Burgess et al v. RTC, Narconon: Order to Dismiss
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Transcript of Burgess et al v. RTC, Narconon: Order to Dismiss
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UNITED STATES DISTRICT COURTNORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
BENJAMIN BURGESS; RHONDABURGESS; HEIDI HOWARD; JOYCEMARTIN; BETH KARAMPELAS;TERRI DACY; and MICHAEL DACY,individually and on behalf of all otherssimilarly situated,
Plaintiffs, CIVIL ACTION
No. 1:13-cv-02217-SCJ
v.
RELIGIOUS TECHNOLOGYCENTER, INC.; ASSOCIATION FORBETTER LIVING AND EDUCATIONINTERNATIONAL; NARCONONINTERNATIONAL; andNARCONON OF GEORGIA, INC.,
Defendants.
O R D E R
This matter is before the Court on Defendant Religious Technology Center,
Inc.s (RTC) Motion to Dismiss [Doc. No. 7], Defendant Narconon Internationals
(International) Motion to Dismiss [Doc. No. 4], Defendant Association for Better
Living and Education Internationals (ABLE) Motion to Dismiss [Doc. No. 5], and
Defendant Narconon of Georgia, Inc.s (NNGA) Motion to Dismiss [Doc. No. 9].
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1 The named plaintiffs allege that International is the parent/licensor of NNGA andexercises direct control over the time, manner, and method of NNGAs operations [id.at 13]. The named plaintiffs further allege that ABLE is a subsidiary of RTC that overseesthe alcohol rehabilitation activities of the Church of Scientology and controls the time,
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For the reasons explained in this order, RTCs, Internationals, ABLEs, and NNGAs
(collectively Defendants) respective motions are GRANTED.
I. FACTUAL AND PROCEDURAL BACKGROUND
NNGA is a nonprofit corporation that provides a drug and alcohol
rehabilitation service known as the Narconon program [Doc. No. 1-1, 16]. The
Narconon program is based on the writings of L. Ron Hubbard, the founder of the
Church of Scientology [id.]. Benjamin Burgess, Rhonda Burgess, Heidi Howard,
Joyce Martin, Beth Karampelas, Terri Dacy, and Michael Dacy (collectively, the
named plaintiffs) each enrolled their respective relatives in the Narconon program
at NNGA [id. at 8-11].
On June 4, 2013, the named plaintiffs, on behalf of themselves and others
similarly situated, filed this action the State Court of Gwinnett County, Georgia [id.
at 46]. In their complaint, the named plaintiffs allege that Defendants made several
misleading and false claims, through their respective advertising and marketing
materials, about the Narconon programs treatment of drug and alcohol addicts [id.
at 23].1Specifically, the named plaintiffs allege that Defendants misrepresented, inter
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manner, and method of Internationals and NNGAs businesses [id.]. Also, according tothe named plaintiffs, RTC oversees Church of Scientology activities and oversees andapproves the activities of International and NNGA [id. at 12]. In summary, the namedplaintiffs allege that Defendants collectively control and are connected with the NNGAsuse and advertising of the Narconon program.
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alia, the Narconon progams connection to Scientology, the Narconon programs
success rate, the certifications of its staff members, and NNGAs government
licensing [id. at 31]. Based on these allegations, the named plaintiffs assert claims
for fraud and misrepresentation, breach of contract, unjust enrichment, detrimental
reliance, negligenceper se and violations of the Georgia Racketeer Influenced and
Corrupt Organizations Act (RICO), O.C.G.A. 16-14-1, et seq.[id. at 7]. The named
plaintiffs further assert that they and their potential class members suffered actual
physical, mental, and economic harm as a result of Defendants false, deceptive,
or misleading business practices [id. at 15].
On July 2, 2013, International properly removed this action to this Court
pursuant to the Class Action Fairness Act, 28 U.S.C. 1711 et seq., and 28 U.S.C.
1332(d)(2) [Doc. No. 1, 2-3]. After removal, International, ABLE, and NNGA filed
motions to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure
[Doc. No. 4, 1; Doc. No. 5, 1; Doc. No. 9, 1]. RTC, a California nonprofit corporation,
also filed a motion to dismiss, requesting that this action be dismissed for lack of
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personal jurisdiction pursuant to Rule 12(b)(2) of the Federal Rules of Civil
Procedure [Doc. No. 7, 1-2]. In the alternative, RTC requests that this action be
dismissed pursuant to Rule 12(b)(6) [id.].Below, as they are ripe for adjudication, the
Court addresses the Defendants respective motions to dismiss.
