Homes Development Corp., and 1031 Realty Trust, LLC, Plaintiffs v. Edmund & Wheeler, Inc., Edmund & Wheeler Exchange Services, LLC, O’Toole Enterprises, LLC, John D. Hamrick, Mary O’Toole, Timothy Burger, and Chris Brown, Defendants

2022 DNH 119

• Court: District Court, D. New Hampshire
• Decided: September 29, 2022
• Docket: 21-cv-0633-SM
• Status: Published

Opinion

UNITED STATES DISTRICT COURT

DISTRICT OF NEW HAMPSHIRE

Homes Development Corp., and 1031 Realty Trust, LLC, Plaintiffs

v. Case No. 21-cv-0633-SM Opinion No. 2022 DNH 119 Edmund & Wheeler, Inc., Edmund & Wheeler Exchange Services, LLC, O’Toole Enterprises, LLC, John D. Hamrick, Mary O’Toole, Timothy Burger, and Chris Brown, Defendants

O R D E R

Plaintiffs Homes Development Corp. (“HDC” and 1031 Realty

Trust, LLC, filed this action asserting multiple state law

claims that arise from two transactions facilitated by defendant

Edmund & Wheeler, Inc. in 2016 and 2018. Defendants have moved

to dismiss all claims against them. Defendants’ motion is

granted in part, and denied in part.

STANDARD OF REVIEW

When ruling on a motion to dismiss under Fed. R. Civ. P.

12(b)(6), the court must “accept as true all well-pleaded facts

set out in the complaint and indulge all reasonable inferences

in favor of the pleader.” SEC v. Tambone, 597 F.3d 436, 441

(1st Cir. 2010). Although the complaint need only contain “a

short and plain statement of the claim showing that the pleader is entitled to relief,” Fed. R. Civ. P. 8(a)(2), it must allege

each of the essential elements of a viable cause of action and

“contain sufficient factual matter, accepted as true, to state a

claim to relief that is plausible on its face,” Ashcroft v.

Iqbal, 556 U.S. 662, 678 (2009) (citation and internal

punctuation omitted). In other words, “a plaintiff's obligation

to provide the grounds of his entitlement to relief requires

more than labels and conclusions, and a formulaic recitation of

the elements of a cause of action will not do.” Bell Atl. Corp.

v. Twombly, 550 U.S. 544, 555 (2007). Instead, the facts

alleged in the complaint must, if credited as true, be

sufficient to “nudge[ ] [plaintiff's] claims across the line

from conceivable to plausible.” Id. at 570.

Generally, a court must decide a motion to dismiss

exclusively upon the allegations set forth in the complaint and

the documents specifically attached or convert the motion into

one for summary judgment. See Fed. R. Civ. P. 12(2). There is,

however, an exception to that general rule, as “[a] district

court may also consider ‘documents incorporated by reference in

[the complaint], matters of public record, and other matters

susceptible to judicial notice.’” Giragosian v. Ryan, 547 F.3d

59, 65 (1st Cir. 2008) (quoting In re Colonial Mortgage Bankers

Corp., 324 F.3d 12, 20 (1st Cir. 2003)) (alterations in

original).

2 BACKGROUND

Accepting the allegations in plaintiffs’ complaint as true,

as the court must at this juncture, the relevant facts are as

follows.

This case arises from two transactions between the parties

known as Section 1031 exchanges. “Section 1031 exchanges take

their name from a provision of the federal tax code, 26 U.S.C.

§ 1031, which allows an owner of investment property to defer

paying capital gains taxes upon the sale of the property if the

property is ‘exchanged’ for property ‘of like kind.’” U.S. v.

Carpenter, 736 F.3d 619, 622 (1st Cir. 2013). “[F]unds from the

initial sale may be held temporarily in cash form with no tax

penalty as long as they are used to purchase new property within

180 days and as long as the investor designates the replacement

property within 45 days.” Id. (citing 26 U.S.C. § 1031(a)(3)).

Federal regulations require that “the exchangor may not take

possession of the funds before purchasing the new property.”

Id. (citing 26 C.F.R. § 1.1031(k)–1(a)). Accordingly,

“exchangors typically rely on ‘qualified intermediaries’ to hold

and invest the funds until the exchange is completed.” Id.

Plaintiffs broadly allege that defendants, while acting as

plaintiffs’ qualified intermediary (“QI”) during the Section

1031 exchange process, conspired with Utah companies Rockwell

3 Debt Free Properties, Inc., Rockwell Birmingham LLC, and

Rockwell TIC, Inc. (collectively “Rockwell”), and now-defunct

event venue operator Noah Corporation, Noah Operations Hoover,

LA, LLC, and Noah Operations Overland Park, KS, LLC,

(collectively “Noah”) to sell plaintiffs' real estate interests,

while Rockwell and Noah were using the funds generated from

those real estate transactions to operate an illegitimate Ponzi

scheme. Plaintiffs believed that defendants were acting

independently as their QI, but say defendants were actually

acting as “finders and feeders” for Noah and Rockwell, working

on Rockwell’s behalf to locate potential investors and convince

them to invest in the properties, in return for Rockwell’s

payment of commissions and fees. Compl. ¶ 19.

The Parties

Defendant Edmund & Wheeler, Inc. (“EWI”), is a Section 1031

consulting firm “with over 35 years of exchange experience.”

Compl. ¶ 3. EWI is a New Hampshire corporation. Defendant Mary

O’Toole is the President, Operations Manager, and managing

broker of EWI. O’Toole is a licensed real estate broker,

realtor, and certified buyer representative. Defendant John

Hamrick is EWI’s Vice President and Director, and a licensed

real estate professional. Defendants Timothy Burger and Chris

Brown work for EWI as Section 1031 Exchange advisors.

4 Defendant Edmund & Wheeler Exchange Services (“EWES”), a

New Hampshire limited liability company, is located at the same

address as EWI. EWES is affiliated with Hamrick and O’Toole:

Hamrick serves as EWES’s Manager/Member, while O’Toole serves as

a Manager. Finally, Hamrick and O’Toole operate O’Toole

Enterprises, LLC, a New Hampshire real estate company comprised

of real estate agents and brokers. O’Toole serves as O’Toole

Enterprises’ principal broker, as a member, and as the company’s

registered agent. Hamrick is a licensed real estate agent with

the company, and, prior to January, 2021, he served as O’Toole

Enterprises’ registered agent.

Plaintiff HDC is a Massachusetts corporation in the

business of building homes and residential developments.

Plaintiff 1031 Realty, a Massachusetts limited liability

company, is a real estate investment company. Plaintiffs share

an address; John Esserian serves as HDC’s President, and as the

sole member of 1031 Realty.

18 Victory Garden 1031 Exchange

In 2014 and 2015 (before the events giving rise to this

action), HDC contracted with EWI for the provision of QI

services on two separate occasions. As a result, HDC “had come

to rely on EWI” and its employees “as professionals with a

fiduciary duty to act in [HDC’s] best interests.” Compl. ¶ 25.

5 In March, 2016, HDC again contracted with EWI for assistance

with a Section 1031 exchange involving the sale of property

located at 18 Victory Garden Way, Lexington, Massachusetts. The

parties agreed that EWI would be paid $2,000 in total exchange

fees: $1,000 as an initial fee, and $1,000 at the time of

closing on the replacement property. Hamrick, Burger, and

O’Toole provided HDC with advisory services.

Under the contract between the parties, 1 EWI agreed to serve

as QI for the Section 1031 exchange, which meant EWI would

“acquire” 18 Victory Garden Way from HDC, “transfer” 18 Victory

Garden Way to the purchaser, hold the funds from the sale of 18

Victory Garden Way in escrow, acquire HDC’s replacement

property, and, finally, transfer the replacement property to

HDC. Defs.’ Mot. to Dismiss, Exh. 1. The contract plainly

discloses that EWI “has established business relationships with

several companies that provide Replacement Property options for

Exchangors which could result in a referral fee being paid to an

affiliate of EWI.” Id. Finally, the contract instructs that

1 Defendants submitted the 2016 and 2018 Exchange Agreements in support of their motion to dismiss. Plaintiffs do not dispute their authenticity, and the court may therefore consider the agreements without treating defendants’ motion as one for summary judgment under Fed. R. Civ. P. 56. See Rivera v. Centro Medico de Turabo, Inc., 575 F.3d 10, 15 (1st Cir. 2009) (courts may properly consider on 12(b)(6) motions “documents the authenticity of which are not disputed by the parties”).

6 HDC should “seek its own legal and accounting advice regarding

this transaction,” and that:

the Exchangor acknowledges that Edmund & Wheeler, Inc. has not rendered legal, tax, or accounting advice in this matter, and further agree to hold the said Edmund & Wheeler, Inc., its officers and directors, and John D. Hamrick, Chris Brown, Timothy L. Burger & Mary J. O’Toole harmless and indemnified from any claim from any source arising out of this transaction, except for breach of this agreement.

Id.

Given the Section 1031 exchange rules, HDC had 45-days from

the day of the sale of 18 Victory Garden to identify three

replacement properties, and 180-days to close on the purchase of

a “like-kind” replacement property (a property of the same

nature, character, or class). HDC identified several potential

local properties, but Hamrick introduced HDC to another

potential replacement property: real estate located at 2025

International Park Lane, Birmingham, Alabama (“Noah’s

Birmingham”). Noah’s Birmingham was an event center owned by

Rockwell; HDC could purchase an undivided Tenant-in-Common

(“TIC”) interest in Noah’s Birmingham, bundled with a long-term

lease of the property to Noah, which would operate the event

center.

7 Hamrick informed HDC that Noah was “an expert in the

field,” with regard to operating event centers, and was

“committed to the success of the venture with a lengthy history

of stable profitability.” Compl. ¶ 29. Noah operated several

similar event centers around the country, Hamrick said, each of

which was a financially separate and independent investment,

and, importantly, each of those investments “had a solid track

record of returns.” Id. “Hamrick promised HDC annual returns

beginning at seven percent per annum with a [two percent] annual

increase,” Compl. ¶ 29, and provided HDC with a Noah’s

Birmingham sales package that featured “beautiful photographs”

of a completed event center, Compl. ¶ 30, and described the

event center as an “attractive 8,000 square foot building

[sitting] on a large 5.2-acre parcel of land in the fast-growing

community of Birmingham, AL.” Id. Since Noah was already in

possession of the property, HDC was promised full rents

immediately upon purchase of the TIC interest. Despite those

representations, construction had not actually begun at Noah’s

Birmingham. Construction did not begin until October of 2016.

