Pridgen v. Carlson

Pridgen v. Carlson, 2025 NCBC 36.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
WAKE COUNTY 24CV012229-910

TAMI L. PRIDGEN,

Plaintiff,

v.
ORDER AND OPINION ON
ROY NEIL CARLSON; CARLSON DEFENDANTS ROY NEIL CARLSON
FINANCIAL SERVICES, LLC; AND CARLSON FINANCIAL
G.A. REPPLE & COMPANY; THE SERVICES, LLC’S MOTION TO
INSTITUTE FOR WEALTH DISMISS AND DEFENDANT G.A.
MANAGEMENT, LLC; REPPLE & COMPANY’S MOTION TO
INSTITUTE FOR WEALTH DISMISS IN LIEU OF ANSWER
ADVISORS, INC. f/k/a CHERRY
INVESTMENT ADVISERS, LTD.,

Defendants.

1. THIS MATTER is before the Court on the 4 October 2024 filing of

Defendants Roy Neil Carlson (Mr. Carlson) and Carlson Financial Services, LLC’s

(Carlson Financial) (collectively, the Carlson Defendants) Motion to Dismiss (the

Carlson Motion), (ECF No. 9 [Carlson Mot.]), and the 25 February 2025 filing of

Defendant G.A. Repple & Company’s (Repple) Motion to Dismiss (the Repple Motion),

(ECF No. 12 [Repple Mot.]), (collectively, the Motions).

2. Pursuant to Rules 12(b)(1) and (b)(6) of the North Carolina Rules of Civil

Procedure (the Rule(s)), the Carlson Defendants seek to dismiss all claims alleged

against them by Plaintiff Tami L. Pridgen (Ms. Pridgen). (Carlson Mot. 1.) Pursuant

to Rule 12(b)(6), Repple seeks to dismiss all claims alleged against it by Ms. Pridgen.

(Repple Mot. 1.)
3. For the reasons set forth herein, the Court GRANTS in part and DENIES

in part the Motions.

Mauney PLLC, by Gary V. Mauney, for Plaintiff Tami L. Pridgen.

Michael Best & Friedrich LLP, by Justin G. May and Joseph Lucas
Taylor, for Defendants Roy Neil Carlson and Carlson Financial
Services, LLC.

Hall Booth Smith, P.C., by Clark W. Goodman and Charles Jake
Taylor, for Defendant G.A. Repple & Company.

Robinson, Chief Judge.

I. INTRODUCTION

4. This action arises out of Ms. Pridgen’s contention that Mr. Carlson, her

investment advisor, made fraudulent statements to induce her to enter an investment

advisor relationship with him. Ms. Pridgen also alleges that Mr. Carlson made

fraudulent statements throughout their relationship regarding his status as a

registered investment advisor and was not forthcoming when Ms. Pridgen inquired

about the state of her investments. Ms. Pridgen alleges that Repple and Carlson

Financial agreed to manage her investment profiles through Mr. Carlson, thereby

also becoming responsible for Mr. Carlson’s fraudulent acts.

II. FACTUAL BACKGROUND

5. The Court does not make findings of fact on the Motions. Rather, the Court

recites the allegations asserted in the Complaint that are relevant to the Court’s

determination of the Motions.
A. The Parties

6. Ms. Pridgen is an individual resident of Nash County, North Carolina.

(Compl. ¶ 229, ECF No. 2 [Compl.].) Ms. Pridgen has little to no financial expertise

and relied on her husband to make the primary financial decisions for her and her

family. (Compl. ¶¶ 2–3.)

7. Mr. Carlson is an individual resident of Wake County, North Carolina.

(Compl. ¶ 230.) Mr. Carlson is the owner of Carlson Financial and has been a

registered investment advisor since at least 2004. (Compl. ¶ 8.)

8. Carlson Financial is a registered investment advisor firm located in

Raleigh, North Carolina. (Compl. ¶ 231.)

9. Repple is a North Carolina corporation with offices located in Raleigh.

(Compl. ¶ 232.) Mr. Carlson and Carlson Financial were agents of Repple until June

2013. (Compl. ¶¶ 225, 232.)

10. In July of 2007, Ms. Pridgen’s husband died—leaving her approximately

$1.2 million in life insurance policy proceeds and $1.3 million from his 401(k) and

retirement plan. (Compl. ¶ 1.) Soon thereafter, Ms. Pridgen began looking for a

financial advisor. (Compl. ¶ 5.) In or around October 2007, one of Ms. Pridgen’s

friends recommended she reach out to Thomas H. Smith (Mr. Smith), a registered

financial advisor that went to the same church. (Compl. ¶ 6.)

11. During their initial meeting, Mr. Smith explained to Ms. Pridgen that since

he was new to investment advising, he was currently being trained by Mr. Carlson.

(Compl. ¶ 6.) Thus, he stated, if Mr. Smith and Ms. Pridgen established an
investment relationship, Mr. Carlson would be making the major decisions and acting

as her registered investment advisor. (Compl. ¶ 7.) In October 2007, Ms. Pridgen

attended a series of meetings with Mr. Carlson and Mr. Smith in which Mr. Carlson

explained the benefits of his investment advisor services. (Compl. ¶ 10.)

B. Ms. Pridgen’s Engagement of Mr. Carlson and Carlson Financial

12. During the October 2007 meetings, Mr. Carlson made the following

representations:

a. Mr. Carlson and Carlson Financial were formally associated with

Repple as federally and state registered investment advisor

representatives (RIA). (Compl. ¶ 9.)

b. Repple would be acting as an auditor or supervisor of Mr. Carlson’s

work, ensuring the quality, transparency, and professionalism of any

investments made. (Compl. ¶ 11.)

c. Mr. Carlson, Carlson Financial, and Mr. Smith would be acting and

operating at all times as Ms. Pridgen’s fiduciaries. (Compl. ¶ 12.)

d. Mr. Carlson, Mr. Smith, and Carlson Financial would always put Ms.

Pridgen’s interests first and would act with transparency with respect

to her investments. (Compl. ¶ 12.)

e. Mr. Carlson, Mr. Smith, and Carlson Financial would operate as Ms.

Pridgen’s RIAs pursuant to the federal or state RIA registrations

maintained by Repple. (Compl. ¶ 12.)
f. Mr. Carlson had considerable experience and education giving him the

requisite skills and qualifications to help Ms. Pridgen manage her

money. (Compl. ¶ 13.)

13. Mr. Carlson further represented that his investment philosophy was

“Christ-centered” and “faith-based,” meaning that the investments would be aligned

with Ms. Pridgen’s faith. (Compl. ¶ 15.) This representation appealed to Ms. Pridgen

as she is a devout Christian who was looking for advice from someone that shared

her religious beliefs. (Compl. ¶ 4.)

14. During the October 2007 meetings, Mr. Carlson provided Ms. Pridgen with

an SEC Form ADV advising Ms. Pridgen that the “Advisers Act imposes a fiduciary

duty on investment advisers,” and thus Mr. Carlson, Mr. Smith, Carlson Financial,

and Repple would operate at all times as her fiduciaries. (Compl. ¶ 22.) Ms. Pridgen

reasonably relied on these assurances and believed that Mr. Carlson, Carlson

Financial, and Repple would act in her best interests. (Compl. ¶ 24.)

15. On 1 November 2007, based on Mr. Carlson’s representations, Ms. Pridgen

engaged Mr. Carlson and Carlson Financial as her RIAs. (Compl. ¶ 25.) Through the

engagement agreement, Mr. Carlson and Carlson Financial assumed total

discretionary control over Ms. Pridgen’s investment portfolio. (Compl. ¶ 53.)

16. Mr. Carlson further promised that Ms. Pridgen’s money would be invested

in conservative investments as she had minimal outside work history. (Compl. ¶ 55.)

Prior to Ms. Pridgen’s engagement of Mr. Carlson, Mr. Carlson presented Ms. Pridgen

with a set of portfolio recommendations. He stated that by investing in “Land
Banking” investments, “Church Bonds,” and “Corporate & Municipal Bonds,” she

could expect to yield about $78,500 per year, which would be enough for her and her

family to live on. (Compl. ¶ 57.)

