Hladik v. LPL Financial LLC

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25-P-45 Appeals Court

TIMOTHY HLADIK & others1 vs. LPL FINANCIAL LLC & another.2

No. 25-P-45.

Suffolk. October 9, 2025. – March 19, 2026.

Present: Vuono, Desmond, & Toone, JJ.

Conversion. Fiduciary. Negligence. Uniform Securities Act.
Investment Advisor. Jurisdiction, Superior Court.
Superior Court, Jurisdiction. Practice, Civil, Motion to
dismiss, Standing.

Civil action commenced in the Superior Court Department on
April 18, 2023.

After a hearing before Michael D. Ricciuti, J., motions to
dismiss were considered by Kenneth W. Salinger, J.

John E. Sutherland for the plaintiffs.
Matthew T. Bohenek for LPL Financial LLC.
Janine M. Lucas, of Michigan (Kirsten Patzer also present)
for SII Investments Inc.

1 Debra Tarr-Johnson, Ralph Brian Johnson, and Brian King.
2 SII Investments Inc.
2

TOONE, J. The plaintiffs, Timothy Hladik, Debra Tarr-

Johnson and Ralph Brian Johnson (the Johnsons), and Brian King,

sued the defendants, LPL Financial LLC and SII Investments Inc.,

in the Superior Court for conversion, breach of fiduciary duty,

negligence, and violation of the Uniform Securities Act, G. L.

c. 110A (MUSA). All four plaintiffs brought claims against SII

Investments, and all but Hladik brought claims against LPL

Financial. A judge dismissed the complaint without prejudice

for lack of subject matter jurisdiction under Mass. R. Civ. P.

12 (b) (1), 365 Mass. 754 (1974) (rule 12 [b] [1]). We conclude

that the plaintiffs' nonspeculative and particularized

allegations of injury are sufficient to allow the court to

decide the merits of their claims. The judge did not address

whether, in the alternative, the complaint should be dismissed

for failure to state a claim under Mass. R. Civ. P. 12 (b) (6),

365 Mass. 754 (1974) (rule 12 [b] [6]), and we decline to affirm

the judgment of dismissal on that ground. Rather, because both

defendants' rule 12 (b) (6) motions relied on "matters outside

the pleading," we remand the case so that the judge may decide

whether to exclude those matters or instead treat the motions as

ones for summary judgment. See Mass. R. Civ. P. 12 (b), 365

Mass. 754 (1974).

1. Background. The plaintiffs allege in their second

amended complaint that they were clients of an investment broker
3

named Paul Richard McGonigle, who worked for SII Investments

from 1998 until February 2018, then worked for LPL Financial

until June 2019. In 2023, McGonigle pleaded guilty in Federal

court to investment adviser fraud, money laundering, wire fraud,

mail fraud, and aggravated identity theft. The plaintiffs

allege that McGonigle stole money from his clients in a variety

of ways. He posed as his clients in telephone calls, forged

their signatures on annuity surrender forms, induced clients to

transfer funds to him, wrote checks to himself from client

accounts, and comingled funds. The plaintiffs further allege

that they "did not suspect or know that Mr. McGonigle was

misappropriating their funds," the defendants "were complicit in

allowing Mr. McGonigle to transfer away [their] assets," and

they lost significant amounts of their savings as a result of

the defendants' "failure to supervise Mr. McGonigle."

Both defendants moved to dismiss the complaint. LPL

Financial moved to dismiss under rule 12 (b) (1) and (6). In

support of its motion, LPL Financial submitted two declarations

from its employees, and a third declaration that attached six

documents from Hladik's Financial Industry Regulatory Authority

(FINRA) arbitration. SII Investments moved to dismiss the

complaint pursuant to rule 12 (b) (6). It submitted an employee

affidavit that attached its 1998 registered representative

agreement with McGonigle and quoted that agreement in its
4

motion. SII Investments also attached the new account

applications and customer agreements for the Johnsons and King

and relied on those documents throughout its motion.

After a judge in the Superior Court heard oral argument on

the defendants' motions, a second judge issued a decision and

order dismissing the complaint pursuant to rule 12 (b) (1).3 The

judge concluded that the plaintiffs' allegations failed to show

that each plaintiff "suffered a nonspeculative, direct injury."

