Burgess: Narconon Georgia Memo in Support of Motion Dismiss

7/28/2019 Burgess: Narconon Georgia Memo in Support of Motion Dismiss

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF GEORGIA

ATLANTA DIVISION

BENJAMIN BURGESS, RHONDA

BURGESS, HEIDI HOWARD,

JOYCE MARTIN, BETH

KARAMPELAS, TERRI DACY, and

MICHAEL DACY, individually and

on behalf of all others similarly

situated,

Plaintiffs,

v.

Civil Action

File No.: 1:13-CV-02217-JOF

RELIGIOUS TECHNOLOGY

CENTER, INC., ASSOCIATION FOR

BETTER LIVING AND

EDUCATION INTERNATIONAL,

NARCONON INTERNATIONAL,

and NARCONON OF GEORGIA,

INC.,

Defendants.

MEMORANDUM IN SUPPORT OF NARCONON OF GEORGIA INC.S

MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM

Defendant Narconon of Georgia, Inc. (NNGA) hereby submits this

memorandum in support of its motion, pursuant to Fed. R. Civ. P. 12(b)(6), to

dismiss each count of the complaint for failure to state a claim upon which relief may

be granted.

Case 1:13-cv-02217-JOF Document 9-1 Filed 07/09/13 Page 1 of 29


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SUMMARY OF FACTS

Plaintiffs have filed their Complaint against NNGA, a nonprofit Georgia

Corporation that for many years has provided drug and alcohol rehabilitation

services. Plaintiffs were not the recipients of those services but allege they suffered

actual physical, mental and economic harm as a result of their reliance on alleged

false, deceptive, or misleading business practices of NNGA and other defendants.

(Compl. 34.)

The Complaint seeks to assert claims for fraud, breach of contract, unjust

enrichment, detrimental reliance, negligence per se, and Georgia RICO.

ARGUMENT AND CITATION OF AUTHORITY

I. MOTION TO DISMISS STANDARD

To survive a motion to dismiss, a complaint must contain sufficient factual

matter, accepted as true, to state a claim to relief that is 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)). The complaint must include sufficient factual allegations to

raise a right to relief above the speculative level. Twombly, 550 U.S. at 555. [A]

formulaic recitation of the elements of a cause of action will not do[.] Id. [W]here

the well-pleaded facts do not permit the court to infer more than the mere possibility

of misconduct, the complaint has alleged but it has not show[n] that the pleader



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is entitled to relief. Iqbal, 556 U.S. at 679 (internal punctuation and citation

omitted). [C]onclusory allegations, unwarranted deductions of facts or legal

conclusions masquerading as facts will not prevent dismissal. Oxford Asset Mgmt.,

Ltd. v. Jaharis, 297 F.3d 1182, 1188 (11th Cir. 2002). Moreover, when there are

dispositive issues of law, a court may dismiss a claim regardless of the alleged facts.

Marshall Cnty. Bd. of Educ. v. Marshall Cnty. Gas Dist., 991 F.2d 1171, 1174 (11th

Cir. 1993).

II. COUNT ONE

Count One of the Complaint purports to plead a fraud claim. Pursuant to Fed.

R. Civ. P. 9(b), a complaint alleging fraud must state with particularity the

circumstances constituting fraud. The purpose of Rule 9(b)s particularity

requirement is to alert[ ] defendants to the precise misconduct with which they are

charged and protect[ ] defendants against spurious charges of immoral and fraudulent

behavior. Ziemba v. Cascade Int'l, Inc., 256 F.3d 1194, 1202 (11th Cir. 2001)

(internal punctuation and citation omitted). To satisfy Rule 9(b), a complaint must

set forth:

(1) precisely what statements were made in what documents or oral

representations or what omissions were made, and (2) the time and place of

each such statement and the person responsible for making (or, in the case of

omissions, not making) same, and (3) the content of such statements and the

manner in which they misled the plaintiff, and (4) what the defendants

obtained as a consequence of the fraud.



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Brooks v. Blue Cross & Blue Shield of Fla., Inc., 116 F.3d 1364, 1371 (11th Cir.

1997).

