United States District Court, W.D. North Carolina, Asheville Division
C. MULLEN UNITED STATES DISTRICT JUDGE
MATTER is before the Court upon Defendants'
Motion to Dismiss (Doc. No. 8), Plaintiff's Response
(Doc. No. 13), and Defendants' Reply (Doc. No. 15). The
Magistrate Judge submitted a Memorandum and Recommendation
(Doc. No. 22), filed July 6, 2017, to grant in part and deny
in part the Defendants' Motion to Dismiss through the
dismissal of Counts I and II, but not Count III. The parties
were advised that pursuant to 28 U.S.C. § 636(b)(1)(C),
written objections to the memorandum and recommendation must
be filed within 14 days after service of the memorandum.
Defendants submitted a limited objection to the Memorandum
and Recommendation arguing that Count III should be
dismissed. (Doc. No. 23). Plaintiffs submitted a Response
(Doc. No. 24) and Defendants submitted a Reply (Doc. No. 25).
Accordingly, this matter is ripe for disposition.
undersigned adopts and incorporates the Magistrate's
findings of fact (Doc. No. 22) herein as if fully set forth.
Such findings are referenced in the substantive discussion
Memorandum and Recommendation, Magistrate Judge Cayer
recommended that the Defendants' motion to dismiss be
granted in part and denied in part. He recommended that all
the Plaintiff's claims be dismissed except for the
Plaintiff's “Fraudulent Concealment” claim.
only objection to this Memorandum and Recommendation was
filed by the Defendants. The Defendants' objection was
limited to arguing that the Plaintiffs “Fraudulent
Concealment” claim should also be dismissed because its
underlying allegations establish that it is actually a claim
for legal malpractice and that claim is time barred and even
if it were a fraud claim, it does not meet the
Twombly and Iqbal standards.
N.C. Gen. Stat. §1-52(9), claims arising out of fraud or
mistake are subject to a three-year statute of limitations
which accrues only when the aggrieved party discovers facts
constituting the fraud or mistake. In the instant case,
Plaintiff alleges he first discovered that the Bader judgment
was not recorded, rendering his creditor claim unsecured, in
June 2015. (Doc. No. 2, ¶¶ 70, 75). Because
Plaintiff filed his Complaint in September 2016, this claim,
if it is in fact a fraud claim, is not time barred under N.C.
Gen. Stat. § 1-52(9).
Defendants assert that Plaintiff's fraudulent concealment
claim is no more than a re-iteration of his negligence and
willful or wanton conduct claims, which constitute ordinary
legal malpractice. As such, Defendants argue it should
instead be governed under N.C. Gen. State §1-15(c) and
barred by its three-year statute of limitations, which
accrues on the last date at which Defendants actions could
have bettered Plaintiff's position and would have run
prior to September 2016.
appropriate statute of limitations depends “‘upon
the theory of the wrong or the nature of the
injury.'” Sharp v. Teague, 439 S.E.2d 792,
794 ( N.C. App. 1994) (citation omitted). N.C. Gen.Stat.
§ 1-15(c) governs malpractice claims. This includes
claims of negligence or breach of contract that arise from
allegations around the failure to perform professional
services. Id. “Fraud by an attorney, however,
is not within the scope of ‘professional services'
as that term is used in N.C. Gen.Stat. § 1-15(c), and
thus cannot be ‘malpractice' within the meaning of
that statute.” Id.
claim must contain the following elements: “‘(1)
false representation or concealment of a material fact, (2)
reasonably calculated to deceive, (3) made with intent to
deceive, (4) which does in fact deceive, (5) resulting in
damage to the injured party.' ” McGahren v.
Saenger, 118 N.C.App. 649, 654 (1995) (quoting
Ragsdale v. Kennedy, 286 N.C. 130, 138, 209 S.E.2d
494, 500 (1974)).
point to two cases in which the North Carolina Court of
Appeals found that the plaintiffs' fraud claims were
considered malpractice claims and so were under the statute
of limitations set in N.C. Gen. Stat. §1-15(c). See
Fender v. Deaton, 571 S.E.2d 1 (2002); see also
Sharp, 439 S.E.2d 792. Yet, these cases are
distinguishable from the current dispute.
Sharp, the critical issue with the fraud allegations
was failure in regard to particularity; it contained only
conclusory statements. 439 S.E.2d at 797. In Fender,
it was clear to the Court that “the allegations set
forth . . . are nothing more than ordinary claims for legal
malpractice, ” which included the failure to accept or
return calls, dismissing the case without consent of
plaintiff, and concealing the legal effect of a dismissal
with prejudice. 571 S.E.2d 3.
Plaintiff's “Fraudulent Concealment” claim,
Plaintiff alleges Defendants were “silent in the face
of repeated and explicit requests” regarding the status
of his case and, variously, that Defendants failed to tell
him, or affirmatively represented, facts regarding the Bader
Judgment, the state court action, and the Adversary
Proceeding for purposes of concealing that they had
negligently represented Plaintiff. (Amended Complaint, Doc.
2, ¶¶97, 98). This is a much more substantive
allegation than in Fender or Sharp and it
is clear to this Court that the theory behind this claim is
fraud, not malpractice. The fraudulent concealment claim
brought by the Plaintiff is distinguishable from one of
ordinary malpractice and thus is subject to N.C. Gen. Stat.
addition, Defendants argue that Plaintiff's fraudulent
concealment claim does not meet the required pleading
standard under Rule 12(b)(6) because it does not “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. 554, 570
(2007)). “A claim has facial plausibility when the
plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable
for the misconduct alleged.” Id. (citing
Twombly, 550 U.S. at 556). However, “[a] court
is not required to accept [t]hreadbare recitals of the
elements of a cause of action supported by mere conclusory
statements. “ Id.
order to state a valid claim for fraud under North Carolina
law, a party must allege a false representation or
concealment of a material fact that: (i) was reasonably
calculated to deceive; (ii) was made with the intent to
deceive; (iii) did in fact deceive the plaintiff; and (iv)
resulted in damages to the party. Synovus Bank v.
Karp, 887 F.Supp.2d 677, 686 (W.D. N.C. 2012) (citing
Anderson v. Sara Lee Corp.,508 F.3d 181, 189 (4th
Cir. 2007)). Defendant contends that the Plaintiff did not
state a fraud claim plausible on its face because ...