Mauney, for Plaintiff Steven C. Hart
DWM Advisors, LLC, Unrepresented Defendant
Joseph P. Davis, III, Unrepresented Defendant
Houston, Judge.
I. BACKGROUND
3. As default has been entered against defendants DWM Advisors, LLC
and Joseph P. Davis, III, (ECF No. 102), the Court accepts the well-pleaded
allegations in the complaint as true for purposes of resolving the motion for default
judgment. See Bell v. Martin, 299 N.C. 715, 721 (1980) (“When default is entered due to defendant’s failure to answer, the substantive allegations raised by plaintiff’s
complaint are no longer in issue, and for the purposes of entry of default and default
judgment are deemed admitted.”).
4. Plaintiff Steven C. Hart alleges a multi-year scheme by DWM, Davis,
and prior defendants First Oak Wealth Management, LLC and Airis Alexander
Abolins1 to exploit their positions of authority as Plaintiff’s financial advisors and to
defraud or otherwise improperly divest Plaintiff of his investment capital. (See
generally ECF No. 3).
5. In short, Plaintiff is a North Carolina hydrogeologist with no
background or expertise in securities, finance, or investment planning, and in 2009,
he contracted with Defendants to help him invest personal funds. (ECF No. 3, ¶¶ 3,
15, 65, 68–69).
6. Around June 2009, Plaintiff met Davis, a North Carolina citizen and
resident, who held himself out as a registered investment adviser and managing
director of DWM Advisors, LLC, a North Carolina limited liability company. (ECF
No. 3, ¶¶ 5–6, 18, 66).
7. Shortly after various discussions, Plaintiff entered into an advisory
agreement with DWM, appointing DWM as his investment advisor and granting
DWM “full power” to control the assets in Plaintiff’s investment account in return for
1 All causes of action asserted against defendants Abolins and First Oak were resolved previously by an Order and Opinion on Motions for Summary Judgment entered by the Court (Earp, J.) on 14 March 2025, (ECF No. 73), and by a subsequent notice of voluntary dismissal with prejudice filed by Plaintiff on 1 December 2025, (ECF No. 92). The Court thereafter amended the caption in this matter to accurately reflect the remaining parties. (ECF No. 98 at 1 n.1). annual management fees. Under the agreement, Defendants were able to control
Plaintiff’s funds without prior authorization or approval from Plaintiff. Further, the
agreement provided that DWM was a registered investment adviser and that DWM
was a fiduciary with respect to Hart’s account. (ECF No. 3, ¶¶ 19, 21, 23, 68–69).
Plaintiff also entered into the agreement based on Davis’s work as “managing
director” of “Davis Wealth Management of [defendant] DWM Advisors, LLC,” with
the understanding that Davis would act in Plaintiff’s best interests as his financial
advisor. (ECF No. 3, ¶¶ 66–69 (alterations in original)).
8. After Plaintiff became a client, DWM (through Davis and Abolins)
periodically provided Plaintiff with a Form ADV, a disclosure required by the U.S.
Securities and Exchange Commission (“SEC”). DWM also provided other
supplemental disclosures from time to time. (ECF No. 3, ¶¶ 71–72). For instance, in
April 2011, DWM provided both a Form ADV and a supplemental disclosure
representing, among other things, that DWM had no disciplinary events to report,
that DWM had adopted internal practices to limit the potential for conflicts of
interest, and that DWM had adopted a Code of Ethics that required its advisers to
act in good faith on behalf of clients. The DWM disclosure also represented that Davis
was not involved in any other business activities and had no other income to disclose.
(ECF No. 3, ¶¶ 71–73, 75).
9. After the parties formed an advisory relationship, rather than investing
in publicly traded securities, Defendants invested Hart’s money in undercapitalized,
non-viable companies in which they had direct or indirect ownership interests that were not disclosed to Plaintiff. Though many of the companies were teetering on the
brink of insolvency, Defendants advised Plaintiff that these investments were in his
best interests. In turn, rather than using the funds to maintain or grow Plaintiff’s
investment or for Plaintiff’s benefit, Defendants used Plaintiff’s funds to help avoid
insolvency of those entities. With their scheme, Defendants also received consulting
fees based on Plaintiff’s investment in these private companies and otherwise
benefited substantially from their actions. (ECF No. 3, ¶¶ 25–29, 84–175).
