Brown v. Secor

Brown v. Secor, 

.


STATE OF NORTH CAROLINA                    IN THE GENERAL COURT OF JUSTICE
                                               SUPERIOR COURT DIVISION
CLEVELAND COUNTY                                      16 CVS 608

DOUGLAS BROWN,

                     Plaintiff,

v.

ARTHUR D. SECOR; SECOR                             ORDER AND OPINION
GROUP, LLC; JOSEPH                               ON RULE 12 MOTIONS AND
CHRISTOPHER ROSSO; ROSSO
GROUP, LLC; and SOUTHGROUP                         DISCOVERY MOTIONS
REAL ESTATE MARKETING, LLC,

                     Defendants.


     1.   In May 2013, Plaintiff Douglas Brown and Defendant Arthur Secor entered

into an oral agreement in which Brown would invest in Secor’s real estate deals.

Three deals and three years later, Brown brought this suit, alleging that his $2

million investment has vanished. Brown contends that Secor, Defendant Joseph

Rosso (Secor’s business partner), and several entities controlled by Secor and Rosso

are liable for a host of wrongs from breach of contract to fraud to securities violations.

Brown also seeks a declaratory judgment regarding his alleged membership interest

in Defendant Southgroup Real Estate Marketing, LLC (“Southgroup”).

     2.   This Order addresses six pending motions. Defendants jointly moved for

judgment on the pleadings under Rule 12(c) of the North Carolina Rules of Civil

Procedure, seeking dismissal of all claims except breach of contract (“Rule 12(c)

Motion”). Rosso and Defendant Secor Group, LLC (“Secor Group”) additionally moved

to dismiss the claim for breach of contract under Rule 12(b)(6) (“Rule 12(b)(6)

Motion”). Finally, after engaging in the procedure set forth in Rule 10.9 of the
General Rules of Practice and Procedure for the North Carolina Business Court

(“BCR”), and after having been given permission by the Court to do so, the parties

filed cross-motions as to two discovery disputes: Brown filed two motions to compel

the production of certain documents and information (“Motions to Compel”), and

Defendants cross-moved for a protective order (“Motions for Protective Order”).

   3.     Having considered the parties’ filings and arguments, the Court GRANTS

the Rule 12(b)(6) Motion, GRANTS in part and DENIES in part the Rule 12(c)

Motion, GRANTS in part and DENIES in part the Motions to Compel, and

GRANTS in part and DENIES in part the Motions for Protective Order.

        Gray, Layton, Kersh, Solomon, Furr & Smith, P.A. by Michael L.
        Carpenter and Marshall P. Walker for Plaintiff.

        Parker Poe Adams & Bernstein LLP by Morgan H. Rogers and Eric A.
        Frick for Defendants.

Conrad, Judge.
                                       I.
                                  BACKGROUND

                                 A. Factual History

   4.     The Court does not make findings of fact in deciding motions filed under

Rule 12(b)(6) or Rule 12(c). The following factual summary is drawn from relevant

allegations in the pleadings and the attached exhibits.

   5.     Secor and Rosso are businessmen and residents of Mecklenburg County,

North Carolina. (Am. Compl. ¶¶ 2, 4.) Secor is the principal owner and manager of

Secor Group, and Rosso is the principal owner and manager of Defendant Rosso
Group, LLC (“Rosso Group”). (Am. Compl. ¶¶ 3, 5.) Secor and Rosso also do business

using the name LW Land, which is not an incorporated entity. (Am. Compl. ¶ 7.)

   6.    In early 2013, Secor met with Brown for the purpose of soliciting Brown’s

investment in certain real estate deals. (See Am. Compl. ¶¶ 1, 8.) Secor represented

that he had many investors in various properties he was marketing or developing.

(Am. Compl. ¶ 9.) Rosso did not attend the meeting, and Rosso’s relationship with

Secor was not discussed. (Am. Compl. ¶¶ 8–9; see also Am. Compl. ¶ 16.)

   7.    A further meeting resulted in an oral agreement in which Brown promised

to finance real estate investments to be held by Southgroup, another entity controlled

by Secor. (See Am. Compl. ¶ 11.) According to Brown, he and Secor agreed to split

any profits from the real estate investments “50/50 at the time of sale” after Brown

“received a return of his principal investment plus six percent (6%) interest.” (Am.

Compl. ¶ 11; see also Am. Compl. ¶ 47.)

   8.    Defendants admit there was an oral agreement but disagree with Brown

over its terms. (See Am. Answer ¶ 11.) Among other things, they allege that “Brown

promised to provide the funding for all of Secor Group’s and Southgroup’s land

acquisitions.” (Am. Countercls. ¶ 18.)

   9.    Between May 13 and June 27, 2013, Brown made five fund transfers totaling

$1,799,488.17 for the purpose of acquiring real property in the name of Southgroup.

(See Am. Compl. ¶¶ 12, 16, 18.) The first two transfers related to a North Carolina

property called Black Bear Falls. (Am. Compl. ¶ 12.) Brown alleges Secor failed to

disclose at the time of the oral agreement that Secor was buying out his former
investors and that Black Bear Falls was subject to a $300,000 mortgage. (Am. Compl.

¶ 13.) The next two transfers related to property in Ashe County, North Carolina

(Am. Compl. ¶ 14), and the final transfer related to a development in Georgia called

Nature’s Courtyard (Am. Compl. ¶ 15). Apart from one $50,000 transfer made to LW

Land, each transfer of funds was made to a law firm involved in the respective real

estate transactions. (See Am. Compl. ¶¶ 12–16.)

   10.   After June 27, 2013, Brown refused to make further advances without

“documentation of the relationship between the parties.” (Am. Compl. ¶ 19.) Brown

also alleges that, around this time, he met with Rosso “for the first time during an

additional solicitation of funds.” (Am. Compl. ¶ 16.)

   11.   In response to Brown’s concerns, Secor “personally represented” that the

Nature’s Courtyard property would be sold the next month “‘at a substantial profit.’”

(Am. Compl. ¶ 20(a).) Secor also sent Brown two documents. The first, a “Marketing

Summary” for LW Land, stated that Nature’s Courtyard would be sold by August 17,

2013, for between $990,000 and $1,320,000, contingent on an additional transfer of

$300,000 from Brown.       (Am. Compl. ¶ 20(b).)        The second document was a

membership interest purchase agreement (“MIPA”), which was signed by Secor on

behalf of Southgroup and backdated to the date Brown first advanced funds. (See

Am. Compl. ¶ 20; see also Am. Compl. Ex. A [“MIPA”].)

