SilverDeer, LLC v. Berton, 2013 NCBC 24.
STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION COUNTY OF WAKE 11 CVS 3539
SILVERDEER, LLC; SILVERDEER ) BUILDERS, LLC; LAKEBOUND FIXED ) RETURN FUND, LLC; SILVERDEER ) MANAGEMENT, LLC; SILVERDEER ) CAROLINAS CARIBBEAN FUND I, LLC; ) PLANTATION PARTNERS, LLC; HOWARD ) A. JACOBSON, ) Plaintiffs ) ) OPINION AND ORDER v. ) ) ROBERT BERTON; ELDON BOLTON; ) ANDREA BURNS; EDWARD BURNS; CGR ) PARTNERS, LLC; STEVEN REINHARD; ) DALE CAREY; ROBERT GLOSSON; GAIL ) DWYER; STEPHEN DWYER; JAMES ) FARRELL; JANICE FARRELL; DANIEL ) GILLIS; WAYNE GOULD; ERIC M. LEVIN; ) BETSY SAWICKI; HOWARD SHAREFF; ) SHAREFF & ASSOCIATES DDS, PA; ) CONSTANCE UTECHT; MICHAEL ) UTECHT; ALAN WOLTMAN; RALPH J. ) DILEONE; VISIONQUEST WEALTH ) MANAGEMENT, LLC; VISIONQUEST ) CAPITAL, LLC and STEVEN C. PETERS, ) Defendants )
THIS CAUSE, designated a mandatory complex business case by Order of the
Chief Justice of the North Carolina Supreme Court, pursuant to N.C. Gen. Stat. § 7A-
45.4(b) (hereinafter, references to the North Carolina General Statutes will be to "G.S."),
and assigned to the undersigned Chief Special Superior Court Judge for Complex
Business Cases, comes before the court upon (a) VisionQuest Defendants' Motion to
Dismiss, (b) Berton Defendants' Motion to Dismiss, (c) CGR Defendants' Motion to
Dismiss and (d) Defendant Ralph J. DiLeone's Motion to Dismiss and Motion for Judgment on the Pleadings (collectively, "Motions"), pursuant to Rules 12(b)(6) and
12(c), North Carolina Rules of Civil Procedure ("Rule(s)"); and
THE COURT, having considered the Motions, oral arguments, briefs in support of
and in opposition to the Motions and other appropriate matters of record, CONCLUDES
that the Motions should be GRANTED in part and DENIED in part for the reasons stated
herein.
Howard A. Jacobson, Esq. for Plaintiffs.
Graebe, Hanna & Sullivan, PLLC, by Christopher T. Graebe, Esq. for Defendants Stephen C. Peters, VisionQuest Wealth Management, LLC and VisionQuest Capital, LLC.
Law Offices of James C. White, PC, by James C. White, Esq. and Michelle M. Walker, Esq. for Defendants Robert Berton, Gail Dwyer, Stephen Dwyer, James Farrell, Janice Farrell, Eric M. Levin, Howard Shareff, Constance Utecht and Michael Utecht.
Brown & Bunch, PLLC, by Charles Gordon Brown, Esq. and James R. Baker, Esq. for Defendants CGR Partners, LLC, Steven Reinhard, Dale Carey and Robert Glosson.
Manning, Fulton & Skinner, PA, by Robert S. Shields, Esq. and J. Whitfield Gibson, Esq. for Defendant Ralph J. DiLeone.
Jolly, Judge.
I.
PROCEDURAL BACKGROUND
[1] On March 2, 2011, Plaintiffs SilverDeer, LLC ("SilverDeer"), SilverDeer
Builders, LLC, Lakebound Fixed Return Fund, LLC ("Lakebound"), SilverDeer
Management, LLC ("Management"), SilverDeer Carolinas Caribbean Fund I, LLC,
Plantation Partners, LLC (collectively, "SilverDeer Companies") and Howard A.
Jacobson ("Jacobson") filed a Complaint against Defendants Robert Berton, Eldon Bolton, Andrea Burns, Edward Burns, Gail Dwyer, Stephen Dwyer, James Farrell,
Janice Farrell, Daniel Gillis, Wayne Gould, Eric M. Levin, Betsy Sawicki, Howard
Shareff, Shareff & Associates DDS, PA, Constance Utecht, Michael Utecht, Alan
Woltman (collectively, "Berton Defendants"), CGR Partners, LLC, Steven Reinhard,
Dale Carey, Robert Glosson (collectively, "CGR Defendants"), VisionQuest Wealth
Management, LLC, VisionQuest Capital, LLC and Steven C. Peters ("Peters")
(collectively, "VisionQuest Defendants") and Ralph J. DiLeone ("DiLeone").
[2] The Complaint alleges ten causes of action ("Claim(s)"): First Cause of
Action – Malicious Prosecution (by All Defendants except DiLeone); Second Cause of
Action – Defamation (by all Defendants except DiLeone); Third Cause of Action – Fraud
(by All Defendants); Fourth Cause of Action – Declaratory Judgment; Fifth Cause of
Action – Negligence (by DiLeone); Sixth Cause of Action – Breach of Contract (by
VisionQuest Defendants); Seventh Cause of Action – Fraud (by VisionQuest
Defendants); Eighth Cause of Action – Breach of Fiduciary Duties (by Peters); Ninth
Cause of Action – Unfair and Deceptive Trade Practices (by All Defendants); Tenth
Cause of Action – Tortious Interference with Prospective Economic Advantage (by All
Defendants).