II. RTCS MOTION TO DISMISS
In its motion to dismiss, RTC challenges the existence of personal jurisdiction
and, therefore, requests that this action be dismissed pursuant to Rule 12(b)(2). In
the alternative, RTCs motion requests that this action be dismissed pursuant to Rule
12(b)(6) for failure to state a claim. As a decision under Rule 12(b)(6) constitutes a
decision on the merits of the named plaintiffs claims, the Court must first address
RTCs arguments under Rule 12(b)(2). See Republic of Panama v. BCCI Holdings
(Luxembourg) S.A., 119 F.3d 935, 940 (11th Cir. 1997) (As a general rule, courts
should address issues relating to personal jurisdiction before reaching the merits of
a plaintiff's claims.). Therefore, the Court addresses RTCs motion to dismiss under
Rule 12(b)(2).
A. Legal Standard
A federal court sitting in diversity undertakes a two-step inquiry in
determining whether personal jurisdiction exists: the exercise of jurisdiction must
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(1) be appropriate under the state long-arm statute and (2) not violate the Due
Process Clause of the Fourteenth Amendment to the United States Constitution.
United Techs. Corp. v. Mazer, 556 F.3d 1260, 1274 (11th Cir. 2009). Further, [a]
plaintiff seeking the exercise of personal jurisdiction over a nonresident defendant
bears the initial burden of alleging in the complaint sufficient facts to make out a
prima facie case of jurisdiction. Id. In the event a defendant, in response to a
complaint, makes an evidentiary showing that personal jurisdiction is lacking, the
plaintiff then has the burden of producing evidence that supports the existence of
jurisdiction. Id.
B. Discussion
The Georgia long arm-statute provides in pertinent part that:
A court of this state may exercise personal jurisdiction over anynonresident or his or her executor or administrator, as to a cause ofaction arising from any of the acts, omissions, ownership, use, orpossession enumerated in this Code section, in the same manner as ifhe or she were a resident of this state, if in person or through an agent,he or she:(1) Transacts any business within this state;(2) Commits a tortious act or omission within this state, except as to acause of action for defamation of character arising from the act;
(3) Commits a tortious injury in this state caused by an act or omissionoutside this state if the tort-feasor regularly does or solicits business, orengages in any other persistent course of conduct, or derivessubstantial revenue from goods used or consumed or services renderedin this state[.]
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O.C.G.A. 9-10-91(1)-(3). Here, the named plaintiffs, while conceding that RTC itself
has no direct presence in Georgia, argue that personal jurisdiction exists over RTC
pursuant to subsection (1)-(3) of O.C.G.A. 9-10-91 because ABLE, International,
and NNGA are its agents [Doc. No. 19, 18]. With its motion to dismiss, RTC attaches
the declaration of its President Warren McShane (Mr. McShane) which challenges
the existence of personal jurisdiction [Doc. No. 7-2, 2]. Specifically, Mr. McShane
asserts in his declaration that ABLE, International, and Narconon are not, and never
have been, agents of RTC [id. at 4] (Neither ABLE, [ ] International, nor NNGA
have ever been agents of RTC.). As a result of this declaration, the burden shifts
back to the named plaintiffs to produce evidence establishing International, ABLE,
and NNGA are RTCs agents.Mazer, 556 F.3d at 1274.
Under Georgia law, an agency relationship can arise in three distinct ways:
expressly, by implication, or through subsequent ratification by the principal of the
agent's conduct.JCarpc, LLC v. Wilkins, 545 F. Supp. 2d 1330, 1337 (N.D. Ga. 2008)
(citing O.C.G.A. 10-6-1). In summary, an agency relationship is created by the
actions of the principal. Ellis v. Fuller, 282 Ga. App. 307, 309, 638 S.E.2d 433, 435
(2006).