HDC’s preferred local investment properties were not

available within the required 180-day closing window. With that

in mind, Esserian asked Hamrick whether Noah’s Birmingham would

be suitable as a short-term investment, and if HDC would be able

8 to sell its TIC interest quickly when a preferred local

replacement property became available (in a separate Section

1031 exchange). Hamrick assured Esserian that the Noah’s

investment was a suitable short-term investment, and that HDC’s

interest could easily be exchanged out at any time. Id. at

¶ 33.

Hamrick continued to reach out to HDC to promote Noah’s

Birmingham, telling HDC that Noah properties had “been selling

out very quickly, and that Noah’s business model was ‘working

perfectly.’” Compl. ¶ 34. HDC entered into a Purchase and

Sales Agreement (“PSA”) with Rockwell on October 10, 2016, for

an undivided 46.58 percent interest in Noah’s Birmingham.

Rockwell assigned the PSA to EWI, through Hamrick, to conform

the transaction to Section 1031’s requirements. Burger

initiated a Request and Authorization for Release of Escrow

Funds, signed by Burger and Hamrick. On October 19, 2016, HDC

(with EWI as QI) closed on the purchase of a 46.58 percent TIC

share of Noah’s Birmingham for $2,678,309.09.

On October 10, 2016, following execution of the PSA,

Rockwell transferred funds, “representing a percentage of the

commission earned on the sale” by defendants to O’Toole

Enterprises. Compl. ¶ 36. On October 19, 2016, following final

9 transfer of the purchase price to Rockwell, Rockwell transferred

the balance of sales commissions owed to O’Toole Enterprises.

Following its Noah’s Birmingham TIC purchase, HDC began

receiving monthly rents in the approximate amount of $15,500.00

from Noah’s property administrator.

Later that year, on December 27, 2016, HDC contacted

Hamrick to discuss selling its interest in Noah’s Birmingham,

since HDC still hoped to locate a local “brick and mortar”

investment property to replace the Noah’s investment. HDC was

unable to find a suitable replacement property that would

qualify for a Section 1031 exchange. And, since Noah’s

Birmingham had been paying HDC monthly returns as expected, HDC

did not sell its interest in the property. Upon Hamrick’s

advice, HDC maintained its interest in Noah’s Birmingham.

On November 15, 2017, with EWI’s knowledge, HDC conveyed

its interest in Noah’s Birmingham to 1031 Realty Trust.

On February 2, 2018, plaintiffs requested that Noah’s

property administrator inform Noah’s Birmingham’s TIC co-owners

of its “Notice of Intent to Sell” its interest in Noah’s

Birmingham (notice was a prerequisite to selling an ownership

interest under the agreement). In response, plaintiffs received

10 an offer from another co-owner to purchase a portion of its TIC

interest for $300,000. But, after Hamrick reassured plaintiffs

of the stability and profitability of the Noah’s Birmingham

investment, plaintiffs decided not to accept the $300,000 offer.

20 Victory Garden Way 1031 Exchange

On January 25, 2018, HDC again contracted with EWI to act

as a QI for a Section 1031 exchange for property located at 20

Victory Garden Way, Lexington, Massachusetts. Hamrick, Burger,

and O’Toole again provided advisory services to HDC. EWI and

HDC again agreed that EWI would be paid $2,000 for its services,

$1,000 as an initial fee, and $1,000 as a final fee at the time

of closing on the replacement property. The contract between

the parties for the 20 Victory Garden Way exchange includes

provisions identical to those in the contract governing the 18

Victory Garden Way exchange.

HDC again identified several potential replacement

properties, but Hamrick suggested a second Rockwell TIC

investment, a Noah event center located at 7341 West 133rd

Street, Overland Park, Kansas (“Noah’s Overland Park”). Hamrick

provided HDC with a sales package related to Noah’s Overland

Park, and told Esserian that, like Noah’s Birmingham, Noah’s

Overland Park was an event center owned by Rockwell, from whom

HDC would purchase an undivided TIC interest in the property,

11 bundled with a long-term lease of the property to Noah

Operations Overland Park, KS, LLC, which would operate the event

Hamrick “sold HDC on the [Overland Park] property by

highlighting the respective good qualities of the property and

even disparage[ing] alternative properties HDC identified.”

Compl. ¶ 43. After Esserian told Hamrick that HDC intended to

hold its interest in the Noah’s Overland Park property only

until a preferable, local property became available, Hamrick

assured Esserian that Noah’s Overland Park, like Noah’s

Birmingham, was a suitable short-term investment.

Accordingly, on January 23, 2018, HDC entered into a

Purchase and Sales Agreement with Rockwell for a 38.19 percent

interest in Noah’s Overland Park. HDC and Rockwell assigned the

PSA to EWI to conform to Section 1031’s requirements. Burger

again initiated a Request and Authorization for Release of

Escrow funds, signed by Burger and Hamrick. On January 26,

2018, HDC, with EWI as QI, closed on the purchase of a 38.19

percent TIC share of Noah’s Overland Park for the price of

$2,387,175.29. Following the purchase, HDC began receiving

monthly rents of approximately $13,900.00 from Noah’s property

administrator. Those payments continued through February, 2019.

12 On January 26, 2018, Rockwell transferred funds

representing a percentage of the commission defendants earned on

the sale to O’Toole Enterprises.

The Collapse of Noah and Rockwell

HDC was the largest investor in both Noah’s Birmingham and

Noah’s Overland Park, having invested over $5 million in the two

enterprises.

Plaintiffs contacted Hamrick in early March, 2019, to

inform him that they intended to sell the entirety of their TIC

interests in the Rockwell properties. But later that month

plaintiffs and other Noah TIC co-owners received a letter from

Noah’s property administrator advising them that Noah’s March,

2019, rent payments would be delayed. Noah stopped making rent

payments completely in April, 2019, and, on May 28, 2019, filed

for Chapter 11 bankruptcy protection in Utah (later converted to

Chapter 7). On September 2, 2020, Rockwell followed suit,

filing for Chapter 7 bankruptcy protection in Utah.

Plaintiffs soon discovered that Noah and Rockwell had been

misappropriating money from plaintiffs’ investments. After

plaintiffs’ TIC purchases, Noah’s President William Bowser and

others used the misappropriated funds, among other things, to

pay operations expenses, to pay Noah’s and Rockwell’s debts, and

13 to complete construction on other Rockwell properties. The

“rents” paid by Noah’s Birmingham and Noah’s Overland Park to

plaintiffs were not derived from profit generated due to

successful operations of the facilities, but instead consisted

of cash obtained from new investments or diverted from other

Rockwell facilities. Plaintiffs label the structure – where

“investor returns are financed not by the success of the

business, but with money acquired from later investors” – a

“Ponzi” scheme, a scheme defendants knowingly concealed from

plaintiffs. Compl. ¶ 61.

As the Ponzi scheme is described, Rockwell associates and

the defendants worked together to induce investors to purchase

TIC investments at grossly inflated prices. They did so through

misleading representations and material omissions in packages of

sales documents that EWI provided to HDC, as well as in

financial calculations purporting to demonstrate positive rates

of return. The sales documents and financial calculations

provided to HDC were designed to:

create the appearance that the commercial properties were capable of generating sufficient revenue to service annual base rents of around $403,301 (Birmingham) and $437,500 (Overland Park) secured by Noah and to provide a return on a $5,862,086 (Birmingham) and $6,375,086 (Overland Park) equity investment in the range of 7.0 [percent] to 10.20 [percent] over the course of twenty years.

14 Compl. ¶ 68. The materials represented that investment return

was dependent on the performance of the specific venue in which

HDC would invest, but noted that other Noah venues had generated

revenue with “less than [six percent] of their current sales as

a receivable.” Compl. ¶ 70. They further stated that “Noah’s

anticipates revenues to well exceed the debt service and

operating cost with their break-even well below their currently

operating occupancy levels.” Id. Those statements were largely

false.

In furtherance of the alleged scheme, Rockwell used finders

such as Hamrick, Brown, and Burger. Plaintiffs say that Hamrick

worked as a “finder” or “feeder” for Rockwell, and led several

of his Section 1031 exchange clients to Rockwell properties.

While pitching the Rockwell investments to HDC, Hamrick informed

HDC that EWI “in collaboration with Rockwell, has used this

strategy many times over the years very successfully.” Compl.

¶ 60. Indeed, EWI’s relationship with Rockwell and Noah’s

stretched back several years, to at least 2013, and Hamrick told

HDC that he had been working with Rockwell since at least 2008.

In fact, Hamrick frequently travelled to Rockwell’s and Noah’s

annual meetings, and he attended Rockwell Christmas parties.

Plaintiffs allege that defendants Hamrick, O’Toole, Brown, and

15 Burger were also close to Bowser, and the Rockwell founders and

owners.

Plaintiffs say that, given the closeness of the

relationship between EWI and Rockwell/Noah, and the defendants

having worked with Rockwell/Noah for several years, defendants

knew (or were negligent in not knowing) that (1) the statements

in the sales packages were false, and (2) neither Noah’s

Overland Park nor Noah’s Birmingham was capable of generating

revenue sufficient to even service the base rent, let alone

provide the projected two percent annual increases. Plaintiffs

say that defendants were aware that “rent” paid to one investor

was “frequently funded through funds received from investors in

other TIC interests,” but deliberately omitted that fact,

thereby misrepresenting the stability of the investments in

order to sell Section 1031 TIC interests. Plaintiffs further

allege that, contrary to defendants’ representations, the

property value of Noah’s Birmingham and Noah’s Overland Park was

“falsely inflated to lure investors to fund” Rockwell’s and

Noah’s ventures, and each value was actually far below the price

at which it was marketed and sold to HDC. Compl. ¶ 62.

Plaintiffs allege that defendants knew (or were negligent or

reckless in not knowing) that the value of the Noah’s Birmingham

16 and Noah’s Overland Park properties were far below the price at

which they were sold to HDC.