   12.   The parties sharply dispute the terms and effect of the MIPA. As relevant,

Southgroup is identified as “the Seller” and represents that it owns a 100%

membership interest in “the Company,” which is not named but is defined as “a
single-purpose entity established for the development of” Black Bear Falls and other

real property, including Nature’s Courtyard. (MIPA p.1.) Southgroup agreed to

transfer this membership interest to Brown, who is identified as “the Buyer.” (MIPA

¶ 1.) Brown interprets these provisions to mean that Southgroup is both “the Seller”

and “the Company,” such that the MIPA transferred to him a 100% membership

interest in Southgroup. (Am. Compl. ¶¶ 17, 20–21.)

   13.   Defendants interpret the MIPA to state that Southgroup and “the Company”

are separate entities. (See Am. Answer ¶ 21A; see also Am. Compl. ¶ 45.) Defendants

also allege that the MIPA, though signed by Brown and Secor, never became

operative. (Am. Answer ¶ 21D.) According to Defendants, the MIPA would have

become effective only in the event of a default under the terms of a separate

memorandum of understanding between Brown and Secor. (Am. Countercls. ¶¶ 19,

24, 31(b).) Defendants and Brown agree that no memorandum of understanding was

ever signed. (See Am. Countercls. ¶¶ 32, 34; Reply ¶¶ 32, 34.)

   14.   After receiving these documents from Secor, Brown made two further fund

transfers. He first wired $100,000 to LW Land on July 5, 2013 for Black Bear Falls.

(See Am. Compl. ¶ 22(a).)    Then, on July 23, 2013, Brown wired an additional

$300,000 to LW Land for marketing and clean-up costs for Nature’s Courtyard. (See

Am. Compl. ¶ 22(b).)

   15.   A partial sale of Nature’s Courtyard took place on August 17, 2013 (as LW

Land’s brochure stated) but returned no more than $600,000 (less than LW Land

forecast).   (See Am. Compl. ¶¶ 20(b), 23–24.)    Brown alleges that Secor falsely
represented that only marketing costs were recovered from the sale. (Am. Compl.

¶¶ 23–25.) Brown further alleges that he did not receive any proceeds, either directly

or through his alleged membership interest in Southgroup. (Am. Compl. ¶ 35.)

   16.   After the Nature’s Courtyard sale, Brown inquired about the properties

throughout the remainder of 2013 and 2014 but received little information. (See Am.

Compl. ¶¶ 26, 30, 32.) It does not appear that Black Bear Falls was ever sold, but on

January 14, 2015, the Ashe County property sold for $1,670,000. (See Am. Compl.

¶ 33.) Brown first learned of the sale some 11 months after it took place and, again,

received no proceeds.    (See Am. Compl. ¶¶ 32–33, 41.)         He alleges that Secor

transferred more than $1 million in proceeds from the sale to Secor Group. (Am.

Compl. ¶ 41.)

   17.   Through counsel, Brown requested access to Southgroup’s books in

December 2015 and January 2016. (See Am. Compl. ¶ 38.) The request was refused

on the ground that Brown does not hold any membership interest in Southgroup. (See

Am. Compl. ¶¶ 39–40.) According to Brown, Defendants’ counsel also “indicated that

all the proceeds from the sales are gone.” (Am. Compl. ¶ 36.)

                               B. Procedural History

   18.   Brown filed his original complaint on April 15, 2016, alleging fraud and

seeking to enforce his rights as an alleged owner of Southgroup. After filing their

answer, Defendants filed an initial motion for judgment on the pleadings on

November 23, 2016, and Brown moved to amend his complaint on January 6, 2017.

After a hearing on both motions, the Court granted in part the motion to amend and
denied the Rule 12(c) motion as moot, without prejudice to Defendants’ ability to

challenge the amended complaint through a subsequent Rule 12 motion. (Order on

Pl.’s Mot. to Am. Compl. and Defs.’ Mot. for J. on the Pleads. ¶ 10(a)–(c).)

   19.   The amended complaint, filed March 2, 2017, asserts 12 causes of action:

breach of contract (as to all Defendants except Rosso Group); a demand for documents

and an accounting of Southgroup; breach of fiduciary duty and constructive fraud (as

to Secor); declaratory judgment regarding the membership of Southgroup; a claim for

distributions from Southgroup; unjust enrichment; fraud; failure to register a

security; securities fraud; constructive trust; unfair or deceptive trade practices; and

conspiracy. Defendants answered the amended complaint and filed counterclaims on

March 16, 2017, with Brown’s reply following on March 24, 2017.

   20.   The Court held a BCR 10.9 teleconference on March 17, 2017, during which

the parties addressed discovery disputes relating to Brown’s requests for, among

other things, banking records, tax returns, agreements used by Defendants in

transactions with other investors, and the identification of other investors. The Court

authorized Brown to file a motion to compel as to the latter three categories of

information but ordered the parties to continue conferring regarding Defendants’

banking records.

   21.   On April 3, 2017, Defendants jointly filed their renewed Rule 12(c) Motion,

seeking judgment on the pleadings as to all claims except for breach of contract.

Rosso and Secor Group additionally filed the Rule 12(b)(6) Motion as to the breach of

contract claim. Brown also filed his first motion to compel, and Defendants cross-
moved for a protective order. These motions are fully briefed and were addressed at

a hearing on May 3, 2017.

   22.   During the May 3 hearing, Brown’s counsel reported that the parties had

reached an impasse regarding Defendants’ banking records and requested

authorization to file a second motion to compel. The Court requested a proposed

briefing schedule from the parties, which was submitted and adopted on June 6, 2017.

The second motion to compel and Defendants’ second cross-motion for protective

order were fully briefed on July 17, 2017. The Court elects to decide these later

motions without another hearing. See BCR 7.4.

                                     II.
                             THE RULE 12 MOTIONS

   23.   A motion to dismiss under Rule 12(b)(6) “tests the legal sufficiency of the

complaint.” Concrete Serv. Corp. v. Investors Grp., Inc., 

, 

, 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, 

, 

 (1986).

   24.   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., 

, 

 (1986); see also Sutton v. Duke, 

,


 (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,

, 

 (2001).

   25.   “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, 

, at *19 (N.C. Super. Ct. Nov. 3, 2011). “A motion for judgment on the

pleadings is the proper procedure when all the material allegations of fact are

admitted in the pleadings and only questions of law remain. When the pleadings do

not resolve all the factual issues, judgment on the pleadings is generally

inappropriate.” Ragsdale v. Kennedy, 

, 

 (1974).

