Blanket References to "All Defendants" Are Insufficient in Multi-Plaintiff, Multi-Defendant Complaints

In North Carolina, the "notice" portion of notice pleading has long been honored more in the breach.  A recent Business Court order perhaps signals that enough is enough, at least when multiple plaintiffs each are suing multiple different defendants.

Allen v. Land Resource Group of North Carolina, LLC is the oldest of a growing number of cases currently pending before the Business Court involving real estate developers who went bankrupt before their developments were completed.  The original complaint in Allen involved 22 plaintiffs, 29 defendants, and 15 causes of action.  As Judge Tennille described it,

Each plaintiff participated in his or her own transaction involving a specific lot or lots.  Each plaintiff may have dealt with different defendants, including different salespeople, different appraisers, and different banks, and each plaintiff may have had a different level of knowledge. The defendants are varied and include officers and owners of the development company as well as administrative employees and salesmen who had no ownership or control of the company, appraisers, banks and even TV show producers.

(The latter reference is to an HGTV Dream Home located in one of these now-defunct developments on Lake Lure).  After being directed to plead their fraud and misrepresentation claims with greater specificity to satisfy Rule 9(b), Plaintiffs filed a 795-paragraph, 107-page amended complaint, which the Court still found deficient under the pleading rules:  "The Amended Complaint still does not clarify which claims are asserted by which plaintiff against which defendant.  Complaints in similar cases suffer from the same deficiencies. The largest problems are created by the indiscriminate references to all 'Defendants' when specific defendants should be identified."  In fact, the Court included a citation to the rarely seen Rule 10(b), which requires that each paragraph of a pleading "be limited to a single set of circumstances and that each claim is founded upon a separate transaction or occurrence."

Procedurally, the Court reached its last straw when certain defendants filed a motion to sever claims and the Court was unable to decide the motion based on the state of the pleadings.  The Court included a threat of sanctions if the situation did not improve:

Rule 11 ensures that counsel have done their homework before filing claims, particularly those involving fraud and conspiracy to commit fraud.  Having done the work required by Rule 11, there is no excuse for not properly pleading separate causes of action that put each defendant on notice of the claims asserted against that defendant.  Failure to properly plead separate causes of action and to identify specifically the party against whom a claim is asserted may be an indication of a Rule 11 violation.

The Court ordered the Plaintiffs to file a "Statement of Claims" within 30 days -- even going so far as to provide a form attached to the Order.  Each plaintiff will be required to file a separate form for each defendant whom he is suing, listing the claims that plaintiff is asserting against that specific defendant.

North Carolina lawyers have wondered whether the Iqbal and Twombley decisions from the U.S. Supreme Court will ever trickle down to state court.  Judge Tennille's order in Allen does not shed much light on that question because a complaint that is unclear as to which plaintiff is suing which defendants falls short of even a properly understood notice pleading regime.  The Allen order, however, is a welcome clarification that the "notice" part of notice pleading is not a superfluous term.

Full Order

UPDATE 9-27-2010:  Judge Tennille issued a similar order two days later in an unrelated case, NNN Durham Office Portfolio I, LLC v. Highwoods Realty L.P.  There, the Court ordered the Plaintiffs to file a second amended complaint with separate responses by each Plaintiff to eight different questions posed by the Court.  You can read the questions in the order here.

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