In sum, plaintiffs allege, defendants misrepresented the

actual value of Rockwell TIC interests, the historical operating

expenses of Noah’s event venues, and the nature of the risk

associated with Rockwell TIC investments. Hamrick and Burger

misrepresented the suitability of Noah as a short-term

investment; that the Noah leases were “corporately guaranteed;”

that Noah was committed to the venture and was performing as

advertised; that construction on Noah’s Birmingham was complete

as of September 30, 2016; and that the Noah event venues were

run as financially separate entities, with returns generated

based on the successful management and profitability of each

facility. Finally, defendants misrepresented both the

suitability of the TIC interests in a Section 1031 Exchange, and

the potential returns plaintiffs would receive from the Rockwell

investments.

Plaintiffs say that the information provided by defendants

Hamrick and Burger concerning Noah and Rockwell was material to

their decision to invest in the properties, and they relied on

the statements that Hamrick and Burger made (and those in the

Sales Packages) in deciding to invest. Had defendants fully

17 disclosed the facts and risks relevant to the investment,

plaintiffs would not have invested in the properties.

Finally, and as mentioned, defendants failed to disclose

their receipt of substantial commissions from Rockwell for the

sale of TIC interests to plaintiffs (commissions which ranged

from three to six percent of the property sales price). Those

substantial commissions caused Hamrick and EWI to act not in the

best interests of HDC, but in their own conflicting monetary

interest. That conflict of interest was not disclosed to

plaintiffs. In fact, when Esserian asked Hamrick

how he made what appeared to be a large amount of money given that EWI charged only $2,000 as an exchange fee, Hamrick did not disclose that he made commissions on 1031 exchanges, nor that he was seeking any commission on HDC’s 1031 exchange – he merely stated that he did a high-volume of 1031 exchanges.

Compl. ¶ 72.

The Rockwell commissions were paid to O’Toole’s separate

company, O’Toole Enterprises. Plaintiffs allege that due to her

position at EWI, and her status as Hamrick’s life partner,

“O’Toole was privy to substantial communications between

Rockwell and [EWI] and had access to information at [EWI]

including financial statements of Noah from which it was clear

that Noah was in poor financial condition.” Compl. ¶ 78.

18 According to plaintiffs, the business relationship with Rockwell

and the Noah TIC program was the “primary source of income for

the couple.” Id.

On June 30, 2020, HDC sold its interest in Noah’s Overland

Park for $859,275, and, on January 12, 2021, 1031 Realty Trust

sold its interest in Noah’s Birmingham for $768,570. Plaintiffs

suffered a loss of nearly $3.5 million of their total

investment.

DISCUSSION

Defendants support their motion to dismiss with three

general arguments. First, defendants argue that all claims

against O’Toole, Burger, Brown, and Edmund & Wheeler Exchange

Services (“EWES”) should be dismissed, because plaintiffs have

not sufficiently alleged particularized facts giving rise to

cognizable claims against them. Defendants next contend that,

because the entire complaint sounds in fraud, it should be

dismissed for failure to comply with the pleading requirements

set out in Fed. R. Civ. P. 9(b). Finally, defendants argue that

all 12 individual claims asserted by the plaintiffs fail to

state cognizable claims, and must be dismissed under Fed. R.

Civ. P. Rule 12(b)(6).

19 (1) Applicability of Rule 9(b)’s Heightened Pleading Standard

Addressing defendants’ second argument first, Federal Rule

of Civil Procedure 9(b) requires a party alleging fraud to

“state with particularity the circumstances constituting fraud.”

Fed. R. Civ. P. 9(b). The complaint must, at a minimum, allege

“the identity of the person who made the fraudulent statement,

the time, place, and content of the misrepresentation, the

resulting injury, and the method by which the misrepresentation

was communicated.” Clearview Software Int'l Inc. v. Ware, No.

07–CV–405–JL, 2009 WL 2151017, at *1, n.3 (D.N.H. July 15, 2009)

(quotation omitted). See also Rodi v. S. New England Sch. of

Law, 389 F.3d 5, 15 (1st Cir. 2004) (“This heightened pleading

standard is satisfied by an averment of the who, what, where,

and when of the allegedly false or fraudulent representation.”)

(citation and internal punctuation omitted). “[O]ther elements

of fraud, such as intent and knowledge, may be averred in

general terms.” Rodi, 389 F.3d at 15.

The gravamen of plaintiffs’ complaint is that EWI and its

employees “fraudulently lured HDC into unsuitable investments

through fraud and misrepresentation.” Defs.’ Mot. to Dismiss,

p. 9. Thus, defendants argue, Rule 9(b) applies broadly to all

of plaintiffs’ claims, whether they rest upon a statutory, tort,

contractual, or fiduciary basis, and requires that plaintiffs

20 meet its strict pleading standards. Plaintiffs disagree,

arguing that, in addition to alleging fraud, they have also

alleged that defendants made misrepresentations “negligently,

recklessly, or knowingly.” Pls.’ Opp. to Mot. to Dismiss at 17

(quoting Compl. ¶ 17).

“The hallmarks of fraud are misrepresentation or deceit.”

Ed Peters Jewelry Co. v. C & J Jewelry Co., 215 F.3d 182, 191

(1st Cir. 2000). A claim sounds in fraud when fraud “lies at

the core of the action.” Hayduk v. Lanna, 775 F.2d 441, 443

(1st Cir. 1985). Most of plaintiffs’ claims fall into that

category (with the exception of their claims for negligence, and

negligent hiring), and Rule 9(b)’s strict pleading standards

apply.

Defendants argue that plaintiffs’ complaint must be

dismissed because its allegations do not satisfy “the time,

place, and content” requirements. Defs.’ Mot. to Dismiss at 10.

Defendants are not entirely wrong – several of plaintiffs’

allegations lack specificity, making it difficult to attribute

particular conduct to an individual defendant. The majority of

plaintiffs’ allegations, however, are sufficiently specific as

to time, place, and content. When “a claim sounding in fraud

contains a hybrid of allegations, some of which satisfy the

strictures of Rule 9(b) and some of which do not, an inquiring

21 court may sustain the claim on the basis of those specific

allegations that are properly pleaded.” Rodi, 389 F.3d at 15-

16.

For example, plaintiffs allege that, during the 180-day

period between the sale of its 18 Victory Garden Way property

and its purchase of a TIC interest in Noah’s Birmingham, Hamrick

represented that Noah’s Overland Park was a suitable short-term

investment, that each Noah’s event center was a financially

separate and independent investment, and that HDC could expect

annual returns beginning at seven percent per annum with a two

percent annual increase. See Compl. ¶ 29. Plaintiffs also

allege that, when Esserian directly questioned Hamrick about how

EWI could maintain its profitability when the company only

earned a small amount from 1031 exchange fees, Hamrick

deliberately failed to disclose that he and O’Toole would

receive a commission from Rockwell of three to six percent of

the purchase prices on sales to HDC. Compl. ¶ 42. Those

allegations are sufficiently specific to satisfy the “time,

place, and manner” pleading requirement.

The court notes that plaintiffs’ fraud allegations are

focused in part on defendants’ failure to disclose material

information regarding Rockwell and Noah, including: the

financial difficulties the companies were facing; that Hamrick

22 was working as a “finder” for Rockwell and Noah while also under

contract to HDC; and that “rents” paid by Noah’s Birmingham and

Noah’s Overland Park were actually derived from other parties’

investments in other, purportedly independent, Noah event

centers. As the court noted in DiTucci v. Ashby, No. 2:19-CV-

277-TC-PMW, 2020 WL 1249627, at *5 (D. Utah Mar. 16, 2020), (a

nearly identical case pending in the District of Utah, and also

involving Rockwell, Noah, and EWI), “it is unclear how

Plaintiffs could be more specific; because they are alleging

that each Defendant failed to make certain disclosures, there is

no practical way for Plaintiffs to detail the date or place of

conversations that never occurred.”

The allegations in plaintiffs’ complaint are, at this

stage, sufficiently specific to meet Rule 9(b)’s requirements.

Moreover, the complaint sufficiently alleges that

defendants had the requisite scienter. Scienter is “a mental

state embracing intent to deceive, manipulate, or defraud.”

Ernst & Ernst v. Hochfelder, 425 U.S. 185, 193 n. 12, (1976).

As stated, Rule 9(b)’s “specificity requirement extends only to

the particulars of the allegedly misleading statement itself.”

Rodi, 389 F.3d at 15 (citation omitted). However, the complaint

still must “identify[ ] the basis for inferring scienter” by

setting forth “specific facts that make it reasonable to believe

23 that defendant knew that a statement was materially false or

misleading.” North American Catholic Educ. Programming Found.,

Inc. v. Cardinale, 567 F.3d 8, 13 (1st Cir. 2009) (quotations

and citations omitted).

Plaintiffs allege a long-standing, close relationship

between Noah, Rockwell, and EWI, and Hamrick. See, e.g., Compl.

¶¶ 67, 60. So close was the relationship that Hamrick attended

Rockwell company meetings and Christmas parties. Plaintiffs’

scienter contentions are bolstered by their allegations that

Hamrick failed to disclose the substantial commission payments

he stood to earn from Rockwell in return for arranging HDC’s

investment in Noah’s Birmingham and Noah’s Overland Park

(despite being directly asked about his compensation by

Esserian). See Tellabs, Inc. v. Makor Issues & Rights, Ltd.,

551 U.S. 308, 325 (2007) (“[P]ersonal financial gain may weigh

heavily in favor of a scienter inference.”). Taken together,

plaintiffs’ allegations are sufficient for pleading purposes to

support a reasonable inference that defendants knew their

statements concerning Rockwell and Noah were false or materially

misleading.

Finally, instead of focusing on the sufficiency of

plaintiffs’ scienter allegations, defendants’ argument is

largely focused on their accuracy. For example, defendants say

24 that Hamrick did not mislead Esserian by telling him that EWI

“was profitable while having low fees because of a ‘high volume’

of work,” rather than disclose the substantial amount he stood

to gain from commissions based on HDC’s Rockwell purchases,

since “‘high volume’ of work is not a false statement regarding

the source of EWI’s revenues.” Defs.’ Mot. to Dismiss at 12.

