United States District Court, M.D. North Carolina
BLUE MOON FIDUCIARY, LLC, individually and as fiduciary to the G FIDUCIARY RETIREMENT INCOME SECURITY PLAN, BENEFITGUARD 401(K) PLAN, and NATIONAL RETIREMENT SECURITY PLAN 401(K), DAVID J. NOVAK, D.D.S., P.A., individually and as fiduciary to the G FIDUCIARY RETIREMENT INCOME SECURITY PLAN BENEFITGUARD 401(K) PLAN, and NATIONAL RETIREMENT SECURITY PLAN 401(K), and DAVID J. NOVAK, a participant in the G FIDUCIARY RETIREMENT INCOME SECURITY PLAN, BENEFITGUARD 401(K) PLAN, and NATIONAL RETIREMENT SECURITY PLAN 401(K), Plaintiffs,
MATTHEW D. HUTCHESON, MATTHEW D. HUTCHESON, LLC, G FIDUCIARY, LLC, n/k/a BENEFITGUARD, LLC, BENEFITGUARD, LLC, AARON GABBART, DANIEL S. PETERSON, ASPIRE FINANCIAL SERVICES, LLC, f/k/a 401K ASP, LLC, NATIONAL RETIREMENT SECURITY PLAN, LLC, ERISA WISE, LLC, STEPHANIE A. BANISTER, DENNIS HURSH, HUTCHESON WALKER ADVISORS, LLC, and ARY ROSENBAUM, Defendants.
MEMORANDUM OPINION AND ORDER
WILLIAM L. OSTEEN, Jr., District Judge.
This case arises primarily from Defendant Matthew D. Hutcheson's misappropriation of certain retirement plan assets ("Novak Plan Assets") belonging to the North Carolina employees and plan participants of David J. Novak, D.D.S. ("Novak Employer"). (First Amended Complaint ("Am. Compl.") (Doc. 91) ¶ 1.) As explained in further detail below, Plaintiffs allege that each Defendant in this case had various obligations to act responsibly with respect to the Novak Plan Assets entrusted to them by Novak Employer, and that they failed to do so in violation of North Carolina state law and the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq.
Presently pending and ripe for ruling is the Motion to Dismiss Plaintiffs' Unfair and Deceptive Trade Practices Claim filed by Defendants Aaron Gabbart, Daniel S. Peterson, and BenefitGuard, LLC (Doc. 94), and the Motion to Dismiss filed by Defendant Aspire Financial Services (Doc. 105). Because of the sheer number of facts and claims alleged, this court has elected to deal with these motions in separate orders, incorporating the overlapping facts and legal analysis by reference into each opinion. This first order deals with Defendants Aaron Gabbart, Daniel Peterson, and BenefitGuard, LLC ("BenefitGuard Defendants"), and the second deals with Defendant Aspire.
I. LEGAL STANDARD
Each set of Defendants moves to dismiss a portion of Plaintiffs' Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). To survive a Rule 12(b)(6) motion, a plaintiff must allege "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) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570 (2007)). For a claim to be facially plausible, a plaintiff must "plead factual content that allows the court to draw the reasonable inference that the defendant is liable" and must demonstrate "more than a sheer possibility that a defendant has acted unlawfully." Id . (citing Twombly , 550 U.S. at 556). When ruling on a Rule 12(b)(6) motion, a court must accept the complaint's factual allegations as true. Id . However, a court does not have to accept as true mere legal conclusions, and "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id . (citing Twombly , 550 U.S. at 555).
II. GENERAL FACTUAL BACKGROUND
Before addressing the facts specific to the BenefitGuard Defendants, this court will set out the background facts common to all defendants, as described in the Amended Complaint.
Novak Employer is a North Carolina professional corporation engaged in the practice of dentistry, with its principal place of business located in High Point, North Carolina. (Am. Compl. (Doc. 91) at ¶ 9.) Initially, Novak Employer sponsored its own single-employer retirement plan, but eventually decided to place its assets into a series of multiple-employer retirement plans ("MEPs"). (Id. ¶ 3.) Plaintiff Blue Moon Fiduciary, LLC ("Blue Moon") served in a fiduciary capacity with respect to the Novak Plan Assets ¶ 35), and continued to serve as a "monitoring fiduciary" for the Novak Plan Assets transferred to the various MEPs at issue in this case (id. ¶ 42).
Around November 7, 2008, Novak Employer decided to join the G Fiduciary Retirement Income Security Plan ("G Plan"), an MEP for which Defendant Hutcheson was a named fiduciary and trustee. (Id. ¶ 11.) The G Plan was sponsored by Defendant G Fiduciary, LLC (id. ¶ 37), and Defendant Aspire Financial Services ("Aspire") was the Plan's recordkeeper, responsible for providing participating employers and employees with accurate information regarding account balance information, the location of participants' assets, and investment performance. (Id. ¶ 40.) Between January 29, 2009 and July 30, 2009, Novak Employer transferred $158, 010.69 of Novak Plan Assets into the G Plan account. (Id. ¶ 38.)
At various times between January and December 2010, Defendant Hutcheson directed Defendant Aspire to make twelve wire transfers totaling $2, 031, 688 from the G Plan to various destinations. (Id. ¶¶ 44-45.) Ultimately, Hutcheson used the money to renovate his house, buy automobiles and motorcycles, and repay personal loans, among other things. (Id. ¶ 47.) In addition, on or around December 15, 2010, Blue Moon employee Deborah Aboudara ("Aboudara") checked the Aspire website and discovered that the Novak Plan Assets were invested entirely in stocks (id. ¶ 62), in violation of the Novak Plan investment policy calling for an allocation of sixty percent (60%) stocks and forty percent (40%) bonds. (Id. ¶ 41.)