17. Ms. Pridgen received monthly investment statements that seemed

consistent with these representations. (Compl. ¶ 59.)

C. Ms. Pridgen’s Investments

18. Mr. Carlson invested Ms. Pridgen’s funds in an array of private

investments, which included “fixed income corporate bonds” or “church bonds” as well

as commercial real estate ventures. (Compl. ¶¶ 64, 66.) Virtually none of these

private investments underwent regular financial statement audits to determine

whether they were compliant with Generally Accepted Accounting Principles

(GAAP). (Compl. ¶ 68.)

19. Mr. Carlson kept many of the private investments at or above their costs

on Ms. Pridgen’s monthly statements and reported to Ms. Pridgen that the

investments were yielding the expected returns. (Compl. ¶ 73.) Mr. Carlson was

responsible for performing the due diligence on these investments and took a

substantial fee from Ms. Pridgen’s funds to do just that. (Compl. ¶¶ 70–71.)

20. However, Ms. Pridgen alleges that Mr. Carlson was cashing out her assets

and falsely representing that her investments were generating enough money to live

on. (Compl. ¶ 74.)

21. The private investments were not subject to internal control audits, and no

reasonably current appraisals were conducted. (Compl. ¶ 75.) Mr. Carlson would
place artificial and inflated rates on these private investments, failing to keep track

of the accurate values. (Compl. ¶ 81.) Some of the investments were even recorded

as “unavailable,” a term which Mr. Carlson represented meant only that the

investment was difficult to value which was normal for private investments. (Compl.

¶¶ 82, 103.) He stated “[t]hat does not mean they are without value[,] it means that

the value cannot be calculated now[.]” (Compl. ¶ 119.)

22. When Ms. Pridgen asked about the status of her investments, Mr. Carlson

stated that they remained valuable and that everything was fine. (Compl. ¶¶ 90,

143.) When some of the companies Mr. Carlson invested Ms. Pridgen’s funds in went

into bankruptcy, Mr. Carlson represented that these events made her investments

more valuable because the underlying real estate would be repurposed. (Compl.

¶ 94.) Ms. Pridgen was unable to ascertain the true value of her investments as they

were not listed on a public exchange. (Compl. ¶ 96.)

23. Through June 2013, Ms. Pridgen received monthly statements from Repple

that were sent out with Mr. Carlson’s authority. (Compl. ¶ 98.) Repple and Mr.

Carlson assessed RIA fees of up to 2.15% from the reported market values on these

statements. (Compl. ¶ 100.) Mr. Carlson continued to operate as an RIA through

Repple until June 2013. (Compl. ¶ 225.)

24. Following Mr. Carlson’s departure from Repple, Ms. Pridgen’s Repple

account became a “house” account, meaning no advisor was assigned to the account

and no advisory or investment fees were charged to Ms. Pridgen. (Aff. Glenn A.

Repple ¶¶ 4–5, ECF No. 41 [Repple Aff.].) A $35 annual fee was taken from each
investment in the Repple account through its closing in 2021. This annual fee was

paid to National Financial Services (NFS), the custodian of Ms. Pridgen’s Repple

account. (Repple Aff. ¶ 4.)

1. DBSI Investments

25. Mr. Carlson made investments on Ms. Pridgen’s behalf in “DBSI

Cavanaugh IV” (DBSI), which was a group of tenant-in-common investments with

value derived from underlying real estate holdings. (Compl. ¶ 105.) Over the course

of Mr. Carlson and Ms. Pridgen’s relationship, Mr. Carlson purchased 150,000 shares

of DBSI for Ms. Pridgen. (Compl. ¶ 105.)

26. Ms. Pridgen’s monthly statements reported the DBSI investments had

value, but the company had actually been maintaining little to no corporate

formalities since its creation. (Compl. ¶ 106.) DBSI was being fully supported by

investments and was only able to operate by the cash flow from new investors.

(Compl. ¶¶ 107, 130.)

27. DBSI has never produced audited financial statements prepared according

to GAAP, a fact which Mr. Carlson was obligated to investigate. (Compl. ¶¶ 108–09.)

Nonetheless, Mr. Carlson and Repple reported to Ms. Pridgen each month a stated

value for these investments. (Compl. ¶ 106.) Without corporate formalities, GAAP

financials, or additional investigation by Mr. Carlson, there was no factual basis for

Mr. Carlson and Repple’s valuation. (Compl. ¶¶ 106, 108–09.)

28. However, DBSI was marking up the values of its real estate holdings by

approximately 20% and then using that mark-up to pay sales commissions to anyone
bringing in investors, which included Mr. Carlson and Repple. (Compl. ¶ 110.) This

commission structure was not disclosed to Ms. Pridgen. (Compl. ¶ 111.) Additionally,

this commission far exceeded the fixed 2.15% of Ms. Pridgen’s managed assets that

Mr. Carlson and Repple were supposed to receive. (Compl. ¶ 111.)

29. By the end of 2008, DBSI was bankrupt. A bankruptcy investigator found

that DBSI never “had any reasonable likelihood of generating income sufficient to

ever repay” its obligations. (Compl. ¶ 112.)

30. On 17 November 2009, Glenn A. Repple (Mr. Repple), Repple’s president,

informed Ms. Pridgen in a written letter of DBSI’s bankruptcy. Mr. Repple told Ms.

Pridgen that any “anger” or “blame” could not be directed toward Repple or the RIAs

because they “have not . . . breached [their] trust with you.” Mr. Repple also stated

that Repple and its RIAs were “dedicating time and resources to assisting and

representing [their] investors in the DBSI recovery efforts.” Ms. Pridgen believed

what she was being told. (Compl. ¶¶ 116–17.)

31. Further, when Ms. Pridgen asked Mr. Carlson about the bankruptcy, he

stated it would make the investments worth even more as it removed DBSI’s

management fees and increased the amount of income flowing from the investment.

(Compl. ¶¶ 124, 135.)

32. Even after the bankruptcy and the subsequent November 2009 letter from

Mr. Repple, Mr. Carlson and Repple continued to include DBSI on Ms. Pridgen’s

monthly account statements and described the market value of the investment as

“unavailable.” (Compl. ¶ 118.) Mr. Carlson also told Ms. Pridgen there “was no need
for any concern” because the investment was “[Securities Investor Protection

Corporation] SIPC insured.” (Compl. ¶ 120.) In reality, the DBSI investments and

other investments on Ms. Pridgen’s portfolio were not insured. (Compl. ¶¶ 121, 261.)

33. Mr. Carlson continued to provide statements to Ms. Pridgen reflecting

minimal or no loss on the DBSI investments. Specifically, on 8 January 2013, Mr.

Carlson sent Ms. Pridgen a statement representing that one of her DBSI investments,

“DBSI Hernando South II LLC,” remained at the full value of $600,000. (Compl.

¶¶ 123, 128.)

34. During this time, the DBSI investments paid Mr. Carlson through

commissions and other compensation. Because of this, Mr. Carlson also inflated the

managed assets fee he charged Ms. Pridgen while he assured her that the investment

was secure, valuable, and appropriate. (Compl. ¶ 133.)

35. Mr. Carlson never disclosed that the DBSI investments were without

material value, that the bankruptcy investigator discovered fraud at DBSI, or that

Mr. Carlson had taken no actions to mitigate any investment losses. (Compl. ¶ 136.)

2. CNL Lifestyle Properties Investment

36. Another investment made on Ms. Pridgen’s behalf was in “CNL Lifestyle

Properties Inc.” (CNL). When the CNL investment appeared to go down in value on

Ms. Pridgen’s monthly statements, Mr. Carlson told Ms. Pridgen this was a product

of CNL being a “[real estate investment trust] REIT [that] has stopped raising assets”

and needed to have an evaluation done by an independent accounting firm. (Compl.

¶ 137.)
37. Mr. Carlson told Ms. Pridgen this was “encour[aging]” and that CNL was

taking steps to “ensure maximum value when [the] asset is sold or goes public.”

(Compl. ¶ 138.) However, CNL was actually in severe financial condition because of

its concentration of speculative and illiquid real estate. (Compl. ¶ 139.) In 2014, CNL

published financial information, which was available to Mr. Carlson, that indicated

the values assigned by Mr. Carlson and Repple were false and unreliable. (Compl.

