Maffeo v. White Pines Investments

United States District Court

District of Massachusetts

)

Anthony Maffeo, )

)

Plaintiff, )

)

v. ) Civil Action No.

) 21-10251-NMG

White Pine Investments, et al., )

)

Defendants. )

)

MEMORANDUM & ORDER

GORTON, J.

Plaintiff Anthony Maffeo, Jr. (“Maffeo” or “plaintiff”)

brings this action individually and as trustee of the 401(k)

plan of Integrated Benefits Group, Insurance Brokerage, Inc.

(“the IBG Plan”) against defendants Andrew Kustas (“Kustas”) and

White Pine Investments (“White Pine”) (collectively,

“defendants”). Plaintiff asserts that defendants improperly

managed the IBG Plan, causing plaintiff and other individual

investors to lose a significant amout of money.

Pending before the Court is the motion of defendant Kustas,

who appears pro se, to dismiss the complaint for failure to

state a claim. For the reasons that follow, that motion will be

denied.

I. Background

Plaintiff is a Massachusetts resident and the President and

founder of Integrated Benefits Group, Insurance Brokerage Inc.,

a Massachusetts corporation with its principal place of business

in the Commonwealth. He is also apparently the trustee of the

IBG Plan. Defendant Kustas is a New Hampshire resident and the

owner of White Pine, an unincorporated New Hampshire registered

investment advisor firm with its principal place of business in

that state.

Plaintiff alleges that, in or about the fall of 2014,

defendants began advising plaintiff and other individuals who

invested in the IBG Plan. Kustas allegedly met with Maffeo and

each of the individual investors to discuss their contributions

to the IBG Plan but supposedly did not inquire about the

individuals’ risk tolerance, time horizon, investment background

or knowledge of the proposed markets. Instead, plaintiff

contends that Kustas invested the members’ funds without

providing them with any material relating to those investments

or any subsequent updates as to how they were doing.

In the spring of 2020, plaintiff retained a new investment

firm which reviewed the portfolio managed by defendants and

concluded that defendants had made several misrepresentations

with respect to the investments. Maffeo asserts that his new

firm determined that Kustas’ investments severely underperformed

and were totally inappropriate for Maffeo and the other

individual investors. Plaintiff adds that, due to the timing of

the investments, he and the other investors remain unable to

divest them and, thus, continue to lose money.

Accordingly, in February, 2021, plaintiff filed this

lawsuit seeking damages exceeding $400,000. He asserts five

counts: (I) breach of fiduciary duty, (II) breach of contract,

(III) unsuitability, (IV) failure to supervise: control person;

respondeat superior and (V) negligence. In response, defendant

Kustas has moved to dismiss the complaint, presumably for

failure to state a claim.

II. Motion to Dismiss

In March, 2021, defendant Kustas filed a single-spaced, pro

se pleading in which he, moves to dismiss Count I (breach of

fiduciary duty) of the complaint on statute of limitations

grounds.1

1 Defendant Kustas failed to comply with Local Rule 5.1 that

requires all pleadings to be filed double-spaced. If he does so

in the future, the pleading will be returned to him for

correction before it is considered by the Court. Moreover, if

defendant makes any further accusations of “lying” by counsel,

he should either be prepared to back them up with evidence and

refer them to the Board of Bar Overseers or show cause why he

should not be sanctioned by this Court. See Eagle Eye Fishing

Corp. v. U.S. Dep’t of Commerce, 20 F.3d 503, 506 (1st Cir.

1994) (“While courts have historically loosened the reins for

pro se parties, the right of self-representation is not a

license not to comply with relevant rules of procedural and

substantive law.” (internal quotation marks and citations

omitted)).

Defendant asserts, specifically, that Maffeo’s claim for

breach of fiduciary duty is time barred because plaintiff was a

client of White Pine only until 2015 and this lawsuit was filed

in February, 2021, many years after the expiration of the

applicable three-year statute of limitations period set forth in

M.G.L. c. 260, § 2A.