   26.   The Court may consider documents “attached to and incorporated within”

the pleadings without converting a Rule 12(b)(6) or Rule 12(c) motion into one for

summary judgment. Weaver v. St. Joseph of the Pines, Inc., 

,

 (2007).

                           A. Claims Against Rosso Group

   27.   At the outset, the Court grants judgment on the pleadings as to all claims

against Rosso Group. Defendants correctly observe that Brown “does not reference

at any time in the Complaint any actions by Rosso Group.” (Defs.’ Br. in Supp. of

Mot. for Partial J. on the Pleads. 14 [“Defs.’ Nov. 23 Br.”].) Brown’s responsive

briefing is conspicuously silent on the point. There is no apparent basis for Rosso

Group to be a defendant in this action, and the Court therefore dismisses the claims

asserted against it with prejudice.
                                B. Breach of Contract

   28.   Brown alleges that he upheld his end of an oral agreement to finance Secor’s

real estate investments but that Defendants (except Rosso Group) breached the

agreement by failing to pay him any proceeds from the transactions. (See Am. Compl.

¶¶ 49–50.) In their Rule 12(b)(6) Motion, Rosso and Secor Group argue that the

amended complaint does not allege they were parties to that agreement. (See Br. in

Supp. of Mot. to Dismiss Pl.’s First Claim for Relief 2.)

   29.   Brown first contends that the motion is procedurally improper because, in

allowing Brown to amend his complaint, the Court concluded that the claim for

breach of contract was not futile. (See Pl.’s Br. in Opp. to Mot. to Dismiss Pl.’s First

Claim for Relief 2.) Not so. The Court held that Brown’s “allegation of breach does

not, on this record, appear to be incapable of surviving a motion to dismiss” but

expressly granted the motion to amend “without prejudice to Defendants’ right to

challenge the amended complaint through a Rule 12 motion.” (Order on Pl.’s Mot. to

Am. Compl. and Defs.’ Mot. for J. on the Pleads. ¶¶ 5, 10(c).) The Rule 12(b)(6) Motion

is properly before the Court. See Simply the Best Movers, LLC v. Marrins’ Moving

Sys., Ltd., 

, at *5–6 (N.C. Super. Ct. Apr. 6, 2016) (noting that

“futility standard under Rule 15 is essentially the same standard used in reviewing

a motion to dismiss under Rule 12(b)(6)” but courts have “liberal discretion to find

that an amendment lacks futility”).

   30.   Indeed, the Rule 12(b)(6) Motion has merit. A claim for breach of contract

requires the “existence of a valid contract.” Carcano v. JBSS, LLC, 

, 

 (2009) (quoting Poor v. Hill, 

, 

 (2000)). When a defendant is “not a party to the contract,” then “as

a matter of law he cannot be held liable for any breach that may have occurred.”

Canady v. Mann, 

, 

 (1992).

   31.   At no point does the amended complaint name Rosso or Secor Group as

parties to the oral agreement. It alleges that, “[a]fter much negotiation, [Brown] and

Secor agreed upon a business relationship in which [Brown] would finance certain

real estate investments to be held in” Southgroup, and “[Brown] and Secor” would

split any profits after a return of Brown’s principal investment plus interest. (Am.

Compl. ¶ 11.) The only other description of the agreement is in paragraph 47, which

refers to the agreement “as aforesaid”—a clear reference to paragraph 11. (Am.

Compl. ¶ 47.)    Neither paragraph mentions Rosso or Secor Group; there is no

allegation that either made any promises or received any consideration; and there is

no allegation that Secor acted on behalf of one or both. In fact, Brown alleges that he

first met Rosso after entering into the oral agreement. (See Am. Compl. ¶ 16.)

   32.   The Court has considered Brown’s arguments and finds them unpersuasive.

Rosso’s participation in the real estate transactions as broker does not make him a

contractual party. (See Am. Compl. ¶ 10.) Nor can Brown contend that Secor Group

is a party to the agreement based on Defendants’ allegation, in their amended

counterclaims, that Brown orally “promised to provide the funding for all of Secor

Group’s and Southgroup’s land acquisitions.” (Am. Countercls. ¶ 18.) The allegation
appears nowhere in the complaint, and Brown specifically denies making the funding

promise. (See Am. Compl. ¶ 48; Reply ¶ 18.)

   33.   The Court therefore grants the Rule 12(b)(6) Motion. The claim for breach

of contract, to the extent asserted against Rosso and Secor Group, is dismissed with

prejudice.

                               C. Declaratory Judgment

   34.   The declaratory judgment claim concerns Brown’s rights and interests with

respect to Southgroup. Specifically, Brown alleges that he holds a 100% membership

interest in Southgroup and all the rights associated with that interest. (See Am.

Compl. ¶¶ 65–66.) Defendants move for judgment on the pleadings that Brown is not

a member of Southgroup. (See Defs.’ Nov. 23 Br. 1; Defs.’ Br. in Supp. of Renewed

Mot. for Partial J. on the Pleads. 2 [“Defs.’ Apr. 3 Br.”].)

   35.   This dispute concerns the meaning of terms in the MIPA and therefore

presents a question of contract interpretation. “When the language of a written

contract is plain and unambiguous, the contract must be interpreted as written and

the parties are bound by its terms.” Atl. & E. Carolina Ry. Co. v. Wheatly Oil Co.,

, 

 (2004). Whether a contractual term is

ambiguous is a question of law. See, e.g., Wachovia Bank Nat’l Ass’n v. Superior

Constr. Corp., 

, 

 (2011).

   36.   On its face, the MIPA is an agreement between Brown (“the Buyer”),

Southgroup (“the Seller”), and Secor as manager of Southgroup. (MIPA p.1.) In the

recitals, Secor represents that he “owns all of the outstanding equity membership
interest in [Southgroup],” and Southgroup represents that it owns a 100%

membership interest in an unnamed entity identified as “the Company.” (MIPA p.1;

see also MIPA ¶¶ 4(a), 5(a).) Southgroup “transfers” to Brown “all of [Southgroup’s]

right, title and interest in and to the Membership Interest” in the Company for the

sum of ten dollars. (MIPA p.1, ¶¶ 1, 2.)

   37.   There is no plausible way to construe this language to mean that Brown

obtained a membership interest in Southgroup, as he contends.               Brown’s

interpretation—that Southgroup is both “the Seller” and “the Company”—is a

nonstarter. The MIPA expressly treats “Seller” and “Company” as different entities

throughout.    It defines the terms differently (MIPA p.1) and imposes distinct

obligations on each (see MIPA ¶¶ 4, 6). Indeed, in paragraph 6, “the Company” makes

representations and warranties to Southgroup, which would make little sense if they

were one and the same. (See MIPA ¶ 6.)