See Pugsley v. Police Dep't of Boston, 472 Mass. 367, 373

(2015). In particular, while the plaintiffs "assert that

McGonigle engaged in schemes to steal money from various

unidentified clients," "[t]here is no way to tell from the

factual allegations in the complaint whether McGonigle did any

of these things to the Plaintiffs." Even though only LPL

Financial moved to dismiss under rule 12 (b) (1), the judge also

allowed SII Investments' motion on this ground because the

plaintiffs' lack of standing "goes to the Court's subject matter

jurisdiction" and the judge had a duty to resolve "any apparent

question about its power to resolve Plaintiffs' claims."

Judgment entered dismissing all claims without prejudice.

3 The record does not indicate why the second judge issued
the decision instead of the first.
5

2. Discussion. We review de novo the dismissal of a

complaint under either rule 12 (b) (1) or (6). See Pinti v.

Emigrant Mtge. Co., 472 Mass. 226, 231 (2015), citing Curtis v.

Herb Chambers I-95, Inc., 458 Mass. 674, 676 (2011).

a. Subject matter jurisdiction. Standing is a question of

subject matter jurisdiction that "goes to the power of the court

to hear and decide the matter." Ginther v. Commissioner of

Ins., 427 Mass. 319, 322 n.6 (1998).4 A jurisdictional challenge

4 Although the Supreme Judicial Court stated in Ginther that
"[a] defendant may properly challenge a plaintiff's standing to
raise a claim by bringing a motion to dismiss" under either rule
12 (b) (1) or (6), Ginther, 427 Mass. at 322, citing Doe v.
Governor, 381 Mass. 702, 705 (1980), the court also stated that
"[b]ecause the question of subject matter jurisdiction goes to
the power of the court to hear and decide the matter, we
consider that question first under rule 12 (b) (1)," Ginther,
supra at 322 n.6. Neither Doe nor Ginther explained how a
defendant can challenge standing, as opposed to a plaintiff's
failure to state a claim, through a motion to dismiss under rule
12 (b) (6). The case that Doe cited for that proposition, Foley
v. Polaroid Corp., 381 Mass. 545, 548 (1980), does not appear to
shed further light on the issue. In Abate v. Fremont Inv. &
Loan, 470 Mass. 821 (2015), the court reiterated that
"[s]tanding may be considered under either" rule 12 (b) (1)
or (6), Abate, supra at 828, citing Ginther, supra at 322, but
also noted that "[a]s a component of subject matter
jurisdiction, a party may challenge, or a judge may consider,
sua sponte, standing under rule 12 (b) (1) at any time." Abate,
supra, citing Mass. R. Civ. P. 12 (h) (3), 365 Mass. 754 (1974).
In that case, the court explained that, although the judge
"ostensibly resolved the respondents' claim that the petition
failed to state a claim under rule 12 (b) (6), the issue before
the judge was essentially a challenge to subject matter
jurisdiction or, more specifically, [the plaintiff's] standing."
Abate, supra at 831. Although we do not decide the issue, the
decision in Abate suggests that the dictum in Doe and Ginther
that standing may be raised under rule 12 (b) (6) is simply an
acknowledgment that an action may be dismissed "[w]henever it
6

under rule 12 (b) (1) can be factual or facial. Where a party's

challenge is supported by affidavits or other matters outside

the record, the challenge is factual and the burden falls to the

nonmoving party to prove jurisdictional facts. See Callahan v.

First Congregational Church of Haverhill, 441 Mass. 699, 710-711

(2004), overruled on other grounds by Temple Emanuel of Newton

v. Massachusetts Comm'n Against Discrimination, 463 Mass. 472,

478 (2012). Under such a challenge, "the plaintiff's

jurisdictional averments [in the complaint] are entitled to no

presumptive weight [and] the court must address the merits of

the jurisdictional claim by resolving the factual disputes

between the parties." Hiles v. Episcopal Diocese of Mass., 437

Mass. 505, 516 (2002), quoting Valentin v. Hospital Bella Vista,

254 F.3d 358, 363 (1st Cir. 2001).

Here, even though the defendants presented a substantial

amount of evidence in support of their motions to dismiss, none

of it supported a jurisdictional challenge. SII Investments did

not challenge jurisdiction at all. LPL Financial sought

dismissal under 12 (b) (1) for lack of subject matter

jurisdiction, but its challenge was limited to the adequacy of

the plaintiffs' allegations of injury. We therefore review the

appears by suggestion of a party or otherwise that the court
lacks jurisdiction of the subject matter." Mass. R. Civ. P.
12 (h) (3).
7

