Bucci v. Burns

2018 NCBC 36

MARCY BUCCI; KEVIN SALVA; RICK BUCCI; EUGENE N. BUCCI; EUGENE M. BUCCI; TOM FERGUSON; DAVID LUBIN; CHRISTINE MERRITT; KARL SCHULER; MATTHEW FERGUSON; CHARLES FERGUSON; and LAUREL MANDERBACH, Plaintiffs, v. ROBERT BURNS; ZEESHAN-UL-HASSAN USMANI; and GARRETT PERDUE, Defendants.

No. 16 CVS 15478

Superior Court of North Carolina, Wake

April 25, 2018

Meynardie & Nanney, PLLC, by Joseph H. Nanney, Robert A Meynardie, and Robert W. Weston, for Plaintiffs.

Graebe Hanna & Sullivan, PLLC, by Douglas Hanna, for Defendant Garrett Perdue.

ORDER AND OPINION ON MOTION TO DISMISS

Adam M. Conrad, Special Superior Court Judge.

I. BACKGROUND

1. This is an action for fraud by twelve individuals who invested in Predictify.me, Inc. ("Predictify.me") before the company went bankrupt. The Court dismissed the original complaint for want of particularity but granted Plaintiffs leave to amend their claims. Defendant Garrett Perdue now moves to dismiss all claims stated against him in the amended complaint. For the reasons given below, the Court GRANTS in part and DENIES in part the motion.

2. The Court does not make findings of fact on a Rule 12(b)(6) motion to dismiss. The following factual summary is drawn from relevant allegations in the amended complaint.

3. Predictify.me^[1] was a technology company, co-founded in May 2014 by Defendants Zeeshan-Ul-Hassan Usmani, Robert Burns, and Garrett Perdue. (See Am. Compl. ¶¶ 24, 31, ECF No. 29.) Initially, Defendants were Predictify.me's only owners and also its officers and directors. (Am. Compl. ¶ 32.)

4. According to the amended complaint, Defendants jointly planned from the outset to market the new company to investors based on a falsehood: that Predictify.me owned proprietary technology developed by Usmani through his company, Go-Fig Solutions (Pvt) Ltd. ("Go-Fig"). (See Am. Compl. ¶¶ 24, 26-27.) Plaintiffs allege that Predictify.me never acquired Go-Fig or its technology despite repeated representations by Defendants that it had in direct communications with investors, press releases, blog posts, and other social media. (E.g., Am. Compl. ¶¶ 38, 43, 50, 54-56, 126-28.)

5. Plaintiff Marcy Bucci ("Bucci") was one of the first individuals to invest in Predictify.me. She first met with Burns before the company was formed. (Am. Compl. ¶¶ 26-29.) A few months later, in June 2014, Bucci attended a meeting with Defendants and the advisors "help[ing] them find funding and investors." (Am. Compl. ¶¶ 35, 38.) At that meeting, each Defendant "represented . . . that Predictify.me had acquired Go-Fig and its proprietary technology." (Am. Compl. ¶¶ 37-38.) Perdue followed up in person with Bucci in August, again to discuss her potential investment. (Am. Compl. ¶ 41.) Within two weeks of meeting with Perdue, Bucci purchased "preferred series seed stock" in Predictify.me. (Am. Compl. ¶¶ 41, 94.) She would do so five more times in 2014 and once in 2015. (Am. Compl. ¶ 94.)

6. Defendants hoped not only to secure Bucci's investment but also to tap into her network of potential investors. (See Am. Compl. ¶¶ 30, 34, 50-51.) Throughout most of 2014 and 2015, Defendants asked Bucci to "identify other potential investors . . . and provide them with the [] information regarding Predictify.me's business plans and its acquisition of Go-Fig." (Am. Compl. ¶ 42; see also Am. Compl. ¶ 51.) This information includes the representations at the June 2014 meeting, e-mail links to a presentation about Go-Fig, and "product scope sheets" authored by Perdue to "rebrand[] the Go-Fig Products for Predictify.me." (Am. Compl. ¶¶ 29, 37-40, 43-45, 49.) It also includes an investor disclosure notebook, which again "represented that Predictify.me had acquired Go-Fig and its proprietary technology." (Am. Compl. ¶ 43.)

7. Predictify.me appeared to enjoy initial success. By the end of 2014, its website reported three new products based on the Go-Fig technology. (See Am. Compl. ¶¶ 74-75.) Around the same time, Defendants began telling Bucci that Predictify.me had entered into a business relationship with the United Nations, which Burns officially announced in an April 2015 quarterly investor report. (See Am. Compl. ¶¶ 77, 83-84.) In fact, there was no relationship with the United Nations. (See Am. Compl. ¶ 130.)

8. Throughout 2014 and 2015, Predictify.me gained investors, allegedly on the strength of the illusory Go-Fig acquisition and the non-existent relationship with the United Nations. Bucci shared the information she received from Defendants with family and friends. (See Am. Compl. ¶ 96; see also Am. Compl. ¶¶ 53, 87.) Two of them (Eugene N. Bucci and Christine Merritt) purchased preferred series seed stock in November and December 2014. (See Am. Compl. ¶¶ 97-100.) Six more (Rick Bucci, Eugene M. Bucci, Kevin Salva, Karl Schuler, Laurel Manderbach, and David Lubin) purchased convertible notes in May and June 2015. (See Am. Compl. ¶¶ 111-17, 120- 23.)