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In their response to RTCs motion to dismiss, the named plaintiffs do not
directly address whether RTCs agency relationship with ABLE, International, and
NNGA is established through express authority, implied authority, or through
ratification. By failing to make this distinction, it is difficult to decipher the named
plaintiffs basis for the existence of an agency relationship. In general, the named
plaintiffs assert that a principal/agent relationship exists because RTC has control
over ABLE, International, and NNGA. However, in making this argument, the
named plaintiffs concede that RTC has kept itself formally separate from
Defendants ABLE, International, and NNGA [Doc. No. 19, 7]. Therefore, the named
plaintiffs essentially concede that express agency, which arises when the principal
expressly confers authority on the agent to act on its behalf, is not present here.
Further, the named plaintiffs do not reference any ratification by RTC of ABLEs,
Internationals, or NNGAs conduct that would allow an inference of an agency
relationship.See O.C.G.A. 10-6-1 (stating an agency relationship can be established
when the principal ratifies the acts of another in his behalf.). Also, the named
plaintiffs fail to establish apparent authority is present, as they do not address how
RTCs exercise of control would allow a third party to reasonably believe that it
consents to ABLE, International, and NNGA acting on its behalf. See Morris v.
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Williams, 214 Ga. App. 526, 527, 448 S.E.2d 267, 269 (1994) (Apparent authority is
an agency concept which refers to an agents authority as it is apparent to third
parties.); see also Hinely v. Barrow, 169 Ga. App. 529, 530, 313 S.E.2d 739, 741 (1984)
(stating it must be emphasized that apparent authority to do an act is created as to
a third person when the statements or conduct of the alleged principalreasonably
cause the third person to believe that the principal consents to have the act done on
his behalf by the purported agent.).
In summary, the named plaintiffs argument that an agency relationship is
present because RTC effectively controls ABLE, International, and NNGA is
misplaced. Again, agency is determined by the actions of the principal and how said
actions lead a third party to reasonably believe an agency relationship exists. Simply
arguing that RTC internally controls ABLE, International, and NNGA does not,
standing alone, establish that this alleged control conveys to third parties that an
agency relationship exists. As the named plaintiffs fail to establish that third parties
are aware of, and relied on, RTCs alleged control, no principal/agent relationship
is established between RTC and ABLE, International, and NNGA. Therefore, as the
named plaintiffs do not establish RTC has an agency relationship with ABLE,
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2As it determines it does not have personal jurisdiction over RTC pursuant to the Georgialong-arm statute, the Court does not need to address whether or not exercise of personaljurisdiction over RTC would violate due process.
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International, and NNGA, the Court determines that it does not have personal
jurisdiction over RTC under the Georgia long-arm statute.2
In their response to RTCs motion to dismiss, the named plaintiffs request, in
the event the Court determines lack of personal jurisdiction over RTC is unresolved,
that they be allowed the opportunity to conduct jurisdictional discovery [Doc. No.
19, 24]. However, the Court determines that it lacks personal jurisdiction over RTC,
not that the issue of personal jurisdiction is unresolved. Therefore, the named
plaintiffs will not be awarded the opportunity to conduct discovery directed at this
Courts personal jurisdiction over RTC.
The named plaintiffs only argue that this Court has personal jurisdiction over
RTC through the acts of ABLE, International, and NNGA. However, for the reasons
explained supra, the named plaintiffs fail to establish RTC has a principal/agency
relationship with ABLE, International, and NNGA. As no agency relationship is
established, the Court does not have personal jurisdiction over RTC. Accordingly,
RTCs Motion to Dismiss [Doc. No. 7] is hereby GRANTED pursuant to Rule
12(b)(2).
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3 ABLEs, Internationals, and NNGAs motions to dismiss all argue that the namedplaintiffs complaint should be dismissed pursuant to Rule 12(b)(6). In their respectivemotions, ABLE, International, and NNGA make similar arguments regarding the claimscontained within the named plaintiffs complaint. Therefore, the Court will addressABLEs, Internationals, and NNGAs motions to dismiss collectively.
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III. ABLES, INTERNATIONALS, AND NNGAS RESPECTIVE MOTIONSTO DISMISS3
A. Legal Standard
A complaint may be dismissed under a Rule 12(b)(6) motion to dismiss if the
facts as pled do not state a claim for relief that is plausible on its face.Ashcroft v.