Plaintiffs complaint fails to meet nearly all of the requirements for pleading a

fraud claim under Rule 9(b). As to the who, when, and where requirements,

Plaintiffs allege they spoke with one or more employees of NNGA and/or

International, and/or [were] provided with marketing materials regarding NNGAs

program. (Compl. 2, 6, 10, 14, 17). Plaintiffs apparently (and implausibly) each

claim to have relied on the same representations, but they fail to identify the specific

source of any of those representations, the person(s) making those representations,

the time and place of the representations, and how the statements were misleading.

(Compl. 3, 7, 11, 15, 18). Nowhere in the Complaint are there any specific

representations attributed to any identified representative of NNGA, much less the

precise statement, its contents, and the time it was made. These facts are particularly

important in a class action such as this, where Plaintiffs have alleged that the nature

of the Defendants representations, statements, [and] advertising is one of the major

questions of law and fact common to the class. (Compl. 33). Plaintiffs cannot

vaguely plead this crucial issue. Rule 9(b) exists to protect defendants from this

situation, and Plaintiffs fraudulent misrepresentation claim should be dismissed.



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Likewise, Plaintiffs Complaint fails to properly plead the substantive

elements supporting a claim for fraudulent misrepresentation. Georgia law requires

the plaintiff to show 1) the defendant made a false representation; 2) the defendant

knew the representation was false; 3) the defendant made the representation with the

intent to deceive the plaintiff; 4) the plaintiff relied upon the representation; and 5)

the plaintiff suffered damage caused by such reliance. Morris v. Pugmire Lincoln

Mercury, Inc., 283 Ga. App. 238, 240, 641 S.E.2d 222, 224 (2007). Plaintiffs allege

the Defendants made eleven misrepresentations in Paragarph 111 of their Complaint

and claim they suffered damage as a result of their reliance on these representations.

Similarly, subparagraph k) of Paragraph 111 does not even allege that

Defendants made a false representation to Plaintiffs. Plaintiffs merely claim NNGA

manipulated referrals to NNGA through websites and toll-free numbers and the

Plaintiffs believed they were receiving an objective referral. Plaintiffs also fail to

allege that the Defendants made the representations in subparagraphs a) through k) of

Paragraph 111 with the intent to deceive the Plaintiffs.

III. COUNTS TWO, THREE AND FOUR

Counts Two (Breach of Contract), Three (Unjust Enrichment), and Four

(Detrimental Reliance), are pled together as claims sounding in breach of



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contract/quasi-contract, and are therefore conveniently considered together. Each

count fails to state a claim.

A. Breach of Written Contract (Count Two)

Count Two alleges a written contract between the Plaintiffs and

defendants. (Compl. 115.) Oddly, the subject contracts are not attached to the

Complaint. Since the Plaintiffs fail to attach the written contract to the Complaint,

NNGA has submitted written contracts with NNGA, executed by most of the

Plaintiffs in the capacity of an appointed personal representative of the student

applicant.1

The Court may consider a document attached to a motion to dismiss if

the document is (1) central to the Plaintiffs claim and (2) undisputed (meaning that

the authenticity of the document is not challenged). Horsley v. Feldt, 304 F.3d 1125,

1134 (11th Cir. 2002); accord Day v. Taylor, 400 F.3d 1272, 1275-76 (11th Cir.

2005). The written contract alleged as the basis of liability in Count Two is plainly

central to the claim, and the authenticity of the attached contractual documents is

indisputable.

1 Written contracts (the Financial Policy and Agreement) for Plaintiffs Howard,

Karampelas, Joyce Martin, and Rhonda Burgess are submitted. No contracts

concerning Plaintiffs Terri Dacy, Michael Dacy, or Benjamin Burgess were

located.



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The Financial Policy and Agreement is the only agreement with NNGA to

which financiers such as Plaintiffs (as distinguished from the students) even arguably

are parties.2

These agreements reference and therefore incorporate the Student Rules

of Conduct, which provide in pertinent part:

2. Drugs And Alcohol: Non-prescribed drugs and alcohol are forbidden to be

brought into the Narconon facility and may not be consumed away from the

Narconon facility, while you are in the program. Drug use is grounds for

immediate dismissal without refund.