¶ 141.)

38. On 25 April 2016, Mr. Carlson informed Ms. Pridgen that CNL had “become

a burden to manage” but that he was working to get things “straighten[ed] out both

[as to] the custodial issues and reporting moving forward.” He stated that he “would

keep [Ms. Pridgen] posted” as to his progress. (Compl. ¶ 140.)

39. Sometime in 2016, CNL’s auditors determined that the company’s prior

financial statements, specifically for 2015, had been misstated and needed to be

revised. By 2017, CNL’s Board of Directors adopted a plan of dissolution due to the

company’s desperate financial condition. Mr. Carlson did not disclose this

information to Ms. Pridgen. (Compl. ¶ 141.)

3. The Madison Park Investment

40. Another investment made by Mr. Carlson on Ms. Pridgen’s behalf was an

investment in Madison Park Church of God (Madison Park). The Madison Park

investment represented real estate in a down real estate market. (Compl. ¶ 142.)

41. When Ms. Pridgen asked Mr. Carlson about the status of her Madison Park

investment, Mr. Carlson stated that the investment was “doing just fine,” that the
investment was increasingly valuable, and that Madison Park was “current on [all]

interest payments” even though Ms. Pridgen’s account statements showed the

market value as “unavailable.” (Compl. ¶ 143.) Mr. Carlson’s answers made Ms.

Pridgen believe she was incapable of understanding the information he was

providing, and she felt intimidated. (Compl. ¶ 144.)

42. On 7 July 2013, Madison Park declared Chapter 11 bankruptcy. Ms.

Pridgen was unaware of this development. On her last account statement that

included Madison Park, dated December 2012, Mr. Carlson reported that the value

of her 7.9% Madison Park bonds was designated as “unavailable.” (Compl. ¶ 149.)

43. In mid-2013, once Mr. Carlson changed RIA firms to the Institute for

Wealth Advisors, Inc. (IWAI), Mr. Carlson changed the name of Madison Park on Ms.

Pridgen’s account statements to Kingdom Trust. Even though Madison Park filed for

bankruptcy, Ms. Pridgen’s account statements showed her investment in the

Kingdom Trust at nearly full value through at least 31 January 2018. (Compl.

¶¶ 149–50.)

4. Worldview Community Church Bonds

44. On 8 January 2013, Mr. Carlson provided Ms. Pridgen with a document

entitled “Combined Account Portfolio” that reflected two Worldview Community

Church Bonds bearing interest at 7.5% and valued at $49,893.75 and $53,589.58.

(Compl. ¶ 151.)
45. Through at least December 2015, Mr. Carlson sent Kingdom Trust

statements representing that the Worldview bonds were worth $48,600 and $52,200.

(Compl. ¶ 151.)

46. However, Worldview had been in financial distress and had not made an

interest payment since at least 31 March 2011. This was never disclosed to Ms.

Pridgen, even though she was told that the bonds were maintaining their value and

were solid investments. (Compl. ¶ 152.)

5. The Lifepoint Investments

47. On 8 January 2013, Mr. Carlson provided Ms. Pridgen with a chart which

listed as investments in her account three bonds issued by Lifepoint Community

Church (Lifepoint Community Bonds) and Lifepoint Village–Southhaven (together

with the Lifepoint Community Bonds, the Lifepoint bonds) valued at $74,905.33,

$38,252.86, and $22,606.25. (Compl. ¶ 153.)

48. Mr. Carlson claimed that the year-over-year percentage change in value of

the Lifepoint bonds was 1.6%, 1.87%, and 2.3% and sent Ms. Pridgen statements with

this same information. (Compl. ¶ 153.)

49. However, the Lifepoint Community Church filed for Chapter 11 bankruptcy

on 18 May 2012 and sent a letter on 21 May 2012 announcing plans to liquidate the

real estate of Lifepoint Village–Southhaven. Instead of disclosing this information to

Ms. Pridgen, Mr. Carlson continued to include the Lifepoint bonds on Ms. Pridgen’s

monthly account statements. (Compl. ¶¶ 155–56.) As recently as 31 March 2020, the
account statements represented that the Lifepoint Community Bonds had increased

in value to $77,376 and $39,675.70. 1 (Compl. ¶ 154.)

50. Mr. Carlson continued to represent to Ms. Pridgen that the Lifepoint bonds

had not materially decreased in value, that the bonds were sound investments, and

that they would continue to provide suitable income. (Compl. ¶ 156.)

6. Capstone Church Bonds Investments

51. Starting on or about 4 December 2007, Mr. Carlson invested Ms. Pridgen’s

funds in the Capstone Church Bond Fund (Capstone). (Compl. ¶ 157.) Capstone was

primarily invested in church-related obligations with church-related real estate

holdings as collateral. (Compl. ¶ 159.)

52. Capstone did not have an established secondary market, meaning there

could not be a represented market value on her statements. (Compl. ¶¶ 158–59.)

However, a market value was provided on Ms. Pridgen’s monthly statements.

(Compl. ¶ 159.)

53. On 28 February 2007, Capstone’s auditor discovered irregularities in

Capstone’s internal controls that prevented Capstone from being qualified as a

regulated investment company for federal income tax purposes. (Compl. ¶¶ 160–61.)

These findings caused Capstone to part ways with its auditor. (Compl. ¶ 160.)

54. Capstone Asset Planning Company (Capstone Asset) was the principal

underwriter and distributor of shares in the Capstone fund. (Compl. ¶ 163.) On

1 While the Complaint alleges in paragraph 153 that Ms. Pridgen purchased three Lifepoint

bonds (see Compl. ¶ 153), the next paragraph of the Complaint alleges that two of the bonds
had increased in value.
approximately 19 October 2013, Capstone Asset was sanctioned by the United States

Financial Regulatory Authority (FINRA) for publishing misleading statements about

Capstone’s performance and making false claims between January and May 2009

that Capstone’s church bonds were analogous to corporate bonds. (Compl. ¶¶ 162–

63.)

55. However, despite Capstone’s financial situation, on Ms. Pridgen’s October

2013 statement, Mr. Carlson represented that her Capstone investments remained

at the following values: $12,673.18 as of 2012 and $12,658.17 as of 2013. (Compl.

¶ 165.) Mr. Carlson continued to assess his RIA management fee based on the

inflated values shown on the statements. (Compl. ¶ 166.)

56. As of 31 March 2019, Capstone, now called the Church Capital Fund,

reported to the SEC a $6,551,198 capital loss carrying forward. (Compl. ¶ 167.)

D. Mr. Carlson’s SEC Registration

57. During Mr. Carlson and Ms. Pridgen’s relationship, Mr. Carlson changed

RIA firms and had complications with renewing his investment advisor registration.

From 1 November 2007 through 21 June 2013, Mr. Carlson’s SEC filings represented

that his investment advisor registration was through Repple. (Compl. ¶ 36.) Starting

on 2 July 2013 through 30 April 2019, Mr. Carlson’s registration was reportedly

through IWAI. (Compl. ¶ 37.) Mr. Carlson informed Ms. Pridgen of this change but

stated that nothing would change about his professional obligations towards her.

(Compl. ¶ 147.)
58. On or about 30 April 2019, Mr. Carlson’s existing registration with IWAI

was terminated because IWAI was forced to withdraw its registration with the SEC.

(Compl. ¶ 177.) On 10 May 2019, Mr. Carlson filed a new investment advisor

representative registration application in North Carolina, claiming an association

with IWAI’s affiliate, the Institute for Wealth Management, LLC (the Institute).

(Compl. ¶ 38.)

59. Each application for renewal triggers an automatic review by the SEC.

(Compl. ¶ 39.) This review revealed that Mr. Carlson’s application had omitted

numerous facts, including (1) his correct and actual business address, (2) his outside

business activities, (3) that he had tax liens against him, and (4) that he had a felony

criminal conviction. (Compl. ¶ 41.) The SEC informed Mr. Carlson of these

deficiencies in a letter dated 6 June 2019. (Compl. ¶ 41.)