dismissal as the result of a "'facial attack' based solely on

the allegations of the complaint, taken as true for purposes of

resolving the complaint." Hiles, 437 Mass. at 516 n.13. See

Ginther, 427 Mass. at 322, citing Nader v. Citron, 372 Mass. 96,

98 (1977). For the same reason, we reject the argument of SII

Investments that the plaintiffs had to present evidence to

"substantiate" their allegations of standing.5

In its motion, LPL Financial contended that the Superior

Court lacked jurisdiction to hear this action because the

plaintiffs did not adequately allege injury. "Under general

principles of standing in the courts of the Commonwealth, an

allegation of injury is required." Kenn v. Eascare, LLC, 103

Mass. App. Ct. 643, 650 (2024), citing Sullivan v. Chief Justice

for Admin. & Mgt. of the Trial Court, 448 Mass. 15, 21 (2006).6

5 We agree with the judge that the complaint could only be
dismissed under 12 (b) (1), if at all, without prejudice.
"Dismissals for lack of subject matter jurisdiction are
ordinarily without prejudice because dismissal for lack of
jurisdiction is typically not an adjudication on the merits"
(citation omitted). Abate, 470 Mass. at 836. The judge's
jurisdictional analysis involved a perceived defect of pleading
-- not a matter "where a lack of standing [was] fatal to the
merits of the plaintiff's claim[s]," which would have required
dismissal with prejudice. Braxton v. Boston, 96 Mass. App. Ct.
714, 720 (2019), quoting Rental Prop. Mgt. Servs. v. Hatcher,
479 Mass. 542, 547 (2018). See Abate, supra.
6 Massachusetts jurisdictional standing requirements are
distinct from Federal requirements. Federal limitations on
justiciability are grounded in the case and controversy
limitation in art. III of the United States Constitution, which
does not apply to State courts. See LaChance v. Commissioner of
8

"Only [plaintiffs] who have themselves suffered, or who are in

danger of suffering" injury have standing to sue, Burlington v.

Bedford, 417 Mass. 161, 164 (1994), and the injury alleged must

be more than merely "speculative, remote, and indirect."

Sullivan, supra. See Vita v. New England Baptist Hosp., 494

Mass. 824, 832 (2024), quoting Murchison v. Zoning Bd. of

Appeals of Sherborn, 485 Mass. 209, 212 (2020) (plaintiff must

"demonstrate a nonspeculative particular and personal harm").

Conclusory assertions that do not rise above speculation and are

"not supported by allegations of specific injury" are

insufficient to confer standing. Kennedy v. Commonwealth, 92

Mass. App. Ct. 644, 649 (2018).

We conclude that the plaintiffs' allegations of injury

suffice to establish standing and thus subject matter

jurisdiction. Among other things, the complaint alleges that,

as a result of the defendants' failure to supervise McGonigle

and prevent his misappropriation of their assets, Hladik lost at

least $100,000, the Johnsons lost at least $167,000, and King

lost at least $80,000 from their retirement savings. Even

though, as discussed infra, other allegations pertaining to the

plaintiffs' claims are conclusory, these allegations of injury

Correction, 475 Mass. 757, 771 n.14 (2016); Kenn, 103 Mass. App.
Ct. at 648-650.
9

are particularized, personal, and nonspeculative. Cf. Kenn, 103

Mass. App. Ct. at 652 (courts find injuries too speculative or

remote when they "concern hypothetical future injuries premised

on a certain set of facts occurring").

We reject the suggestion that, to establish subject matter

jurisdiction, the plaintiffs also had to show that the

defendants owed them a legal duty and committed a breach of that

duty. Such allegations are required when a party sues a "public

defendant." See Pugsley, 472 Mass. at 371; Sullivan, 448 Mass.