Defendants further argue that, despite plaintiffs’ allegations

to the contrary, Hamrick believed the statements set forth in

Rockwell’s sales documents were accurate. Such factual

challenges, however, are inappropriate in the context of a

motion to dismiss. See Cebollero-Bertran v. Puerto Rico

Aqueduct & Sewer Auth., 4 F.4th 63, 69 (1st Cir. 2021) (“Rule

12(b)(6) motions . . . are always facial, not factual,

challenges to the complaint.”) (citations omitted).

Defendants’ remaining arguments are similarly unpersuasive,

and defendants’ contention that the entirety of plaintiffs’

complaint should be dismissed for failure to comply with Rule

9(b)’s requirements is unavailing. Plaintiffs’ complaint sets

forth allegations that are sufficiently particular at this stage

of the litigation.

For similar reasons, defendants’ motion to dismiss Count

11, plaintiffs’ fraud/constructive fraud claim, for failure to

state a claim is denied.

25 (2) Claims against O’Toole, Burger, Brown, and EWES

Defendants argue that plaintiffs’ claims against EWES,

O’Toole, Burger, and Brown should be dismissed because

plaintiffs have not set forth sufficiently particularized

allegations in support of the claims against them. Defendants

say that, rather than alleging each defendant’s role in the

matter, plaintiffs rely instead on impermissible “group

pleading,” referring to the “defendants” generally, or listing

all the defendants without distinguishing between them.

Plaintiffs respond that those allegations are permissible

because the complaint alleges securities fraud, and the group

pleading doctrine applies.

The “group pleading” doctrine allows a plaintiff in a

securities action to satisfy fraud pleading requirements by

imputing false or misleading statements in a company's group-

published SEC public filings, press releases, or other corporate

documents to the high-level corporate officers involved in the

everyday business of the company. See In re Raytheon Sec.

Litig., 157 F. Supp. 2d 131, 152 (D. Mass. 2001) (“Under the

group-published information doctrine, the plaintiff may impute

false or misleading statements conveyed in annual reports,

quarterly and year-end financial results, or other group-

published information to corporate officers.”); In re Cabletron

26 Sys., Inc., 311 F.3d 11, 40 (1st Cir. 2002) (“under the so-

called group pleading presumption, the court need not consider

the liability of each individual defendant, but may attribute

all the statements to all the defendants as ‘collective

actions.’”). The Court of Appeals for the First Circuit has

recognized a “very limited version of the group pleading

doctrine for securities fraud” in In re Cabletron Sys., Inc. 311

F.3d at 40, but noted the doctrine’s questionable validity

following the enactment of the Private Securities Litigation

Reform Act of 1995.

Here, however, the doctrine does not apply because

plaintiffs fail to allege that the documents at issue – the

sales brochures created by Rockwell and Noah’s – were published

or created by any of the defendants. Plaintiffs make vague

allegations concerning falsities in “other documents,” including

the Purchase and Sales Agreements, and “documents generated to

falsely inflate the returns expected on investments.” But they

fail to identify with any degree of specificity the content of

the misleading statements in these (largely unidentified)

documents.

Plaintiffs’ argument also fails because they seek to apply

the group pleading doctrine to defendants Brown and Burger.

Plaintiffs have not alleged that Brown or Burger served as high-

27 level officers involved in the day-to-day management of the

company. See In re Lernout & Hauspie Sec. Litig., 208 F. Supp.

2d 74, 84 (D. Mass. 2002) (“To hold defendants responsible for

the group-published information, the plaintiffs must

sufficiently allege that each individual defendant is a clearly

cognizable corporate insider with [an] active daily role in the

relevant companies or transactions.”) (quotation and citation

omitted).

For these reasons, the “group pleading doctrine” is

inapplicable. The court turns now to defendants’ motions to

dismiss claims against named defendants.

(a) Mary O’Toole

Defendants say that plaintiffs’ claims against Mary O’Toole

should be dismissed because she acted only as the office

administrator for EWI, was not involved in Section 1031

exchanges, and had no contacts with plaintiffs. Defendants note

that plaintiffs have not alleged conduct individual to O’Toole,

but instead recite her job titles with EWI and EWE, and allege

that she is a principal broker at O’Toole Enterprises who

resides with and is Hamrick’s life partner. Such allegations,

defendants say, do not support plaintiffs’ conclusory statements

that O’Toole provided “advisory services” as part of plaintiffs’

28 Section 1031 exchange transactions, or was in any way involved

in the scheme alleged.

Plaintiffs respond that they have alleged that O’Toole is a

director and officer at EWI and EWES, with authority over the

other defendants who were directly involved in the fraudulent

scheme. They argue that O’Toole’s close personal relationship

with Hamrick supports an inference that the two were working

together to commit the alleged wrongful acts. And, plaintiffs

say, they have alleged that, as a result of O’Toole’s close

relationship with the founders of Rockwell, she had access to

information contradicting defendants’ representations that the

Rockwell investments were appropriate, yet failed to provide

accurate information to correct those misrepresentations.

Plaintiffs further contend that the “use of O’Toole’s separate

company, O’Toole Enterprises, LLC to receive commissions” from

the Rockwell transactions “manifests the Defendants’ scheme to

hide the payment of commissions from the Plaintiffs.” Pl.’s

Opp. to Mot. to Dismiss at 14 (quoting Compl. ¶ 76). Finally,

plaintiffs point out that defendants’ argument regarding

O’Toole’s office administrator status raises a factual issue,

since their complaint alleges that she is held out publicly as

the President, Operations Manager, and Managing Broker of EWI,

as well as the principal of O’Toole Enterprises. At this stage

29 of the litigation, plaintiffs say, the factual allegations of

the complaint must be taken as true.

While it is a close call, plaintiffs have plausibly –

albeit barely – alleged O’Toole’s personal participation in

defendants’ purported scheme. Plaintiffs allege that O’Toole

served as the President and managing broker of EWI (Compl.

¶ 21), provided plaintiffs with advisory services with respect

to the relevant exchanges (Compl. ¶ 27), and that she was privy

to information concerning Rockwell’s financial status and the

viability of the Noah’s business model that effectively

contradicted representations being made to plaintiffs.

Plaintiffs further allege that O’Toole Enterprises, of which

O’Toole is the principal, received commissions from the exchange

transactions earned by others, with no apparent connection to

O’Toole’s company. Compl. ¶ 38. Finally, plaintiffs allege

that “O’Toole was privy to substantial communications between

Rockwell and EWI;” “had access to information at EWI, including

Noah’s financial statements from which it was evident that Noah

was in poor financial condition,” and that “O’Toole communicated

frequently with Hamrick regarding the business relationship with

Rockwell and the Noah TIC program as . . . it was the primary

source of income for the couple.” Compl. ¶ 78.

30 Again, plaintiffs’ allegations concerning O’Toole’s

involvement in the purported scheme are inferentially meagre.

At this stage, they are sufficient to preclude dismissal, but

will no doubt be revisited again on summary judgment.

(b) Timothy Burger

The same can be said for plaintiffs’ allegations concerning

the involvement of defendant Timothy Burger in the purported

scheme: while meagre, they barely suffice to preclude Burger’s

dismissal at this stage.

Defendants argue plaintiffs’ claims against Burger are

insufficient because they fail to allege specifics about

Burger’s alleged actions or omissions. However, plaintiffs

allege that Burger, who has worked as a Section 1031 advisor for

EWI since 2013, provided them with advisory services with

respect to the relevant exchanges (Compl. ¶¶ 27, 42), and

executed certain documents in furtherance of the exchanges

(Compl. ¶¶ 35, 47). Plaintiffs also allege (somewhat vaguely)

that Burger, along with Hamrick “made false and misleading

representations or omitted [material] information concerning the

actual value of the TIC interests, the historic[] operating

experience of the Noah’s event venues, and the nature of the

risk[s] associated with the TIC securities.” Compl. ¶ 71.

Finally, plaintiffs allege that Burger “communicated with HDC on

31 multiple occasions,” and “reinforced the misrepresentations

contained in the [Rockwell] sales materials.” Compl. ¶ 73.

Again, those factual allegations are sufficient to preclude

Burger’s dismissal at this early stage.

(c) Chris Brown

As defendants point out, plaintiffs allege only that Brown

worked for EWI. There is no allegation suggesting that he was

in any way involved in plaintiffs’ exchange transactions. The

only factual allegations concerning Brown’s involvement are

impermissible “group pleading” allegations in which Brown’s name

is listed along with those of all the other defendants;

plaintiffs allege no actions taken by Brown that relate in any

way to the transactions at issue.

Defendants’ motion to dismiss all claims against defendant

Chris Brown is granted.

(d) EWES

Finally, defendants say that plaintiffs’ claims against

EWES must be dismissed, since the only allegations against EWES

(beyond jurisdictional) are that: (1) EWES shares officers, or

members, with EWI; and (1) EWES shares an address with EWI.

Accordingly, defendants argue, because no culpable conduct is

attributed to EWES, and no allegations would establish that EWES

32 is liable for the conduct of other defendants, plaintiffs have

not stated a cognizable claim against EWES.

Plaintiffs argue in response that they have sufficiently

alleged that EWES and EWI worked together to facilitate the

Section 1031 exchanges at issue. They further argue that they

have alleged that EWES may be vicariously liable for the

wrongful acts of its officers and employees, Hamrick and

O’Toole, since both are managers of EWES, “were acting within

the scope of their employment when the tortious acts and other

wrongful acts were undertaken,” and “had a duty to exercise

reasonable case in hiring, supervising, and retaining its

employees to prevent the foreseeable conduct alleged herein.”

Pls.’ Mem. in Opp. to Mot. to Dismiss at 12. Finally,

plaintiffs say that their allegations would support piercing the

corporate veil between EWI and EWES “to the extent these

entities were used collectively to perpetrate the securities

fraud and other wrongful acts” against the plaintiffs. Id.

As a preliminary matter, plaintiffs’ decision to

collectively refer to both EWI and EWES as “EWI” does not

address EWES’s alleged role in the Section 1031 exchanges in the

slightest. HDC’s contract to provide Section 1031 exchange

services was with EWI, not EWES, and the complaint does not

assert that EWES was involved in the transactions at issue.