Plaintiff responds that his claim is timely under the

“discovery rule” because he did not become aware of the facts

giving rise to the defendants’ alleged misconduct until he hired

a new investment firm in the spring of 2020. Because he filed

this action in February, 2021, plaintiff contends that his

breach of fiduciary duty claim is timely.

A. Legal Standard

To survive a motion under Fed. R. Civ. P. 12(b)(6), the

subject pleading must contain sufficient factual matter to state

a claim for relief that is actionable as a matter of law and

“plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678

(2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570

(2007)). A claim is facially plausible if, after accepting as

true all non-conclusory factual allegations, the court can draw

the reasonable inference that the defendant is liable for the

misconduct alleged. Ocasio-Hernandez v. Fortuno-Burset, 640 F.3d

1, 12 (1st Cir. 2011).

When rendering that determination, a court may not look

beyond the facts alleged in the complaint, documents

incorporated by reference therein and facts susceptible to

judicial notice. Haley v. City of Boston, 657 F.3d 39, 46 (1st

Cir. 2011). A court also may not disregard properly pled

factual allegations even if actual proof of those facts is

improbable. Ocasio-Hernandez, 640 F.3d at 12. Rather, the

relevant inquiry focuses on the reasonableness of the inference

of liability that the plaintiff is asking the court to draw. Id.

at 13.

B. Application

i. Statute of Limitations

A defendant may assert a statute of limitations defense in

a motion to dismiss if “the facts establishing the defense are

clear on the face of the plaintiff’s pleadings.” Trans-Spec

Truck Serv., Inc. v. Caterpillar Inc., 524 F.3d 315, 320 (1st

Cir. 2008) (internal quotation marks and citations omitted).

Granting a motion to dismiss on limitations grounds is

appropriate, therefore, only when the complaint “leave[s] no

doubt that an asserted claim is time-barred.” LaChapelle v.

Berkshire Life Ins. Co., 142 F.3d 507, 509 (1st Cir. 1998).

When a complaint “sketch[es] a factual predicate” warranting the

tolling of the statute of limitations, however, dismissal is

inappropriate. Trans-Spec Truck, 524 F.3d at 320.

In Massachusetts, claims for breach of fiduciary duty are

subject to a three-year statute of limitations. See M.G.L. c.

260, § 2A. As a general rule, the tort accrues at the time the

plaintiff is injured. See Koe v. Mercer, 876 N.E.2d 831, 836

(Mass. 2007). Massachusetts state courts have developed an

exception to that rule, however, which provides that

the statute of limitations starts when the plaintiff

discovers, or reasonably should have discovered, [his

injury].

Id. (“the discovery rule”).

Here, defendant has failed to establish in his pro se

pleadings that plaintiff’s breach of fiduciary duty claim is

time-barred. Plaintiff plausibly states in his complaint that

he was unaware of any misrepresentations by Kustas or any

misconduct with respect to his investing decisions until

plaintiff retained a new investment firm in the spring of 2020

(“discovery date”). That describes a factual predicate which,

if proved, would warrant the tolling of the statute of

limitations until that alleged discovery date. If the

limitation period was tolled, plaintiff filed his complaint

within it.

In any event, “what the plaintiff knew or should have

known” is generally “a factual question that is appropriate for

the trier of fact”. See Koe, 876 N.E.2d at 836. Accordingly, at

this early stage of litigation, it is premature to determine

whether the discovery rule applies or plaintiff’s claim is time-

barred. For that reason, this Court will deny defendant’s

motion to dismiss for failure to state a claim, without

prejudice.

The Court also strongly urges defendant to retain counsel.

If Kustas nevertheless chooses to proceed pro se, he will be

expected to comply with the Federal Rules of Civil Procedure and

professional protocol in pleading. Eagle Eye Fishing, 20 F.3d at

506 (noting that, by proceeding pro se, the [litigants] appeared

“to have been penny wise and pound foolish”).

ORDER

For the foregoing reasons, defendant’s motion to dismiss

(Docket No. 6) is DENIED without prejudice.

So ordered.

/s/ Nathaniel M. Gorton

Nathaniel M. Gorton

United States District Judge

Dated April 28, 2021