[3] On May 6, 2011, VisionQuest Defendants filed a Motion to Dismiss
("VisionQuest Motion"), seeking dismissal of the entirety of the Complaint as alleged
against them, pursuant to Rule 12(b)(6). [4] On May 6, 2011, Berton Defendants filed a Motion to Dismiss ("Berton
Motion"), seeking dismissal of the entirety of the Complaint as alleged against them,
pursuant to Rule 12(b)(6).1
[5] On May 13, 2011, CGR Defendants filed a Motion to Dismiss ("CGR
Motion"), seeking dismissal of the entirety of the Complaint as alleged against them,
pursuant to Rule 12(b)(6).
[6] On May 10, 2011, DiLeone filed his Answer, which also contains a motion
for dismissal of the Complaint as to him, pursuant to Rule 12(b)(6). On June 10, 2011,
DiLeone also filed a Motion for Judgment on the Pleadings (collectively, DiLeone's Rule
12(b)(6) and Rule 12(c) motions are referred to herein as the "DiLeone Motion").
[7] Subsequently, all Defendants filed separate motions to stay discovery until
determination of the pending Rule 12 Motions.
[8] On August 11, 2011, the court entered an Order granting Defendants'
motions to stay discovery.
[9] The court heard oral arguments on the Motions. At the hearing, the court
announced orally its rulings on the Motions with respect to certain Claims and
Defendants. Those previous rulings are reflected herein.
[10] On March 22, 2012, Plaintiffs filed a Motion to Lift Stay on Discovery. On
March 23, 2012, the court entered an Order lifting the stay on discovery, limited to
Claims and Defendants not dismissed orally at the hearing on the Motions.
1 On May 19, 2011, Defendant Wayne Gould ("Gould") filed a Motion to Dismiss, which joins and incorporates by reference the Berton Motion. On June 15, 2011, and August 3, 2011, Defendants Betsy Sawicki ("Sawicki") and Daniel Gillis ("Gillis"), respectively, filed substantially similar Motions to Dismiss. For purposes of this Opinion and Order, the court will consider the above-mentioned motions of Gould, Sawicki and Gillis as part of the Berton Motion. To the extent the Berton Motion is granted or denied, the above motions are granted or denied to the same extent. [11] The Motions have been fully briefed and are ripe for determination.
II.
FACTUAL BACKGROUND
Among other things, the Complaint alleges that:
[12] This case arises out of two previous civil actions filed by a majority of the
named Defendants, their managers and related companies.
[13] The two previous actions are captioned Berton, et al. v. Jacobson, et al.,
Wake County No. 09 CVS 10870 ("Berton Action") and Shareff v. Lakebound Fixed
Return Fund LLC, et al., Wake County No. 09 CVS 9983 ("Shareff Action") (both filed
on or about May 21, 2009) (collectively, "Previous Actions").2 All Plaintiffs in this action
were named defendants in the Berton Action. Plaintiffs SilverDeer, Management,
Lakebound and Jacobson in this action were named defendants in the Shareff Action.
[14] The Previous Actions were based on alleged mismanagement that
resulted in a failed multimillion dollar real estate investment project.
[15] All Defendants in this action, with the exception of DiLeone, acted in
concert and by agreement to file the Previous Actions.3 Further, Defendants knew the
allegations to be materially false and lacking probable cause at the relevant time.4
[16] In March of 2010, certain Defendants in this action (those who were
plaintiffs in the Previous Actions) entered into settlement negotiations with counsel for
Richard Deckelbaum ("Deckelbaum"), a member-manager of SilverDeer.5 Deckelbaum
2 Compl. ¶¶ 28-31. 3 Id. ¶¶ 32, 35. 4 Id. 5 Id. ¶¶ 30, 48-50. retained DiLeone, who served as his counsel during the relevant settlement negotiation
time period.
[17] Deckelbaum was one of SilverDeer's two member-managers (Jacobson
was the other member-manager), and Deckelbaum purportedly had the authority, under
SilverDeer's operating agreement, to bind the company in a settlement.
[18] Those negotiations resulted in Deckelbaum signing settlement
agreements ("Settlement Agreements") with on behalf of SilverDeer for the purported
settlement with certain plaintiffs in the Previous Actions ("Settlement").6
[19] Defendants knew that SilverDeer was represented in the Previous Actions
by separate counsel and did not consult with SilverDeer's counsel during the Settlement
negotiations with Deckelbaum.7
[20] Certain Defendants voluntarily dismissed their Claims in the Previous
Actions based upon the procurement of the purported Settlement with SilverDeer.
[21] Plaintiffs in this action (SilverDeer Companies and Jacobson) now allege
various tort-based Claims, among other things, against Defendants, arising from the
filing and purported Settlement of the Previous Actions.
6 Id. 7 Id. ¶ 51. III.
DISCUSSION
A.
Legal Standard
[22] All Defendants seek dismissal of the Complaint pursuant to Rule 12(b)(6),
which is appropriate when the complaint fails to state a claim upon which relief can be
granted.
[23] When deciding a Rule 12(b)(6) motion, the well-pleaded allegations of the
complaint are taken as true and admitted, but conclusions of law or unwarranted
deductions of facts are not admitted. Sutton v. Duke, 277 N.C. 94, 98 (1970).
[24] A complaint fails to state a claim upon which relief can be granted when
either (a) the complaint on its face reveals that no law supports the plaintiff's claim, (b)
the complaint on its face reveals the absence of facts sufficient to make a good claim or
(c) some fact disclosed in the complaint necessarily defeats the plaintiff's claim.