Iqbal, 556 U.S. 662, 679 (2009) (explaining only a complaint that states a plausible
claim for relief survives a motion to dismiss.); Bell Atlantic Corp. v. Twombly, 550
U.S. 544, 56162, 570 (2007) (retiring the prior Conley v. Gibson, 355 U.S. 41, 4546
(1957), standard which provided that in reviewing the sufficiency of a complaint, the
complaint should not be dismissed unless it appears beyond doubt that the plaintiff
can prove no set of facts in support of his claim which would entitle him to relief.).
In Iqbal, the Supreme Court reiterated that although Rule 8 of the Federal Rules of
Civil Procedure does not require detailed factual allegations, it does demand more
than an unadorned, the-defendant-unlawfully-harmed-me accusation. Iqbal, 556
U.S. at 678.
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In their respective motions to dismiss, International and ABLE argue that the namedplaintiffs do not have standing to assert the aforementioned claims. Specifically,International and ABLE argue that the named plaintiffs have no injury because the named[p]laintiffs paid for NNGA program services, which were provided [Doc. No. 4-1, 24].However, the named plaintiffs claims hinge on the allegation that they were fraudulentlyinduced into enrolling their relatives in the Narconon program. If this allegation is true, the
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In Twombly, the Supreme Court emphasized a complaint requires more than
labels and conclusions, and a formulaic recitation of the elements of a cause of action
will not do. 550 U.S. at 555. Factual allegations in a complaint need not be detailed
but must be enough to raise a right to relief above the speculative level on the
assumption that all the allegations in the complaint are true (even if doubtful in
fact). Id. at 555 (internal citations and emphasis omitted).
B. Discussion
In their complaint, the named plaintiffs assert the following claims: 1.
Fraudulent Misrepresentation; 2. Breach of Contract; 3. Unjust Enrichment; 4.
Detrimental Reliance; 5. Negligence Per Se; 6. Civil RICO for Theft by Deception; 7.
Civil RICO for Mail and Wire Fraud; 8. Civil RICO for False Statements to a
Government Agency; 9. Civil RICO for Credit Card Fraud; and 10. Civil RICO for
Identity Fraud [Doc. No. 1-1, 3-4]. Below, where practical, the Court will discuss
certain claims asserted by the named plaintiffs collectively. Where a specific claim
cannot be discussed in relation to another, the Court will address such a claim
individually.4
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named plaintiffs injury would be the harm suffered as a result of paying for a service theyotherwise would not have. Any argument that the Narconon program was effective wouldspeak to the issue of damages. Therefore, the Court determines the named plaintiffs havestanding to assert the claims listed in their complaint.
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1. Fraudulent Misrepresentation Claim
Under Georgia law, to prevail on a claim of fraud or fraudulent
misrepresentation, a plaintiff must prove the following five elements: (1) that the
defendant made representations; (2) that at the time he knew they were false; (3) that
he made them with the intention and purpose of deceiving the plaintiff; (4) that the
plaintiff relied on the representations; and (5) that the plaintiff sustained the alleged
loss and damage as the proximate result of their having been made. Bacote v.
Wyckoff, 251 Ga. 862, 865, 310 S.E.2d 520, 523 (1984). While state law governs the
burden of proving fraud, a claim of fraud in federal court is subject to the
heightened pleading requirements established under Rule 9(b) of the Federal Rules
of Civil Procedure. To properly allege fraud under Rule 9(b), a plaintiff must state
with particularity the circumstances constituting fraud or mistake. Fed. R. Civ. P.
9(b). To satisfy this particularity requirement of Rule 9(b), a plaintiff must allege: (1)
the precise statements, documents, or misrepresentations made; (2) the time, place,
and person responsible for the statement; (3) the content and manner in which these
statements misled the [p]laintiffs; and (4) what the defendants gained by the alleged
fraud. White v. Americas Servicing Co., 461 F. Appx 841, 843 (11th Cir. 2012) (internal
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citation omitted); U.S. ex rel. Matheny v. Medco Health Solutions, Inc., 671 F.3d 1217,
1222 (11th Cir. 2012) (The particularity requirement of Rule 9(b) is satisfied if the
complaint alleges facts as to time, place, and substance of the defendant's alleged
fraud, specifically the details of the defendants' allegedly fraudulent acts, when they
occurred, and who engaged in them.) (internal quotations and citation omitted).