3. Selling or Possession of Illegal Drugs: Selling, possession, or giving illegal

drugs to another student is grounds for immediate dismissal without refund as

well as reporting to appropriate legal authorities as indicated by the situation.

The Financial Policy and Agreement states [b]reaking the Student Rules of Conduct

may result in immediate expulsion from the program.3

2Other agreements are typically executed between NNGA and the student upon

admission of the student to the Narconon program, such as the Admission and

Services Agreement and the New Life Ambulatory Detoxification Program

Admission and Services Agreement. Since [a] written contract can consist of

multiple documents as long as all the necessary terms are contained in signed

contemporaneous writings, Carr v. Bd. of Regents, 249 Fed. Appx. 146, 150 (11th

Cir. 2007) (internal punctuation omitted), out of an abundance of caution these

agreements between the students and NNGA are also provided.

3 The Admission and Services Agreement and New Life Ambulatory DetoxificationProgram Admission and Services Agreement similarly state:

Violation of the Student Rules of Conduct may result in immediate dismissal

or suspension from the program. Such violation may result in automatic

waiver of the confidentiality of the students ethics file. Immediate dismissal

from the program will result from any of the following violations: (1) The use



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A plaintiff claiming breach of contract bears the burden of pleading (1) the

subject matter of the contract, (2) consideration, and (3) mutual assent by the parties

to all of the contract terms. If the plaintiff has successfully pled the existence of a

contract, the plaintiff must then plead (1) the breach and (2) the resultant damages to

the party who has the right to complain about the contract being broken. Tracfone

Wireless, Inc. v. Zip Wireless Products, Inc., 716 F. Supp. 2d 1275, 1285 (N.D. Ga.

2010) (internal punctuation and citations omitted).

Georgia law is clear that an action on contract shall be brought in the name of

the party in who the legal interest in the contract is vested, and against the party who

made it in person or by agent. O.C.G.A. 9-2-20(a). It is immediately apparent

from the Financial Policy and Agreement that the only defendant who had any

obligation under the contract is NNGA. It is also apparent that those Plaintiffs who

executed agreements did so in a representative capacity, are not beneficiaries of any

contractual promises of NNGA, and thus lack standing to assert a claim for breach.

See generally O.C.G.A. 10-6-86 (instrument signed by agent is obligation of

principal).

of drugs, alcohol or other controlled substance while on Narconon or affiliates

property (such as a doctors office, housing, etc.), (2) Providing or offering

drugs to another student.



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Even assuming that Plaintiffs have standing, the Complaint does not plead a

valid breach of contract claim against NNGA. Plaintiffs contend in paragraph 117 of

the Complaint that a breach of the contracts occurred in ten different ways. Nine of

the alleged breaches, 117(a i), however, refer to alleged misrepresentations in

the inducement of the contract, not to breaches of a contract itself. None of the

representations that are claimed to be misrepresentations appear in the subject

contract. The only possible alleged breach, then, is that set forth in paragraph 117(j)

of the Complaint, failing to provide a drug-free environment for its patients i.e.,

that NNGA was the insurer of a drug-free environment. Plaintiffs contention is

flawed for three reasons.

First, the contract plainly shows that NNGA did not promise a drug-free

environment; rather, it imposed rules of conduct and discipline on its students that

were intended to promote a drug-free environment. That the Student Rules of

Conduct state, for example, [n]on-prescribed drugs and alcohol are forbidden to be

brought into the Narconon facility, indicates that, while NNGA aspired to be a

drug-free environment, NNGA was not insuringa drug-free environment.

Second, paragraphs 85 and 86 of the Complaint make it clear that the alleged

breach refers to events occurring at NNGAs supposed housing, consistent with

Plaintiffs repeated (and unfounded) assertion that NNGA was a residential treatment



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Count Two fails to state a claim upon which relief may be granted.