at 21; Ginther, 427 Mass. at 323; Northbridge v. Natick, 394

Mass. 70, 75 (1985). This action, by contrast, involves a

dispute between individuals and businesses. Accordingly, the

plaintiffs need only allege injuries that are particularized,

nonspeculative, and personal to them.7

For the same reason, we need not decide, for purposes of

this jurisdictional inquiry, whether the plaintiffs have stated

plausible claims for relief. In other contexts, jurisdictional

7 If a plaintiff sues a defendant for violation of a law,
regulation, or constitutional provision, the alleged injury must
also fall "within the area of concern of the statute, regulatory
scheme, or constitutional guarantee under which the injurious
action has occurred." Doe No. 1 v. Secretary of Educ., 479
Mass. 375, 386 (2018). The plaintiffs in this case assert only
one violation of a statute, MUSA, and the alleged theft of their
savings falls within that statute's area of concern. The area
of concern test does not apply to the plaintiffs' common-law
claims for conversion, breach of fiduciary duty, and negligence.
10

facts may intertwine with the merits of a party's claims.

Compare Friedman v. Conservation Comm'n of Edgartown, 62 Mass.

App. Ct. 539, 543 & n.6 (2004) (merits of dispute were

"intertwined to some degree" with jurisdictional question

whether plaintiffs had "suffered injury to a protected legal

interest"), with Marashlian v. Zoning Bd. of Appeals of

Newburyport, 421 Mass. 719, 722-723 (1996) (distinguishing

between plaintiffs' "success on the merits" and status as

"person aggrieved" under G. L. c. 40A, § 17, for purposes of

challenging zoning decision). Not so here. Because the

plaintiffs' allegations of misappropriated funds are

particularized, personal, and nonspeculative, the court has

jurisdiction to decide their claims and the complaint should not

have been dismissed under rule 12 (b) (1).

b. The defendants' rule 12 (b) (6) motions. Even though

we conclude that the complaint should not have been dismissed

under rule 12 (b) (1) for lack of subject matter jurisdiction,

we have discretion to consider the defendants' alternative

arguments for dismissal under rule 12 (b) (6). See Chang v.

Winklevoss, 95 Mass. App. Ct. 202, 215 (2019).8 To survive a

8 Because the defendants have not cross-appealed, they could
not have obtained, on this appeal by the plaintiffs, a dismissal
of the plaintiffs' claims with prejudice, as that would have
amounted to "a judgment more favorable to [them] than the
11

motion to dismiss under rule 12 (b) (6), plaintiffs "must

plausibly allege an entitlement to relief above the speculative

level." Hornibrook v. Richard, 488 Mass. 74, 78 (2021), citing

Iannacchino v. Ford Motor Co., 451 Mass. 623, 636 (2008).

"While a complaint need not contain 'detailed factual

allegations,' it 'requires more than labels and conclusions.'"

Cannata v. Mashpee, 496 Mass. 188, 191 (2025), quoting

Iannacchino, supra. "What is required at the pleading stage are

factual 'allegations plausibly suggesting (not merely consistent

with)' an entitlement to relief." Iannacchino, supra, quoting

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557 (2007).

As the United States Supreme Court has explained in

discussing the analogous Federal standard, determining whether a

complaint states a plausible claim for relief is "a context-

specific task that requires the reviewing court to draw on its

judicial experience and common sense." Ashcroft v. Iqbal, 556

U.S. 662, 679 (2009). Here, we share the judge's concern that

the plaintiffs' complaint "leaves us guessing" as to how

McGonigle allegedly stole from them. Even though the complaint

alleges that McGonigle misappropriated money from the accounts

of "his clients," induced "clients" to transfer funds to him,

judgment entered below." See Boston Edison Co. v. Boston Redev.
Auth., 374 Mass. 37, 43 n.5 (1977).
12

and comingled "client funds" in his investment business account,

it does not specify what McGonigle did with the plaintiffs'

funds. Instead, it makes only conclusory assertions with

respect to the theft of those funds, and also fails to allege

when the thefts occurred, which is key to understanding what

claims each plaintiff may have against each defendant in light

of McGonigle's change in employers in 2018.9

Notwithstanding this concern, we cannot affirm the judgment

of dismissal under the alternative ground of rule 12 (b) (6).

Under Mass. R. Civ. P. 12 (b), the judge must first decide how

to respond to the defendants' reliance on material outside the

pleading in support of their rule 12 (b) (6) motions.