10. Defendants never informed Plaintiff of these conflicts of interest or of
the scope of Defendants’ self-dealing transactions, and Plaintiff was not otherwise
aware of the conflicts. (ECF No. 3, ¶¶ 25–29, 84–175).
11. In the years after the parties established their investment relationship,
Defendants and their representatives at various times represented, in disclosures
provided to Plaintiff, that Davis was not engaged in other businesses and had no
other income or compensation to disclose, that DWM had not been disciplined by
regulators, and that DWM and Davis were in good standing to continue investing
Plaintiff’s funds as his registered investment advisors. (ECF No. 3, ¶¶ 30–31, 72, 75–
76, 88).
12. In early 2017, Abolins formed First Oak Wealth Management as a North
Carolina limited liability company and purchased DWM’s securities accounts. (ECF
No. 3, ¶¶ 37–38). First Oak also registered and was approved as an investment
adviser in North Carolina. (ECF No. 3, ¶¶ 40, 42–43). 13. During this process, Davis disassociated from DWM as an investment
adviser, though Abolins maintained his registration status with the SEC. (ECF No.
3, ¶ 41).
14. In March 2017, the South Carolina Securities Commissioner concluded
that Davis, on behalf of DWM, had made inappropriate investment recommendations
to clients and that he had failed to disclose conflicts of interest to clients. As a result,
Davis and DWM were barred from participating in the securities industry in South
Carolina. Defendants did not disclose these determinations to Plaintiff, nor was he
otherwise aware of them. (ECF No. 3, ¶¶ 31–33).
15. Also around March 2017, DWM filed its Form ADV with the SEC and
made multiple false statements and material omissions concerning Defendants’
licensure status, business activities, securities advisory services, and other matters,
including a failure to report the administrative action by the South Carolina
Securities Commissioner. (ECF No. 3, ¶¶ 73–84).
16. Ultimately, Defendants both concealed information about, and
affirmatively misrepresented, their advisory services, the status of regulatory
proceedings against them, and substantial other information concerning their
business activities, and these misrepresentations induced Plaintiff to continue
investing funds through Defendants. (ECF No. 3, ¶¶ 74–84).
17. Once First Oak was approved as an investment advisor by the relevant
division of the North Carolina Secretary of State, it shifted DWM’s client accounts to
First Oak, pitching the transition largely as a branding change, with customers still working with Davis and others at First Oak. (ECF No. 3, ¶¶ 43–48). Though Davis
was not registered as an investment advisor in North Carolina and had been barred
in South Carolina, this was not disclosed to First Oak’s clients. (ECF No. 3, ¶¶ 45–
48).
18. Ultimately, Davis never registered as an investment advisor in North
Carolina, and Plaintiff was never informed that Davis was acting as an unregistered
investment adviser. (ECF No. 3, ¶¶ 43, 46–48).
19. On 17 May 2017, the SEC sanctioned Davis and barred him from
association with any investment adviser based in large part upon his failure to
disclose conflicts of interest in investments when giving financial advice, but
Defendants failed to inform Plaintiff of this action and instead maintained that things
were “business as usual.” (ECF No. 3, ¶¶ 49–51).
20. Following a 2019 investigation, a division of the North Carolina
Secretary of State’s office determined that Defendants had violated multiple North
Carolina securities regulations, including via Davis’s work as an unregistered
investment advisor and Defendants’ failure to inform their clients of Davis’s
disbarment from the securities industry. Based on violations of North Carolina
securities law and regulations, largely those involving Davis and his wrongful
conduct, the Securities Division of the Secretary of State’s office issued a cease-and-
desist order against First Oak and assessed fines against the company. Nonetheless,
Defendants failed to disclose these actions to Plaintiff. (ECF No. 3, ¶¶ 52–60). 21. Around the same time, Defendants also made false representations and
omissions regarding the investigations and disciplinary actions taken against Davis
and First Oak in communications with Plaintiff. (ECF No. 3, ¶¶ 77–82).
22. Davis was an agent and representative of defendant DWM and was
authorized by DWM to act on its behalf in all respects in connection with the
relationship with Plaintiff.
23. Plaintiff compensated Defendants for advising and directing him in the
valuation and purchase of securities and otherwise in the course of managing
Plaintiff’s securities portfolio.
24. A relationship of trust and confidence existed between Plaintiff and
Defendants, as his purported financial advisors, and Defendants represented to
Plaintiff that they would act as his fiduciary and in his best interests. Defendants
took advantage of their position of trust and confidence vis-à-vis Plaintiff to benefit
themselves and to Plaintiff’s detriment. (E.g., ECF No. 3, ¶¶ 179–192).