B. Unjust Enrichment (Count Three)

Unjust enrichment in law is premised upon the principle that a party cannot

induce, accept, or encourage another to furnish or render something of value to such

party and avoid payment for the value received; otherwise, the party has been

unjustly enriched at the expense of another and, in fairness and good conscience,

must reimburse the other to the extent of the value conferred. Reidling v. Holcomb,

225 Ga. App. 229, 232, 483 S.E.2d 624 (1997). A claim of unjust enrichment will

not lie where there is an express contract between the parties, however. E.g., Layer

v. Clipper Petroleum, Inc., 319 Ga. App. 410, 420, 735 S.E.2d 65, 74 (2012); accord

McCaughey v. Bank of America, N.A., 279 Fed. Appx. 794, 797 (11th Cir. 2008).

Plaintiffs have pled an express contract in Count Two of the Complaint,

seeking damages for its breach. (See also Count Three, 123) (Plaintiffs signed

a written contract with one or more of the Defendants). They noticeably have not

pled in the alternative. The unjust enrichment claim thus fails.

C. Detrimental Reliance (Count Four)

Count Four of the Complaint is supposedly pled on a theory that the Plaintiffs

have been harmed by their reliance on the Defendants promise to perform under the

contract, which is labeled as a claim of detrimental reliance. (Compl. 125.) The



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Count lists 10 supposed instances of breach of duty, consisting, again, of the familiar

purported misrepresentations upon which plaintiffs claim they relied when entering

into the contract.

Count Four does not set forth a cause of action known to Georgia law. The

claim is, at best, a repackage of allegations made in Count Two. Since plaintiffs

admit the existence of a contract between the parties, (see Compl. 123), Count Four

can only be a breach of contract claim, or another version of the fraud claim, and it

therefore fails.

IV. COUNT FIVE

Count Five of the Complaint purports to assert a claim of negligence per se

for NNGAs alleged operation of an unlicensed housing program for its drug and

alcohol rehabilitation patients. (Compl. 127.) This supposed negligence is

described as:

a. violation of its licensure and O.C.G.A. 26-5-3; Ga. Comp. R. & Regs.

290-4-2-.03(s), (t), (u), 290-4-2.11 (8), 290-4-2-.16, 290-4-2-.19, 290-4-2-

.20, 290-4-2.21;

b. violation of the limitation set upon it by its license pursuant to Ga. Comp. R.

& Regs 290-4-2-.03 (a); and

c. violation of its duty to disclose its housing programs to licensing andregulatory authorities pursuant to Ga. Comp. R. & Regs 290-4-2-.05 and

290-4-2-.07(2).

(Id.) The Complaint contains only a conclusory allegation that the Plaintiffs were

harmed by any alleged negligence. (Compl. 128.)



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rules is to provide for the licensing and inspection of narcotic treatment programs.

Doe, 628 F.3d at 1330 (quoting Reg. 290-9-12-.02).

The Plaintiffs in the present case likewise rely on regulations of the Georgia

Department of Human Services. The regulations at issue appear in Chapter Two, and

Reg. 290-4-2-.02 (Title and Purpose) states the purpose of those regulations: The

purpose of these rules is to provide for the licensing and inspection of drug abuse

treatment and education programs. Thus, the express purpose of the regulations

relied upon by the Plaintiffs is materially identical to the regulation at issue in Doe .

Therefore, under the holding in that case, the regulations relied upon by Plaintiffs

cannot be the basis for a claim of negligence per se.5

Furthermore, the alleged breach of these administrative regulations is not

capable of being causally connected to Plaintiffs alleged harm. [T]he violation

must be capable of having a causal connection between it and the damage or injury

inflicted upon the other person. Siegel v. Park Avenue Condominium Ass'n, Inc.,

2013 WL 3037292 (Ga. App. 2013). This refers to the character of the legal duty

involved, not proximate causation. Id. Because the licensure regulations above

5 The statute cited by plaintiffs, O.C.G.A. 26-5-3, merely defines terms, and plainly

has nothing to do with protecting a class of persons from harm.



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were not capable of producing the Plaintiffs alleged injuries, the Plaintiffs failed to

state a claim upon which relief can be granted.