   38.   The MIPA further states that Secor owns Southgroup and Southgroup owns

the Company.      (See MIPA p.1.)     Brown’s interpretation would render these

statements incoherent: first, that Southgroup claims to own a 100% membership

interest in itself; and second, that Secor and Southgroup each claim to own an

undivided interest in the same piece of personal property. Neither would make sense.

See N.C. Gen. Stat. § 57D-2-01(a) (“An LLC is an entity distinct from its interest

owners.”); N.C. Gen. Stat. § 57D-5-01 (“An ownership interest [in an LLC] is personal

property.”).
   39.     This is not to say that the MIPA is a model of clarity—it isn’t.         The

“Company” is not named, and Defendants do not name the entity in their briefs. Yet

the MIPA’s plain language makes clear that, whatever else “the Company” could be,

it is not Southgroup. Brown’s insistence that the MIPA must be construed against

Secor as the drafter is therefore misplaced. (See Pl.’s Br. in Opp’n to Defs.’ Mot. for

Partial J. on the Pleads.3 [“Pl.’s Dec. 16 Br.”].) This rule of construction applies only

in a contest between reasonable alternatives, and Brown’s interpretation is not

reasonable. See 11 Williston on Contracts § 32:12 (4th ed.) (“[I]t is only when,

consistent with the general rules of contract interpretation, the meaning proposed by

the nondrafter . . . is reasonable. . . that the rule of contra proferentem is properly

invoked.” (collecting cases)).

   40.     As a matter of law, Brown does not hold a membership interest in

Southgroup, and he is not entitled to a declaration to that effect. The Court therefore

grants judgment on the pleadings as to the claim for declaratory judgment. The Court

need not address Defendants’ alternative argument that the MIPA never became

operative. (See Defs.’ Nov. 23 Br. 4–5.)

         D. Demand for Documents and Accounting and Claim for Distributions

   41.     The resolution of Brown’s declaratory judgment claim also requires

dismissal of his claims demanding documents, an accounting, and distributions from

Southgroup. (See Am. Compl. ¶¶ 52–55, 67–68.) Brown may not assert claims based

on a membership interest in Southgroup, which he does not possess. See N.C. Gen.

Stat. § 57D-1-03(9) (only “an interest owner in respect of the interest owner’s
ownership interest” entitled to distribution); N.C. Gen. Stat. § 57D-3-04(a) to (f)

(limiting information rights to “member[s], manager[s], or other company official[s]”).

Accordingly, the Court grants the Rule 12(c) Motion as to these claims.

                E. Breach of Fiduciary Duty and Constructive Fraud

   42.    Brown’s third claim for relief is a combined claim for breach of fiduciary duty

and constructive fraud. (See Am. Compl. ¶¶ 56–62.) Brown asserts this claim against

Secor only, alleging that Secor, as manager of Southgroup, owed fiduciary duties to

Brown and to Southgroup. (See Am. Compl. ¶¶ 57–58.) The amended complaint

alleges that Secor breached these duties by engaging in self-dealing and diverting

Southgroup’s distributions from Brown to himself. (See Am. Compl. ¶¶ 60–61.)

   43.    Although Brown has pleaded them together, breach of fiduciary duty and

constructive fraud are distinct causes of action. See White v. Consolidated Planning,

Inc., 

, 

 (2004). An essential element of

each is the existence of a fiduciary relationship. See Dalton v. Camp, 

, 

 (2001) (fiduciary duty); Crumley & Assocs., P.C. v. Charles

Peed & Assocs., P.A., 

, 

 (2012) (constructive

fraud).

   44.    As pleaded, Brown has not sufficiently alleged the existence of a fiduciary

relationship with Secor. Brown’s claims are based entirely on duties allegedly owed

by Secor as manager of Southgroup. (See Am. Compl. ¶¶ 57–61.) Having concluded

that Brown has no membership interest in Southgroup, the Court further concludes

that he may not assert a fiduciary relationship based on that non-existent
membership interest, whether individually or derivatively. See N.C. Gen Stat. § 57D-

8-01(a) (plaintiff to derivative suit must, among other things, be a member of the

LLC); Kaplan v. O.K. Techs., LLC, 

, 473–74, 

(2009) (manager of LLC does not owe a fiduciary duty to members solely on basis of

role as manager).

   45.   In his briefing, Brown asserts a second, independent theory: that Secor owed

him a fiduciary duty as a seller of securities. (See Pl.’s Dec. 16 Br. 14; Pl.’s Br. in

Opp’n to Defs.’ Renewed Mot. for J. on the Pleads. 8 [“Apr. 14 Br.”].) This argument

omits any citation to the original or amended complaints, and the Court finds no

allegations that serve to provide adequate notice to Secor of a claim on this basis. The

requirement to liberally construe the complaint is not an invitation to rewrite it.

   46.   Accordingly, the Court grants the Rule 12(c) Motion as to the claim for

breach of fiduciary duty and constructive fraud.

                                F. Unjust Enrichment

   47.   Brown’s claim for unjust enrichment is based on “his payments to or for the

benefit of” Southgroup. (Am. Compl. ¶ 70.) Defendants argue this claim necessarily

fails because Brown alleges “that the MIPA was an effective contract” and the

existence of an express agreement precludes an unjust enrichment claim. (Defs.’ Nov.

23 Br. 8.)

   48.   Defendants’ argument is misplaced. A plaintiff is entitled to assert an

unjust enrichment claim in the alternative. This is especially true here where the

parties contest the scope and effect of the MIPA (as well as the oral agreement) and
the Court has concluded that the MIPA does not transfer to Brown a membership

interest in Southgroup. The Court denies the Rule 12(c) Motion as to the claim for

unjust enrichment. See, e.g., Krawiec v. Manly, 

, at *31 (N.C.

Super. Ct. Jan. 22, 2016).

                                       G. Fraud

   49.   Brown asserts his claim for fraud against all Defendants. To state a claim,

Brown must allege “(a) a false representation or concealment of a material past or

existing fact; (b) that was reasonably calculated to deceive; (c) that was made with an

intent to deceive; (d) that did in fact deceive, i.e., was relied upon and (e) resulted in

damage to the injured party.” Shamoon v. Turkow, 

, at *10

(N.C. Super. Ct. Dec. 6, 2011) (citing State Props., LLC v. Ray, 

,

 (2002)).