Jackson v. Bumgardner, 318 N.C. 172, 175 (1986). However, a complaint should not
be dismissed for failure to state a claim upon which relief can be granted unless it (a)
does not give sufficient notice to the defendant of the nature and basis of the plaintiff's
claim or (b) appears beyond a reasonable doubt that the plaintiff could not prove any set
of facts in support of his claim that would entitle him to relief. Sutton, 277 N.C. at 108.
[25] Defendant DiLeone also seeks dismissal of the Complaint pursuant to
Rule 12(c), which is appropriate after the pleadings are closed and when the movant
establishes that "no material issue of fact remains to be resolved and that the movant is
entitled to judgment as a matter of law." Groves v. Cmty. Hous. Corp. of Haywood Cnty., 144 N.C. App. 79, 86-87 (2001) (citing Minor v. Minor, 70 N.C. App. 76, 78
(1984)). Further, the court will "view the facts and permissible inferences in the light
most favorable to the non-moving party [ ], taking all well-pleaded factual allegations in
the non-moving party's pleadings as true." Id. (quoting Ragsdale v. Kennedy, 286 N.C.
130, 136-37 (1974)) (internal quotations omitted). The standard of review for a Rule
12(c) motion is the same as for a motion to dismiss under Rule 12(b)(6). Akzo Nobel
Coatings Inc. v. Rogers, 2011 NCBC 41, ¶ 32 (N.C. Super. Ct. Nov. 3, 2011). The
function of Rule 12(c) is to "dispose of baseless claims or defenses when the formal
pleadings reveal their lack of merit" as a matter of law. Id. (quoting Ragsdale, 286 N.C.
at 137).
[26] The court may consider documents that are attached to and incorporated
within a complaint, when ruling on a Rule 12(b)(6) or 12(c) motion, without converting it
into a motion for summary judgment. Weaver v. Saint Joseph of the Pines, Inc., 187
N.C. App. 198, 204 (2007).
B.
First Claim – Malicious Prosecution
[27] Plaintiffs' First Claim alleges malicious prosecution against all Defendants,
with the exception of DiLeone.
[28] In order to state a claim for malicious prosecution, the plaintiff must
establish that (a) the defendant initiated the earlier proceedings, (b) he did so
maliciously, (c) he lacked probable cause, (d) the earlier proceeding terminated in the
plaintiff's favor and (e) the plaintiff suffered "special damages." Stanback v. Stanback,
297 N.C. 181, 202-03 (1979). To sufficiently plead special damages, the plaintiff must allege that the prior prosecution resulted in a "substantial interference with either his
person or his property," such as an arrest or injunction. Id. at 203 (noting that a
showing of special damages "is an essential, substantive element of the claim").
Further, the North Carolina Court of Appeals upheld the dismissal of a malicious
prosecution claim where the plaintiff alleged "that he suffered injury to his reputation,
embarrassment, loss of work and leisure time and that he has incurred expenses in
defending the claim." Stikeleather v. Willard, 83 N.C. App. 50, 51-52 (1986).
[29] Here, the Complaint fails to allege special damages sufficient to support a
malicious prosecution claim. At best, Plaintiffs allege that they suffered harm to
reputation and they have been economically injured in an amount to be proved at trial.8
Following Stikeleather, such allegations "fail to allege any substantial interference with
either plaintiff's person or property as contemplated by the special damages
requirement" adopted in Stanback. As such, Plaintiffs' Claim for malicious prosecution
fails to state a claim upon which relief can be granted and the Motions as to that Claim
should be GRANTED.
C.
Second Claim – Defamation
[30] Plaintiffs' Second Claim alleges defamation against all Defendants, with
the exception of DiLeone.
[31] The statute of limitations for defamation is one year from publication. G.S.
1-54(3).
8 Compl. ¶¶ 35, 38. [32] The Complaint alleges that Defendants defamed Plaintiffs "[f]rom 2008
and at least through the filing of the [Previous Actions] . . . ."9 The Previous Actions
were filed in May 2009. The Complaint in this matter was filed on March 2, 2011, which
is well over one year from the latest-identified publication of an alleged defamatory
statement.
[33] Accordingly, Plaintiffs' Claim for defamation is time-barred on its face and
the Motions as to that Claim should be GRANTED.
D.
Third Claim – Fraud
[34] Plaintiffs' Third Claim alleges fraud against all Defendants. Plaintiffs
allege that all Defendants committed fraud in connection with the Settlement
Agreements executed in the Previous Actions. More specifically, Plaintiffs allege that
Deckelbaum and the Defendants entered into Settlement Agreements affecting the
rights of SilverDeer, then fraudulently concealed those negotiations from Jacobson.10
[35] Plaintiffs' allegations make clear that Berton Defendants and CGR
Defendants were parties in the Previous Actions and participated in the Settlement
negotiations, along with Defendant DiLeone, who helped facilitate the Settlement as
counsel for Deckelbaum.11 However, Defendants involved in those Settlement
negotiations contend that Plaintiffs have failed to state a claim for fraudulent
concealment with the requisite level of particularity. In addition, Defendants contend
that North Carolina law does not recognize a duty to disclose settlement negotiations
under the circumstances of this case.
9 Id. ¶ 41. 10 Id. ¶ 53. 11 Id. ¶¶ 48-50. [36] As against the Berton Defendants, CGR Defendants and Defendant
DiLeone, Plaintiffs have sufficiently stated a claim for fraud under the standards
articulated by Rule 12(b)(6), Rule 9 and Sutton v. Duke, 277 N.C. 94, 98 (1970).