25. Defendants made myriad affirmative misrepresentations of material
facts to Plaintiff while also concealing other material facts in the course of the parties’
relationship. Those misrepresentations were reasonably calculated and intended to
deceive Plaintiff and did, in fact, deceive Plaintiff. Plaintiff reasonably relied on
Defendants’ misrepresentations in continuing to invest with Defendants and to allow
them to possess, invest, and otherwise control his funds. (E.g., ECF No. 3, ¶¶ 193–
256). 26. As a direct result of Defendants’ conduct, Plaintiff incurred investment
losses in the amount of at least $525,117.00, and paid advisory fees in the amount of
at least $103,799.87, for a total principal amount of at least $628,916.87 in damages
and harm.
27. Plaintiff’s damages are documented by ample evidence in the record,
including the deposition testimony of Plaintiff’s accounting expert, Gregory T.
Reagan.
28. Plaintiff would not have expended or lost those amounts or otherwise
incurred those damages if not for Defendants’ conduct at issue.
29. On 1 October 2021, Plaintiff filed this action in Mecklenburg County
Superior Court, asserting causes of action against Defendants for (i) constructive
fraud, (ii) common law fraud, (iii) violation of the North Carolina Investment Advisers
Act, N.C. Gen. Stat. § 78C-38 et seq. (“NCIAA”), (iv) negligent misrepresentation, (v)
violation of the North Carolina Racketeer Influenced and Corrupt Organizations Act,
N.C. Gen. Stat. § 75D-1 et seq. (“RICO”), and (vi) civil conspiracy, and (6) punitive
damages. (ECF No. 3, ¶¶ 193–289). 2
30. Thereafter, Defendants were properly served with process between
October and November 2021 and had their attorney request from Plaintiff’s counsel
2 In its Order and Opinion on Motions for Summary Judgment, the Court granted summary
judgment in favor of Abolins and First Oak as to Plaintiff’s causes of action for fraud, negligent misrepresentation, and violation of the NCIAA on the grounds that these claims were barred because the statutes of limitations had expired. (ECF No. 73, ¶ 146). For purposes of default judgment, however, “trial courts have no authority to raise the statute of limitations defense on their own initiative”; instead, “the defendant must assert this affirmative defense or it is waived.” Unifund CCR v. Francois, 260 N.C. App. 443, 445 (2019.) an extension of time to respond to the complaint on 3 November 2021, though they
did not subsequently file a motion requesting that relief. (ECF No. 93, ¶¶ 1–3 & Exs.
A–C). Consistent with N.C. Gen. Stat. § 1–75.10 and § 1–75.11, Plaintiff submitted
an affidavit of service demonstrating personal jurisdiction over Defendants. (ECF No.
93).
31. Defendant Davis was even deposed in this action on 16 November 2022.
(ECF No. 92, ¶ 5). At that deposition, through their attorney, Defendants
acknowledged that they were properly served with process no later than 3 November
2021. (ECF No. 93, ¶¶ 1, 3 & Exs. B–C).
32. In seeking an extension of time from Plaintiff’s counsel through their
attorney and otherwise agreeing to be deposed in this action, Defendants made an
appearance in this action under Rule 55 for purposes of entry of a default judgment.
E.g., Stanaland v. Stanaland, 89 N.C. App. 111, 114 (1988) (determining that, for
purposes of default judgment, defendant made an “appearance” under Rule 55 by
agreeing “to meet with plaintiff and her attorney”; explaining that “negotiations for
settlements or continuances whether by letter or by meeting, after the complaint is
filed, constitute appearances within the meaning of Rule 55(b)(2)”); Roland v. W & L
Motor Lines, Inc., 32 N.C. App. 288, 289 (1977) (“In fact, an appearance may arise by
implication when a defendant takes, seeks, or agrees to some step in the proceedings
that is beneficial to himself or detrimental to the plaintiff.”; determining that
defendant “appeared” by sending a letter to plaintiff’s attorney and the clerk of court);
Accordingly, as Defendants have not asserted these defenses in this action, the Court will not sua sponte do so on their behalf. Id. N.C. Nat. Bank v. McKee, 63 N.C. App. 58, 61 (1983) (determining that “defendants
had made an appearance through their settlement negotiations with plaintiff”
(citations omitted)); Webb v. James, 46 N.C. App. 551, 556–57 (1980) (“Depending on
the particular circumstances, communications between parties relative to giving the
defendant an extension of time in which to plead have been considered an
“appearance” within the meaning of Rule 55(b)(2). In addition, negotiations between
parties after the institution of an action may constitute an appearance.” (internal
citations omitted)).