60. A few months later, in or about October 2019, the SEC confirmed that Mr.

Carlson had an undisclosed felony charge, a felony nolo contendere plea, and two tax

liens. (Compl. ¶ 42.) On 17 December 1985, Mr. Carlson had been arrested and

charged with felony possession of a controlled substance, to which he pled nolo

contendere. (Compl. ¶ 27.) This had never previously been disclosed to the SEC.

(Compl. ¶¶ 27–28.)

61. Mr. Carlson did not make any attempts to update his registration until

23 June 2020. (Compl. ¶ 43.) However, throughout this time he did not inform Ms.

Pridgen that any of this was occurring. Rather, Mr. Carlson continued to represent

to Ms. Pridgen that his RIA services were offered through IWAI and that his
registration was current. (Compl. ¶¶ 43, 48.) Specifically, from 1 May 2019 through

15 December 2020, Carlson Financial held itself out as “Investment Advisory Services

Offered through Institute for Wealth Management, Inc[.]” (Compl. ¶ 48.)

E. Securities Division of North Carolina Investigation

62. On the same day as Mr. Carlson’s attempts to update his registration, a

securities Form U4 was filed with the Securities Division reporting a number of Mr.

Carlson’s unreported disclosure deficiencies. (Compl. ¶ 212.) Almost a year later, on

14 March 2021, the Institute filed a securities Form U5 terminating Mr. Carlson’s

active advisor registration with it. A Form U5 is understood in the industry to mean

that the individual was encouraged to leave rather than fired. (Compl. ¶ 213.)

63. Based on Mr. Carlson’s failure to update his registration in a timely manner

or inform his clients of his lack of registration, the Securities Division sent a cease-

and-desist letter to Mr. Carlson on 26 March 2021 stating in pertinent part:

CARLSON failed to comply with the registration provisions of the Act
by transacting business as an unregistered investment adviser
representative in the State from on or about May 1, 2019 through on or
about July 31, 2020. CARLSON unlawfully generated in excess of
$450,000 in advisory management fees in North Carolina while
unregistered from on or about May 1, 2019 through on or about July 31,
2020.

(Compl. ¶ 46.)

64. The Securities Division entered an order prohibiting Mr. Carlson and

Carlson Financial from: (1) promoting themselves or operating in any way as an

unregistered investment advisor or (advisor representative); and (2) violating any
provision of the Investment Advisers Act or in willful violation of Chapter 78C of the

North Carolina Investment Advisers Act or any rule thereunder. (Compl. ¶ 215.)

65. Despite this order, Mr. Carlson continued to operate as an unregistered

investment advisor. (Compl. ¶ 216.) A second order against Mr. Carlson was entered

on 21 May 2021, in which Mr. Carlson was directed to “[i]mmediately and

permanently cease and desist from violating [N.C.G.S.] §§ 78C-16(a1), 78C-18(d),

78C-19(a)(2)(b), and 18 NCAC 06A. 1703.” (Compl. ¶¶ 217–18.) Even after this order,

Mr. Carlson continued to operate out of Carlson Financial as an unlicensed

investment advisor. (Compl. ¶ 219.) None of this was disclosed to Ms. Pridgen.

(Compl. ¶¶ 217–19.)

66. Due to his lack of registration as an investment advisor for this period, Mr.

Carlson began appending the name of Nathaniel Barton (Mr. Barton), a planning

assistant at Carlson Financial, to account statements going out to clients, including

Ms. Pridgen. (Compl. ¶ 206.) However, Mr. Carlson and Carlson Financial continued

to charge Ms. Pridgen as if Mr. Carlson was a duly registered investment advisor

through at least 2022. (Compl. ¶ 210.)

67. On 19 April 2021, Ms. Pridgen received a phone call from Mr. Barton in

which he informed her that Mr. Carlson had lost his financial advisor’s license. (Pl.’s

Opp’n Mot. Dismiss [Pl.’s Opp’n], Aff. Tami L. Pridgen ¶¶ 5, 7, ECF No. 24.1 [Pridgen

Aff.].) Further, Mr. Barton shared the online link that contained the findings of the

Secretary of State. Mr. Barton did not share any further details. (Pridgen Aff. ¶¶ 7–
8.) After the phone call, Ms. Pridgen followed up with Mr. Carlson, who responded

that the information Mr. Barton provided was not true. (Pridgen Aff. ¶ 9.)

68. However, shortly thereafter, Ms. Pridgen decided to make a change of

advisors and began looking for an attorney. (Pridgen Aff. ¶ 10; Compl. ¶ 26.) Ms.

Pridgen terminated the relationship with Mr. Carlson around July 2021. (Compl.

¶ 26.)

III. PROCEDURAL BACKGROUND

69. On 17 April 2024, Ms. Pridgen initiated this action upon the filing of the

Complaint. (ECF No. 2.)

70. The Carlson Defendants filed their Motion on 4 October 2024. (ECF No. 9.)

On 25 February 2025, Repple filed its Motion. (ECF No. 12.)

71. After full briefing, the Court held a hearing on the Motions on 9 June 2025

(the Hearing), where all parties were represented by counsel. (See ECF No. 39.)

72. The Motions have been fully briefed. The Motion is now ripe for resolution.

IV. LEGAL STANDARD

A. Rule 12(b)(6)

73. In ruling on a motion to dismiss pursuant to Rule 12(b)(6), the Court

reviews the allegations in the complaint in the light most favorable to the plaintiff.

See Christenbury Eye Ctr., P.A. v. Medflow, Inc., 370 N.C. 1, 5 (2017). The Court’s

inquiry is “whether, as a matter of law, the allegations of the complaint . . . are

sufficient to state a claim upon which relief may be granted under some legal

theory[.]” Harris v. NCNB Nat’l Bank, 85 N.C. App. 669, 670 (1987). The Court
accepts all well-pleaded factual allegations in the relevant pleading as true. See

Krawiec v. Manly, 370 N.C. 602, 606 (2018). The Court is therefore not required “to

accept as true allegations that are merely conclusory, unwarranted deductions of fact,

or unreasonable inferences.” Good Hope Hosp., Inc. v. N.C. HHS, Div. of Facility

Servs., 174 N.C. App. 266, 274 (2005) (citation omitted).

74. Furthermore, the Court “can reject allegations that are contradicted by the

documents attached, specifically referred to, or incorporated by reference in the

complaint.” Moch v. A.M. Pappas & Assocs., LLC, 251 N.C. App. 198, 206 (2016)

(citation omitted). The Court may consider these attached or incorporated documents

without converting the Rule 12(b)(6) motion into a motion for summary judgment.

Id. (citation omitted). Moreover, the Court “may properly consider documents which

are the subject of a plaintiff’s complaint and to which the complaint specifically refers

even though they are presented by the defendant.” Oberlin Cap., L.P. v. Slavin, 147

N.C. App. 52, 60 (2001) (citation omitted).

75. Our Supreme Court has observed that “[i]t is well-established that

dismissal pursuant to Rule 12(b)(6) is proper when ‘(1) the complaint on its face

reveals that no law supports the plaintiff’s claim; (2) the complaint on its face reveals

the absence of facts sufficient to make a good claim; or (3) the complaint discloses

some fact that necessarily defeats the plaintiff’s claim.’ ” Corwin v. Brit. Am. Tobacco

PLC, 371 N.C. 605, 615 (2018) (quoting Wood v. Guilford Cnty., 355 N.C. 161, 166

(2002)). This standard of review for Rule 12(b)(6) motions is the standard our
Supreme Court “routinely uses . . . in assessing the sufficiency of complaints in the

context of complex commercial litigation.” Id. at 615 n.7 (citations omitted).

B. Rule 12(b)(1)

76. A court shall dismiss the action when it appears that the court lacks subject

matter jurisdiction. N.C. R. Civ. P. 12(h)(3). A defect in subject matter jurisdiction

may be raised by a party or by the court sua sponte. Conner Bros. Mach. Co. v. Rogers,

177 N.C. App. 560, 561 (2006). “A motion to dismiss for lack of subject matter

jurisdiction is not viewed in the same manner as a motion to dismiss for failure to

state a claim upon which relief can be granted.” Tart v. Walker, 38 N.C. App. 500,

502 (1978). A court may consider matters outside the pleadings in determining

whether subject matter jurisdiction exists. Id.; Keith v. Wallerich, 201 N.C. App. 550,

554 (2009).