Accordingly, the Berton Motion, CGR Motion and DiLeone Motion as to Plaintiffs' Third
Claim for fraud should be DENIED.
[37] As to the VisionQuest Defendants, they were not parties to the Berton
Action and there is no allegation that they participated as non-parties in the alleged
fraudulent Settlement of the Berton Action. While VisionQuest Defendants were named
defendants in the Shareff Action, the Complaint here does not allege that they played
any role in the purported Settlement of the Shareff Action.12 Moreover, there is no
mention of VisionQuest Defendants in Plaintiffs' Third Claim for fraud. Thus, it appears
that Plaintiffs intended to raise this fraud Claim against all Defendants, with the
exception of VisionQuest Defendants. If Plaintiffs intended to include VisionQuest
Defendants in its fraud Claim, then the Claim fails to meet the Rule 9 particularity
requirements as to VisionQuest Defendants.
[38] Accordingly, the VisionQuest Motion as to Plaintiffs' Third Claim for fraud
E.
Fourth Claim – Declaratory Judgment
[39] Plaintiffs' Fourth Claim seeks a declaratory judgment that the Settlement
Agreements from the Previous Actions are void and unenforceable. Specifically,
Plaintiffs allege that the Settlement Agreements "were procured through fraud and direct
12 The court notes that it dismissed VisionQuest Defendants from the Shareff Action in open court on October 23, 2009. The alleged fraudulent Settlement of the Shareff Action occurred more than six months later in May/June 2010. violations of the Rules of Professional Conduct applicable to attorneys and, therefore, is
[sic] void and unenforceable."13
[40] Defendants contend that a declaratory judgment action is not a proper
avenue for voiding the Settlement Agreements.
[41] "The purpose of the Declaratory Judgment Act, [G.S. 1-253 et seq.,] is to
settle and afford relief from uncertainty and insecurity, with respect to rights, status, and
other legal relations . . . ." Nationwide Mut. Ins. Co. v. Roberts, 261 N.C. 285, 287
(1964) (quoting Walker v. Phelps, 202 N.C. 344, 349 (1932)) (internal quotations
omitted). Declaratory judgment is not available to void or nullify a conveyance or written
instrument. Town of Nags Head v. Tillett, 314 N.C. 627, 629 (1985); Farthing v.
Farthing, 235 N.C. 634, 635 (1952)) ("The Declaratory Judgment Act is designed to
provide an expeditious method of procuring a judicial decree construing wills, contracts,
and other written instruments and declaring the rights and liabilities of parties
thereunder. It is not a vehicle for the nullification of such instruments.") (emphasis in
original); A. Perrin Dev. Co. v. Ty-Par Realty, Inc., 193 N.C. App. 450, 452 (2008).
[42] Here, it appears that Plaintiffs are attempting to use the Declaratory
Judgment Act as a "vehicle" to nullify the Settlement Agreements. In Farthing and
Tillett, the Supreme Court held that such an attempt to void a contract is outside the
scope of the Declaratory Judgment Act. Farthing, 235 N.C. at 635; Tillett, 314 N.C. at
396.
[43] Accordingly, the court CONCLUDES that Plaintiffs' Claim for declaratory
judgment, which seeks a declaration that the Settlement Agreements are void and
13 Compl. ¶ 59. unenforceable, fails to state a claim upon which relief can be granted, and the Motions
as to that Claim should be GRANTED.14
F.
Fifth Claim – Negligence
[44] Plaintiffs' Fifth Claim alleges negligence against only Defendant DiLeone.
Plaintiffs allege that DiLeone committed negligence by failing to exercise reasonable
care when he negotiated the Settlement Agreements on behalf of SilverDeer.
[45] Defendant DiLeone contends that he did not owe a duty of care to
SilverDeer because SilverDeer was not a client.15 Further, Defendant DiLeone argues
that Plaintiffs only allege that he violated the Rules of Professional Conduct, which he
contends does not amount to a breach of duty.16
[46] To state a claim of negligence in a legal malpractice action, a plaintiff must
sufficiently allege that (a) the attorney breached the duties owed to his client as
established in Hodges v. Carter, 239 N.C. 517 (1954) and (b) the negligence
proximately caused damage to the plaintiff. Summer v. Allran, 100 N.C. App. 182
(1990). The duties promulgated under Hodges require that an attorney:
(1) possess[ ] the requisite degree of learning, skill, and ability necessary to the practice of his profession and which others similarly situated ordinarily possess; (2) [ ] exert his best judgment in the prosecution of the litigation entrusted to him; and (3) [ ] exercise reasonable and ordinary care and diligence in the use of his skill and in the application of his knowledge to his client's cause.
Hodges, 239 N.C. at 519.
14 The court notes that Plaintiffs failed to respond to Defendants' briefs and arguments with regard to the Claim for declaratory judgment. 15 Br. Supp. DiLeone's Mot. J. Pleadings 7-8. 16 Id. [47] Here, Plaintiffs have alleged that DiLeone provided legal services to
SilverDeer, which necessarily created legal duties owed by DiLeone to SilverDeer.17
Specifically, DiLeone allegedly reviewed and revised a draft of the Settlement
Agreements on behalf of SilverDeer in the Previous Actions.18
[48] The court agrees with DiLeone that an alleged violation of the Rules of
Professional Conduct does not itself give rise to a negligence-based cause of action
against an attorney, nor should it create a presumption that a legal duty has been
breached. Baars v. Campbell Univ., Inc., 148 N.C. App. 408, 421 (2002; see also R.