Moreover, even when negligence per se has been shown, proximate cause

must still be proved. Central Anesthesia Assocs., P.C. v. Worthy, 254 Ga. 728, 733,

333 S.E.2d 829 (1985). A showing of negligence per se standing alone does not

establish liability per se. Breach of duty alone does not make a defendant liable in

negligence. R&R Insulation Servs., Inc. v. Royal Indem. Co., 307 Ga. App. 419,

425, 705 S.E.2d 223, 231 (2010). In determining what is proximate cause the true

rule is, that the injury must be the natural and probable consequence of the

negligence, such a consequence as under the surrounding circumstances of the case

might and ought to have been foreseen by the wrong-doer as likely to flow from his

act. Combs v. Atlanta Auto Auction, Inc., 287 Ga. App. 9, 14, 650 S.E.2d 709, 715

(2007). In Combs, the Georgia Court of Appeals held the defendants failure to

obtain a certificate of occupancy for its facility did not cause the plaintiffs injuries;

the cause of the injuries was the accident and the accident would have occurred even

if a certificate had been issued. This case is similar to Combs in that the licensing

statutes were not capable of causing the Plaintiffs alleged harm. Even if the

regulations in question impose a legal duty not to harm Plaintiffs, the Plaintiffs



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conclusory allegations on damages fail to show their alleged injuries actually flowed

from the violation of the regulations.

V. COUNTS SIX, SEVEN, EIGHT, NINE AND TEN

A. Plaintiffs Civil RICO Claims Fail To Plead Fraud With Particularity

And Should Be Dismissed Pursuant To Rule 9(b)

Counts Six through Ten of the Complaint purport to allege violations of

Georgias Racketeer Influence and Corrupt Organizations (RICO) statute,

O.C.G.A. 16-14-1, et seq. Specifically, the Plaintiffs assert the following Georgia

Civil RICO claims: Count Six: Civil RICO for Theft by Deception; Count Seven:

Civil RICO for Mail and Wire Fraud; Count Eight: Civil RICO for False Statements

to a Government Agency; Count Nine: Civil RICO for Credit Card Fraud; and Count

Ten: Civil RICO for Identity Fraud.

As can be gleaned from the Plaintiffs allegations, Civil RICO claims are

essentially a breed of fraud claims. Faith Enterprises Grp., Inc. v. Avis Budget Grp.,

Inc., 1:11-CV-3166-TWT, 2012 WL 1409403 (N.D. Ga. Apr. 20, 2012). As such,

the [Rule 9(b)] particularity requirement for fraud applies to fraud-based state RICO

claims, such as the instant one[s], brought in federal court. Curtis Inv. Co., LLC v.

Bayerische Hypo-und Vereinsbank, AG, 341 Fed. Appx. 487, 493 (11th Cir. 2009).

Rule 9(b) requires Plaintiffs alleging fraud or mistake to state with

particularity the circumstances constituting fraud. Fed. R. Civ. P. 9(b). The purpose



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of Rule 9(b)s particularity requirement is to alert[ ] defendants to the precise

misconduct with which they are charged and protect[ ] defendants against spurious

charges of immoral and fraudulent behavior. Ziemba, 256 F.3d at 1202 (internal

punctuation and citation omitted). When a plaintiff does not specifically plead the

minimum elements of [her] allegation, it enables [her] to learn the complaints bare

essentials through discovery and may needlessly harm a defendants goodwill and

reputation by bringing a suit that is, at best, missing some of its core underpinnings,

and at worst, baseless allegations used to extract settlements. United States ex

rel. Clausen v. Lab. Corp. of Am., Inc., 290 F.3d 1301, 1313, n.24 (11th Cir. 2002).

To satisfy Rule 9(b), a RICO complaint must set forth:

(1) precisely what statements were made in what documents or oral

representations or what omissions were made, and (2) the time and place ofeach such statement and the person responsible for making (or, in the case of

omissions, not making) same, and (3) the content of such statements and the

manner in which they misled the plaintiff, and (4) what the defendants

obtained as a consequence of the fraud.

Brooks, 116 F.3d at 1371.

Here, the Plaintiffs RICO claims, as alleged, fail to comply with Rule 9(b)s

heightened pleading standard. For example, the Plaintiffs allege, generally, in Count

Seven that the Defendants distributed the following false statements and/or

representations to Plaintiffs and the class members through the mail, telephone wire

facilities, and/or Internet. and in Count Six that the Defendants committed



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theft by deception by creating or confirming a false impression, and/or failing to

correct the false impression, and/or promising to perform services which NNGA did

not provide, to Plaintiffs and all class members. (Compl. 133, 142.) Aside from

the obvious ambiguity created by the Plaintiffs repeated use of and/or, the

Complaint is deficient in several other respects. In a case alleging fraud against

multiple defendants, Rule 9(b) requires that the complaint contain specific

allegations with respect to each defendant; generalized allegations lumping multiple

defendants together are insufficient. West Coast Roofing & Waterproofing, Inc. v.

