BAKER v. HOBART FIN. GRP., INC., 2023 NCBC 24

Baker v. Hobart Fin. Grp., Inc., 2023 NCBC 24.
STATE OF NORTH CAROLINA
MECKLENBURG COUNTY
IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
22 CVS 1520
WILLIAM BAKER III, individually, and
as personal representative of NANCY
BAKER and her IRA; FRANCIS
BURTON and JEAN M. BURTON,
individually and on behalf of their IRA;
BEVERLY BYRNES, individually, on
behalf of her IRA, and as personal
representative of KATHERINE R.
GLEASON and her IRA; MICHAEL
FORBIS, individually and on behalf of
his IRA; JAMES LESHOCK and
CAROLYN LESHOCK, individually and
on behalf of their IRA; GARY
OSTRANDER and PAM OSTRANDER,
individually and on behalf of their IRA;
CLIFFORD N. RHODES, individually
and on behalf of his IRA; JAMES
TANGER, individually and on behalf of
his IRA; LARRY BRENT WILSHIRE and
CYNTHIA WILSHIRE, individually and
on behalf of their IRA; and JOSEPH
ZUCKER, individually and on behalf of
his IRA,
Plaintiffs1,
v.
HOBART FINANCIAL GROUP, INC.;
HOBART PRIVATE CAPITAL, LLC;
HOBART INSURANCE SERVICES LLC;
LEGACY GFIS & KCI HOLDINGS,
L.L.C.; CHRISTOPHER SCOTT
HOBART; STEVEN ANDREW GREER;
and COREY S. SUNSTROM,
Defendants.
ORDER AND OPINION
REQUIRING PLAINTIFFS TO
FILE A SECOND AMENDED
COMPLAINT
1 On 17 May 2022 the case caption was amended to reflect the change in parties from the
Complaint to the Amended Complaint. (ECF. No. 13.)

Baker v. Hobart Fin. Grp., Inc., 2023 NCBC 24.
1. THIS MATTER is before the Court on Defendants’ Motion to Dismiss
pursuant to rules 12(b)(6) and Rule 9(b) of the North Carolina Rules of Civil
Procedure (the “Rule(s)”).
2. Having considered the Motion, the parties’ initial and supplemental briefs
in support of and in opposition to the Motion, the arguments of counsel at the 15
September 2022 hearing on the Motion, (See ECF No. 31), the Amended Complaint,
and the exhibits thereto, (ECF Nos. 9–9.8), the Court DENIES the Motion at this
time as moot without prejudice and ORDERS Plaintiffs to file a Second Amended
Complaint in compliance with the Court’s instructions below.
Eric Spengler, Spengler and Agans, PLLC, and Jason Kane, Peiffer Wolf
Carr Kane Conway & Wise, LLP, for Plaintiffs.
Mark Nebrig, Jospeh Piligian, Caroline Savini, and Christopher
Tomlinson, Moore & Van Allen PLLC, for Defendants.
Robinson, Judge.
I. BACKGROUND
3. Plaintiffs commenced this Action on 1 February 2022 with a Rule 3
Application. (See Rule 3 Application and Order, ECF No. 3.) Subsequently, Plaintiffs
filed a twenty-two-page Complaint on 21 February 2022, (ECF No. 4). That pleading
then evolved into an eighty-four-page Amended Complaint filed on 20 April 2022,
(ECF No. 9). Plaintiffs, ten individuals or couples, bring suit against seven
defendants alleging seven causes of action: breach of fiduciary duty, constructive
fraud, violations of the North Carolina Securities Act, unfair and deceptive trade

Baker v. Hobart Fin. Grp., Inc., 2023 NCBC 24.
practices, fraud, professional negligence, and negligent misrepresentation. (ECF
No. 9.)
4. Although the Amended Complaint contains copious detail in its first
seventy-seven pages, the Causes of Action as presented on the last seven pages of the
Amended Complaint introduce unnecessary confusion due to their lack of clarity and
specificity. (Am. Compl. ¶¶ 268–317.) For instance, the First, Third, Fourth, Fifth,
Sixth and Seventh Causes of Action are asserted on behalf of “one or more Plaintiffs.”
(See Am. Compl. ¶¶ 273, 286, 295, 302, 311, 317). Moreover, every cause of action is
asserted against “Defendants” generally. (See Am. Compl. ¶¶ 272, 279, 285, 293, 301,
307, 314.) It appears to the Court, based on the allegations contained in the first
seventy-seven pages of the Amended Complaint, that all Defendants likely are not
and cannot be responsible for all of the claims, especially if raised by all of the
Plaintiffs.
5. The Amended Complaint discloses as much in several places. For instance,
it acknowledges that certain Plaintiffs bring claims only against certain Defendants.
(See Am. Compl. ¶ 1, “The Claims brought by Mr. Baker, in any capacity, are asserted
only against the Hobart Entities and Mr. Sunstrom—and not Mr. Hobart and Mr.
Greer.”). Likewise, the Amended Complaint acknowledges that some Plaintiffs only
bring certain claims. (See Am. Compl. ¶ 3, “Ms. Byrnes . . . brings claims against
Defendants only under the cause of action for constructive fraud.”). Where the
Complaint is less direct, the reader is expected to infer which allegations are brought
by which plaintiff against which defendant.