33. Nonetheless, despite proper service of process on both Defendants,
neither Defendant ever answered or otherwise responded to the complaint, and the
time within which to do so has long expired. (ECF No. 102).
34. On 9 November 2021, this case was designated as a mandatory complex
business case and assigned to the Honorable Julianna Earp before being reassigned
to the undersigned on 14 July 2025. (ECF Nos. 1–2, 85).
35. On 10 December 2025, Plaintiff filed motions for entry of default and a
default judgment against Defendants. (ECF Nos. 94–95). In support of his motions,
Plaintiff attached excerpts and exhibits from the deposition of Mr. Reagan, but he did
not provide the full deposition transcript. (ECF Nos. 96.1–96.2).
36. In an Order entered 12 December 2025, the Court directed Plaintiff to
file with the Court a full, certified copy of the transcript, along with any evidence
Plaintiff wished for the Court to consider in determining whether Mr. Reagan should
be qualified as an expert and the subjects and topics as to which Plaintiff sought to have Mr. Reagan qualified for purposes of the evidence offered. The Court also
required Plaintiff to serve the motion, briefs, and supporting documents on
Defendants via first-class U.S. Mail and provide the addresses for such service. (ECF
No. 98).
37. Over the course of several months, Plaintiff provided several filings and
additional supporting evidence, including evidence regarding his damages. (E.g., ECF
Nos. 100, 100.1, 100.2, 103, 103.1, 103.2). With his filings, Plaintiff tendered Mr.
Reagan as an expert in forensic accounting, damages, the value of the investments
made on behalf of Plaintiff, and the impairments of those values. (ECF No. 100 at 2).
38. Defendants were also served with copies of the motions for entry of
default and for a default judgment. (ECF No. 100).
39. On 18 March 2026, the Court entered default against Defendants. (ECF
No. 102).
40. Unsurprisingly, Defendants did not respond to Plaintiff’s motions for
entry of default and for a default judgment, and the Court therefore considers the
motion uncontested pursuant to Rule 7.6 of the Business Court Rules.
41. Defendant DWM is or was a North Carolina limited liability company
and, as a non-human, necessarily cannot be in active military service. (ECF No. 50.68
(affidavit confirming that DWM is a “company”)). 3
3 The Court takes judicial notice of DWM’s filings with the North Carolina Secretary of State
reflecting that it was registered as a North Carolina limited liability company before being administratively dissolved on 20 November 2024. DMV Advisors, LLC, N.C. SEC’Y ST., https://sosnc.gov/online_services/search/profile_filings/9102262 (last visited Mar. 30, 2026). 42. Based upon the evidence of record, Defendants are not minors, not
incompetent, and not in active military service. (See, e.g., ECF Nos. 103, 103.1, 103.2
(SCRA affidavit and related evidence as to defendant Davis)).
II. ANALYSIS
43. As default has been entered against Defendants, the allegations of
Plaintiff’s complaint are deemed admitted as against Defendants. Bell, 299 N.C. at
721.
44. The Court has personal jurisdiction over Defendants and jurisdiction
over the subject matter of this action.
45. Although Defendants are deemed to have admitted the allegations in
the complaint, for the Court to enter default judgment against Defendants, the
complaint still must state a claim. Brown v. Cavit Scis., Inc., 230 N.C. App. 460, 467
(2013) (“A complaint which fails to state a cause of action is not sufficient to support
a default judgment for plaintiff.” (citation omitted)); Beem USA Limited-Liability Ltd.
P’ship v. Grax Consulting, LLC, 2020 NCBC LEXIS 39, at *8 (N.C. Super. Ct. Mar.
26, 2020) (“Accordingly, ‘for the Court to enter default judgment, the complaint must
state a cause of action.’” (citations omitted)); JCG & Assocs. LLC v. Disaster Am. USA
LLC, 2022 NCBC LEXIS 156, at *18 (N.C. Super. Ct. Dec. 12, 2022) (“A default
judgment is appropriate only if the allegations of the complaint are adequate to state
a claim.”). A. Constructive Fraud
46. The elements of a constructive fraud claim largely overlap with the
elements of a claim for breach of fiduciary duty. See Chisum v. Campagna, 376 N.C.