Johns Manville, Inc., 287 Fed. Appx. 81, 86 (11th Cir. 2008) (citing Ambrosia Coal

& Const. Co. v. Pages Morales, 482 F.3d 1309, 1317 (11th Cir. 2007)). Each

defendant should be informed of the nature of his alleged participation in the fraud.

Brooks, 116 F.3d at 1371.

The Plaintiffs in this case have done exactly what the Eleventh Circuit

condemned in West Coast Roofing. They have made no attempt to provide

allegations against each specific Defendant and instead have provided only

generalized allegations lumping multiple Defendants together. The Complaint

contains no details as to which Defendant made what particular statement, to whom

the statement was made, where the statement was made, or even when the statement



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was made. As a result, the Plaintiffs RICO allegations are too vague and general to

satisfy the requirements of Rule 9(b) and should be dismissed pursuant thereto.

B. Counts Nine and Ten Fail To Sufficiently Allege a Pattern of

Racketeering Activity

Under the Georgia Civil RICO statute, [i]t is unlawful for any person,

through a pattern of racketeering activity or proceeds derived therefrom, to acquire or

maintain, directly or indirectly, any interest in or control of any enterprise or to

conduct or participate in, directly or indirectly, such enterprise through a pattern of

racketeering activity. O.C.G.A. 16-14-4. A person participates in a pattern of

racketeering activity when he or she engages in at least two acts of racketeering

activity in furtherance of one or more incidents, schemes, or transactions that have

the same or similar intents, accomplices, victims, or methods of commission and

are not isolated incidents. O.C.G.A. 16-14-3(8). Racketeering activity means

any crime, known within the RICO context as a predicate offense, which is

chargeable by indictment under certain specified categories of laws. O.C.G.A. 16-

14-3(9). The predicate offenses for Counts Nine and Ten, respectively, are credit

card fraud and identity fraud. Although these two acts constitute racketeering

activity under O.C.G.A. 16-14-3(9), as set forth below, the Plaintiffs have not

alleged that the Defendants engaged in a pattern of said racketeering activity

sufficient to support a claim under Georgia RICO.



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Both the federal and Georgia RICO statutes define a pattern as requiring at

least two acts of racketeering activity. See O.C.G.A. 16-14-3(8); see also 18

U.S.C. 1961(5). However, Georgia courts have explained that [i]t is not the intent

of the Georgia Assembly that isolated incidents be prosecuted under [O.C.G.A.

16-14-4] but only an interrelated pattern of criminal activity. Larson v. Smith, 194

Ga. App. 298, 299, 391 S.E.2d 686, 688 (1990) (internal punctuation and citation

omitted). Moreover, decisions of the Eleventh Circuit and the U.S. Supreme Court

interpreting both federal and state RICO laws have determined that in order to prove

a pattern of racketeering activity it is not sufficient to simply establish two

isolated predicate acts. Jackson v. Bellsouth Telecomm., 372 F.3d 1250, 1264 (11th

Cir. 2004). As the Supreme Court has stated: while two acts are necessary, they

may not be sufficient. Indeed, in common parlance, two of anything do not generally

form a pattern. Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 497, n.14

(1985).6

Here, with regard to Counts Nine and Ten, the Complaint fails to sufficiently

allege a pattern of racketeering activity. The credit card and identity fraud counts

6Because of the similarities between Georgia RICO and federal RICO, federal

courts generally apply the same analysis to both statutes. See, e.g., Morast v.

Lance, 631 F. Supp. 474, 481 (N.D. Ga. 1986), affd, 807 F.2d 926 (11th Cir.

1987).



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allege that Defendants opened several high interest credit cards in the name of

NNGAs patients and/or patients family members, without their permission, and

used those credit cards to pay for NNGAs fees. (Compl. 159, 167.)