V. ANALYSIS

A. Limitations Period for Ms. Pridgen’s Claims

77. The Court begins by examining the applicability of the statutes of

limitations and repose in N.C.G.S. 1-15(c) and N.C.G.S. 1-52(16) to Ms. Pridgen’s

claims.

78. “A statute of limitations can provide the basis for dismissal on a Rule

12(b)(6) motion if the face of the complaint establishes that plaintiff’s claim is so

barred.” Soderlund v. N.C. Sch. of the Arts, 125 N.C. App. 386, 389 (1997) (citation

omitted). “Dismissal pursuant to Rule 12(b)(6) on the grounds that a claim is barred

by the statute of limitations is proper only when all the facts necessary to establish
that the claim is time-barred are either alleged or admitted in the complaint,

construing the complaint liberally in favor of plaintiff.” Lau v. Constable, 2017 NCBC

LEXIS 10, at *10 (N.C. Super. Ct. Feb. 7, 2017) (cleaned up) (citing Fox v. Sara Lee

Corp., 210 N.C. App. 706, 708–09 (2011)).

79. “Once a statute of limitations issue is properly raised by a defendant, ‘the

burden of showing that the action was instituted within the prescribed period is on

the plaintiff.’ ” Beam v. Sunset Fin. Servs., Inc., 2019 NCBC LEXIS 56, at *32 (N.C.

Super. Ct. Sep. 3, 2019) (quoting Horton v. Carolina Medicorp, 344 N.C. 133, 136

(1996) (citation omitted)). “A plaintiff sustains this burden by showing that the

relevant statute of limitations has not expired.” Id. (citation omitted).

80. The Carlson Defendants and Repple argue that the fraud claims should be

analyzed under the statute of limitations provided in N.C.G.S. § 1-15(c) because

investment advisory services are considered professional services, and the fraud

claims are in essence claims of professional malpractice. (Memo. Supp. Roy Neil

Carlson & Carlson Financial Services, LLC’s Mot. Dismiss 6, ECF No. 19 [Carlson

Memo.]; Def. G.A. Repple & Company’s Br. Supp. Mot. Dismiss Pl.’s Compl. 7–8, ECF

No. 20 [Repple Br.].)

81. Ms. Pridgen responds that the claims alleged are not claims of professional

malpractice and Defendants are not considered professionals under

N.C.G.S. § 1-15(c). (Pl.’s Opp’n 21–23, ECF No. 24.)

82. N.C.G.S. § 1-15(c) imposes the following statute of limitations:

(c) Except where otherwise provided by statute, a cause of action for
malpractice arising out of the performance of or failure to perform
professional services shall be deemed to accrue at the time of the
occurrence of the last act of the defendant giving rise to the cause of
action[.]

N.C.G.S. § 1-15(c).

83. The Court first notes that the parties have not cited any case, and the Court

has found none, in which this statute has been applied to investment advisors.

84. This Court has stated that there is no “authority to support the legal

proposition that a professional negligence claim exists in North Carolina for the

negligent acts of investment advisors.” Burton v. Hobart Fin. Grp., Inc., 2024 NCBC

LEXIS 34, at *51 (N.C. Super. Ct. Feb. 26, 2024). Further, the Supreme Court of

North Carolina has determined that under N.C.G.S. § 1-15(c), the term professional

services refers to “those services where a professional relationship exists between

plaintiff and defendant—such as a physician-patient or attorney-client relationship.”

Barger v. McCoy Hillard & Parks, 346 N.C. 650, 665 (1997) (quoting Doe v. Am. Nat’l

Red Cross, 798 F. Supp. 301, 306 (E.D.N.C. 1992) (footnote omitted)). The Court is

not inclined to expand the scope of professional services under section 1-15(c) to

include investment advisors in the absence of persuasive authority.

85. Moreover, even if this Court were to find that this statute applies to claims

of professional negligence arising from investment advisory services, it would not

apply to Ms. Pridgen’s fraud claims. See Provectus Biopharmaceuticals, Inc. v. RSM

US LLP, 2018 NCBC LEXIS 101, at *29 (N.C. Super. Ct. Sep. 28, 2018) (“Fraud by a

professional is not within the scope of section 1-15(c).”). Fraud claims are governed

by N.C.G.S. § 1-52(9). Id.
86. Defendants contend that even though Ms. Pridgen has alleged claims for

fraud, those claims are “in essence” claims for professional malpractice. The Court

does not agree. Defendants rely on Fender v. Deaton, in which the North Carolina

Court of Appeals determined that fraud claims were “in essence claims of legal

malpractice” when plaintiff alleged the defendant failed to accept or return calls,

failed to discuss the cause of action with plaintiff, and dismissed the case without

knowledge or consent of plaintiff. 153 N.C. App. 187, 190–91 (2002).

87. The claims in Fender are not analogous to the case at bar. Here, Ms.

Pridgen’s fraud claims revolve around breaches of fiduciary duty from

representations made by Defendants regarding her investments. These are not

claims for mere malpractice by failing to perform their investment duties. Thus, the

fraud claims will be analyzed as fraud claims, and N.C.G.S. § 1-15(c) is not applicable

in this case.

88. In the alternative, Defendants raised an unbriefed argument at the

Hearing that the statute of repose in N.C.G.S. § 1-52(16) applies. Because

Defendants did not properly brief this issue, the Court will not consider it.

89. The Court now turns to Defendants’ substantive arguments and will

analyze each claim in turn.

B. Counts One, Two, Three, and Four: Fraud

90. Ms. Pridgen has asserted four claims for fraud—Count One against all

Defendants for fraudulent inducement, (Compl. ¶¶ 239–54), Count Two against all

Defendants for fraudulent concealment, (Compl. ¶¶ 255–75), Count Three against all
Defendants for constructive fraud, (Compl. ¶¶ 276–91) and Count Four against all

Defendants for common law fraud, (Compl. ¶¶ 292–310).

91. Defendants argue that Ms. Pridgen’s fraud claims are barred by the statute

of limitations because Ms. Pridgen had ample reason to investigate Mr. Carlson’s

actions as early as 2009. (Repple Br. 15.) Even in the light most favorable to Ms.

Pridgen, Defendants contend that Ms. Pridgen’s claims accrued no later than May

2015 or April 2016. (Carlson Memo. 9; Repple Br. 15.)

92. In the alternative, the Carlson Defendants contend that even if the fraud

claims are not time barred, the claims are not pled with sufficient particularity as

required under Rule 9(b). (Carlson Memo. 10–12.) Further, Repple contends that all

of Ms. Pridgen’s allegations against it are based on its association with Mr. Carlson,

a relationship which ended in 2013. (Repple Br. 8.)

93. Repple contends that it cannot be vicariously liable under the doctrine of

respondeat superior as all the alleged fraudulent statements were made by Mr.

Carlson and not Repple except for the 17 November 2009 letter sent by Mr. Repple.

Repple argues that Ms. Pridgen is trying to impute liability on it based on

representations made by Mr. Carlson. (Repple Br. 9–10, 9 n.2.)

94. “Under the doctrine of respondeat superior, a principal is liable for the torts

of its agent which are committed within the scope of the agent’s authority, when the

principal retains the right to control and direct the manner in which the agent works.

Of course, respondeat superior does not apply unless an agency relationship . . .
exists.” Sutton v. Driver, 211 N.C. App. 92, 107 (2011) (quoting Holleman v. Aiken,

193 N.C. App. 484, 504 (2008)).

95. The Court of Appeals has stated that “intentional tortious acts are rarely

considered to be within the scope of an employee’s employment.” B.B. Walker Co. v.

Burns Int’l Sec. Servs., Inc., 108 N.C. App. 562, 566 (1993). However, “a principal is

liable ‘to third parties for the fraud [committed by] its agent while acting within’ the

scope of his or her authority.” BDM Invs. v. Lenhil, Inc., 2014 NCBC LEXIS 6, at *53

(N.C. Super. Ct. Mar. 20, 2014) (quoting White v. Consol. Plan., Inc., 166 N.C. App.