680, 706–07 (2021). “[A] cause of action for constructive fraud must allege (1) a
relationship of trust and confidence, (2) that the defendant took advantage of that
position of trust in order to benefit himself, and (3) that plaintiff was, as a result,
injured.” White v. Consol. Planning Inc., 166 N.C. App. 283, 294 (2004) (citation
omitted). “The primary difference between pleading a claim for constructive fraud
and one for breach of fiduciary duty is the constructive fraud requirement that the
defendant benefit himself.” Id.
47. Considering the allegations deemed admitted from the complaint and
all other appropriate matters of record, the Court concludes that Plaintiff has met his
burden of properly alleging and demonstrating a basis for recovery under the theory
of constructive fraud.
B. Fraud
48. “The essential elements of fraud are: ‘(1) [f]alse representation or
concealment of a material fact, (2) reasonably calculated to deceive, (3) made with
intent to deceive, (4) which does in fact deceive, (5) resulting in damage to the injured
party.’” Rowan Cnty. Bd. of Educ. v. U.S. Gypsum Co., 332 N.C. 1, 17 (1992) (citation
omitted). “Additionally, reliance on alleged false representations must be
reasonable.” Sullivan v. Mebane Packaging Grp., Inc., 158 N.C. App. 19, 26 (2003)
(citation omitted). 49. Applying these principles, the Court concludes that Plaintiff has met his
burden to prevail on his claim for fraud.
C. Violation of the North Carolina Investment Advisers Act, N.C. Gen. Stat. § 78C-1 et seq.
50. The NCIAA, N.C. Gen. Stat. § 78C-1 et seq., “creates a private cause of
action against persons who commit primary violations of the NCIAA and for persons
who are liable as control persons.” Austin v. Regal Inv. Advisors, LLC, 2018 NCBC
LEXIS 3, at *50 (N.C. Super. Ct. January 8, 2018) (citing N.C. Gen. Stat. § 78C-38).
Thus, liability under the NCIAA can be primary or secondary. Id.; N.C. Gen. Stat. §
78C-38(a)–(b).
51. Under the NCIAA,
[i]t is unlawful for any person 4 who receives, directly or indirectly, any consideration from another person for advising the other person as to the value of securities or their purchase or sale, whether through the issuance of analyses or reports or otherwise, (1) [t]o employ any device, scheme, or artifice to defraud the other person, [or] (2) [t]o engage in any act, practice or course of business which operates or would operate as a fraud or deceit upon the other person…
N.C. Gen. Stat. § 78C-8(a)(1)–(2).
52. Primary liability under the Act exists when any person,
(1) [e]ngages in the business of advising others, for compensation, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities, or
4 “Person” means an individual, a corporation, a partnership, an association, a joint-stock
company, a trust where the interests of the beneficiaries are evidenced by a security, an unincorporated organization, a government, or a political subdivision of a government. N.C. Gen. Stat. § 78C-2(5). (2) [r]eceives, directly or indirectly, any consideration from another person for advice as to the value of securities or their purchase or sale, whether through the issuance of analyses, reports or otherwise and employs any device, scheme, or artifice to defraud such other person or engages in any act, practice or course of business which operates or would operate as a fraud or deceit on such other person, in violation of G.S. 78C-8(a)(1) or (2)[.]
N.C. Gen. Stat. § 78C-38(a)(1)–(2).
53. Further, secondary liability exists for
(1) [e]very person who directly or indirectly controls a person liable under subsection (a) of this section, including every partner, officer, or director of the person, every person occupying a similar status or performing similar functions, and every dealer or salesman who materially aids in the conduct giving rise to the liability is liable jointly and severally with and to the same extent as the person, unless able to sustain the burden of proof that the person did not know, and in the exercise of reasonable care could not have known, of the existence of the facts by reason of which the liability is alleged to exist.
(2) Unless liable under subdivision (1) of this subsection, every employee or associate of a person liable under subsection (a) of this section who materially aids in the conduct giving rise to the liability and every other person who materially aids in the conduct giving rise to the liability is liable jointly and several with and to the same extent as the person if the employee or associate or other person actually knew of the existence of the facts by reason of which the liability is alleged to exist.
N.C. Gen. Stat. § 78C-38(b)(1)–(2).