Importantly, however, the Plaintiffs allege that these frauds were perpetrated against

only two individual Plaintiffs: Burgess and Dacy.7

(Compl. 4, 19.) Perhaps even

more importantly, the acts related to Burgess and Dacy occurred approximately two

years apart. (Compl. 2, 17.) Thus, while the Plaintiffs have arguably alleged at

least two acts of credit card and identity fraud, those two acts were isolated and

sporadic and, as a result, do not constitute a pattern of racketeering activity

sufficient to support a claim under Georgias RICO statute. Accordingly, Counts

Nine and Ten should be dismissed.

C. Count Eight Fails to Sufficiently Allege a Pattern Of Racketeering

Activity and that Defendants Conduct Was the Proximate Cause of

Plaintiffs Injuries

Under Georgias RICO statute, the two predicate offenses must be

sufficiently linked to form a RICO pattern, but nevertheless sufficiently

distinguishable so that they do not become two sides of the same coin otherwise

known as a mere single transaction, instead of the two or more transactions or

7Plaintiffs Howard, Martin, and Karampelas have indisputably failed to allege a

Civil RICO claim based on credit card or identity fraud. Thus, at the very least,

these Plaintiffs Civil RICO claims for credit card fraud and identity fraud should

be dismissed.



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incidents (forming a pattern) that the statute requires. Southern Intermodal

Logistics, Inc. v. D.J. Powers Co., 10 F. Supp. 2d 1337, 1359 (S.D. Ga. 1998); see

also Stargate Software Intl, Inc. v. Rumph, 224 Ga. App. 873, 877, 482 S.E.2d 498

(1997) (the taking and wrongful use of computer equipment and records is one single

transaction even though the elements of two crimes may have been present at two

separate points in time); Raines v. State, 219 Ga. App. 893, 894, 467 S.E.2d 217

(1996) (the sale of timber land by a single deed cannot be broken down into two

predicate acts of theft by taking and filing of fraudulent documents; the issue is not

whether the party could have been charged with two separate criminal offenses);

Emrich v. Winsor, 198 Ga. App. 333, 333, 401 S.E.2d 76 (1991) (the sale of a single

investment to a plaintiff and co-investor did not constitute a pattern but simply a

single transaction with two victims).

Count Eight alleges a Civil RICO violation for False Statements to a

Government Agency. (Compl. 145-153.) The Plaintiffs allege that the

Defendants made various misrepresentations to the State of Georgia when applying

for a license to operate a drug abuse treatment and education program.8

While the

8It is far from clear that an application for a license to operate a drug abuse

treatment and education program requires the various statements the Plaintiffs

claim the Defendants misrepresented and/or failed to disclose. See

http://dch.georgia.gov/drug-abuse-treatment-and-education-program. It is, of

course, well established that an obligation to disclose must exist before a party can

http://dch.georgia.gov/drug-abuse-treatment-and-education-program.http://dch.georgia.gov/drug-abuse-treatment-and-education-program.


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Plaintiffs identify multiple allegedly false statements, it cannot be disputed that the

submission of a license application constitutes a single transaction. As noted above,

the question is not whether the Defendants could be charged with two separate

criminal offenses, but rather whether the acts are sufficiently distinguishable so that

they do not become two sides of the same coin. The predicate acts attributed to the

Defendants in Count Eight are not distinguishable as two or more acts forming a

pattern. Accordingly, because the license application process constitutes a single

transaction, the Plaintiffs have failed to allege a pattern of racketeering activity

sufficient to support a cause of action under the Georgia RICO statute. Count Eight

should be dismissed.

Even assuming the Plaintiffs sufficiently alleged a pattern of false statements

to a government agency, Count Eight still fails. Georgias Civil RICO statute

provides a cause of action for [a]ny person who is injured by reason of any violation

of Code Section 16-14-4. O.C.G.A. 16-14-6(c). As stated in Maddox v. S. Engg

Co., 231 Ga. App. 802, 500 S.E.2d 591 (1998), the language by reason of imposes

a proximate causation requirement on the plaintiff. Id. at 805. Thus, a plaintiff has

standing under RICO only to the extent that [the RICO plaintiff] has been injured

be held liable for fraud based on the concealment of material facts. See Williams

v. Dresser Indus. Inc., 120 F.3d 1163 (11th Cir. 1997). Thus, to the extent the

license application did not require disclosure of certain facts, the Defendants

cannot be held liable for their alleged concealment of those facts.