283, 297 (2004)). “A principal who puts a servant or other agent in a position which

enables the agent, while apparently acting within his authority, to commit a fraud

upon third persons is subject to liability to such third persons for the fraud.” White,

166 N.C. App. at 298 (citations omitted). Thus, it is irrelevant “that the servant or

other agent acts entirely for his own purposes, unless the [victim] had notice of this.”

Id. (citations omitted).

96. Here, Mr. Carlson’s alleged fraudulent statements relate to Ms. Pridgen’s

investment portfolio during the scope of her relationship with Mr. Carlson as her

investment advisor. Mr. Carlson was authorized to send out monthly statements to

Ms. Pridgen and to discuss the financial status of her investments. Further, there is

no indication that Ms. Pridgen would have known that Mr. Carlson was not acting

within his authority given by Repple as he explained that Repple “would be acting as

an auditor or supervisor of [his] work.” (Compl. ¶ 11.) Thus, Mr. Carlson was

performing the specific duties he was hired to accomplish, and therefore, at this
preliminary stage, Ms. Pridgen has alleged enough to show Repple can be held liable

for Mr. Carlson’s actions as its agent. 2

1. Counts One and Four: Fraudulent Inducement and Common
Law Fraud

97. As a preliminary matter, Defendants argue that the statute of limitations

and repose bar Ms. Pridgen’s fraud claims. As analyzed above, the statute of

limitations and repose in N.C.G.S. § 1-15(c) is not applicable in this case. Thus, the

general statute of limitations for fraud is applicable.

98. The statute of limitations for fraud claims is three years.

N.C.G.S. § 1-52(9). Typically, the statute of limitations begins to run at the time that

the injury occurs. Matthieu v. Piedmont Nat. Gas Co., 269 N.C. 212, 215 (1967).

However, fraud claims are subject to the discovery rule. See N.C.G.S. § 1-52(9) (Fraud

claims do not accrue “until the discovery by the aggrieved party of the facts

constituting the fraud or mistake.”).

99. The discovery rule “tolls the statute of limitations only until a reasonable

person should have discovered the fraud under the circumstances and in the exercise

of reasonable prudence. The particular moment that a specific plaintiff alleges he

actually discovered the fraud is irrelevant.” Taylor v. Bank of Am., N.A., 385 N.C.

783, 789 (2024) (citing Latham v. Latham, 184 N.C. 55, 66 (1922)).

2 Mr. Carlson’s association with Repple ran from 1 November 2007 until 21 June 2013.
(Compl. ¶ 36.) Thus, Repple can only be held liable for Mr. Carlson’s actions under the
doctrine of respondeat superior until Ms. Pridgen was advised that the agency relationship
was terminated. See Sutton, 211 N.C. App. at 107 (“respondeat superior does not apply unless
an agency relationship . . . exists”) (citations omitted).
100. Discovery, with respect to fraud, is defined as “actual discovery or the time

when the fraud should have been discovered in the exercise of due diligence.” Spears

v. Moore, 145 N.C. App. 706, 708 (2001). Accrual begins “at the time of discovery

regardless of the length of time between the fraudulent act or mistake and plaintiff’s

discovery of it.” Forbis v. Neal, 361 N.C. 519, 524 (2007) (quoting Feibus & Co. v.

Godley Constr. Co., 301 N.C. 294, 304 (1980) (emphasis omitted)). However, “ ‘the

failure of the defrauded person to use diligence in discovering the fraud may be

excused where there exists a relation of trust and confidence between the parties.’ ”

Vail v. Vail, 233 N.C. 109, 116 (1951).

101. “Absent undisputed circumstances that, as a matter of law, would have

alerted a reasonable person to investigate, determining when a plaintiff discovered

or should have discovered facts constituting a claim is generally an issue of fact

reserved for a jury.” Hart v. First Oak Wealth Mgmt., LLC, 2025 NCBC LEXIS 27,

at *61–62 (N.C. Super. Ct. Mar. 14, 2025) (collecting cases). However, “[a] statute of

limitation or repose may be the basis of a 12(b)(6) dismissal if on its face the complaint

reveals the claim is barred.” Forsyth Mem’l Hosp. v. Armstrong World Indus., 336

N.C. 438, 442 (1994) (citation omitted).

102. Defendants contend that no later than 2016, Ms. Pridgen was armed with

sufficient information to discover the misrepresentations at issue. Defendants direct

the Court’s attention to the 17 November 2009 letter regarding DBSI’s bankruptcy,

(Compl. ¶ 116), the 21 May 2012 letter from Lifepoint Community Church regarding

its bankruptcy, (Compl. ¶ 155), and the published statements made in 2014 and 2016
by CNL Lifestyle regarding its unreliable financial information, (Compl. ¶ 141). (See

also Carlson Memo. 8–9; Repple Br. 15.)

103. First, Ms. Pridgen alleges that she was not informed of the statements

made by CNL Lifestyle or the bankruptcy of Lifepoint Community Church as that

information was only disclosed to Mr. Carlson. (Compl. ¶¶ 141, 155.) Second, Ms.

Pridgen asserts that she did inquire about her investments—specifically when DBSI

went bankrupt, and that she was reassured that everything was fine and that these

events would increase the value of her investments. (Compl. ¶¶ 124, 135, 138, 143.)

Moreover, the alleged inflated rates on her statements led Ms. Pridgen to believe

what Mr. Carlson was saying. (Compl. ¶¶ 49, 76, 95, 166, 168, 267.) Ms. Pridgen

alleges that the earliest time she should have been alerted to investigate was April

2021, when Mr. Barton informed her of Mr. Carlson’s lack of a financial advisor’s

license. (Pridgen Aff. ¶¶ 5–7.)

104. Reading the allegations in the light most favorable to Ms. Pridgen and

based upon the discovery rule, the Court determines that, at this preliminary stage,

Ms. Pridgen has met her burden of showing that the fraud claims are not barred as a

matter of law by the applicable statute of limitations. See, e.g., Hart v. First Oak

Wealth Mgmt., LLC, 2022 NCBC LEXIS 81, at *42 (N.C. Super. Ct. July 28, 2022)

(finding at the motion to dismiss stage plaintiff’s allegations of defendants’

concealment was sufficient to rebut the statute of limitations argument); Aldridge v.

Metro. Life Ins. Co., 2019 NCBC LEXIS 116, at *52–53 (N.C. Super Ct. Dec. 31, 2019)

(concluding on a motion to dismiss that given the disputed facts about when plaintiffs
could have discovered the Ponzi schemes at issue, “[p]laintiffs’ fraud-based claims are

[not] time-barred”).

105. Turning to the substantive allegations of Ms. Pridgen’s fraud claims, Ms.

Pridgen alleges that Mr. Carlson made affirmative false representations during the

October 2007 meetings, including that he would act in Ms. Pridgen’s best interests

and that he and Carlson Financial would maintain their RIA registration.

(Compl. ¶¶ 249, 251.) These statements induced Ms. Pridgen to engage Mr. Carlson

as her investment advisor. (Compl. ¶ 190.) Further, Ms. Pridgen alleges Repple was

vicariously liable for these representations as Mr. Carlson was acting within the

scope of his agency relationship with Repple at the time of the alleged

misrepresentations. (Compl. ¶ 246.)

106. The essential elements of fraudulent inducement are: “(1) [f]alse

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.” S.N.R. Mgmt. Corp. v. Danube Partners 141, LLC, 189 N.C.

App. 601, 609 (2008).

107. Rule 9(b) requires that “the circumstances constituting fraud” be alleged

“with particularity.” N.C. R. Civ. P. 9(b). Our Supreme Court has held that “in

pleading actual fraud[,] the particularity requirement is met by alleging [the] time,

place[,] and content of the fraudulent representation, [the] identity of the person

making the representation[,] and what was obtained as a result of the fraudulent acts

or representations.” Terry v. Terry, 302 N.C. 77, 85 (1981).
108. The Carlson Defendants concede that the statements made in 2007, 2009,

2012, 2015, and 2018 were pled with sufficient particularity. (Carlson Memo. 10.)