54. When they are based on underlying fraud, causes of action for primary
or secondary liability under the NCIAA generally must meet Rule 9 pleading
requirements as well. Shareff v. Lakebound Fixed Return Funds, LLC, 2013 NCBC
LEXIS 14, at *12–13 (N.C. Super. Ct. Mar. 6, 2013) (determining that a cause of
action for violation of N.C. Gen. Stat. § 78C-8(a)(1) was subject to Rule 9). 55. Here, as explained above, Plaintiff has adequately pleaded and
otherwise met his evidentiary burden with respect to a fraud claim, and based on the
admitted allegations of the complaint and other competent evidence of record, the
Court concludes that Plaintiff has met his burden with respect to properly alleging
and demonstrating a basis for recovery under the NCIAA.
D. Negligent Misrepresentation
56. “It has long been held in North Carolina that ‘the tort of negligent
misrepresentation occurs when (1) a party justifiably relies (2) to his detriment (3) on
information prepared without reasonable care (4) by one who owed the relying party
a duty of care.’” Simms v. Prudential Life Ins. Co. of Am., 140 N.C. App. 529, 532
(2000) (quoting Raritan River Steel Co. v. Cherry, Bekaert & Holland, 322 N.C. 200,
206 (1988)). However, “[e]ven if a misrepresentation is made, plaintiff will only be
able to recover if his reliance was justified.” Associated Packaging, Inc. v. Jackson
Paper Mfg. Co., 2012 NCBC LEXIS 13, at *59 (N.C. Super. Ct. Mar. 1, 2012). “When
the party relying on the false or misleading representation could have discovered the
truth upon inquiry, the complaint must allege that he was denied the opportunity to
investigate or that he could not have learned the true facts by exercise of reasonable
diligence.” Id. at *48–49 (citation omitted). “Under North Carolina law, omissions do
not serve as a basis for a negligent misrepresentation claim.” Provectus
Biopharmaceuticals, Inc. v. RSM US LLP, 2018 NCBC LEXIS 101, at *26 (N.C.
Super. Ct. Sept. 28, 2018) (citations omitted). Finally, “[w]hen alleging negligent
misrepresentation, a plaintiff must satisfy the heightened pleading standard for fraud found in Rule 9.” Oliver v. Brown & Morrison, Ltd., 2022 NCBC LEXIS 20, at
*23 (N.C. Super. Ct. Mar. 3, 2022) (citations omitted).
57. Here, between the now-admitted allegations of his complaint and the
additional evidence of record, Plaintiff has adequately pleaded and otherwise met his
evidentiary burden with respect to a claim for negligent misrepresentation. (E.g.,
ECF No. 3, ¶¶ 265–71).
58. However, intentional conduct generally cannot also be negligent
conduct. E.g., Horne v. Cumberland Cnty. Hosp. Sys., Inc., 228 N.C. App. 142, 149
(2013) (affirming dismissal of a negligent infliction of emotional distress claim where
it was “premised on allegations of intentional—rather than negligent—conduct” and
noting that “[a]llegations of intentional conduct, . . . even when construed liberally on
a motion to dismiss, cannot satisfy the negligence element of an NIED claim” (citation
omitted)); Woodard v. N.C. Dep’t of Transp., Div. of Motor Vehicles, 271 N.C. App. 180
(2020) (unpublished); see also Jenkins v. N.C. Dep’t of Motor Vehicles, 244 N.C. 560,
563 (1956) (“[T]here is, however, general agreement that an intentional act of violence
is not a negligent act.”); Sheaffer v. Cnty. of Chatham, 337 F. Supp. 2d 709, 734
(M.D.N.C. 2004).
59. Where the evidence would permit reasonable inferences of intent and of
negligence, it nonetheless might be appropriate to submit both causes of action to the
jury or other fact finder. Lail v. Woods, 36 N.C. App. 590, 592 (1978) (quoting Jenkins
and explaining that it was appropriate to submit theories of assault and battery to
jury); Lynn v. Burnette, 138 N.C. App. 435, 440 (2000) (explaining that “[n]egligence and intentional tort have been described as mutually exclusive theories of liability”
and noting that “[o]ur North Carolina Supreme Court has also acknowledged that an
intentional tort and willful negligence are discrete concepts”; nonetheless, permitting
plaintiff’s pursuit of intentional and negligent tort claims in light of conflicting
evidence).
60. Here, by virtue of the entry of default against Defendants and the
imputed complaint admissions resulting from that entry of default, Plaintiff’s
allegations of Defendants’ intentional misrepresentations and wrongdoing are
deemed admitted, and Plaintiff identifies no additional factual allegations in support
of his negligent misrepresentation cause of action that would be different from or in
addition to those that he contends were intentional. (See generally, e.g., ECF No. 3,
¶¶ 265–71).