Prof. Conduct N.C. State B. 0.2[7]. Here, Plaintiffs allege that DiLeone breached the
Rules of Professional Conduct, which alone is insufficient to state a legal malpractice
claim.19 However, Plaintiffs also allege that DiLeone violated a legal duty owed to
SilverDeer. Specifically, the Complaint alleges that DiLeone, before facilitating the
Settlement, (a) failed to investigate the facts of the Previous Actions, (b) failed to consult
with SilverDeer's retained counsel and (c) failed to consider SilverDeer's ability to satisfy
the payment obligations set forth in the Settlement Agreements.20 In sum, Plaintiffs
sufficiently allege that DiLeone failed to exercise reasonable care in performing legal
services, as contemplated by Hodges. Further, Plaintiffs allege sufficiently that
SilverDeer was injured by the Settlement of the Previous Actions, which was facilitated
by DiLeone.21
[49] Accordingly, the court CONCLUDES that Plaintiffs have sufficiently
alleged their negligence Claim against Defendant DiLeone under the standards of Rule
17 Compl. ¶¶ 62, 64, 66. 18 Id. ¶ 62. 19 Id. ¶ 65. 20 Id. ¶ 66. 21 Id. ¶ 68. 12(b)(6)22 and Sutton v. Duke, 277 N.C. 94 (1970). As such, the DiLeone Motion as to
that Claim should be DENIED.
G.
Sixth Claim – Breach of Contract
[50] Plaintiffs' Sixth Claim alleges breach of contract against only VisionQuest
Defendants. Specifically, there are two contracts between certain VisionQuest
Defendants and SilverDeer Companies that allegedly were breached.
[51] VisionQuest Defendants seek dismissal of Plaintiffs' breach of contract
Claim on the grounds that the provisions of the contracts, on their face, do not create
obligations that were breached.
[52] At the outset, Plaintiffs failed to attach to the Complaint the contracts in
question, which are (a) the November 13, 2007 written contract ("2007 Contract") and
(b) the May 15, 2008 written contract ("2008 Contract") (collectively, "Contracts").23
VisionQuest Defendants attached those documents, along with a related termination
letter dated May 23, 2008, for consideration in conjunction with the VisionQuest Motion.
The court will consider such documentation as referenced in the Complaint without
converting the matter into one for summary judgment under Rule 56. See Oberlin
Capital, L.P. v. Slavin, 147 N.C. App. 52, 59 (2001) (allowing consideration on a motion
to dismiss of documents referenced by the complaint, but attached by the defendant).
22 The same conclusion holds true with regard to Rule 12(c). 23 The court acknowledges that (a) VisionQuest Wealth Management, LLC, SilverDeer and Lakebound are the specific parties to the 2007 Contract, and (b) VisionQuest Capital, LLC and SilverDeer are the specific parties to the 2008 Contract. [53] After reviewing the Contracts, it is apparent to the court that the
allegations of the Complaint misstate the actual written contractual obligations of
VisionQuest Defendants.
[54] Plaintiffs allege the following breaches of the 2007 Contract: (a) failure to
obtain necessary licenses, (b) failure to raise $25,000,000, (c) failure to assist
Lakebound to administer funds received and (d) encouragement of investors to file the
Previous Actions.24
[55] However, none of these alleged breaches are supported by the actual
2007 Contract. First, nothing in the 2007 Contract required that any particular licenses
be held by VisionQuest Defendants. Second, as to the alleged obligation to raise
$25,000,000, the 2007 Contract only required that VisionQuest Defendants "act as a
consultant to [SilverDeer] in the raising of Twenty-Five Million Dollars ($25,000,000.00).
As a consultant, VisionQuest will provide advice in the structuring, acquiring, and
administration of these funds."25 Clearly, this language does not create an affirmative
obligation upon VisionQuest Defendants to raise $25,000,000. Third, the 2007 Contract
contains no obligation whereby VisionQuest Defendants are to assist in administration
of the Lakebound fund. Finally, nothing in the 2007 Contract discusses any rights or
obligations related to the encouragement or discouragement of lawsuits by third parties
against SilverDeer. Accordingly, Plaintiffs' alleged breaches of contract do not reconcile
with the plain language of the 2007 Contract. On the face of the Complaint, Plaintiffs
have failed to state a breach of contract Claim with regard to the 2007 Contract.
24 Compl. ¶¶ 75-77, 80. 25 VisionQuest Defs. Mot. Dismiss Ex. 3 [56] As for the 2008 Contract, Plaintiffs' breach of contract Claim fails for the
same reasons as the 2007 Contract.
[57] Accordingly, the court CONCLUDES that the VisionQuest Motion as to
Plaintiffs' Sixth Claim for breach of contract should be GRANTED.
H.
Seventh Claim – Fraud against VisionQuest Defendants
[58] Plaintiffs' Seventh Claim alleges that the VisionQuest Defendants
defrauded them by making the representations contained and embodied in the 2007
Contract and by failing to fulfill those representations.
[59] VisionQuest Defendants contend that this Claim is merely a disguised
breach of contract claim, and even if it were a fraud claim, the allegations fail to meet
the Rule 9 particularity requirements.
[60] Indeed, "an independent tort action in a breach of contract action . . .