They merely argue that the statute of limitations bars these claims. However, as

stated above, at this stage of the proceeding, Ms. Pridgen has sufficiently alleged that

her claims are not barred by the statute of limitations.

109. The fraudulent inducement claims are based on the representations made

by Mr. Carlson to Ms. Pridgen during the initial October 2007 meetings. The Carlson

Defendants concede that these allegations were alleged with sufficient particularity.

Thus, the Carlson Defendants’ Motion on this claim is DENIED.

110. Moreover, as to Repple, Ms. Pridgen alleges that Mr. Carlson was acting

within the scope of his agency at the time of the October 2007 representations. There

are no facts alleged in the Complaint which would demonstrate that Ms. Pridgen was

aware that Mr. Carlson was not acting within the scope of his authority at the

relevant time. Therefore, at this preliminary stage, Ms. Pridgen has met her burden

to demonstrate vicarious liability, and the Repple Motion is DENIED on this claim.

2. Count Two: Fraudulent Concealment

110. A claim for fraudulent concealment is governed by the same three-year

statute of limitations as a fraudulent inducement claim, and the discovery rule

applies. See N.C.G.S. § 1-52(9); Christenbury Eye Ctr., P.A. v. Medflow, Inc., 2015

NCBC LEXIS 64, at *18 (N.C. Super. Ct. June 19, 2015). Thus, as analyzed above,
at this preliminary stage, Ms. Pridgen has sufficiently alleged that the fraud claims

are not barred by the applicable statute of limitations.

111. To state a claim for fraudulent concealment, the plaintiff must plead the

same elements: “(1) [f]alse 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.” Terry, 302 N.C. at 83

(citations and quotations omitted). In addition, for fraudulent concealment, a

plaintiff must allege that defendant “had a duty to disclose material information [to

the plaintiff], as silence is fraudulent only when there is a duty to speak.” Lawrence

v. UMLIC-Five Corp., 2007 NCBC LEXIS 20, at *8 (N.C. Super. Ct. June 18, 2007).

112. This Court has acknowledged that fraudulent concealment “is, by its very

nature, difficult to plead with particularity.” Id. at *9 (quoting Breeden v. Richmond

Cmty. Coll., 171 F.R.D. 189, 195 (M.D.N.C. 1997) (internal quotation marks omitted)).

Notwithstanding that difficulty, to meet the 9(b) particularity requirements, the

plaintiff must also allege the following:

(1) the relationship [between plaintiff and defendant] giving rise to the
duty to speak; (2) the event or events triggering the duty to speak and/or
the general time period over which the relationship arose and the
fraudulent conduct occurred; (3) the general content of the information
that was withheld and the reason for its materiality; (4) the identity of
those under a duty who failed to make such disclosures; (5) what [the
defendant] gained by withholding information; (6) why plaintiff’s
reliance on the omission was both reasonable and detrimental; and (7)
the damages proximately flowing from such reliance.
Lawrence, 2007 NCBC LEXIS 20, at *9–10 (quoting Breeden, 171 F.R.D. at 195–96).

113. The allegations against the Carlson Defendants have been pled with

sufficient particularity at this stage of the proceeding. Ms. Pridgen has sufficiently

pled a fiduciary relationship between herself and both Mr. Carlson and Carlson

Financial that gave rise to a duty to speak. See infra ¶¶ 122–25; see also McKee v.

James, 2013 NCBC LEXIS 33, at *23 (N.C. Super. Ct. July 24, 2013) (a duty to speak

arises “in the context of a fiduciary relationship”). This relationship, if proven, would

give rise to a duty to disclose the material facts Mr. Carlson was aware of, including

the true value and status of Ms. Pridgen’s investments.

114. Ms. Pridgen alleges that Mr. Carlson failed to inform her of his felony

charge (Compl. ¶ 27), as well as the true value and status of her investments

(specifically those involving entities that had undergone bankruptcy proceedings)

(Compl. ¶¶ 76, 81, 110, 118, 136, 150), and when her investments were in financial

distress, (Compl. ¶¶ 136, 141, 152). Ms. Pridgen alleges that when she would ask

questions, Mr. Carlson’s answers would make her believe that “she was just not

capable of understanding that everything was just fine.” (Compl. ¶ 144.) Despite a

fiduciary relationship, she contends, Mr. Carlson and Carlson Financial failed to

disclose these material facts to her. (Compl. ¶¶ 27, 136, 152, 155, 211.) Ms. Pridgen

further alleges that Mr. Carlson and Carlson Financial profited from these inflated

rates and faulty investments. (Compl. ¶¶ 81, 133, 166, 303.)

115. Moreover, Ms. Pridgen asserts that she was completely reliant on Mr.

Carlson for investment advice as he explained that at all times he would act as her
fiduciary. (Compl. ¶¶ 23–24, 85.) Indeed, Ms. Pridgen alleges that Mr. Carlson and

Carlson Financial “assumed total discretionary control over [Ms.] Pridgen’s

investment portfolio.” (Compl. ¶ 53.) Based on these, and other similar allegations,

the Court concludes that Ms. Pridgen has sufficiently stated a claim for fraudulent

concealment against Mr. Carlson and Carlson Financial.

116. Repple argues that the claims against it are based on its supervisory role

over Mr. Carlson and that the allegations do not, by themselves, assert a direct claim

against it. (Repple Br. 9–10.) However, as stated above, Ms. Pridgen alleges that

“[Mr.] Carlson and Carlson Financial were, at relevant times, agents of Repple (i.e.,

investment adviser representatives), operating within the course and scope of that

agency.” (Compl. ¶ 232.) The Complaint alleges that Mr. Carlson sent monthly

account statements, through Repple, that contained false financial information.

(Compl. ¶¶ 98–99, 104, 303.) Thus, at this stage of the litigation, Ms. Pridgen has

satisfied the pleading requirements for a claim against Repple. See, e.g., Thrower v.

Coble Dairy Prods. Co-operative, Inc., 249 N.C. 109, 112 (“The master is liable for the

unlawful or negligent acts of his servant if about the master’s business, and if doing

or attempting to do that which he was employed to do.”).

117. Thus, the Carlson Defendants’ Motion is DENIED, and Repple’s Motion is

also DENIED to the extent the fraudulent concealment claim is based on

concealments during Repple and Mr. Carlson’s relationship.
3. Count Three: Constructive Fraud

118. “A claim of constructive fraud based upon a breach of fiduciary duty falls

under the ten-year statute of limitations contained in N.C.[G.S.] § 1-56[.]”

NationsBank v. Parker, 140 N.C. App. 106, 113 (2000). Further, the statute of

limitations accrues upon discovery. See Carlisle v. Keith, 169 N.C. App. 674, 685

(2005). Thus, based on the discovery rule, at this stage of the proceeding, Ms. Pridgen

has met her burden of showing initially that her claims are timely.

119. To establish a constructive fraud claim, a plaintiff must allege: “(1) facts

and circumstances creating a relation of trust and confidence; (2) which surrounded

the consummation of the transaction in which the defendant is alleged to have taken

advantage of the relationship; and (3) the defendant sought to benefit himself in the

transaction.” Self v. Yelton, 201 N.C. App. 653, 660 (2010) (citation and quotation

marks omitted).

120. First and foremost, “[a] claim for constructive fraud requires the presence

of a confidential or fiduciary relationship between the parties.” DS & T II, Inc. v. D

& E Tax & Acct., Inc., 2021 NCBC LEXIS 87, at *18 (N.C. Super. Ct. Oct. 4, 2021)

(citing Forbis, 361 N.C. at 528). “Absent such a relationship, Plaintiffs’ claim

necessarily fails.” Id. (citing Loray Master Tenant, LLC v. Foss N.C. Mill Credit 2014

Fund I, LLC, 2021 NCBC LEXIS 15, at *14 (N.C. Super. Ct. Feb. 18, 2021) (“A claim

for constructive fraud . . . requires a plaintiff to allege facts establishing a confidential

or fiduciary relationship.”).
121. Ms. Pridgen has sufficiently alleged that, as an investment advisor, Mr.