61. Plaintiff will recover damages for Defendants’ fraudulent
misrepresentations and omissions, as set forth above, and Plaintiff may not recover
twice for the same harm. Martin v. Thotakura, 267 N.C. App. 130, at *5 n.1 (2019)
(unpublished) (“While a plaintiff, in the appropriate case, may bring these two claims
in the alternative, a plaintiff is not entitled to double recovery for the same injury.”
(quoting Alston v. Britthaven, 177 N.C. App. 330 (2006))).
62. Thus, in light of Plaintiff’s recovery for fraud, the Court DISMISSES
WITHOUT PREJUDICE Plaintiff’s negligent misrepresentation cause of action.
See Tuwamo v. Tuwamo, 248 N.C. App. 441, 445 (2016) (“This Court has found that
‘[c]ourts have continuing power to supervise their jurisdiction over the subject matter before them, including the power to dismiss ex mero motu.’” (alteration in original)
(quoting Narron v. Union Camp Corp., 81 N.C. App. 263, 267 (1986))).
E. North Carolina Racketeer Influenced and Corrupt Organizations Act, N.C. Gen. Stat. § 75D-1 et seq.
63. “To state a claim under the N.C. RICO Act, (1) an ‘innocent person’ must
allege (2) an injury or damage to his business or property (3) by reason of two or more
acts of organized unlawful activity or conduct, (4) one of which is something other
than mail fraud, wire fraud, or fraud in the sale of securities, (5) that resulted in
pecuniary gain to the defendant[s].” Gilmore v. Gilmore, 229 N.C. App. 347, 356
(2013) (quoting In re Bostic Constr., Inc., 435 B.R. 46, 68 (Bankr. M.D.N.C. 2010)
(internal quotation marks omitted)).
64. North Carolina law defines “racketeering activity” as a “means to
commit . . . an act or acts which would be chargeable by indictment if such act or acts
were accompanied by the necessary ‘mens rea’ under Chapter 14 of the General
Statutes of North Carolina.” N.C. Gen. Stat. § 75D-3(c)(1). A “pattern of racketeering
activity” is defined to require “[e]ngaging in at least two incidents of racketeering
activity that have the same or similar purposes, results, accomplices, victims, or
methods of commission or otherwise are interrelated by distinguishing
characteristics” within a four-year period of time. N.C. Gen. Stat. § 75D-3(b). Section
75D-3(c)(1) enumerates specific North Carolina statutory provisions, the violation of
which serves as a predicate action to support a RICO claim.
‘Racketeering activity’ also includes the description in Title 18, United States Code,
Section 1961(1).” N.C. Gen. Stat. § 75D-3(c)(2). 65. As the Court (Earp, J.) recognized and agreed in ruling on the motions
for summary judgment filed by former defendants Abolins and First Oak, “the
misconduct alleged [in Plaintiff’s complaint] is not the sort of activity that the
General Assembly intended to constitute a violation of the N.C. RICO Act claim.”
Hart v. First Oak Wealth Mgmt., LLC, 2022 NCBC LEXIS 81, at *60–61 (agreeing
with the moving defendants’ arguments and quoting Avadim Health, Inc. v. Harkey,
2021 NCBC LEXIS 104, at *31 (N.C. Super. Ct. July 28, 2022)).
66. Here, even with the well-pleaded allegations of Plaintiff’s complaint
deemed admitted, the same rule holds for reasons the Court articulated in that Order
and Opinion, and Plaintiff should not recover on his RICO cause of action. See
generally id. at *59–63.
67. Accordingly, the Court DISMISSES WITHOUT PREJUDICE
Plaintiff’s RICO cause of action. See Tuwamo, 248 N.C. App. at 445; Maola Ice Cream
Co. of N.C., Inc. v. Maola Milk & Ice Cream Co., 238 N.C. 317, 324 (1953) (“If the
cause of action, as stated by the plaintiff, is inherently bad, why permit him to proceed
further in the case, for if he proves everything that he alleges he must eventually fail
in the action.” (citations omitted)).