Baker v. Hobart Fin. Grp., Inc., 2023 NCBC 24.
6. The facts alleged clearly do not support certain claims by all Plaintiffs—for
instance, where a Plaintiff did not purchase a security (in this case, an Alternative
Investment) it is obvious there is no claim under the North Carolina Securities Act.
Likewise, a plaintiff who did not purchase an insurance product such as a fixed-
income annuity likely cannot bring a claim for unfair and deceptive trade practices
under N.C.G.S § 58 absent some additional showing not apparent to the Court on the
face of the Amended Complaint.
7. Consequently, although the Amended Complaint, as a whole, may contain
sufficient detail to withstand a Motion to Dismiss, assessing this information is a
herculean task. By the time Plaintiffs assert their Causes of Action against
Defendants, they have set out 267 paragraphs that the Court must cross-reference
and decipher to determine whether support exists for each claim.
8. Assessing the Amended Complaint is further complicated by Plaintiffs’
frequent use of “and/or” throughout. Regarding information about commissions,
Plaintiffs allege that “[t]he Hobart Financial Advisory Team deliberately
misrepresented and/or withheld this information from all the Plaintiffs[.]”. (Am.
Compl. ¶ 126.) Whether information was affirmatively misrepresented or whether it
was concealed is material to the Court’s analysis of the claim of fraud, but the Court
is unable to discern which occurred. Particularly when the pleading must satisfy
Rule 9, use of “and/or” is problematic.
9. In response to the Amended Complaint, on 20 June 2022 Defendants filed
a motion to dismiss pursuant to Rule 12(b)(6) and Rule 9(b), (the “Motion,” ECF No.

Baker v. Hobart Fin. Grp., Inc., 2023 NCBC 24.
22.) One of Defendants’ chief complaints is that the Amended Complaint contains
impermissible group pleading. (Mot. 23-24.) While this may be the case, it is a
difficult argument to assess because it is unclear if the specific representations and
advertisements referenced were relied on by all—or only some—plaintiffs.
10. Equally concerning, the lack of clarity in the Causes of Action contained in
the Amended Complaint means that the Court must guess whether the Rule 9(b)
particularity requirement applies to claims other than the fraud claims. For instance,
liability for breach of fiduciary duty, unfair and deceptive trade practices, and
professional negligence can, but need not, arise from fraudulent conduct. The lengthy
factual allegations in the Amended Complaint could support multiple theories of
liability that Plaintiffs neither explicitly embrace nor exclude in their broadly worded
Causes of Action.
11. In opposition to Defendants’ Motion, Plaintiffs filed a Response brief on 26
June 2022 in which counsel acknowledges for the first time that certain Plaintiffs do
not assert claims within a five-year statute of limitations. (Pls.’ Br. Opp. Mot. Dismiss
35, ECF No. 29.) While the Court appreciates this candor, Plaintiffs’ Amended
Complaint should itself reflect this concession. In other words, if Plaintiff recognizes
that its claim is barred by the applicable statute of limitations, Plaintiff should not
bring the claim.
12. Defendants filed a Reply to Plaintiffs Opposition on 15 August 2022. (ECF
No. 30.) In the Reply, Defendants note: “the Opposition clarifies what the Amended
Complaint does not: which claims belong to which Plaintiffs.” (Reply Br. Supp. Defs.’

Baker v. Hobart Fin. Grp., Inc., 2023 NCBC 24.
Mt. to Dismiss 2, ECF. No. 30.) Even if true, the clarity should exist in the Amended
Complaint itself.
13. On 15 September 2022 the Court held a hearing on the Motion at which
counsel for all parties were present. (See ECF No. 31.) The Court, during the hearing,
requested supplemental briefs addressing the application of the statute of limitations
to the claims brought under the North Carolina Security Act, N.C.G.S. § 78A-1 et seq.
(See ECF Nos. 32, 33.) The parties filed supplemental briefs on 26 September 2022
and 30 September 2022. (ECF Nos. 32, 33.) The Court has reviewed the briefing and
considered the arguments.
II. ANALYSIS
14. “The general standard for civil pleading in North Carolina is notice
pleading” pursuant to Rule of Civil Procedure 8(a)(1). Murdock v. Chatham Cty., 198
N.C. App. 309, 316 (2009). Rule 8(a)(1) requires “[a] short and plain statement of the
claim sufficiently particular to give the court and the parties notice of the
transactions, occurrences, or series of transactions or occurrences, intended to be
proved showing that the pleader is entitled to relief”. N.C.G.S. § 1A-1 Rule 8. Under
the “notice theory of pleading” a statement of a claim is adequate if it gives sufficient
notice of the claim asserted “to enable the adverse party to answer and prepare for
trial, to allow for the application of the doctrine of res judicata, and to show the type
of case brought. . . .” Sutton v. Duke, 277 N.C. 94, 102 (1970).
15. Importantly, this rule prescribes the minimum information that a pleading
must contain; as our Supreme Court has observed, “ ‘[t]here is nothing in the rules to