   50.   Defendants raise two arguments. First, they object to the allegation that

“Defendants’ provision of the MIPA . . . to secure additional funds from Brown was a

fraud in the inducement” (Am. Compl. ¶ 76), contending that the allegation is

conclusory. (See Defs.’ Nov. 23 Br. 10.) Second, they argue that Brown has not

sufficiently alleged reasonable reliance on the provision of the MIPA (because he

knew its terms), on the alleged concealment of the relationship between Secor and

Rosso (because he was aware of it), or on the alleged concealment of the debt on Black

Bear Falls (because he did not investigate it). (See Defs.’ Nov. 23 Br. 10–12.)
   51.   The Court concludes that Brown has alleged facts sufficient to state a claim

for fraud. Defendants’ arguments, even if correct, overlook numerous allegations in

the amended complaint.

   52.   For example, the amended complaint alleges that Secor represented to

Brown that he would receive proceeds from the sale of properties acquired by

Southgroup and that Secor did not intend to abide by that agreement at the time he

made it. (Am. Compl. ¶¶ 10–12, 20(b), 24, 78.) The amended complaint further

alleges that (1) Brown relied on the representation by providing more than $2 million

in funds (Am. Compl. ¶¶ 18, 22, 35, 50); (2) two properties were sold for substantial

sums (Am. Compl. ¶¶ 22, 35, 50); (3) Secor Group received more than $1 million from

the sales (Am. Compl. ¶¶ 41, 43); and (4) Brown has not received any proceeds (Am.

Compl. ¶¶ 23–25, 32–33). These allegations are sufficient to survive a Rule 12

motion. See, e.g., Priest v. Coch, 

, at *19–20 (N.C. Super. Ct.

Jan. 25, 2013) (denying Rule 12(b)(6) motion as to fraud claim where it was alleged

that defendants “did not intend to pay” at time of contracting).

   53.   The amended complaint further alleges affirmative misrepresentations that

were designed to induce, and did induce, Brown to make additional fund transfers.

For example, (1) Secor sent Brown a “Marketing Summary” from LW Land, which

forecast a sale of as much as $1.3 million (Am. Compl. ¶ 20(b)); (2) Secor and Rosso

are partners in LW Land (Am. Compl. ¶¶ 7, 16; see also Am. Compl. ¶ 37); (3) Brown

provided $400,000 in funds to LW Land based on these representations (Am. Compl.

¶ 22); (4) the Nature’s Courtyard property sold for much less than forecast (see Am.
Compl. ¶¶ 24–25); and (5) Brown has not received proceeds from the sales (Am.

Compl. ¶ 35).     These allegations, although not stated with crystal clarity, are

“minimally sufficient” to state a claim. Holcomb v. Landquest Ltd. Liab. Co., 

, at *21 (N.C. Super. Ct. Apr. 21, 2017); see also Shamoon, 

, at *10–12 (finding question of material fact as to whether defendant

knew representations were false).

   54.   For these reasons, the Court denies the Rule 12(c) Motion as to the claim for

fraud (except as to Rosso Group, as noted above). For the same reason, the Court also

denies the motion as to the conspiracy claim, which Defendants seek to dismiss solely

on the ground that the underlying fraud claim should be dismissed. (Defs.’ Apr. 3 Br.

4.) Because the fraud claim survives, so too does the claim for conspiracy. See Nye v.

Oates, 

, 346–47, 

 (1989) (holding that precedent

“permits one defrauded to recover from anyone who facilitated the fraud by agreeing

for it to be accomplished”).

                                 H. Securities Fraud

   55.   Brown contends that the alleged fraud also constitutes securities fraud

under the North Carolina Securities Act. See N.C. Gen. Stat. § 78A-8. Defendants

argue that Brown has not alleged the existence of any securities.

   56.   The North Carolina Securities Act defines the term “security” broadly. As

relevant, a security may include an “investment contract” or a “certificate of interest

or participation in any profit-sharing agreement.” N.C. Gen. Stat. § 78A-2(11); see

also Blue Ridge Pediatric & Adolescent Med., Inc. v. First Colony Healthcare, LLC,


, at *25 (N.C. Super. Ct. Oct. 3, 2012). In interpreting this

language, North Carolina courts are guided by federal law, which applies a functional

approach. See N.C. Gen. Stat. § 78A-64 (noting statutory purpose to “coordinate the

interpretation . . . of this Chapter with the related federal regulation”).

   57.   Brown first alleges that the oral agreement between Brown and Secor is an

"investment contract” as defined in N.C. Gen. Stat. § 78A-2(11). According to the

amended complaint, under this agreement, Brown “invested his money, in a common

enterprise, and was led to expect profits solely from the efforts of others.” (Am.

Compl. ¶ 82.) This allegation is sufficient to survive a Rule 12 motion. See S.E.C. v.

W.J. Howey Co., 

 (1946) (finding a security based on the “investment

of money in a common enterprise with profits to come solely from the efforts of

others”); see also NNN Durham Office Portfolio 1, LLC v. Grubb & Ellis Co., 

, at *44 (N.C. Super. Ct. Dec. 5, 2016).

   58.   Brown also alleges that the membership interest transferred via the

MIPA—whether for Southgroup or some other entity—“may also constitute a security

under North Carolina law.” (Am. Compl. ¶ 83.) Determining whether an interest in

an LLC is a security requires “‘case-by-case analysis into the ‘economic realities’ of

the underlying transaction.”     U.S. v. Leonard, 

 (2d Cir. 2008)

((citations omitted)); see also Robinson v. Glynn, 

 (4th Cir. 2003)

(looking to “economic reality” of investment scheme); see also NNN Durham Office

Portfolio 1, 

, at *50.           Liberally construing the amended

complaint, Brown purported to purchase an interest in a manager-managed LLC, the
fortunes of which would be determined by the abilities of its manager, Secor. (See

MIPA p.1; see also Am. Compl. ¶ 21(b),(d).) For purposes of this motion, the amended

complaint sufficiently alleges the existence of a security.

   59.   Defendants also reiterate their arguments that the amended complaint does

not sufficiently allege fraud. (See Defs.’ Apr. 3 Br. 3.) For the reasons stated above,

the Court disagrees.

   60.    Accordingly, the Court denies the Rule 12(c) Motion as to the claim for

securities fraud (other than as to Rosso Group).

                          I. Failure to Register a Security

   61.   Brown asserts that Defendants violated N.C. Gen. Stat. § 78A-24 by failing

to register the oral agreement and the MIPA as securities. (See Am. Compl. ¶¶ 81–

85.) Defendants contend this claim is barred by the statute of limitations, which

prohibits claims brought “more than two years after the sale or contract of sale” of

the security at issue. N.C. Gen. Stat. § 78A-56(f).