33 Moreover, because HDC contracted with EWI to provide exchange

services, it makes little sense that the individual defendants

would be acting as agents and employees of EWES when they

“induced HDC to make unsuitable investments as part of an

intended 1031 exchange.” Compl. ¶ 18.

Nor have plaintiffs adequately pled a basis upon which to

pierce the corporate veil. By referring to EWES and EWI

collectively as “EWI,” plaintiffs seemingly seek to create one

entity, or a “single enterprise” out of two distinct companies.

Plaintiffs allege that EWES and EWI shared an address, as well

as officers or members. Compl. ¶ 3. But, as the New Hampshire

Supreme has held, “the fact that one person controls two

corporations is not sufficient to make the two corporations and

the controlling stockholder the same person under the law.”

Vill. Press, Inc. v. Stephen Edward Co., 120 N.H. 469, 471

(1980) (citations omitted). And, critically, “in New Hampshire,

corporate veil piercing and the alter-ego doctrine have been

used to do one thing only: hold the owners of corporations

liable for the debts of the corporations they own.” Michnovez

v. Blair, LLC, 795 F. Supp. 2d 177, 186 (D.N.H. 2011).

Plaintiffs point to no authority “for the proposition that New

Hampshire would, if presented with the question, adopt a single-

enterprise theory . . . , under which an entity other than an

34 owner of a corporation could be held liable for that

corporation's conduct by means of veil piercing.” Id.

Even if the court were to assume that New Hampshire courts

would allow piercing in such instances, and – following the lead

of the New Hampshire Supreme Court in Mbahaba v. Morgan, 163

N.H. 561, 568 (2012) – assume but not decide that managers of a

limited liability corporation may be held liable on a veil-

piercing theory in an appropriate case – plaintiffs’ claim still

falls short. To support veil piercing under New Hampshire law,

a plaintiff must assert factual allegations sufficient to

plausibly establish that the EWES corporate form was used “to

promote an injustice or fraud” on the plaintiff. Norwood Grp.,

Inc. v. Phillips, 149 N.H. 722, 724 (2003). “Lack of sufficient

separation between an LLC and a member may be shown by, among

other things, demonstrating that the member exercised ‘sole and

exclusive control over’” the LLC.” Fujifilm N. Am. Corp. v. M&R

Printing Equip., Inc., No. 20-CV-492-LM, 2021 WL 722861, at *7

(D.N.H. Feb. 24, 2021) (quoting Antaeus Enters., Inc. v.

Davidson, 774 F. Supp. 2d 409, 416 (D.N.H. 2011)). Simply put,

plaintiffs’ argument is unpersuasive because the complaint is

lacking any factual allegations that suggest EWES members were

using the EWES corporate form to perpetuate fraud in the context

of the claims in this case.

35 Along those lines, plaintiffs’ reliance on G.E. Mobile

Water, Inc. v Red Desert Reclamation, LLC, 6 F. Supp. 3d 195

(D.N.H. 2014), is misplaced. In finding that plaintiffs had

successfully stated a claim for piercing the corporate veil, the

court did note that the companies “operate out of the same

business address,” and that the companies’ “officers hold titles

with both” companies, but those allegations were not

dispositive. The court also noted that plaintiffs had alleged

the company was the “parent corporation” of Red Desert (the

company they wished to pierce), the parent company had offered

to pay a portion of Red Desert’s debts (“permitting an inference

of the intermingling of corporate funds;” and the parent

company’s officers had played the primary role in negotiating

the contract, and managing plaintiffs’ concerns regarding

contract performance, which, the court stated, “permits an

inference that [the parent company] in fact controlled the

project and was using Red Desert's corporate form to not only

insulate itself from liability but to commit an injustice.” GE

Mobile Water, Inc. v. Red Desert Reclamation, LLC, 6 F. Supp. 3d

195, 203 (D.N.H. 2014). Finally, plaintiff had alleged that Red

Desert was severely undercapitalized. Id. Such critical

allegations concerning the relationship between EWES and EWE are

entirely absent from plaintiffs’ complaint in this case.

36 Defendants’ motion to dismiss plaintiffs’ claims against

EWES is granted.

(3) Claims asserted by 1031 Realty

Defendants next argue that 1031 Realty’s claims against the

defendants must be dismissed because defendants did not provide

exchange services to 1031 Realty, nor was 1031 Realty a party to

the Section 1031 agreements. Plaintiffs respond that 1031

Realty is a limited liability company created for the purpose of

holding title to Noah’s Birmingham, and that John Esserian, the

president of HDC, is the sole member of 1031 Realty. According

to plaintiffs, HDC’s claims against the defendants transferred

to 1031 Realty when HDC transferred its interest to 1031 Realty.

And, plaintiffs argue, defendants’ misrepresentations concerning

the Rockwell investments continued after HDC’s interest was

transferred to 1031 Realty.

Defendants cite no authority in support of their argument,

which is woefully undeveloped. In any event, plaintiffs have

sufficiently alleged that defendants’ misrepresentations

continued after HDC’s interest was transferred to 1031 Realty.

Defendant’ motion to dismiss all claims by 1031 Realty is

therefore denied, on grounds that the argument is undeveloped

and unpersuasive.

37 (4) Economic Loss Doctrine

Defendants contend that the economic loss doctrine bars

plaintiffs’ nine tort claims, since the damages plaintiffs seek

to recover are purely economic (lost principal, investment

gains, etc.), which are not recoverable in tort.

Generally speaking, the economic loss doctrine operates “to

preclude contracting parties from pursuing tort recovery for

purely economic or commercial losses associated with the

contract relationship.” Plourde Sand & Gravel Co. v. JGI

Eastern, Inc., 154 N.H. 791, 794 (2007). See also Wyle v. Lees,

162 N.H. 406, 412 (2011) (noting that economic loss doctrine

precludes claims that “merely relate to a breached promise to

perform the terms of the contract or attempt to recharacterize a

breach of contract claim as a negligent misrepresentation.”).

In other words, “[a] plaintiff cannot recover damages in tort

for a negligently performed contract.” Androscoggin Valley

Regl. Refuse Disposal Dist. v. R.H. White Constr. Co., No. 15-

cv-434-LM, 2017 WL 1906612 at *4 (D.N.H. May 8, 2017). Thus,

the economic loss “doctrine precludes a harmed contracting party

from recovering in tort unless he is owed an independent duty of

care outside the terms of the contract.” Mentis Sciences, Inc.

v. Pittsburg Networks, LLC, 173 N.H. 584, 593 (2020) (internal

quotations omitted).

38 However, the “economic loss doctrine is not absolute.”

Gasparik v. Fed. Nat'l Mortg. Ass'n, No. 16-CV-147-AJ, 2016 WL

7015672, at *3 (D.N.H. Dec. 1, 2016). As the New Hampshire

Supreme Court has noted, “economic loss recovery may be

permitted . . . where there is: (1) a ‘special relationship’

between the plaintiff and the defendant that creates a duty owed

by the defendant; or (2) a negligent misrepresentation made by a

defendant who is in the business of supplying information.”

Wyle v. Lees, 162 N.H. 406, 410 (2011). Plaintiffs argue that

both exceptions apply, as they have sufficiently alleged (1) a

“special relationship” existed between the parties (since

defendants were acting in a fiduciary role, and as a QI for

HDC); and (2) that defendants made negligent misrepresentations

upon which plaintiffs reasonably relied to their detriment.

The facts as pled fall within one or both of the exceptions

to the economic loss doctrine. However, whether the economic

loss doctrine applies cannot be fully resolved in the context of

this motion to dismiss, given unresolved factual disputes

relating to the nature of the relationship between the parties.

“Special Relationship” Exception

“A special relationship for purposes of the exception is

similar to the duty ‘owed by a promisor to a third-party

beneficiary,’ that is, ‘if the contract is so expressed as to

39 give the promisor reason to know that a benefit to a third party

is contemplated by the promisee as one of the motivating causes

of making the contract.’” Johnson v. Cap. Offset Co., No. 11-

CV-459-JD, 2013 WL 2250145, at *3 (D.N.H. May 22, 2013) (quoting

Plourde, 154 N.H. at 796. “The special relationship exception

‘hinge[s] upon the presence of an independent duty owed to the

plaintiff because of the nature of the ‘special relationship’

with the defendant.’” Id. (quoting Plourde, 154 N.H. at 796–

97).

Defendants’ argument that a QI should be considered a

“special relationship” under New Hampshire law is somewhat

sparse, and the court declines to wade into the issue without

the benefit of adequate briefing from both sides. But,

plaintiffs have also alleged that defendants were acting in a

fiduciary capacity, given the long-standing relationship between

the parties, the advice regarding different exchange

opportunities, and that defendants took on an overall advisory

role when they suggested (or marketed) the Rockwell properties,

providing sales information concerning the Rockwell properties,

and dissuading HDC from purchasing alternative, likely more

appropriate, exchange properties. The described relationship

and advisory activity created a duty on the part of defendants

40 that was separate and apart from their contractual duties under

the QI contracts, plaintiffs say.

As mentioned, whether defendants did, by their actions,

assume a duty beyond their contractual obligations is a factual

issue. It cannot, therefore, be decided at the motion to

dismiss stage. Defendants are, of course, free to raise the

argument at summary judgment with the benefit of a fully

developed record.

Negligent Misrepresentation Exception

Turning to the negligent misrepresentation exception, the

New Hampshire Supreme Court explained in Plourde that a

plaintiff may invoke the exception against a defendant:

who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.

154 N.H. at 799 (quoting Restatement (Second) of Torts

§ 552(1)).

Plaintiffs have sufficiently alleged that such

circumstances existed here: that defendants, in the course of

41 their employment, supplied false information to plaintiffs

regarding the Noah properties. Those purported

misrepresentations are outside the subject matter of the

contracts between the parties, which concern the parties’

obligations relating to the Section 1031 exchange (i.e., that

EWI will acquire the property being sold by HDC, transfer HDC’s

property to its new owner, acquire a replacement property, and

transfer the replacement property to HDC). See Schaefer v.

Indymac Mortg. Servs., 731 F.3d 98, 109 (1st Cir. 2013) (“the

negligent misrepresentation exception reaches only those

representations that precede the formation of the contract or

that relate to a transaction other than the one that constitutes

the subject of the contract.”).