Meanwhile, in late July 2010, before Novak Employer or Blue Moon had any knowledge of Hutcheson's activities, Defendant Daniel S. Peterson ("Peterson"), a G Plan administrator (id. ¶ 16), told Aboudara that the G Plan had changed its name to the BenefitGuard 401(k) Plan ("BenefitGuard Plan"). (Id. ¶ 48.) Defendant Peterson also told Aboudara that Aspire was no longer going to serve as recordkeeper for the G Plan, but that he did not know which entity would replace Aspire in that role. (Id. ¶ 50.) In December 2010, Defendant Aaron Gabbart ("Gabbart"), another G Plan fiduciary, told Aboudara that it was time to transition the Novak Plan Assets from the G Plan to the BenefitGuard Plan, and that all retirement contributions should thereafter be made through Capital Plan Services, which had apparently been chosen as the BenefitGuard Plan's recordkeeper in the interim. (Id. ¶ 51.) Novak Employer made its final contribution to the G Plan in mid-January 2011, in the amount of $5, 351.98 (id. ¶ 64), and whatever Novak Plan Assets remained in the G Plan after Hutcheson's embezzlement were transferred to the BenefitGuard Plan. (Id. ¶ 66.) After that date, Novak Employer deposited the Novak Plan contributions with the BenefitGuard Plan in accordance with Gabbart's instructions. (Id.)
In March 2011, Hutcheson, who was also a fiduciary of the BenefitGuard Plan, e-mailed Aboudara and made several disapproving remarks about the BenefitGuard Plan and its managers. (Id. ¶ 67.) Hutcheson also advised Aboudara that Novak Employer should cease to communicate with anyone but Hutcheson about the Novak Plan Assets, and that it should move the assets from the BenefitGuard Plan to a third MEP, the National Retirement Security Plan 401(k) ("NRSP 401(k)"), for which Hutcheson also served as a fiduciary. (Id. ¶ 69.) According to the Amended Complaint, Hutcheson made this request in order to obtain additional fees and assets for his personal benefit and to delay Novak Employer's discovery of his 2010 misappropriation of G Plan assets. (Id. ¶ 68.) In reliance on Hutcheson's assurances, and because Defendants Peterson, Gabbart, and BenefitGuard had not disclosed Hutcheson's prior embezzlement, Novak Employer agreed to transfer its retirement plan assets from the BenefitGuard Plan to the NRSP 401(k). (Id. ¶ 71.) Hutcheson facilitated the transfer and advised Plaintiffs to communicate only with him or one of his employees, John Fitzgerald, and to stop all communication with Peterson and Gabbart. (Id.)
Also around March 2011, while attempting to obtain the distribution of retirement assets to two Novak Plan participants, Blue Moon received contradictory information regarding the location of the Novak Plan Assets. (Id. ¶ 74.) Specifically, Blue Moon could not determine whether the funds were located in any of the three aforementioned MEPs, whether they were in the custody of Charles Schwab Bank or TD Ameritrade, or whether they were in Hutcheson's possession. (Id.)
In May 2011, Defendant Peterson e-mailed Hutcheson requesting that Hutcheson provide information about the G Plan funds he had withdrawn the previous year, including the location of the assets and the contact information of anyone who could help facilitate their return to the proper MEP. (Id. ¶ 75.) Peterson did not, however, inform Plaintiffs of this request, or the fact that Hutcheson had removed G Plan funds in the first place. (See id. ¶ 57.) Aboudara, whose suspicions were aroused by the conflicting information, questioned Hutcheson, but Hutcheson deflected her queries by stating that the ongoing transition from the BenefitGuard Plan to the NRSP 401(k) prevented a full accounting of Novak Plan Assets. (Id. ¶ 79.) In July 2011, however, Trautmann Maher, the recordkeeper for the NRSP 401(k), received a wire transfer of $40, 000 (including $4, 960.89 of Novak Plan Assets originally attributable to the G Plan) instead of the $1.9 million it was expecting. (Id. ¶¶ 97-98.) Further investigation revealed that $279, 521.18 of Novak Plan Assets was unaccounted for, although an additional $9, 004.04 of Novak Plan Assets were transferred to the NRSP 401(k) a few days later. (Id. ¶¶ 99-100.)
On or around August 17, 2011, Aboudara sent a letter to Hutcheson demanding that he provide Trautmann Maher with a full and proper accounting of Novak Plan Assets on or before August 19, or else she would contact the Department of Labor. (Id. ¶ 101.) Hutcheson responded that he had used the Novak Plan Assets to purchase State of Idaho Economic Development Bonds, which, although they were a "prudent investment, " could not be liquidated for at least ninety days. (Id. ¶ 105.) Hutcheson also sent Aboudara a file purporting to list the assets of each participant in the Novak Plan as of January 1, 2011. (Id. ¶ 104.) The Amended Complaint alleges, however, that Hutcheson falsified this file to conceal his improper use of the G Plan assets. (Id.) In addition, Hutcheson pressured Aboudara not to contact the Department of Labor, because an investigation would purportedly cause a delay in the distribution of retirement benefits to the Novak Plan participants. (Id. ¶ 106.) Despite Hutcheson's warning, Aboudara contacted the Department of Labor about Hutcheson's actions on August 24, 2011. (Id. ¶ 108.) Meanwhile, unable to ...