[must involve] some other aggravating element outside the breach of contractual
duties." Garlock v. Hilliard, 2000 NCBC 11, ¶ 33 (N.C. Super. Ct. Aug. 22, 2000) (citing
Broussard v. Meineke Discount Muffler Shops, Inc., 155 F.3d 331 (4th Cir. 1998)); see
also N.C. State Ports Auth. v. Lloyd A. Fry Roofing Co., 294 N.C. 73, 81 (1978)
("Ordinarily, a breach of contract does not give rise to a tort action by the promisee
against the promisor." (citing Firemen's Mut. Ins. Co. v. High Point Sprinkler Co., 266
N.C. 134 (1966))). An independent tort may arise out of a breach of contract only in
carefully circumscribed instances where the tort is identifiable and distinct from the
primary breach of contract claim. Newton v. Standard Fire Ins. Co., 291 N.C. 105, 111-
12 (1976). "The mere failure to carry out a promise in contract . . . does not support a tort action for fraud." Strum v. Exxon Co., USA, 15 F.3d 327, 331 (4th Cir. 1994) (citing
Hoyle v. Bagby, 253 N.C. 778, 781 (1961)).
[61] Here, contrary to Plaintiffs' contention, their fraud Claim against
VisionQuest Defendants is not identifiable and distinct from the primary breach of
contract Claim. Plaintiffs simply allege that VisionQuest Defendants represented that
they would perform under the 2007 Contract, but never intended to do so.26
[62] On the face of the Complaint, Plaintiffs' fraud Claim against VisionQuest
Defendants appears to be a breach of contract claim, merely styled as a fraud.27
However, reading the Complaint in a light most favorable to Plaintiffs, the court will
analyze those allegations as a fraud claim.
[63] Rule 9(b) requires that a claim for fraud be pled with particularity and
"[m]ere generalities and conclusory allegations of fraud will not suffice." Sharp v.
Teague, 113 N.C. App. 589, 597 (1994) (quoting Moore v. Wachovia Bank & Trust Co.,
30 N.C. App. 390, 391 (1976)). The pleader must allege the "time, place and content of
the fraudulent representation, identity of the person making the representation and what
was obtained as a result of the fraudulent acts or representations." Bob Timberlake
Collection, Inc. v. Edwards, 176 N.C. App. 33, 39 (2006) (quoting Terry v. Terry, 302
N.C. 77, 85 (1981)) (internal quotations omitted).
[64] Here, Plaintiffs do not identify how or why any particular statement is
thought to have been false. The content of the alleged fraudulent representation is
presumably somewhere in the 2007 Contract, but is not identified with any particularity.
Aside from a conclusory allegation of fraudulent intent, Plaintiffs only assert the
26 Compl. ¶¶ 84-85. 27 Tellingly, the fraud Claim against VisionQuest Defendants even includes the phrase "breach of contract" twice. Id. ¶¶ 88, 91. nonperformance of a promissory representation, which is insufficient in itself to establish
intent. Brandis v. Lightmotive Fatman, Inc., 115 N.C. App. 59, 67 (1994). Accordingly,
the court CONCLUDES that Plaintiff has not satisfied the heightened pleading standard
for fraud under Rule 9, and the VisionQuest Motion as to the Seventh Claim should be
Eighth Claim – Breach of Fiduciary Duty
[65] Plaintiffs' Eighth Claim alleges breach of fiduciary duty against only
Defendant Peters.
[66] VisionQuest Defendants (collectively on behalf of Peters) contend that no
duty was owed to Plaintiffs.28 Further, VisionQuest Defendants argue that Plaintiffs fail
to allege that Peters took advantage of any relationship of trust to benefit himself.29
[67] "For a breach of fiduciary duty to exist, there must first be a fiduciary
relationship between the parties." Kaplan v. O.K. Techs., L.L.C., 196 N.C. App. 469,
472 (2009) (quoting Dalton v. Camp, 353 N.C. 647, 651 (2001)). A de facto fiduciary
relationship has been defined broadly as a relationship in which "there has been a
special confidence reposed in one who in equity and good conscience is bound to act in
good faith and with due regard to the interests of the one reposing confidence . . . ."
Dalton, 353 N.C. at 651-52. Domination and influence are essential components in a
fiduciary relationship. Id. "Only when one party figuratively holds all the cards – all the
financial power or technical information, for example – have North Carolina courts found
that the special circumstance of a fiduciary relationship has arisen." S.N.R. Mgmt.
28 VisionQuest Defs. Br. Supp. Mot. Dismiss 13-14. 29 Id. 15 Corp. v. Danube Partners 141, LLC, 189 N.C. App. 601, 613 (2008) (quoting Broussard,
155 F.3d at 348). Additionally, parties to a contract do not become each other’s
fiduciaries, but only owe each other the duties specified by the terms of the contract.
Branch Banking & Trust Co. v. Thompson, 107 N.C. App. 53, 61 (1992).
[68] Plaintiffs have not alleged facts sufficient to show the existence of de facto
fiduciary relationship between Peter and Plaintiffs, nor have Plaintiffs argued that a de
facto fiduciary relationship actually existed. Instead, Plaintiffs seem to argue that a de
jure fiduciary relationship existed by virtue of an investment advisor-client relationship
between Peters and Plaintiffs.30
[69] Plaintiffs and VisionQuest Defendants cite no case law, nor has the court
located any relevant authority in North Carolina holding that a relationship of an
investment advisor-client or consultant-client creates a de jure fiduciary relationship.
Instead, Plaintiffs merely cite G.S. 78C et seq. for the proposition that an investment
advisor owes a duty of disclosure to his clients, which they argue in turn creates a de
jure fiduciary relationship.
[70] Indeed, "North Carolina recognizes certain de jure fiduciary relationships
which arise as a matter of law because of the nature of the relationship, 'such as
attorney and client, broker and principal, executor or administrator and heir, legatee or
devisee, factor and principal, guardian and ward, partners, principal and agent, trustee
and cestui que trust.'" BDM Invs. v. Lenhil, Inc., 2012 NCBC 7, ¶ 89 (N.C. Super. Ct.