Whether defendants can be considered “in the business of

supplying information,” however, is a closer question. Given

the early stage of this suit, the court declines to rule now, as

a matter of law, that defendants were not a “supplier of

information,” without the benefit of a fully developed record.

The complaint can support a claim that defendants took on other

roles beyond that described in the contract for QI services.

Defendants’ motion to dismiss plaintiffs’ tort claims

because they are barred by the economic loss doctrine is denied

without prejudice. Defendants are of course free to raise the

42 issue at summary judgment, should the fully developed record

support their position.

(5) Individual Claims

Finally, Defendants have moved to dismiss each of

plaintiffs’ claims for failure to state a cognizable claim.

(a) Count One – Negligence

To state a claim for negligence under New Hampshire law, a

plaintiff must allege facts that show the defendant owed him a

duty, breached that duty, and that the breach caused the

plaintiff harm. Yager v. Clauson, 169 N.H. 1, 5, 139 A.3d 1127

(2016). Defendants argue that plaintiffs have not stated a

negligence claim because they have not alleged that defendants

had a duty to plaintiffs outside their obligations under the

contracts.

“Whether a duty exists in a particular case is a question

of law.” Bloom v. Casella Constr., Inc., 172 N.H. 625, 627

(2019). A duty generally arises from a relationship between the

plaintiff and defendant. Sisson v. Jankowski, 148 N.H. 503,

505, 809 A.2d 1265 (2002) (citations omitted). “When charged

with determining whether a duty exists in a particular case,

[the court] necessarily encounter[s] the broader, more

fundamental question of whether the plaintiff's interests are

43 entitled to legal protection against the defendant's conduct.”

Walls v. Oxford Mgmt. Co., 137 N.H. 653, 657 (1993) (internal

As discussed supra, plaintiffs have alleged that defendants

took on extracontractual advisory and fiduciary roles during the

Section 1031 exchange process by “suggesting the Rockwell

Properties, sending sales information, following up on the

opportunity, and dissuading HDC from [investing in] an

alternative property.” Pls.’ Obj. to Mot. to Dismiss at 27. By

taking on such a role, plaintiffs argue, an extracontractual

duty arose. In addition, plaintiffs argue that, as real estate

agents, O’Toole and Hamrick had a duty arising from N.H. Rev.

Stat. Ann. 331-A, as well as a fiduciary duty that arose from

their status as QI. Finally, plaintiffs argue that, because

defendants made a partial disclosure of fees earned from the

Rockwell transaction, they had a duty to make a full and

accurate disclosure, since partial disclosure gives rise to a

duty to fully disclose when the “partial disclosure, standing

alone, is deceptive.” Id. at 28 (quoting Manchester Mfg.

Acquisitions, 802 F. Supp. at 602-03).

Given the early stage of the litigation, plaintiffs have

sufficiently alleged that defendants owed extracontractual

duties to plaintiffs. Cf., Sintros v. Hamon, 148 N.H. 478, 482,

44 810 A.2d 553, 556 (2002) (listing circumstances that might

suggest a “special relationship” between insurance agent and

insured, including “express agreement, long established

relationships of entrustment in which the agent clearly

appreciates the duty of giving advice, additional compensation

apart from premium payments, and the agent holding out as a

highly-skilled expert coupled with reliance by the insured.”).

But, because the existence of a “special relationship” is fact-

specific, as discussed in the context of defendants’ argument

concerning the economic loss doctrine, the nature of that duty

cannot be determined in the context of this motion to dismiss

without the benefit of a fully developed record. See Sintros,

148 N.H. at 483 (”The existence of a special relationship

requires a fact-specific inquiry.”) (citations omitted).

Defendants’ motion to dismiss plaintiffs’ negligence claim

is therefore denied at this juncture.

(b) Count Two: Negligent Misrepresentation

Under New Hampshire law, “[i]t is the duty of one who

volunteers information to another not having equal knowledge,

with the intention that he will act upon it, to exercise

reasonable care to verify the truth of his statements before

making them.” Wyle v. Lees, 162 N.H. 406, 413 (2011) (citations

omitted). Accordingly, the elements of a claim for negligent

45 misrepresentation are a “negligent misrepresentation of a

material fact by the defendant and justifiable reliance by the

plaintiff.” Wyle v. Lees, 162 N.H. 406, 413 (2011) (citing

Snierson v. Scruton, 145 N.H. 73, (2000)).

Defendants argue that plaintiffs have not sufficiently

alleged that they relied on the statements allegedly made by the

defendants. Defendants say that, at least with respect to the

Noah’s Birmingham exchange, the complaint does not allege that

HDC relied on defendants’ statements, since Esserian decided to

invest in the TIC interests only after “HDC’s preferred

replacement properties did not become available within the 180-

day closing window.” Defs.’ Mot. to Dismiss at 24 (quoting

Compl. ¶ 33).

Plaintiffs counter that they have sufficiently alleged

justifiable reliance, as the complaint alleges that the

defendants’ misrepresentations were material to plaintiffs’

decision to invest (and remain invested) in the Rockwell

properties. Plaintiffs further argue that their agreement to

invest in Noah’s Birmingham after their preferred replacement

properties were unavailable is “not an indication that

Plaintiffs did not rely on Defendants’ misrepresentation,” but

rather suggests that “Defendants used the time pressure of a

1031 exchange . . . to lure investors into unsuitable

46 investments in order to earn commissions.” Pls.’ Obj. to Mot.

to Dismiss at 29.

Plaintiffs have the better argument here, having alleged

that HDC would not have invested in the Rockwell properties in

the absence of defendants’ purported misrepresentations

concerning, inter alia, the short-term suitability of the

investments, the expected rate of return, Noah’s business model

“working perfectly,” Compl. ¶34, the actual value of the

Rockwell properties, and the nature of the risks relating to the

investments. While plaintiffs’ allegations of reliance are

perhaps conclusory, the facts underlying those allegations are

better addressed in the context of a summary judgment motion.

Accordingly, defendants’ motion to dismiss plaintiffs’ negligent

misrepresentation claim is denied.

(c) Count Three: Negligent Hiring/Supervision/Retention

Defendants say that plaintiffs’ negligent

hiring/supervision/retention claim should be dismissed because:

(1)”it is unclear which employees [the complaint] refers to[,]

and it lacks any facts regarding O’Toole Enterprises and EWI’s

knowledge of the unfitness of these unnamed employees;” and

(2) plaintiffs allege that it was O’Toole Enterprises and EWI’s

principals (not employees) that allegedly committed the tortious

conduct, and therefore, it was not the allegedly negligent

47 hiring, supervision or retention of employees that caused

plaintiffs’ injury. Defs.’ Mot. to Dismiss at 18.

The court agrees. Plaintiffs’ allegations in support of

its negligent hiring/supervision/retention claim are vague, and

conclusory. Plaintiffs fail to allege how EWI “knew or should

have known” that its employees would commit the complained of

acts, or explain how additional supervision or training might

have avoided the risk. See Ashcroft v. Iqbal, 556 U.S. 662, 663

(2009) (“the tenet that a court must accept a complaint's

allegations as true is inapplicable to threadbare recitals of a

cause of action's elements, supported by mere conclusory

statements.”). Moreover, defendants are correct in pointing out

that the majority of the “employees” accused of perpetuating the

alleged scheme (O’Toole and Hamrick) are not employees, but

principals of the company.

Accordingly, defendants’ motion to dismiss plaintiffs’

claim for negligent hiring/supervision/retention is granted.

(d) Count Four: Unjust Enrichment

In support of their motion to dismiss plaintiffs’ claim for

unjust enrichment, defendants argue that the complaint does not

allege that defendants received an “unconscionable” benefit.

The referral fees upon which plaintiffs’ unjust enrichment claim

48 is based, defendants say, were disclosed in the agreements

governing both Section 1031 exchanges.

Plaintiffs respond that defendants received commissions

from plaintiffs’ purchases of the Rockwell properties that

ranged from approximately $151,964.53 to $303,929.07, and

defendants’ misrepresentations and omissions were motivated by

the prospect of earning those commissions. Plaintiffs say that

defendants "knew they were misrepresenting their commissions

structure by not disclosing the amount and nature of their

commissions and actually taking steps to hide the commissions.”

Pls.’ Obj. to Mot. to Dismiss at 30. Under such circumstances,

plaintiffs contend, it “would be unconscionable” to allow

defendants the benefit of the commissions they received.

“The doctrine of unjust enrichment is that one shall not be

allowed to profit or enrich himself at the expense of another

contrary to equity.” Est. of Mortner v. Thompson, 170 N.H. 625,

631 (2018) (quoting Pella Windows and Doors v. Faraci, 133 N.H.

585, 586 (1990)). “To state a claim, a plaintiff must

sufficiently allege that the defendant was enriched at the

plaintiff's expense through either: (1) wrongful acts; or (2)

‘passive acceptance of a benefit that would be unconscionable to

retain.’” Id. (quoting Kowalski v. Cedars of Portsmouth Condo.

Assoc., 146 N.H. 130, 133 (2001). “A defendant's retention of a

49 benefit is ‘unconscionable’ when it ‘affronts the sense of

justice, decency, or reasonableness’ or is ‘[s]hockingly unjust

or unfair.’” Id. at 632 (quoting Black's Law Dictionary 1757

(10th ed. 2014)).

Plaintiffs have alleged that, motivated by the prospect of

earning commissions, rather than any duty they might have had to

plaintiffs, defendants misrepresented the stability and

profitability of the Rockwell investments. The nature and

extent of defendants’ disclosure of those commissions is a

question of fact that cannot be resolved at this juncture. And,

whether the commissions paid by the sellers were accepted in

breach of a fiduciary duty owed plaintiffs presents issues of

fact as well. Accordingly, defendants’ motion to dismiss

plaintiffs’ unjust enrichment claim for failure to state a claim

is denied.