Here, the named plaintiffs do not adequately plead their claim for fraudulent
misrepresentation. Specifically, the named plaintiffs assert Defendants made several
fraudulent misrepresentations, including misrepresent[ing] the success rate of the
Narconon program and misrepresent[ing] the nature of the training given to their
staff members [Doc. No. 1-1, 31]. However, these are mere generalized allegations
that fail to specify with particularity the time and place these misrepresentations
were made. More importantly, named plaintiffs do not allege with specificity the
party that actually engaged in each specific fraudulent misrepresentation. In short,
the named plaintiffs make no distinction between the Defendants in regards to who
actually committed the alleged acts of fraud. As a general rule, when a plaintiff
claims fraud by several defendants, the complaint should contain specific
allegations with respect to each defendant; generalized allegations lumping
multiple defendants together are insufficient.W. Coast Roofing & Waterproofing, Inc.
v. Johns Manville, Inc., 287 F. Appx 81, 86 (11th Cir. 2008). In their complaint, the
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named plaintiffs simply assert that the alleged misrepresentations were made by
the Defendants [Doc. No. 1-1, 31]. In summary, the named plaintiffs do not
attribute any specific misrepresentation to any specific Defendant. By failing to
establish when each misrepresentation was made, and who made each
misrepresentation, the named plaintiffs do not satisfy the heightened particularity
pleading standard of Rule 9(b). Therefore, the named plaintiffs fraudulent
misrepresentation claim must be dismissed.
2. RICO Claims
To establish a civil RICO claim under Georgia law, in addition to showing the
defendant has committed an act of racketeering, a plaintiff must also show his injury
flowed from one or more predicate acts. Cox v. Mayan Lagoon Estates Ltd., 319 Ga.
App. 101, 109, 734 S.E.2d 883, 891 (2012). However, when the predicate act alleged
sounds in fraud, the plaintiff must plead said predicate act in compliance with the
particularly requirement of Rule 9(b). Curtis Inv. Co., LLC v. Bayerische Hypo-und
Vereinsbank, AG, 341 F. Appx 487, 493 (11th Cir. 2009). Again, to meet the
particularity standard of Rule 9(b) in a case involving multiple defendants, a
complaint must, inter alia, inform each defendant of the nature of his alleged
participation in the fraud. Brooks v. Blue Cross & Blue Shield of Fla., Inc., 116 F.3d
1364, 1381 (11th Cir. 1997) (citation omitted).
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In support of their RICO claims, the named plaintiffs make generalized
allegations that Defendants improperly obtained money by creating or confirming
a false impression about, inter alia, the Narconon programs success rate, the
qualifications of NNGAs staff, and NNGAs compliance with applicable law and
regulations [Doc. No. 1-1, 38]. The named plaintiffs further allege that
Defendants committed the following acts: improperly transmitted written
communication by wire or mail that was devised in a scheme to defraud [id. at 39];
improperly provided false statements and writings to a government agency [id.
at 41]; improperly opened several high interest credit cards in the name of NNGAs
patients [id. at 43]; and fraudulently used the identities of NNGAs patients
and/or patients family members, without permission [id. at 44]. Again, however,
these generalized allegations do not properly plead fraud as they do not identify the
time or place of these misrepresentations, nor do they articulate which specific
Defendant committed each specific act of fraud. See Brooks, 116 F.3d at 1381
(Because fair notice is perhaps the most basic consideration underlying Rule 9(b)
. . . the plaintiff who pleads fraud must reasonably notify the defendants of their
purported role in the scheme.) (alterations, internal quotations, and citation
omitted). In summary, the named plaintiffs allegations of predicate acts of fraud in
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5 In their responses to Defendants motions to dismiss, the named plaintiffs do notchallenge that the particularity pleading standard under Rule 9(b) applies to their RICOclaims for mail and wire fraud (Count 7), credit card fraud (Count 9), and identity fraud(Count 10). Further, the named plaintiffs responses do not make an argument that theysufficiently plead these RICO claims under Rule 9(b).
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support of their RICO claims are too vague and generalized to satisfy the heightened
particularity standard of Rule 9(b).
In response to Defendants respective motions to dismiss, the named plaintiffs
contend that the Rule 9(b) pleading standard does not apply to its RICO claims of
theft by deception (Count 6) and false statements to a government agency (Count
8), as said claims do not sound in fraud [Doc. No. 14, 19].5However, a claim
sounds in fraud when a plaintiff alleges a unified course of fraudulent conduct
and rel[ies] entirely on that course of conduct as the basis of [that] claim. Vess v.