Consideration of a rule 12 (b) (6) motion is limited to

"the allegations in the complaint, although matters of public

record, orders, items appearing in the record of the case, and

exhibits attached to the complaint, also may be taken into

account" (citation omitted). Schaer v. Brandeis Univ., 432

Mass. 474, 477 (2000). See Golchin v. Liberty Mut. Ins. Co.,

9 Although the judge wrote that the plaintiffs do not
contend "that they could amend their complaint to add factual
allegations sufficient to show that they have standing to sue
SII Investments or LPL Financial," their counsel informed this
court that they can provide more details regarding McGonigle's
theft of their funds in a further amended complaint. The
plaintiffs may wish to consider seeking leave to amend for that
purpose on remand.
13

460 Mass. 222, 224 (2011), quoting Marram v. Kobrick Offshore

Fund, Ltd., 442 Mass. 43, 45 n.4 (2004) (movant under rule

12 (b) (6) may also rely on documents that plaintiff had notice

of "and relied on . . . in framing the complaint"). Both

defendants rely on declarations from LPL Financial employees

that purport to "refute" the allegation that LPL Financial had a

customer relationship with the Johnsons and King. SII

Investments relies on other outside-the-pleading material,

including its 1998 registered representative agreement with

McGonigle and its customer agreements with the plaintiffs. None

of that evidence may be considered under rule 12 (b) (6).10

Nor can we disentangle the defendants' arguments for

dismissal based on the purported inadequacy of the complaint

from their arguments based on the outside-the-pleading material.

Even now, the parties cite this material throughout their briefs

and in tandem with their challenges to the plaintiffs'

allegations. For example, SII Investments contends that, even

though the complaint "seeks to hold Defendants liable for

10LPL Financial also contended that the judge could
consider documents from the FINRA arbitration involving Hladik
because the plaintiffs relied on them in framing their
complaint. See Marram, 442 Mass. at 45 n.4. Because, as the
plaintiffs stated in their complaint, Hladik "does not bring
claims against LPL," there was no justification for LPL
Financial to introduce those documents in support of its rule
12 (b) (6) motion.
14

McGonigle's conduct simply because McGonigle was allegedly

associated with Defendants at various times when he committed

the theft," its affidavit and attached materials (which the

defendants included in their supplemental record appendix) show

that "McGonigle engaged in other business activities wholly

unrelated to SII," and that the plaintiffs were informed through

their customer agreements that McGonigle was an independent

contractor and "his contractual authority was limited to selling

securities approved by the firm." For its part, LPL Financial

contends that we should discount the plaintiffs' allegations

that they were its customers, both because the allegations are

conclusory and because its employees' declarations assert that

they could not "locate account statements or account opening

documents for the Johnsons or King."

Under rule 12 (b) (6), if "'matters outside the pleading

are presented to and not excluded by the court, the motion shall

be treated as one for summary judgment' rather than as one to

dismiss." Golchin, 460 Mass. at 224, quoting Mass. R. Civ. P.

12 (b). See Rawan v. Massad, 80 Mass. App. Ct. 826, 828 (2011)

("By submitting these matters outside the pleadings together

with their motions, the [defendants] invited the judge to treat

their motion to dismiss as one for summary judgment"). To be

sure, "[n]othing requires the judge to accept the extraneous

material; a possible alternative is to reject the proffer and
15

handle the matter as a straight [rule 12 (b) (6)] motion." J.W.

Smith & H.B. Zobel, Rules Practice § 12.15 (2d ed. 2025).

However, a failure "to exclude the outside-the-pleadings

material equates to accepting them and thus mandates treating

the motion as one for summary judgment." Id. The conversion

requirement under Mass. R. Civ. P. 12 (b) ensures that when a

court decides to consider material outside the pleading, the

plaintiff will receive notice of that decision and have the

opportunity to contest the defendant's evidence by submitting

material that controverts it.

In this case, the judge must first decide how to treat the

defendants' motions in accordance with the requirements of

Mass. R. Civ. P. 12 (b). Specifically, the judge must decide

whether to exclude the outside-the-pleading material presented

in support of the defendants' motions or, instead, convert the

motions into ones for summary judgment. If the judge decides to

convert the motions, the plaintiffs must be given "reasonable

opportunity to present all material made pertinent to such

[motions] by Rule 56," see Mass. R. Civ. P. 12 (b), and the

judge will need to decide any motion for discovery pursuant to

Mass. R. Civ. P. 56 (f), 365 Mass. 824 (1974). Accordingly, we

vacate the judgment of dismissal and remand for further

proceedings consistent with this opinion.

So ordered.