(e) Count Five: Breach of Fiduciary Duty

Under New Hampshire law, “[a] fiduciary relationship has

been defined as a comprehensive term and exists wherever

influence has been acquired and abused or confidence has been

reposed and betrayed.” Brzica v. Trustees of Dartmouth Coll.,

147 N.H. 443, 447 (2002) (quoting Lash v. Cheshire County

Savings Bank, 124 N.H. 435, 438 (1984)). “[A] confidential

relation exists between two persons when one has gained the

50 confidence of the other and purports to act or advise with the

other's interest in mind.” Id. (quoting Cornwell v. Cornwell,

116 N.H. 205, 209 (1976).

Defendants contend that plaintiffs have not sufficiently

alleged predicate facts establishing a fiduciary relationship

between the parties, especially concerning the selection and

vetting of replacement Section 1031 properties. Furthermore,

defendants say, their role as a QI for the Section 1031

exchanges cannot be the basis for the creation of a fiduciary

relationship, since the contract between the parties specifies

that EWI was not acting as a broker for the exchanges, would not

provide legal or tax advice for the transactions, and that HDC

should consult with appropriate professionals concerning the

transactions.

Again, whether a fiduciary relationship did, in fact, exist

between the parties, and the nature of that fiduciary

relationship, cannot be determined on this motion to dismiss

without the benefit of a developed record. However, plaintiffs’

allegations are sufficient, at this stage, to survive

defendants’ motion to dismiss the claim. See Cardigan Mountain

Sch. v. New Hampshire Ins. Co., 787 F.3d 82, 88 (1st Cir. 2015)

(“factual allegations need only be enough to nudge the claim

across the line from conceivable to plausible, thus raising a

51 reasonable expectation that discovery will reveal evidence of

the lost policy.”) (internal quotations omitted). Plaintiffs

allege that, as a result of their long-standing business

relationship with defendants, they placed their confidence in

defendants (who were experts concerning Section 1031 exchanges),

and believed defendants to be acting in plaintiffs’ best

interests in recommending the Rockwell properties as

investments. See Compl. ¶¶ 25, 72, 115, 118. Plaintiffs

further allege that defendants had access to knowledge about the

Rockwell investments that plaintiffs did not have (such as

information about the financial performance of Noah), and that

defendants breached their fiduciary duties by “concealing and/or

failing to alert” plaintiffs to the misappropriation of funds by

Rockwell and Noah from the Rockwell properties. See Compl.

¶¶ 118-119. Construing all reasonable inferences in plaintiffs’

favor, as the court must, the complaint alleges a sufficient

factual basis to state a claim for breach of fiduciary duty.

(f) Count Six: Blue Sky Violations

Defendants move to dismiss plaintiffs’ claim under the

Massachusetts Uniform Securities Act, Section 410, Mass. Gen. L.

c. 110A § 410, because, they contend, plaintiffs fail to

adequately allege material omissions or misrepresentations

establishing that any of the defendants knew or should have

52 known that any omission or representation was untrue.

Plaintiffs respond that defendants’ knowledge may be inferred

from allegations that defendants had a close relationship with

Noah and Rockwell, and had assisted in preparing documents used

to sell the Rockwell properties, as well as plaintiffs’

allegations concerning defendants’ representations regarding

their investigations into the strength of the Rockwell

To state a claim under the Massachusetts Uniform Securities

Act, Section 410(a), a plaintiff “must show that (1) Defendants

offered or sold securities in Massachusetts; (2) by making an

untrue statement of, or omitting, any material fact; (3)

Plaintiff did not know of the untruth or omission; and

(4) Defendants knew or should have known of the untruth or

omission.” Mass. Mut. Life Ins. Co. v. Residential Funding Co.,

LLC, 843 F. Supp. 2d 191, 200 (D. Mass. 2012) (citing Marram v.

Kobrick Offshore Fund, Ltd., 809 N.E.2d 1017, 1026 (Mass.

2004)). A plaintiff need not “prove scienter, negligence, or

reliance because the law is designed to hold the seller liable

for inaccurate disclosure or nondisclosure of material

information.” Miller Inv. Tr. v. Morgan Stanley & Co. Inc., 879

F. Supp. 2d 158, 164 (D. Mass. 2012). Moreover, “the buyer's

sophistication is irrelevant to a MUSA claim, and the buyer has

53 no duty to investigate or verify a statement's accuracy.” Mass.

Mut. Life Ins. Co. v. Residential Funding Co., LLC, 843 F. Supp.

2d. at 200 (citing Marran, 809 N.E. at 1027).

As discussed supra (in the context of defendant’ arguments

concerning Fed. R. Civ. P. 9(b)’s pleading requirements and

scienter), plaintiffs have sufficiently alleged that defendants

knew, or should have known, that the purported representations

were untrue and omissions were material. Nothing more need be

said. Defendants’ motion to dismiss count six of plaintiffs’

complaint is denied.

(g) Count Seven: Violation of N.H. Real Estate Practice Act Plaintiffs have also asserted a claim for purported

violations of the New Hampshire Real Estate Practice Act, N.H.

Rev. Stat. Ann. (“RSA”) 331-A. Plaintiffs allege that

defendants O’Toole and Hamrick have violated, inter alia,

several of the Act’s provisions as set forth in N.H. RSA 331-

A:25-f, N.H. RSA 331-A:25-d, N.H. RSA 331-A:25-a, and N.H. RSA

331-A:26.

Defendants assert that plaintiffs’ claim should be

dismissed because they fail to plausibly allege that defendants

were acting as real estate professionals during the transaction.

Defendants point out that plaintiffs have not claimed that

54 defendants represented to any party that they were acting as

real estate professionals, or that they performed any work on

the Section 1031 exchanges in such capacity. Instead,

defendants argue, plaintiffs’ allegations that defendants were

acting as real estate professionals is “based solely on the fact

that [defendants] have real estate licenses and advertise that

fact on their website.” Defs.’ Mot. to Dismiss at 24.

Plaintiffs’ claim for violation of the New Hampshire Real

Estate Practice Act, N.H. Rev. Stat. Ann. 331-A, is dismissed,

but not for the reasons argued by defendants. In a recent New

Hampshire Supreme Court case, Lacasse v. Majewski, No. 2019-

0646, 2020 WL 2306572, at *1 (N.H. Apr. 2, 2020), the court

affirmed a trial court’s decision that N.H. Rev. Stat. Ann. 331-

A:26 “does not create a private cause of action.” The court

noted that, “the legislature intended [RSA chapter 331-A] to

have no effect outside the ethical, licensing, and disciplinary

confines of the business.’” Id. (quoting Snierson v. Scruton,

145 N.H. 73, 82 (2000)). See also Finlay Com. Real Est., Inc.

v. Paino, 133 N.H. 4, 8, 573 A.2d 125, 127 (1990) (“The

standards set forth in RSA chapter 331–A meant to guide the

Commission in promulgating the various rules required to

effectuate its purpose are entirely directed at the internal

policies and procedures necessary to maintain the integrity of

55 the real estate business.”). Plaintiffs fail to provide any

explanation as to why the Supreme Court’s ruling should not

apply to their claim asserted here.

Defendants’ motion to dismiss count seven, plaintiffs’

claim for violations of New Hampshire’s Real Estate Practice

Act, is granted.

(h) Count Eight: Civil Conspiracy

“New Hampshire courts define civil conspiracy as ‘a

combination of two or more persons by concerted action to

accomplish an unlawful purpose, or to accomplish some purpose

not in itself unlawful by unlawful means.’” Sykes v. RBS

Citizens, N.A., 2 F. Supp. 3d 128, 138 (D.N.H. 2014) (quoting

Jay Edwards, Inc. v. Baker, 130 N.H. 41, 47 (1987) (further

quotations omitted)). The elements of a cause of action for

civil conspiracy are “‘(1) two or more persons (including

corporations); (2) an object to be accomplished (i.e. an

unlawful object to be achieved by lawful or unlawful means or a

lawful object to be achieved by unlawful means); (3) an

agreement on the object or course of action; (4) one or more

unlawful overt acts; and (5) damages as the proximate result

thereof.’” Id. (quoting Jay Edwards, 130 N.H. at 47 (emphasis

omitted)).

56 Defendants argue that plaintiffs’ civil conspiracy claim

should be dismissed because the alleged conspiracy between

defendants is not supported with any specificity with regards to

an agreement. Defendants say that, because the plaintiffs have

not sufficiently pled the existence of an agreement, Count Eight

should be dismissed.

Plaintiffs argue in response that they have alleged that:

a. defendants were close business associates with Noah and Rockwell;

b. with Noah and Rockwell, defendants jointly coordinated a scheme to induce the plaintiffs’ investment in their Ponzi scheme in order to receive commissions of three to six percent from the sale of Rockwell properties;

c. in furtherance of their scheme, defendants participated in the creation of marketing materials that they disseminated to plaintiffs that contain multiple misrepresentations and material omissions;

d. in furtherance of their scheme, defendants represented that the Rockwell properties were profitable, operated independently, and that “revenues from the individual venues were more than sufficient to pay the guaranteed lease payments from Noah’s,” pls.’ obj. to mot. to dismiss at 32; and

e. in furtherance of their scheme, commissions were paid to defendants by Rockwell, deposited in an account owned by O’Toole Enterprises in order to hide those commissions from the plaintiffs.

57 These allegations, plaintiffs say, are sufficient to support a

claim for civil conspiracy.

Giving plaintiffs the benefit of all reasonable inferences

at this stage, the complaint adequately alleges an agreement

between the defendants and the Rockwell/Noah associates to

engage in a scheme to defraud the plaintiffs by, among other

things, misrepresenting the value and profitability of the

Rockwell properties, the economic relationship between the

individual Noah event spaces, and defendants’ receipt of

substantial commissions from Rockwell for the sale of its

properties to plaintiffs under false pretenses. Plaintiffs also

allege the existence of a “finder’s” arrangement between

Rockwell and several of the defendants, which resulted in

commissions paid to those defendants, and the depositing of

those commissions into an account with O’Toole Enterprises. The

existence of such an arrangement suggests an agreement between

the defendants and the Rockwell individuals and entities to

place properties with defendants’ Section 1031 clients, without

regard to suitability, in the pursuit of mutual monetary gain.

Accordingly, while weak, plaintiffs’ allegations adequately

plead the essential elements and sufficient inferences to

58 support a viable claim for civil conspiracy. Defendants' motion

to dismiss that claim must therefore be denied.

(i) Count Nine: Violation of N.H. Consumer Protection Act

New Hampshire's Consumer Protection Act, N.H. Rev. Stat.