Jan. 18, 2012) (quoting Abbitt v. Gregory, 201 N.C. 577, 598 (1931)).
[71] The North Carolina Court of Appeals, in Harrold v. Dowd, 149 N.C. App.
777 (2002), held that an accountant-client relationship is not an inherently fiduciary one 30 Pls. Br. Opp'n Defs. Mot. Dismiss 6. and the mere allegations of the accountant's failure to properly advise his client were
insufficient to support a claim for breach of fiduciary duty. Id. at 784. ("We have found
no case stating that the relationship between accountant and client is per se fiduciary in
nature"). Consequently, the court of appeals upheld the trial court's Rule 12(b)(6)
dismissal of the breach of fiduciary duty claim in that case. Id.
[72] Similar to Harrold, here, Plaintiffs allege that Peters and VisionQuest
Defendants failed to properly advise Plaintiffs, specifically certain SilverDeer Companies
and their members, by "ignoring the best interests of Lakebound" and "putting the
interests of [VisionQuest] ahead of the interests of [Lakebound]."31
[73] In the absence of any North Carolina appellate authority holding that an
investment advisor-client relationship is a de jure fiduciary one, the court finds the
Harrold holding instructive and CONCLUDES that no fiduciary relationship existed
between Peters and Plaintiffs. The mere assertion of an investment advisor-client
relationship or reliance upon G.S. 78C et seq. does not give rise to a de jure fiduciary
relationship. Further, without sufficient alleged circumstances showing the existence of
a relationship of confidence and trust (i.e., a de facto fiduciary relationship), Plaintiffs'
Claim for breach of fiduciary duty against Peters must fail. Accordingly, the court further
CONCLUDES that the VisionQuest Motion as to Plaintiffs' Eighth Claim should be
J.
Ninth Claim – Unfair and Deceptive Trade Practices
[74] Plaintiffs' Ninth Claim alleges unfair and deceptive trade practices against
all Defendants. 31 Compl. ¶ 100. [75] In order to state a claim for unfair or deceptive trade practices in North
Carolina, the plaintiff must show that the defendant committed an unfair or deceptive act
or practice, in or affecting commerce and that the plaintiff was injured as a result.
Phelps-Dickson Builders, L.L.C. v. Amerimann Partners, 172 N.C. App. 427, 439
(2005). An unfair trade practice is one that "is immoral, unethical, oppressive,
unscrupulous, or substantially injurious to consumers." Edwards v. West, 128 N.C. App.
570, 574 (1998) (quoting Johnson v. Phoenix Mut. Life Ins. Co., 300 N.C. 247, 263
(1980)) (internal quotations omitted). Determining whether an act or practice is unfair or
deceptive is a question of law and such claims are regularly dismissed upon a Rule
12(b)(6) motion.
[76] On its face, Plaintiffs' Chapter 75 claim is derivative of their other Claims,
specifically the fraud claims,32 and therefore rises and falls with those Claims.
Governor's Club, Inc. v. Governors Club Ltd. P'ship, 152 N.C. App. 240, 255 (2002)
(affirming the dismissal of a Chapter 75 claim where it was derivative of a constructive
fraud claim that was dismissed pursuant to Rule 12(b)(6)). As such, the disposition of
Plaintiffs' fraud Claim as to each set of Defendants determines the disposition of
Plaintiffs' Chapter 75 Claim as to those same Defendants.
1.
Berton Defendants and CGR Defendants
[77] As mentioned supra, Plaintiffs have stated a Claim for fraud against
Berton Defendants and CGR Defendants. As such, the alleged fraud is sufficient to
support Plaintiffs' Chapter 75 Claim against those same Defendants. Compton v. Kirby,
32 Id. ¶ 106. 157 N.C. App. 1, 20 (2003) (recognizing that conduct constituting a fraud-based claim is
also sufficient to support a Chapter 75 claim).
[78] Accordingly, the court CONCLUDES that the Berton Motion and CGR
Motion as to Plaintiffs' Claim for unfair and deceptive trade practices should be
DENIED.
2.
VisionQuest Defendants
[79] As alleged against VisionQuest Defendants, Plaintiffs' Chapter 75 Claim
fails because all other Claims against VisionQuest Defendants fail.
[80] Accordingly, the court CONCLUDES that the VisionQuest Motion as to
Plaintiffs' Claim for unfair and deceptive trade practices should be GRANTED.
3.
Defendant DiLeone
[81] As alleged against Defendant DiLeone, Plaintiffs' Chapter 75 Claim fails
because Defendant DiLeone is an attorney and excepted from liability under G.S. 75-
1.1(b). Under Chapter 75, "commerce" includes "all business activities, however
denominated, but does not include professional services rendered by a member of a
learned profession." G.S. 75-1.1(b). "Thus, professional services rendered by an
attorney in the course of his business are exempt under the statute and may not form
the basis of an unfair or deceptive trade practices claim." Boyce & Isley, PLLC v.
Cooper, 153 N.C. App. 25, 36 (2002) (citing Sharp v. Gailor, 132 N.C. App. 213, 217
(1999)). [82] Here, Plaintiffs allege that DiLeone committed attorney malpractice, by
acting negligently in the course of his business as an attorney, and that such conduct
constituted a violation of Chapter 75.33
[83] Accordingly, DiLeone's actions, as alleged in the Complaint, are not
deemed to be "in or affecting commerce" and therefore he cannot be held liable under
Chapter 75. Thus, the court CONCLUDES that the DiLeone Motion as to Plaintiffs'
Claim for unfair and deceptive trade practices should be GRANTED.