   62.   A court may grant judgment on the pleadings in favor of a defendant who

asserts the statute of limitations as a defense “when, and only when, all the facts

necessary to establish the limitation are alleged or admitted.” Flexolite Electrical v.

Gilliam, 

, 87–88, 

 (1981). In other words, “on a

motion for judgment on the pleadings, dismissal is proper only if it appears on the

face of the complaint that the plaintiff filed outside the limitations period.” Benson

v. Barefoot, 

, 396–97, 

 (2002).
   63.   Here, as to both the oral agreement and the MIPA, it is clear from the face

of the amended complaint that Brown filed his claim outside the two-year limitations

period. The amended complaint alleges that Brown and Secor entered into the oral

agreement in May 2013, and it alleges that Secor sent the MIPA to Brown in July

2013. (See Am. Compl. ¶¶ 11–12, 20(c).) Both dates are more than two years prior

to the filing of the original complaint on April 15, 2016, which is the earliest filing

date Brown could conceivably rely on.

   64.   Brown’s briefs are silent regarding the oral agreement. (See generally Pl.’s

Reply Br. in Supp. of Mot. to Amend Compl. 5–7; Pl.’s Apr. 14 Br. 9.) Accordingly, he

has offered no basis to avoid the statute of limitations as to that agreement.

   65.   As to the MIPA, Brown does not identify any supporting allegations in the

amended complaint. Instead, he argues that Defendants created a factual dispute as

to the beginning of the limitations period by asserting in their amended

counterclaims that the MIPA did not become effective in July 2013. (See Pl.’s Apr. 14

Br. 9.) The Court disagrees. Defendants’ position is that the MIPA was intended to

become effective only in the event of a default under the terms of a separate

memorandum of understanding, which Brown admits he and Secor never executed.

(See Am. Countercls. ¶¶ 31(b), 32, 34; Reply ¶¶ 31, 32, 34.) Accordingly, the claim is

either time-barred (under the facts alleged in the complaint), or the MIPA resulted

in no sale and was not subject to a registration requirement (under the facts alleged

in the counterclaims).
   66.   The Court grants the Rule 12(c) Motion as to the claim for failure to register

a security. The Court does not address Defendants’ alternative argument that the

oral agreement and the MIPA were exempt from registration under N.C. Gen. Stat.

§ 78A-17(5) and (9).


                            J. Unfair or Deceptive Trade Practices

   67.   Defendants invoke the well-settled rule that a mere breach of contract does

not constitute an unfair or deceptive trade practice under 

.

See Branch Banking & Trust Co. v. Thompson, 

, 

 (1992). Fraud, however, may constitute a section 75-1.1 violation. See, e.g.,

Hardy v. Toler, 

, 

 (1975) (fraud a deceptive

practice); Forest2Market, Inc. v. Arcogent, Inc., 

, at *14 (N.C.

Super.   Ct.   Jan.    5,    2016) (aggravating    circumstances include “fraudulent

inducements”). Having concluded that Brown’s fraud claim survives Rule 12, the

Court also concludes that Brown has, at this stage, stated a claim for unfair or

deceptive trade practices.

                                    K. Constructive Trust

   68.   A constructive trust is a remedy, not a cause of action. See Weatherford v.

Keenan, 

, 

 (1997).           Accordingly, for

purposes of clarity, the Court grants the Rule 12(c) Motion to the extent it seeks

dismissal of the purported cause of action for constructive trust. The Court renders

this decision without prejudice to Brown’s ability to pursue the equitable remedy of a

constructive trust based on his remaining legal claims, including his claim for fraud.
See Roper v. Edwards, 

, 

 (1988) (describing

constructive trust as an equitable remedy “to prevent the unjust enrichment of the

holder of . . . an interest in[] property which such holder acquired through fraud”).

                                      III.
                            THE DISCOVERY MOTIONS

   69.   “[O]rders regarding discovery matters are within the discretion of the trial

court and will not be upset on appeal absent a showing of abuse of that

discretion.” Wachovia Bank v. Clean River Corp., 

, 

 (2006) (quoting Nationwide Mut. Fire Ins. Co. v. Bourlon, 

, 

 (2005)). Here, Brown’s Motions to Compel request production

of four categories of information: (1) Defendants’ initial and amended tax returns for

2012 to 2015; (2) Defendants’ banking records for 2012 to present; (3) the names of

third-party investors; and (4) documents used by Defendants in transactions with

other investors.

                                  A. Legal Standard

   70.   In general, “[p]arties may obtain discovery regarding any matter, not

privileged, which is relevant to the subject matter involved in the pending action.”

N.C. R. Civ. Pro. 26(b)(1). “The test of relevancy under Rule 26 is not, of course, the

stringent test required at trial.   The rule is designed to allow discovery of any

information ‘reasonably calculated to lead to the discovery of admissible evidence.’”

Willis v. Duke Power Co., 

, 

 (1976) (quoting N.C.

R. Civ. Pro. 26(b)); accord Wachovia Capital Partners, LLC v. Frank Harvey Inv.

Family L.P., 

, at *48 (N.C. Super. Ct. Mar. 5, 2007).
   71.   Nevertheless, a party seeking discovery is “not entitled to a fishing

expedition to locate it.” Dworsky v. Travelers Ins. Co., 

, 

 (1980). A court may enter a discretionary protective order “even as

to relevant material” after balancing “[o]ne party’s need for information . . . against

the likelihood of an undue burden [being] imposed upon the other.” Willis, 

, 

.

                                   B. Tax Returns

   72.   Brown requests production of tax returns for each Defendant from 2012 to

2015. Defendants produced redacted versions of Southgroup’s initial filing for 2014

and Secor Group’s amended returns for 2013 and 2014.           They have objected to

providing any other returns and to removing the redactions.

   73.   The Court agrees that Defendants’ 2012 tax returns and Rosso Group’s

returns for any year are not relevant. The events giving rise to this action first began

in 2013, and the relevant real estate transactions occurred in late 2013 and early

2015. (See Am. Compl. ¶¶ 11, 12, 23, 33.) As to Rosso Group, the Court has dismissed

all claims against the company, which apparently was not even formed until 2015.

(See Am. Countercls. ¶ 5.) Brown is not entitled to 2012 tax returns for any Defendant

or for Rosso Group’s tax returns for any year.