Baker v. Hobart Fin. Grp., Inc., 2023 NCBC 24.
prevent detailed pleading if the pleader deems it desirable.’ ” Sutton v. Duke, 277
N.C. 94, 105 (1970). Here, Plaintiffs take advantage of their right to provide copious
details, but then they frame their Causes of Action without them, leaving the Court
and Defendants to parse the exceedingly lengthy pleading in order to pinpoint the
legal claims they think Plaintiffs are making.
16. The Court is cognizant that pleading a matter with multiple claims and
multiple parties is challenging, especially when those claims involve alleged fraud.
Given that fraud can occur in a variety of scenarios, Rule 9 requires the pleader to
identity the time, place, and content of a fraudulent representation, as well as the
identity of the person making the representation, and what was obtained as a result
of the misrepresentation. See Terry v. Terry, 302 N.C. 77, 84, (1981); N.C.G.S. § 1A-
1 Rule 9(b). Thus, a detailed pleading is appropriate, but the objective of that detail
is to provide notice, not to obscure it.
17. When an opposing party complains of a pleading’s ambiguity, Rule 12(e)
provides the mechanism by which that party can seek a more definite statement
before filing a responsive pleading. N.C.G.S. § 1A-1 Rule 12(e). Together with Rule 8,
Rule 12(e) guards against vague and ambiguous complaints that impede either the
defendants’ receipt of adequate notice of the claims asserted against them or their
ability to form a responsive pleading. Parker v. Learn the Skills Corp., No. 03-6936,
2004 U.S. Dist. LEXIS 21499, at *3 (E.D. Pa. Oct. 25, 2004).
18. Although Defendants bring their motion pursuant to Rules 12(b)(6) and
9(b), a presiding judge “is empowered to exercise his discretion in the interest of

Baker v. Hobart Fin. Grp., Inc., 2023 NCBC 24.
efficiency, practicality and justice.” Shute v. Fisher, 270 N.C. 247, 253 (1967); see also
Beard v. The N.C. State Bar, 320 N.C. 126, 129 (1987) (“[t]hrough its inherent power
the court has authority to do all things that are reasonably necessary for the proper
administration of justice”). It is the Court’s opinion that, in this matter, requiring
the filing of a Second Amended Complaint that contains a more definite statement is
both necessary and appropriate. See Page v. Mandel , 154 N.C. App. 94, (2002)
(finding no abuse of discretion in the trial court’s treating defendants’ motion to
dismiss, under Rule 12(b)(6) as a motion for a more definite statement, under Rule
12(e), and ordering plaintiff to file a second amended complaint); see also Ross v. Ross,
33 N.C. App. 447 (1977) (“[t]he grant or denial of a Rule 12(e) motion for a more
definite statement rests in the sound discretion of the trial judge, and his ruling
thereon will not be overturned on appeal absent a showing of abuse of discretion”)
(citation omitted).
19. Although there is nothing per se inappropriate with a Complaint that
requires the Court to cross-reference over 300 paragraphs, it is the Court’s opinion
that justice and economy would be better served by requiring Plaintiffs to file a
Second Amended Complaint that identifies which Plaintiffs bring which causes of
action against which Defendants.2
20. The Court, cognizant of its duty to confirm subject matter jurisdiction, also
proposes that Plaintiffs consider whether they can bring claims both personally and
2 The Court notes that the parties have presumably been conducting discovery and
exchanging information which should aid Plaintiffs in sharpening their claims allegations.

Baker v. Hobart Fin. Grp., Inc., 2023 NCBC 24.
on behalf of their self-directed IRAs, and include in their pleading facts relevant to
this consideration.
III. CONCLUSION
21. Wherefore, the Court hereby Orders as follows:
a. Plaintiffs shall file a Second Amended Complaint on or before 21 April
2023. The Second Amended Complaint shall make clear which causes
of action are brought by which Plaintiffs against which Defendants
based on which alleged facts. Where Plaintiffs have admitted that a
particular cause of action is not being brought by a particular Plaintiff
or against a particular Defendant, Plaintiffs’ causes of action should so
reflect. Plaintiffs are further instructed to avoid use of “and/or” because
of the confusion it can create regarding the facts alleged.
b. Given the Court’s direction to Plaintiffs, Defendants’ pending Motion to
Dismiss is denied as moot. Defendant may file a renewed Motion to
Dismiss in Response to Plaintiffs’ Second Amended Complaint.
This the 22nd day of March, 2023.
/s/ Michael L. Robinson
Michael L. Robinson
Special Superior Court Judge
for Complex Business Cases