Ciba-Geigy Corp. USA, 317 F.3d 1097, 1103 (9th Cir. 2003). Here, the named plaintiffs
RICO theft by deception claim relies on the generalized allegation that Defendants
created or confirmed several false statements and material misrepresentations in
order to induce enrollment in the Narconon program [Doc. No. 1-1, 39]. In support
of their RICO false statements to a government agency claim, the named plaintiffs
assert that Defendants knowingly and willfully falsified, concealed, or covered up
pertinent licensing information from the State of Georgia in order to maintain
NNGAs ability to operate the Narconon program [id. at 41]. Therefore, while
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6 In their motions to dismiss, Defendants make additional arguments regarding thedismissal of the named plaintiffs RICO claims. As it determines the named plaintiffs RICOclaims fail to satisfy the pleading standard of Rule 9(b), the Court does not need to addressthese arguments.
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excluding the use of the word fraud, both of these claims rely exclusively on the
allegation that Defendants engaged in fraudulent conduct. Based on these
allegations, the Court determines that the named plaintiffs RICO theft by deception
(Count 6) and false statements to a government agency (Count 8) claims are
appropriately sounded in fraud, thereby necessitating application of the Rule 9(b)
pleading standard. As explained supra, these claims are improperly pled as they do
not properly allege the time and place where each act of fraud took place. In
addition, the named plaintiffs RICO claims simply lump all the Defendants
together, failing to articulate the specific act of fraud committed by each of the
Defendants. Therefore, these claims, like the named plaintiffs other RICO claims,
must be dismissed for failure to meet the particularity pleading standard of Rule
9(b).6
3. Breach of Contract Claim
Under Georgia law, [t]o constitute a valid contract, there must be parties able
to contract, a consideration moving to the contract, the assent of the parties to the
terms of the contract, and a subject matter upon which the contract can operate.
O.C.G.A. 13-3-1. Once a plaintiff establishes a valid contract between himself and
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a defendant, the elements of a breach of contract claim are (1) breach and the (2)
resultant damages (3) to the party who has the right to complain about the contract
being broken. Duke Galish, LLC v. Manton, 308 Ga. App. 316, 320, 707 S.E.2d 555, 559
(2011) (citation omitted). Additionally, in order to be properly pled, a breach of
contract claim must sufficiently allege a provision of the contract at issue has been
breached.Am. Casual Dining, L.P. v. Moes Sw. Grill, LLC, 426 F. Supp. 2d 1356, 1369
(N.D. Ga. 2006) (citingAdkins v. Cagle Foods JV, LLC, 411 F.3d 1320, 1327 (11th Cir.
2005)).
In support of their breach of contract claim, the named plaintiffs simply assert
that Defendants, by and through its agents, employees, or representatives, entered
into a written contract with the [named plaintiffs] and the class members [Doc. No.
1-1, 32]. However, the named plaintiffs do not articulate a specific contract at issue
in this action. Based on this generalized and conclusory allegation, the named
plaintiffs complaint fails to establish the existence of a valid contract. See Textiles
Morales, S.A. de C.V. v. Green Paradigm Partners, LLC, No. 8:10-cv-2298-T-30EAJ, 2011
WL 2881666, at *2 (M.D. Fla. July 19, 2011) (The Court agrees that merely alleging
the existence of a contract and stating that it was breached would be inadequate
under Iqbal.). In addition to failing to establish which contract each Defendant has
entered, the named plaintiffs complaint fail to articulate a contractual obligation
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that Defendants have actually breached. Specifically, the named plaintiffs assert
Defendants have breached their contractual duties by committing ten separate acts,
most of which concern misrepresentations made in order to induce enrollment in the
Narconon program [Doc. No. 1-1, 33]. However, the named plaintiffs complaint
does not articulate that the contract contains provisions that were breached as a
result of these misrepresentations.