K.
Tenth Claim – Tortious Interference with Prospective Economic Advantage
[84] Plaintiffs' Tenth Claim alleges tortious interference with prospective
economic advantage against all Defendants.
[85] To state a claim for tortious interference with prospective economic
advantage, a plaintiff must show that the defendant, without justification, induced a third
party to refrain from entering into a contract with the plaintiff and which would have been
entered into absent the defendant's interference. Dalton v. Camp, 138 N.C. App. 201,
211 (2000), rev'd on other grounds, 353 N.C. 647 (2001). The plaintiff must "assert
some measurable damages resulting from defendant's allegedly tortious activities, i.e.,
what 'economic advantage' was lost to plaintiffs as a consequence of defendants'
conduct." Walker v. Sloan, 137 N.C. App. 387, 394 (2000) (affirming the Rule 12(b)(6)
dismissal of a tortious interference with prospective economic advantage claim where
the plaintiff failed to identify a specific contract that would have been made but for the
defendants' conduct); see also Daimlerchrysler Corp. v. Kirkhart, 148 N.C. App. 572,
585 (2002) (recognizing that the plaintiff "failed to identify any particular contract that a 33 Id. ¶¶ 62-68, 106. third party has been induced to refrain from entering into" with the plaintiff; thus, the
plaintiff did not establish a likelihood of success on the merits of its tortious interference
with prospective economic advantage claim).
[86] Here, Plaintiffs have pleaded only generalized conjecture regarding a
prospective economic advantage, and they have failed to identify a person or entity with
whom they were unable to enter into a contract.. Thus, this Claim is insufficiently
pleaded and fails for that reason. Accordingly, the court CONCLUDES that Plaintiffs
have failed to state a Claim for tortious inference with prospective economic advantage
against all Defendants, and all Defendants' Motions as to this Claim should be
L.
Leave to Amend
[87] Plaintiffs' responsive brief to the Motions raises the argument that they
should be given leave to amend the Complaint if the court determines that any
allegations fail to state a claim.34 However, to date, Plaintiffs have neglected to file a
formal motion to amend.35
[88] Accordingly, the court CONCLUDES that Plaintiffs' request for leave to
amend is not deemed a formal Motion, pursuant to BCR 15, and is not before the court
for determination. Even if such a request were deemed a Motion, the court
34 Pls. Br. Opp'n Defs. Mot. Dismiss 4 n.1. 35 At a hearing on the Motions, the court advised Plaintiffs' counsel that Plaintiffs would need to submit a formal motion to amend before the court would consider the allegations of a First Amended Complaint for purposes of determining the instant Motions. Plaintiffs did not do so. Instead, on January 5, 2012, Plaintiffs filed their First Amended Complaint without consent of the parties or leave of court. On March 23, 2012, the court struck Plaintiffs' First Amended Complaint from the record because it was procedurally improper. CONCLUDES, in its discretion, that an amendment would be futile under the
circumstances of this civil action and should be DENIED.
NOW THEREFORE, based on the foregoing, it hereby is ORDERED that:
[89] Defendants VisionQuest Wealth Management, LLC, VisionQuest Capital,
LLC and Steven C. Peters' Motion to Dismiss is GRANTED as to all Plaintiffs' Claims,
and as to said Defendants, this civil action is DISMISSED.
[90] The Berton Defendants' Motion to Dismiss is GRANTED as to Plaintiffs'
(a) First Claim – Malicious Prosecution, (b) Second Claim – Defamation, (c) Fourth
Claim – Declaratory Judgment and (d) Tenth Claim – Tortious Interference with
Prospective Economic Advantage. Accordingly, as to said Defendants each of those
Claims is DISMISSED.
[91] The Berton Defendants' Motion to Dismiss is DENIED as to Plaintiffs' (a)
Third Claim – Fraud and (b) Ninth Claim – Unfair and Deceptive Trade Practices.
[92] The CGR Partners Defendants' Motion to Dismiss is GRANTED as to
Plaintiffs' (a) First Claim – Malicious Prosecution, (b) Second Claim – Defamation, (c)
Fourth Claim – Declaratory Judgment and (d) Tenth Claim – Tortious Interference with
Prospective Economic Advantage. Accordingly, as to said Defendants each of those
[93] The CGR Partners Defendants' Motion to Dismiss is DENIED as to
Plaintiffs' (a) Third Claim – Fraud and (b) Ninth Claim – Unfair and Deceptive Trade
Practices.
[94] Defendant DiLeone's Motion to Dismiss and Motion for Judgment on the
Pleadings is GRANTED as to Plaintiffs' (a) Ninth Claim – Unfair and Deceptive Trade Practices and (b) Tenth Claim – Tortious Interference with Prospective Economic
Advantage. Accordingly, as to said Defendant each of those Claims is DISMISSED.
[95] Defendant DiLeone's Motion to Dismiss and Motion for Judgment on the
Pleadings is DENIED as to Plaintiffs' (a) Third Claim – Fraud and (b) Fifth Claim –
Negligence.
[96] On May 21, 2013, at 11:00 a.m., at the North Carolina Business Court,
225 Hillsborough Street, Suite 303, Raleigh, North Carolina, the court will conduct a
Case Management Conference with all remaining parties to this action. The parties
shall submit a Case Management Report on or before May 17, 2013.
This the 24th day of April, 2013.