Ann. § 358-A:2, provides that “[i]t shall be unlawful for any

person to use any unfair method of competition or any unfair or

deceptive act or practice in the conduct of any trade or

commerce within this state.” The Act lists several “actions

that fall within its prohibition, but that is not an exhaustive

list of prohibited methods, acts, or practices.” Moulton v.

Bane, No. 14-CV-265-JD, 2016 WL 1091093, at *11 (D.N.H. Mar. 21,

2016) (citing ACAS Acquisitions (Precitech) Inc. v. Hobert, 155

N.H. 381, 402 (2007)). “If the challenged conduct is not listed

in RSA 358-A:2, to be actionable it ‘must attain a level of

rascality that would raise an eyebrow of someone inured to the

rough and tumble of the world of commerce.’” Moulton, 2016 WL

1091093, at *11 (quoting Axenics, Inc. v. Turner Constr. Co.,

164 N.H. 659, 675 (2013)).

In support of their CPA claim, plaintiffs allege that

defendants violated the CPA by making false representations and

concealing material facts regarding the Rockwell properties, and

by promoting “their services as trustworthy and reliable when

59 they were in fact intentionally or recklessly defrauding their

clients.” Compl. ¶¶ 157-158. Defendants urge dismissal of

plaintiffs’ CPA claim, arguing that plaintiffs have merely

recited conduct prohibited by the statute as grounds for

recovery, which, defendants say, is insufficient to support a

claim under the statute because plaintiffs have not alleged

conduct rising to the level of “rascality” the statute requires.

The court disagrees. Plaintiffs have plausibly pled that

defendants’ alleged conduct constitutes an “unfair or deceptive

act or practice.” RSA 358-A:2. This is not a case where

plaintiffs have merely alleged broken promises, or selfish

bargaining. See Hair Excitement, Inc. v. L'Oreal U.S.A., Inc.,

158 N.H. 363, 370 (2009) (“selfish bargaining and business

dealings will not be enough to justify a claim for damages”

under the Consumer Protection Act) (quoting Barrows v. Boles,

141 N.H. 382, 390 (1996)); see also Romano v. Site Acquisitions,

Inc., No. 15-CV-384-AJ, 2016 WL 50471, at *3 (D.N.H. Jan. 4,

2016) (“Although the plaintiffs’ allegations are serious,

misrepresentations ... [and] broken promises alone do not rise

to the level of rascality where successful [CPA] claims dwell.”)

(internal quotations omitted). Instead, plaintiffs allege that,

while purportedly acting in plaintiffs’ best interests,

defendants conspired to deliberately provide fraudulent

60 information (and to withhold material information) to induce

plaintiffs’ purchase of two Rockwell properties, so that

defendants could receive commissions from Rockwell on the

plaintiffs’ purchase of the properties. Those alleged acts

attain “a level of rascality that would raise an eyebrow of

someone inured to the rough and tumble of the world of

commerce.” Beer v. Bennett, 160 N.H. 166, 171 (2010) (affirming

trial court’s finding that defendant violated CPA where “he made

representations, knowing he lacked sufficient knowledge to

substantiate them, to induce the plaintiff’s purchase.”) See

also Snierson v. Scruton, 145 N.H. 73, 81 (2000), as modified

(Nov. 22, 2000) (allegations supported a claim of unfair or

deceptive trade practices under the Consumer Protection Act,

where plaintiffs alleged: (1) [defendant] misrepresented

material facts; (2) she did so to induce the plaintiffs to enter

into the real estate contract; (3) [defendant] had reason to

know that she did not have sufficient knowledge to make such

statements and, therefore, made such statements with reckless

disregard for their truth or correctness; (4) the plaintiffs

believed and relied on the representations; and (5) [defendants]

did not give the [plaintiffs] reason to believe that the said

representations were not true”) (internal quotations omitted).

61 Defendants’ motion to dismiss plaintiffs’ Consumer

Protection Act claim is denied.

(j) Count Ten: Aiding and Abetting

Defendants move to dismiss Count Ten, plaintiffs aiding and

abetting claim because, they say, plaintiffs have not alleged

facts that would, if proven, establish that any defendant knew

of the others’ purported breach of duty, and knowingly assisted

the breach of that duty. Plaintiffs respond that they have

alleged that defendants worked together to promote their scheme,

and used O’Toole Enterprises to receive and hide the payment of

commissions from Rockwell related to the transactions. The use

of O’Toole Enterprises, plaintiffs say, “manifests the

Defendants’ scheme to hide the payment of commissions from the

Plaintiffs.” Pls. Obj. to Mot. to Dismiss at 32 (quoting Compl.

¶ 76).

However, neither party addresses a necessary preliminary

matter: whether the New Hampshire Supreme Court would recognize

the tort of aiding and abetting breach of fiduciary duties,

fraud, and conversion. The few courts that have addressed the

issue have concluded that New Hampshire “would recognize the

tort of aiding and abetting breach of fiduciary duty based on

the Restatement (Second) of Torts § 876(b).” HayJo S.A. de CV

v. Sponge-Jet, Inc., No. 14-CV-196-JD, 2015 WL 9459918, at *4

62 (D.N.H. Dec. 23, 2015) (citing Invest Almaz v. Temple-Inland

Forest Prods. Corp., 243 F.3d 57, 82-83 (1st Cir. 1994); Tamposi

v. Denby, 974 F. Supp. 2d 51, 61-62 (D. Mass. 2013); In re Felt

Mfg. Co., Inc., 371 B.R. 589, 615 (Bankr. N.H. 2007)). However,

the court declines to weigh in without the benefit of adequate

briefing by the parties. Accordingly, defendants’ motion to

dismiss plaintiffs’ aiding and abetting claim is denied without

prejudice, pending additional briefing as to whether the New

Hampshire Supreme Court would recognize the tort.

The court observes that plaintiffs’ aiding and abetting

claim is, word-for-word, duplicative of their conspiracy claim.

Compare Compl. ¶¶ 146-153 and Compl. ¶¶ 160-167. In other

words, plaintiffs have seemingly pled conspiracy twice. While

Fed. R. Civ. P. 8(d)(2) allows a party to assert alternative

claims based on the same facts, or alternative theories of

liability, this practice may not provide “fair notice to

Defendants regarding what claim Plaintiffs are actually

pursuing.” DiTucci v. Ashby, 2020 WL 1249627, at *10. The

court urges plaintiffs to “consider whether all of [their]

claims are equally meritorious and whether it is in [their] best

interest to take a more focused approach on [their] theories of

relief.” Pigulski v. Johnson & Johnson, Inc., No. 18-CV-1061-

LM, 2019 WL 2582540, at *4 (D.N.H. June 24, 2019) (citing

63 Batterman v. Leahy, 544 F.3d 370, 373 (1st Cir. 2008) (“A

kitchen-sink complaint, unless dismissed for some central

jurisdictional or pleading flaw, is likely to be hard slogging,

requiring that counts be worked through one by one.”)).

(k) Count 12: Conversion

Finally, defendants have moved to dismiss plaintiffs’ claim

for conversion, arguing that the complaint fails to allege that

defendants converted any property outside of an unspecified

amount of money, and “money can be the subject of conversion

only when it can be described, identified, or segregated in the

manner similar to a specific chattel.” Defs.’ Mot. To Dismiss

at 23.

In response, plaintiffs contend that they have alleged that

defendants “wrongfully converted a sum of money, capable of

being identified,” specifically, plaintiffs’ investment in the

Rockwell properties ($2,678,309.09 in Noah’s Birmingham, and

$2,387,175.29 in Noah’s Overland Park). Pls. Obj. to Mot. to

Dismiss at 33. According to plaintiffs, defendants wrongfully

converted between three to six percent of those investments (or

approximately $151,964.53 - $303,929.07, in total), which were

misappropriated to provide the defendants’ secret commission,

pursuant to defendants’ scheme with Rockwell.

64 “Conversion is an intentional exercise of dominion or

control over a chattel which so seriously interferes with the

right of another to control it that the actor may justly be

required to pay the other the full value of the chattel.” Garod

v. Steiner Law Office, PLLC, 170 N.H. 1, 6-7 (2017) (further

quotations omitted). The New Hampshire Supreme Court has found

that money can be a proper subject of a conversion claim. See,

e.g., Giles v. Merritt, 59 N.H. 325 (1879) (“The appropriation

of the money to her own use by the defendant was a conversion

....”); see also Broadus v. Infor, Inc., No. 18-CV-1079-JD, 2019

WL 1992953, at *5 (D.N.H. May 6, 2019).

Indeed, the exact issue has been previously addressed by

courts in the District of Utah and Vermont, involving the same

facts at issue here. See DiTucci v. Ashby, 2020 WL 1249627, at

*9; Oak Hill Mgmt., Inc. v. Edmund & Wheeler, Inc., No. 2:20-CV-

124, 2022 WL 797394, at *10 (D. Vt. Mar. 16, 2022). Both courts

found that plaintiffs had sufficiently stated a conversion

claim. See DiTucci, 2020 WL 1249627 at *9 (“The complaint

specifically states that the E&W Defendants secretly skimmed off

a portion of Plaintiffs’ investment to pay themselves a

commission. If, as alleged, the E&W Defendants were redirecting

part of Plaintiffs’ funds for themselves, then the E&W

Defendants may be liable for conversion. Accordingly, this claim

65 has been properly pled.”) (internal citations omitted); Oak Hill

Mgmt., Inc., 2022 WL 797394 at *10 (“The Court therefore joins

another court in finding that the facts in this case, taken as

true, support a conversion claim.” (citing DiTucci, 2020 WL

1249627 at *9)).

Defendants’ motion to dismiss plaintiffs’ conversion claim

CONCLUSION

For the foregoing reasons, defendants’ motion to dismiss is

DENIED in part, and GRANTED in part, as set forth herein. All

of plaintiffs’ claims against defendants EWES and Chris Brown

are necessarily dismissed for failure to state a claim, as are

plaintiffs’ claims for negligent hiring/supervision/retention,

and for violation of the New Hampshire Real Estate Practice Act.

SO ORDERED.

____________________________ Steven J. McAuliffe United States District Judge

September 29, 2022

cc: Counsel of Record