Again, the crux of the named plaintiffs complaint is that they were
fraudulently induced into enrolling their respective relatives in the Narconon
program at NNGA. Further, the named plaintiffs assert that they fulfilled their
contractual obligations with Defendants by providing payment for drug or alcohol
rehabilitation services at NNGA [id. at 32]. Based on these generalized allegations,
Defendants, in their respective motions to dismiss, infer that the contract
referenced in the complaint is the named plaintiffs respective Financial Policy and
Agreement contracts, which is the enrollment contract that provides payment for
the Narconon program with NNGA. In essence, in an effort to formulate a response,
Defendants attempt to rectify the deficiencies in the named plaintiffs complaint by
asserting the actual contracts at issue in this action. In response, the named plaintiffs
appear to concede that the Financial Policy and Agreement contracts are in fact at
issue in this action. However, the named plaintiffs responses further assert that
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their breach of contract claim actually concerns the breach of several implied
terms contained in multiple documents that are incorporated with the Financial
Policy and Agreement contracts [Doc. No. 16, 7-9]. Further, while maintaining that
their breach of contract claim actually concerns multiple documents or contracts
incorporated with the Financial Policy and Agreement contracts, the named
plaintiffs responses still do not identify the actual contractual provisions that
Defendants have breached. Instead, the named plaintiffs claim that Defendants have
only breached the implied duty of good faith and fair dealing present in the
contracts at issue in this action. This argument is insufficient as, under Georgia law,
a party cannot establish a claim based on the implied covenant of good faith and fair
dealing absent the breach of an express term in the contract at issue. Morrell v.
Wellstar Health Sys., Inc., 280 Ga. App. 1, 5, 633 S.E.2d 68, 72 (2006) (stating there is
no independent cause of action for violation of the covenant [of good faith and fair
dealing] apart from breach of an express term of the contract.). By failing to
articulate an actual contract provision that Defendants have breached, the named
plaintiffs have failed to properly plead a breach of contract claim.
In summary, the named plaintiffs do not sufficiently plead their breach of
contract claim. In their complaint, the named plaintiffs fail to establish both the
specific contract at issue in this action and the specific provisions within said
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7In their complaint, the named plaintiffs do not articulate their claim for unjust enrichmentas an alternative claim. However, in response to Defendants respective motions to dismiss,the named plaintiffs do articulate their claim of unjust enrichment as an alternative to theirbreach of contract claim. Accordingly, the Court considers the named plaintiffs unjustenrichment claim as an alternative claim.
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contract that Defendants have allegedly breached. In response to Defendants
motion to dismiss, the named plaintiffs concede that the contracts at issue in this
action are the Financial Policy and Agreement contracts, the contracts that enrolled
their respective relatives in the Narconon program with NNGA. The named
plaintiffs further maintain through their responses that, by making several
misrepresentations to induce enrollment in the Narconon program, Defendants
breached the duty of good faith in fair dealing present in these Financial Policy and
Agreement contracts. However, as explained inMorrell, the duty of good faith and
fair dealing cannot be breached independently from the breach of an express term
in a contract. Again, the named plaintiffs do not articulate an actual provision in a
contract that Defendants have breached. Accordingly, the named plaintiffs breach
of contract claim must be dismissed.
4. Unjust Enrichment Claim
In the alternative to their breach of contract claim,7the named plaintiffs assert
a claim for unjust enrichment. The named plaintiffs are correct in their assertion that
a claim for unjust enrichment is an equitable form of relief that serves as an
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alternative theory of recovery if a contract claim fails. Wachovia Ins. Servs., Inc. v.
Fallon, 299 Ga. App. 440, 449, 682 S.E.2d 657, 665 (2009) (citation omitted). However,
a plaintiff may not plead an unjust enrichment claim in the alternative to a claim
for breach of contract when it is undisputed (or when the court has found) that a
valid contract exists. Clark v. Aarons Inc., 914 F. Supp. 2d 1301, 1310 (N.D. Ga.
2012); see also Goldstein v. Home Depot U.S.A., Inc., 609 F. Supp. 2d 1340, 1347 (N.D.
Ga. 2009) (While a party may plead equitable claims in the alternative, the party
may only do so if one or more of the parties contests the existence of an express
contract governing the subject of the dispute.). Again, the crux of this action is the
named plaintiffs allegation that they were fraudulently induced into enrolling their
respective relatives in the Narconon program. As discussed supra, all parties concede
that the Financial Policy and Agreement contracts are valid agreements that
effectively enrolled the named plaintiffs relatives in the Narconon program with
NNGA. In summary, all parties concede that the contracts at issue in the named
plaintiffs breach of contract claim are valid. Therefore, the named plaintiffs unjust
enrichment claim cannot serve as an alternative to their breach of contract claim.