   74.   Defendants’ other relevance objections are not supported. Brown contends

that he invested $2.2 million to be used in Southgroup’s land acquisitions, expecting

to receive a return of his principal plus half the profits. He further contends that

Secor and Rosso (through LW Land) concealed transactions disposing of the real
estate in 2013 and 2015 and then diverted the proceeds to Secor Group, without

paying any proceeds to Brown. (See, e.g., Am. Compl. ¶¶ 7, 22, 36, 41.) Whether and

how Defendants accounted for these transactions in their 2013 to 2015 tax returns is

plainly relevant. See Transatlantic Healthcare, LLC v. Alpha Constr. of the Triad,

Inc., 

, at *38–39 (N.C. Super. Ct. Mar. 9, 2017) (granting motion

to compel tax records). Any change in the reporting of these transactions between

initial and amended filings would be equally relevant.

   75.   There remains an issue regarding whether Defendants may redact the tax

returns by removing information they deem irrelevant. The Court is not aware of

any North Carolina precedent addressing the propriety of unilateral redactions for

relevance, but federal courts frequently hold that “relevance-based redactions are

disfavored.” Wellin v. Wellin, No. 2:13-cv-1831-DCN, 

,

at *18 (D.S.C. Sept. 30, 2015) (collecting cases).

   76.   The Court agrees with the reasoning of these decisions.         “It is a rare

document that contains only relevant information.” Bartholomew v. Avalon Capital

Group, Inc., 

, 451–52 (D. Minn. 2011). A producing party should not

“decide unilaterally what context is necessary . . . and what might be useless to the

case.” Evon v. Law Offices of Sidney Mickell, No. S–09–0760, 

, at *5 n. 1 (E.D. Cal. Feb. 3, 2010); see also Scranton Products, Inc. v. Bobrick

Washroom Equipment, Inc., 

, 436–38 (M.D. Pa. 2016); Kipperman

v. Onex Corp., 

 (N.D. Ga. 2009). This is especially so when there
is a protective order in place to shield any sensitive information. See Evon, 

, at *5 n. 1.

   77.   The discretion to make unilateral redactions would incentivize parties to

hide “as much as they dare.” Burris v. Versa Prods., 

, at

*10 (D. Minn. Feb. 19, 2013). That, in turn, would give rise to “suspicion that relevant

material harmful to the producing party has been obscured,” along with “tend[ing] to

make documents confusing or difficult to use.” Bonnell v. Carnival Corp, CASE NO.

13-22265-CIV-WILLIAMS/GOODMAN, 

, at *8 (S.D. Fla.

2014) (quoting In re Medeva Securities Litigation, Master File No. 93-4376-

Kn(AJWx), 

, at *8 (C.D. Cal. 1995)). Indeed, there is “no

better way to ensure that a motion to compel will be filed than to unilaterally black

out large portions of documents as the human mind is naturally curious.” David v.

Alphin, No. 3:07cv11, 

, at *23 (W.D.N.C. Mar. 30,

2010).

   78.   The suspicions are heightened in this case where Brown contends

Defendants stole more than $2 million from him, concealed the transactions, and are

now hiding the wrongdoing behind large-scale redactions of relevant documents.

Matters are not helped by Defendants’ narrow understanding of the standard for

relevance. (See Defs.’ Br. in Supp. Mot. for Prot. Order and in Opp’n to Pl.’s Mot. to

Compel Discovery 3–4 [“Defs.’ Tax Br.”]; Defs.’ Br. in Supp. Mot. for Prot. Order and

in Opp’n to Pl.’s Mot. to Compel Discovery (Banking Records) 1–3 [“Defs.’ Banking

Br.”].) Taking into account that the parties have agreed to a Consent Protective
Order, the Court is persuaded that Defendants’ unilateral redactions for relevance

are not appropriate.

   79.   For all these reasons, Defendants, except Rosso Group, must produce tax

returns for 2013 through 2015 within their possession, custody, or control. These

include Southgroup’s 2013 return, the original 2013 and 2014 returns for Secor

Group, the 2015 returns for Secor Group and Southgroup, and the returns for Secor

and Rosso for each year. Defendants shall not make any substantive redactions but

may redact confidential identifying information, such as social security numbers,

taxpayer identification numbers, and employer identification numbers. Defendants

shall also produce unredacted versions of the tax returns produced to date.

   80.   To the extent any returns do not exist or have not yet been filed, Defendants

shall certify to that effect and produce copies of the relevant extensions. (Defs.’ Tax

Br. 6 (stating that 2015 returns “have not been filed because they have received

extensions of time”).) To the extent Defendants do not possess the documents but

have “the legal right to obtain the documents on demand,” they shall do so. Lowd v.

Reynolds, 

, 

 (2010) (quoting Pugh v. Pugh,

, 380–81, 

 (1994)).            The Court rejects

Defendants’ argument that they are not required to obtain tax returns from the

Internal Revenue Service under 

. See United States v. All Assets

Held at Bank Julius Baer & Co., 

, 45–46 (D.D.C 2015) (holding that

section 6103 “only regulates disclosure of tax returns by the IRS, not private

litigants,” and “the weight of case authority similarly holds that section 6103 did not
enact a limitation on civil discovery” (collecting cases)); see also In re Pedestrian

Walkway, 

, 242–43, 

 (2005) (noting order

requiring party to obtain tax returns from IRS and compelling their production).

                       C. Information Related to Other Deals

   81.   Brown requests two types of information related to other deals made by

Defendants. First, he seeks the production of all Membership Interest Purchase

Agreements entered into between Defendants and other investors.          Second, he

requests that Defendants identify, in interrogatory responses, their other investors,

including both investors in the real estate at issue in this litigation and prior

investors in similar transactions.

   82.   The Court denies the motion to compel as to any Membership Interest

Purchase Agreements. The Court has held that Brown is not a member of Southgroup

under the terms of the MIPA he and Secor signed. In the absence of claims based on

that membership, the production of similar agreements does not appear reasonably

likely to lead to the discovery of admissible evidence.

   83.   The identification of Defendants’ other investors, however, could be

relevant. Defendants have alleged, for example, that Brown “promised to provide the

funding for all of Secor Group’s and Southgroup’s land acquisitions”—that is, Brown

was the exclusive source of funding. (Am. Countercls. ¶ 18.) They further allege that

Brown breached this promise by failing to fund a development called Sanctuary Cove.

(Am. Countercls. ¶ 67.) If Defendants had other investors during this time, it could
be relevant to the issue of exclusivity and perhaps to mitigation of damages. (See Am.

Countercls. ¶ 18; Reply 10.)