9. Burns personally solicited others, including Plaintiffs Tom Ferguson, Charles Ferguson, and Matthew Ferguson. (See Am. Compl. ¶¶ 61, 67, 72.) Burns allegedly represented to each that Predictify.me had acquired Go-Fig and its technology, and he provided them with written materials, including the investor disclosure notebook. (See Am. Compl. ¶¶ 60-73.) Each purchased preferred series seed stock in November 2014. (Am. Compl. ¶¶ 101-06.)

10. By late 2015, "Predictify.me was failing financially." (Am. Compl. ¶ 135.) Looking for "alternative strategies, " the board of directors "considered selling Go-Fig" only to discover that Predictify.me "did not own Go-Fig" or its software. (Am. Compl. ¶ 137.) In February 2016, Predictify.me's CEO "announced . . . that Predictify.me did not own, and had never owned, Go-Fig or its assets." (Am. Compl. ¶ 139.) Less than four months later, Predictify.me filed for bankruptcy, and Plaintiffs lost their investments. (See Am. Compl. ¶¶ 142, 156, 165.)

11. The original complaint, filed on December 22, 2016, included claims for fraud, negligent misrepresentation, breach of fiduciary duty, and securities violations. Burns and Perdue each moved to dismiss the complaint. (ECF Nos. 12, 18.) The Court held that Plaintiffs' allegations were not stated with particularity, reasoning that the complaint did not attribute the alleged misrepresentations to any individual Defendant, that it "did not identify which Plaintiffs relied on any given misrepresentation, " and that it was not "clear from the face of the complaint whether any individual Plaintiff ever interacted with any individual Defendant." (Order & Opinion on Mots. to Dismiss ¶¶ 23-24 ["Opinion"], ECF No. 28.) The Court dismissed all claims without prejudice but granted Plaintiffs' request for leave to amend. (Opinion ¶¶ 26, 35.)

12. Ten of the eleven original Plaintiffs, along with four new Plaintiffs, timely filed their amended complaint on October 16, 2017. The amended complaint asserts causes of action for fraud, negligent misrepresentation, violations of the North Carolina Securities Act, and unfair or deceptive trade practices. Two Plaintiffs have since voluntarily dismissed their claims without prejudice. (See ECF Nos. 48, 49.)

13. Perdue moved to dismiss all claims against him in the amended complaint on December 4, 2017. The motion has been fully briefed, and the Court held a hearing on March 13, 2018 at which all parties were represented by counsel. This motion is ripe for determination.

II. ANALYSIS

14. A motion to dismiss under Rule 12(b)(6) "tests the legal sufficiency of the complaint." Concrete Serv. Corp. v. Investors Grp., Inc., 79 N.C.App. 678, 681, 340 S.E.2d 755, 758 (1986). "Dismissal of a complaint under Rule 12(b)(6) is proper when one of the following three conditions is satisfied: (1) when the complaint on its face reveals that no law supports plaintiff's claim; (2) when the complaint on its face reveals the absence of fact sufficient to make a good claim; (3) when some fact disclosed in the complaint necessarily defeats plaintiff's claim." Jackson v. Bumgardner, 318 N.C. 172, 175, 347 S.E.2d 743, 745 (1986).

15. In deciding a Rule 12(b)(6) motion, the Court must treat the well-pleaded allegations of the complaint as true and view the facts and permissible inferences "in the light most favorable to" the non-moving party. Ford v. Peaches Entm't Corp., 83 N.C.App. 155, 156, 349 S.E.2d 82, 83 (1986); see also Sutton v. Duke, 277 N.C. 94, 98, 176 S.E.2d 161, 163 (1970). "[T]he court is not required to accept as true any conclusions of law or unwarranted deductions of fact." Oberlin Capital, L.P. v. Slavin, 147 N.C.App. 52, 56, 554 S.E.2d 840, 844 (2001).

A. Matters Outside the Complaint

16. In support of his motion to dismiss, Perdue attaches four exhibits: Predictify.me's bankruptcy petition; the investor disclosure notebook; and two of Predictify.me's corporate formation documents (including the certificate of incorporation). (See ECF Nos. 37.1-37.4.) Plaintiffs object to the consideration of any materials outside the amended complaint. (See Response Br. in Opp'n to Mot. Dismiss 9-10 ["Opp'n"], ECF No. 42.)

17. The general rule is that "matters outside the complaint are not germane to a Rule 12(b)(6) motion." Weaver v. Saint Joseph of the Pines, Inc., 187 N.C.App. 198, 203, 652 S.E.2d 701, 707 (2007). That is because a Rule 12(b)(6) motion tests the legal sufficiency of the pleading, not the evidentiary support for the claims. See, e.g., White v. White, 296 N.C. 661, 667, 252 S.E.2d 698, 702 (1979). Thus, Rule 12 itself makes clear that, if "matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment, " not as a motion to dismiss for failure to state a claim. N.C. R. Civ. P. 12(b).

18. This rule...