Carlson “is a fiduciary and has a duty to act primarily for the benefit of [his] clients.”

18 N.C. Admin. Code 06A.1801(a).

122. Further, “North Carolina courts have found that the relationship between

an unsophisticated investor and a financial advisor can be a [de facto] fiduciary one

depending on the circumstances.” Howell v. Heafner, 2020 NCBC LEXIS 105, at *35

(N.C. Super. Ct. Sep. 11, 2020) (citing Beam, 2019 NCBC LEXIS 56, at *11 (finding a

de facto fiduciary relationship where plaintiffs were an elderly couple who lacked

financial sophistication); see also Hart, 2022 NCBC LEXIS 81, at *31 (finding a de

facto fiduciary relationship when plaintiff lacked expertise in the financial field, the

investment advisors had discretionary authority, and defendants represented they

were plaintiff’s fiduciaries); Austin v. Regal Inv. Advisors, LLC, 2018 NCBC LEXIS 3,

at *19 (N.C. Super. Ct. Jan. 8, 2018) (a de facto fiduciary relationship existed when

plaintiffs were unsophisticated investors who relied on advisor’s expertise and gave

advisor discretionary authority).

123. Ms. Pridgen alleges that Mr. Carlson was a registered investment advisor,

at least until the discrepancies were found on his renewal application. (Compl. ¶¶ 8–

9, 41.) Carlson Financial was also represented to be a registered investment advisor

during that time. (Compl. ¶ 9.) Consequently, pursuant to 18 N.C. Admin. Code

06A.1801(a), they are fiduciaries de jure.

124. Furthermore, to the extent Mr. Carlson and Carlson Financial were not

registered investment advisors during their relationship with Ms. Pridgen, Ms.
Pridgen alleges sufficient facts to support the allegation that there was a de facto

fiduciary relationship. Ms. Pridgen asserts that at the time her relationship with Mr.

Carlson was formed and until she discovered his wrongdoing, she had no expertise in

investing and her husband made the primary financial decisions for her family.

(Compl. ¶¶ 2–3.) Due to her lack of financial expertise, Ms. Pridgen gave Mr. Carlson

and Carlson Financial complete discretionary control over her investment portfolio.

(Compl. ¶¶ 53–54.) Moreover, Mr. Carlson represented that he and Carlson Financial

would be operating at all times as Ms. Pridgen’s fiduciaries and look after her best

interests. (Compl. ¶ 12.)

125. As for Repple, at least from 2007 through June 2013, Ms. Pridgen alleges

that Repple was acting as an auditor or supervisor of Mr. Carlson and Carlson

Financial. (Compl. ¶ 11.) Further, Mr. Carlson and Carlson Financial operated as

Ms. Pridgen’s registered investment advisors pursuant to registration maintained by

Repple. (Compl. ¶ 12.) Thus, at least until June 2013, Ms. Pridgen has sufficiently

alleged that Repple was her fiduciary. Ms. Pridgen has also alleged that, in breach

of their fiduciary duties, Defendants artificially inflated the value of her investments

to increase their percentage-based advisory and management fees and that, as a

result, Defendants received compensation in the form of fees to which they were not

entitled. (Compl. ¶¶ 76, 95, 148, 284.)

126. Once a fiduciary relationship is established, “[a] claim of constructive fraud

does not require the same rigorous adherence to elements as actual fraud.” Hunter

v. Guardian Life Ins. Co. of Am., 162 N.C. App. 477, 482 (2004) (quoting Terry, 302
N.C. at 83 (quotation marks omitted)). “Constructive fraud differs from actual fraud

in that it is based on a confidential relationship rather than a specific

misrepresentation.” Id. (citing Barger, 346 N.C. at 666 (quotation marks omitted)).

Accordingly, a claim for constructive fraud “does not need to meet the Rule 9(b)

pleading requirement.” Beam, 2019 NCBC LEXIS 56, at *12 (quoting Hunter, 162

N.C. App. at 482).

127. Thus, the Court concludes that Ms. Pridgen has sufficiently alleged a claim

for constructive fraud against all Defendants. Specifically, to the extent Defendants

argue Ms. Pridgen’s claim for constructive fraud should be dismissed for failing to

plead with particularity, Defendants’ argument is misplaced, and the Motions should

be DENIED.

C. Violation of the North Carolina Investment Advisers Act

128. The North Carolina Investment Advisers Act’s (the NCIAA) applicable

statute of limitations provision states:

No person may sue . . . more than three years after the person discovers
facts constituting the violation, but in any case no later than five years
after the rendering of investment advice, except that if a person who
may be liable under this section engages in any fraudulent or deceitful
act that conceals the violation . . . the suit may be commenced not later
than three years after the person discovers or should have discovered
that the act was fraudulent or deceitful.

N.C.G.S. § 78C-38(d).

129. Here, allegations of wrongful conduct date back to 2007 when Ms. Pridgen

engaged Mr. Carlson as her investment advisor. The Complaint was filed on 17 April

2024, well past the five-year limit. However, evaluating the Complaint in the light
most favorable to Ms. Pridgen, fraudulent inducement and fraudulent concealment

are sufficiently alleged, and there are disputed facts regarding when Ms. Pridgen

should have reasonably discovered the fraudulent conduct. See, e.g., Hart, 2022

NCBC LEXIS 81, at *53 (declining to dismiss NCIAA violations on statute of

limitations grounds at the motion to dismiss stage).

130. Defendants do not argue for dismissal of this claim on any other grounds

except the statute of limitations. Thus, the Motions are DENIED as to this claim.

D. Negligent Misrepresentation

131. The statute of limitations for negligent misrepresentation is three years.

N.C.G.S. § 1-52(5). However, “[a] claim for negligent misrepresentation does not

accrue until two events occur: first, the claimant suffers harm because of the

misrepresentation, and second, the claimant discovers the misrepresentation.”

Trantham v. Michael L. Martin, Inc., 228 N.C. App. 118, 126 (2013) (quotation marks

omitted). Thus, as stated above, whether the statute of limitations bars Ms. Pridgen’s

negligent misrepresentation claim will be determined on a more developed record.

132. As the Defendants do not provide any other argument for dismissal of the

negligent misrepresentation claim, the Motions are DENIED as to this claim.

E. Civil Liability under N.C.G.S. § 1-538.2

133. N.C.G.S. § 1-538.2 allows for private actions for claims predicated on a

violation of the criminal statutes for larceny, embezzlement, or a related criminal

offense. See Caliber Packaging & Equip., LLC v. Swaringen, 2023 NCBC LEXIS 74,

at *8 (N.C. Super. Ct. May 31, 2023). Specifically, the statute states “[a]ny person . .
. who commits an act that is punishable under G.S. 14-72, 14-72.1, 14-72.11, 14-74,

14-86.6, 14-86.7, 14-90, or 14-100 is liable for civil damages to the owner of the

property.” N.C.G.S. § 1-538.2.

134. As there is no statute of limitations provided in N.C.G.S. § 1-538.2, the

statute of limitations in N.C.G.S. § 1-52(2) applies. See N.C.G.S. § 1-52(2) (“Within

three years an action . . . [u]pon liability created by statute, either state or federal,

unless some other time is mentioned in the statute creating it.”). Further, the Court

is aware of no cases which would support applying the discovery rule to this claim.

135. Thus, any allegation of actions occurring or performed under N.C.G.S.

§ 1-538.2 that took place before 17 April 2021 are barred by the three-year statute of

limitations applicable to a claim under section 1-538.2. Therefore, the Repple Motion

is GRANTED in its entirety as to this claim, and the Carlson Motion is GRANTED

to the extent the claim is based on actions that occurred prior to 17 April 2021.

VI. CONCLUSION

136. For the foregoing reasons, the Court hereby GRANTS in part and DENIES

in part the Motions as follows:

a. The Motions are GRANTED as to Count Seven for civil liability pursuant

to N.C.G.S. § 1-538.2, to the extent said claim is based on actions that

occurred prior to 17 April 2021.

b. Except as herein granted, the Motions are DENIED.
SO ORDERED, this the 25th day of July, 2025.

/s/ Michael L. Robinson
Michael L. Robinson
Chief Business Court Judge