The named plaintiffs argue that their unjust enrichment claim should be
allowed to proceed if this Court determines they did not allege a plausible breach
of contract claim [Doc. No. 14, 13]. This argument would be persuasive if the Court
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dismissed the breach of contract claim on the basis that no valid contract actually
exists. However, that is not the case here. As explained supra, the breach of contract
claim at issue in this action is dismissed because the named plaintiffs fail to
plausibly establish that a provision within their relatives respective enrollment
contracts was actually breached. Accordingly, the named plaintiffs unjust
enrichment claim must be dismissed.
5. Detrimental Reliance Claim
In their complaint, the named plaintiffs assert a claim for Detrimental
Reliance [Doc. No. 1-1, 35]. However, in their responses to Defendants respective
motions to dismiss, the named plaintiffs concede that a claim for detrimental
reliance does not exist under Georgia law. Instead, the named plaintiffs assert in
their responses that their detrimental reliance claim is actually a mislabeled claim
for promissory estoppel [Doc. No. 14, 15]. Further, the named plaintiffs state in their
responses that [s]hould this Court determine that Count Four [for detrimental
reliance] was improperly pled, [the named plaintiffs] request the opportunity to
amend [pursuant to Rule 15(a)] [id. at 16]. However, it is procedurally improper to
request leave to amend under Rule 15 in a response to a motion to dismiss, rather
than in a separate motion. See Long v. Satz, 181 F.3d 1275, 1279 (11th Cir. 1999)
(stating that a request for leave to amend in a response opposing a Rule 12(b)(6) is
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procedurally improper under Rule 15, as [f]iling a motion is the proper method to
request leave to amend a complaint.). As they did not properly request leave to
amend, the Court must accept the named plaintiffs complaint in its current form
and cannot grant a request for leave to amend contained in a response to a motion
to dismiss. Again, a claim for detrimental reliance does not exist under Georgia
law. Accordingly, the named plaintiffs claim for detrimental reliance must be
dismissed.
6. Negligence Per Se Claim
Negligence per searises when a statute, ordinance, or mandatory regulation
that imposes a legal duty for the protection of others has been violated. Hubbard v.
Dept of Transp., 256 Ga. App. 342, 349-50, 568 S.E.2d 559, 566-67 (2002). To recover
on a claim of negligence per se, assuming there is a violation of a statute, a plaintiff
must show that (1) a person injured as the result of the violation falls within the
class of persons the statute was intended to protect, and (2) the harm complained of
is the harm the statute was intended to guard against. Swinney v. Schneider Natl
Carriers, Inc., 829 F. Supp. 2d 1358, 1367 (N.D. Ga. 2011). Additionally, in order to
prevail on a claim or defense of negligenceper se, there must be a causal connection
between the negligence and the injury. Id.
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11 As it does not provide a basis for a negligence per se claim, the Court does not need todetermine whether or not Defendants actually violated the Rules and Regulations for DrugAbuse Treatment and Education Programs.
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Regulations for Drug Abuse Treatment and Education Programs do not provide a
basis for a negligence per se claim.
11
Accordingly, the named plaintiffs negligence
per se claim must be dismissed.
In summary, the named plaintiffs complaint fails to establish a plausible
claim for relief. Accordingly, Internationals Motion to Dismiss [Doc. No. 4], ABLEs
Motion to Dismiss [Doc. No. 5], and NNGAs Motion to Dismiss [Doc. No. 9] are
hereby GRANTED pursuant to Rule 12(b)(6).
IV. CONCLUSION
For the above stated reasons, RTCs Motion to Dismiss [Doc. No. 7] is hereby
GRANTED pursuant to Rule 12(b)(2). Internationals Motion to Dismiss [Doc. No.
4], ABLEs Motion to Dismiss [Doc. No. 5], and NNGAs Motion to Dismiss [Doc.
No. 9] are hereby GRANTED pursuant to Rule 12(b)(6).
All pending motions not otherwise ruled upon are hereby DISMISSED AS
MOOT. As there are no further issues outstanding, the Clerk is hereby DIRECTED
toCLOSE THIS ACTION.
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IT IS SO ORDERED, this 19thday of February, 2014.
s/Steve C. JonesHONORABLE STEVE C. JONESUNITED STATES DISTRICT JUDGE
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