   84.    Defendants state that they have no names to report because there were no

third-party investors “involved in Black Bear Falls, New River, or Nature’s

Courtyard.” (Defs.’ Tax Br. 12.) It is unclear, however, whether Defendants were

involved in deals with other investors for other properties at this time. If they were,

that would be relevant, at a minimum, to the alleged exclusive funding agreement

with Brown. Accordingly, Defendants shall supplement their interrogatory responses

to identify any investors in transactions after May 2013—that is, during the period

of the alleged funding agreement with Brown. If there are no such investors, they

shall supplement their responses to say so.

   85.    Brown is not entitled, however, to discovery regarding all investors Secor

and Rosso have ever had. This litigation concerns a limited time period and specific

agreements and transactions. The Court is not persuaded that Defendants’ investor

relationships prior to the agreement between Brown and Secor have any bearing on

this litigation.

   86.    The Court acknowledges Defendants’ concern that Brown will harass the

other investors and “will disclose the information.” (Defs.’ Tax Br. 8; see also Defs.’

Tax Br. 1, 7, 12.) These “concerns are not a proper reason to fail to produce relevant

information.” Balfour Beatty Rail, Inc. v. Vaccarello, 3:06-cv-551-J-20MCR, 

 (M.D. Fla., Jan. 18, 2007) (citing Fed. R. Civ. Pro. 26(c)).

Moreover, the parties’ Consent Protective Order states that any information produced
during discovery “shall be used solely and exclusively for the purposes of prosecuting

or defending this Litigation, and shall not be used by a Party for any other purposes.”

(Consent Protective Order ¶ 2.)

                                  D. Banking Records

   87.   Brown seeks all banking records for each Defendant—including the

personal records of Secor and Rosso—from 2012 to present. Defendants produced

records for Secor Group from January 2013 to January 2017, but the records are

heavily redacted. Defendants refused to produce any other records, including the

records of “ACRE,” which is simply another name for Secor Group.

   88.   This dispute is perplexing. It is clear from the record—including the initial

Business Court Rule 10.9 proceedings and the subsequent motion to compel—that

the real issue concerns Secor Group’s banking records. There is no dispute that funds

and expenses for the real estate transactions flowed through Secor Group, in part

because Southgroup does not have its own bank account. Pre-motion correspondence

between the parties reflects this: Defendants agreed to produce some banking records

for Secor Group, and Brown’s counsel expressed hope that these records would

provide most of the needed information. The parties’ current all-or-nothing positions

are untenable.

   89.   The Court concludes, first, that bank records from 2012 and bank records

for Rosso Group are not relevant. Brown maintains that records from 2012 are

relevant to assessing damages and to assessing Defendants’ “business model.” (Br.

in Supp. of Pl.’s Mot. to Compel Discovery (Banking Records) 11–12 [“Pl.’s Banking
Br.”].) The connection is tenuous and unconvincing, and the Court denies the motion

to compel as to these records.

   90.   Second, the Court reiterates that relevance-based redactions are disfavored.

See Wellin, 

, at *18. Even if producing parties were

entitled to unilaterally determine what context is important and what is not, this

would not be such a circumstance. Secor Group’s bank accounts may reveal expenses

associated with the relevant properties, the disposition of proceeds from their sales,

and transactions with other investors during the period of the alleged funding

promise. Moreover, Secor Group’s account was apparently used for the transactions

of Southgroup and ACRE, adding to the need for transparency.             Accordingly,

Defendants shall provide unredacted copies of the information already produced as

to Secor Group.

   91.   Third, Defendants’ basis for withholding the records of ACRE on relevance

grounds is unpersuasive. ACRE is another name for Secor Group, and there is no

dispute that ACRE received commissions and played a role in at least some of the

real estate transactions. (Defs.’ Banking Br. 7; see also Defs.’ Banking Br. 8; Defs.’

Tax Br. 3.) Defendants shall produce the requested information for the account

associated with ACRE.

   92.   Fourth, Brown is not entitled to the banking records of the individual

defendants, Secor and Rosso, which are highly likely to contain vast amounts of

irrelevant, personal information.   Brown’s basis for making such an overbroad,

intrusive request appears to be a belief that funds deposited with Secor Group were
ultimately distributed to Secor and Rosso. The banking records of Secor Group and

the tax records of the individuals provide adequate, targeted discovery for this

purpose. Balancing Brown’s minimal need for these records against their likely

irrelevance and the burden to Secor and Rosso, the Court denies the motion to compel

as to these records and grants the cross-motion for protective order.

                                         IV.
                                     CONCLUSION

   93.     The Court GRANTS Rosso and Secor Group’s Rule 12(b)(6) Motion. The

claim for breach of contract against these parties is DISMISSED with prejudice.

   94.     The Court GRANTS in part Defendants’ Rule 12(c) Motion as follows:

         a. All claims against Rosso Group are DISMISSED with prejudice.

         b. Brown is not entitled to a declaration that he is a member of Southgroup,

            and judgment on the pleadings is GRANTED in favor of Defendants as to

            this claim.

         c. The claims for an accounting, distribution, breach of fiduciary duty and

            constructive fraud, and failure to register a security are DISMISSED with

            prejudice.

         d. In all other respects, the Rule 12(c) Motion is DENIED.

   95.     The Court GRANTS in part the Motions to Compel and GRANTS in part

the Motions for Protective Order as follows:

         a. Defendants, except Rosso Group, shall produce unredacted copies of tax

            returns for 2013 to 2015 within their possession, custody, or control. To the

            extent such returns do not exist, each Defendant shall certify to that effect.
   To the extent Defendants must obtain any returns from the relevant

   governmental authority, they shall do so. As needed, Defendants shall

   produce the returns, certify their non-existence, or initiate an appropriate

   request to obtain them (and provide Brown a copy of the request) within

   two weeks of this Order.

b. Secor Group and ACRE shall produce unredacted copies of all responsive

   banking records from May 2013 to January 2017 within their possession,

   custody, or control, within two weeks of this Order. Brown is not entitled

   to the personal banking records of Secor and Rosso or to the records of Rosso

   Group.

c. Defendants, except Rosso Group, shall supplement their interrogatory

   responses to identify all entities and individuals with whom they had an

   investment relationship during the period of the alleged funding promise.

   Brown is not entitled to receive the names of investors who entered into an

   investment relationship with Defendants prior to the date of the alleged

   funding promise.

d. Brown is not entitled to the production of Defendants’ agreements with

   other investors.

e. The Court determines, in its discretion, that the parties shall bear their

   own costs.

f. Except as stated, the Motions to Compel and Motions for Protective Order

   are DENIED.
This the 28th day of July 2017.



                                  /s/ Adam M. Conrad
                                  Adam M. Conrad
                                  Special Superior Court Judge
                                    for Complex Business Cases