F. Civil Conspiracy
68. “Civil conspiracy is not an independent cause of action in North
Carolina. Rather, liability for civil conspiracy must be alleged in conjunction with an
underlying claim for unlawful conduct.” Glob. Textile All., Inc. v. TDI Worldwide,
LLC, 2018 NCBC LEXIS 104, at *18 (N.C. Super. Ct. Oct. 9, 2018) (citing Toomer v. Garrett, 155 N.C. App. 462, 483 (2002)). Indeed, the Supreme Court of North Carolina
has explained that
[a]ccurately speaking, there is no such thing as a civil action for conspiracy. The action is for damages caused by acts committed pursuant to a formed conspiracy, rather than by the conspiracy itself; and unless something is actually done by one or more of the conspirators which results in damage, no civil action lies against anyone. The gist of the civil action for conspiracy is the act or acts committed in pursuance thereof—the damage—not the conspiracy or the combination. The combination may be of no consequence except as bearing upon rules of evidence or the persons liable.
Reid v. Holden, 242 N.C. 408, 414–15 (1955) (citation omitted).
69. To recover for a civil conspiracy, a plaintiff must demonstrate “‘(1) an
agreement between two or more individuals; (2) to do an unlawful act or to do a lawful
act in an unlawful way; (3) resulting in injury to plaintiff inflicted by one or more of
the conspirators; and (4) pursuant to a common scheme.’” Glob. Textile All., 2018
NCBC LEXIS 104, at *18–19 (quoting Piraino Bros., LLC v. Atlantic Fin. Grp., Inc.,
211 N.C. App. 343, 350 (2011)). However, proof of a civil conspiracy “does no more
than associate the defendants together. The gravamen of the action is the resultant
injury, and not the conspiracy itself.” Henry v. Deen, 310 N.C. 75, 87 (1984) (internal
citations omitted).
70. Here, considering all appropriate matters of record, the Court concludes
that Plaintiff has met his burden for a default judgment based upon a civil conspiracy
involving Defendants. (E.g., ECF No. 3, ¶¶ 281–84). G. Punitive Damages
71. While Plaintiff requested punitive damages in his complaint, (ECF No.
3, ¶ 285–89), Plaintiff subsequently and expressly waived and withdrew that request.
(ECF No. 97 at 5 n.2). Accordingly, the Court deems that request WITHDRAWN and
does not further address it.
H. Default Judgment
72. Under Rule 55 of the North Carolina Rules of Civil Procedure, “[w]hen
a party against whom a judgment for affirmative relief is sought has failed to plead
or is otherwise subject to default judgment as provided by these rules or by statute
and that fact is made to appear by affidavit, motion of attorney for the plaintiff, or
otherwise, the clerk shall enter his default.” 5 N.C. R. Civ. P. 55(a). After entry of
default, a default judgment may be entered by the clerk or the Court. N.C. R. Civ. P.
55(b).
73. Here, Plaintiff has complied with the requirements of Rule 55, and entry
of a default judgment in favor of Plaintiff and against Defendants is appropriate.
74. Default judgment in favor of Plaintiff and against Defendants is
appropriate in the principal compensatory amount of $628,916.87.
75. Further, Plaintiff is entitled to interest at the legal rate of eight percent
(8%) on the principal compensatory amount of $628,916.87 beginning 1 October 2021
(the date the action was instituted) and continuing until the judgment is paid in full.
5 “Although the Rule provides that entry is to be made by the clerk, the judge has concurrent
jurisdiction and can order entry of default.” Ruiz v. Mecklenburg Utils., Inc., 189 N.C. App. 123, 126 (2008). See N.C. Gen. Stat. § 24-5(b) (“In an action other than contract, the portion of [the]
money judgment designated by the fact finder as compensatory damages bears
interest from the date the action is instituted until the judgment is satisfied. Interest
on an award . . . shall be at the legal rate.”); (see also ECF No. 3).
76. Defendants’ liability to Plaintiff should be joint and several.
III. CONCLUSION
77. Therefore, in the exercise of its discretion and for good cause shown, the
Court GRANTS Plaintiff’s motion for a default judgment and ENTERS
JUDGMENT BY DEFAULT against defendants Joseph P. Davis, III and DWM
Advisors, LLC, jointly and severally, and in favor of Plaintiff in the principal amount
of $628,916.87, with interest accruing thereon at the legal rate of eight percent (8%)
from 1 October 2021 until this judgment is satisfied in full.
78. All recoverable costs of this action are ASSESSED and TAXED against
SO ORDERED, this 30th day of March 2026.
/s/ Matthew T. Houston Matthew T. Houston Special Superior Court Judge for Complex Business Cases