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by the conduct constituting the violation. Id. Put another way, the injury must

flow directly from the predicate acts. Id.

The analysis here is controlled by Maddox, which involved a Georgia RICO

claim based on false statements to a government agency and is thus analogous to the

present case. The Maddox plaintiff asserted that the defendant submitted false

statements to the United States Army Corps of Engineers in an application for a

permit to build a dam and reservoir upstream from the plaintiffs property. The

Georgia Court of Appeals held that the plaintiff was not injured as a directresult of

any misrepresentations, but rather by reason of the Corps decision to issue a permit

for the dam and reservoir upstream from his property. Id. at 806 (emphasis in

original). Although the plaintiff in Maddox may not have been injured but for the

misrepresentations, it [was] clear those misrepresentations were not the proximate

cause of his injuries. Id.

The Plaintiffs in this case likewise were not injured as a direct result of any

alleged false statements the Defendants made to the State of Georgia in a license

application. The alleged false statements were neither made to nor intended to be

received by the Plaintiffs. In fact, nowhere in the Complaint do the Plaintiffs allege

that they were even aware of the alleged false statements at the time they agreed to

contract with the Defendants. Thus, like in Maddox, the Plaintiffs alleged injuries in



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this case were, at best, nothing more than an eventual consequence of the alleged

false statements. Accordingly, because the Plaintiffs have failed to sufficiently allege

that the Defendants false statements to a government agency were the proximate

cause of their injuries, Count Eight should be dismissed.

CONCLUSION

On the basis of the foregoing law and authorities, Narconon of Georgia, Inc.

respectfully submits that the complaint should be DISMISSED.

This 9th day of July, 2013.

Goodman McGuffey Lindsey &

Johnson, LLP

Attorneys for Defendant Narconon of

Georgia, Inc.

By:S/ JAMEST. HANKINS, III

EDWARD H. LINDSEY, JR.

GA State Bar No. 453075

[email protected]

JAMES T. HANKINS, III


[email protected]

3340 Peachtree Road NE, Suite 2100

Atlanta, GA 30326-1084

Phone: (404) 264-1500Fax: (404) 264-1737

Chilivis, Cochran, Larkins & Bever LLP

Attorneys for Defendant Narconon of

Georgia, Inc.

By: S/ JOHN K. LARKINS, JR.

JOHN K. LARKINS, JR.


[email protected]

WILLIAM TAYLOR MCNEILL


[email protected]

3127 Maple Dr. NE

Atlanta, GA 30305

Phone: 404-233-4171Fax: 404-261-2842

mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]


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FOR THE NORTHERN DISTRICT OF GEORGIAATLANTA DIVISION



JOYCE MARTIN, BETH




situated,

Plaintiffs,

v.

Civil Action




BETTER LIVING AND


NARCONON INTERNATIONAL,and NARCONON OF GEORGIA,

INC.,

Defendants.

CERTIFICATE OF COMPLIANCE

The foregoing document is double spaced in 14 point Times New Roman font

and complies with the type-volume limitation set forth in Local Rule 7.1.



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S/JAMEST. HANKINS, III

James T. Hankins, IIIGoodman McGuffey Lindsey & Johnson, LLP



Phone: (404) 264-1500

Fax: (404) 264-1737

Email: [email protected]

mailto:[email protected]:[email protected]


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FOR THE NORTHERN DISTRICT OF GEORGIA

ATLANTA DIVISION



JOYCE MARTIN, BETH




situated,

Plaintiffs,

v.

Civil Action




BETTER LIVING AND


NARCONON INTERNATIONAL,

and NARCONON OF GEORGIA,INC.,

Defendants.

CERTIFICATE OF SERVICE

This is to certify that I electronically filed this MEMORANDUM IN

SUPPORT OF NARCONON OF GEORGIA INC.S MOTION TO DISMISS FOR

FAILURE TO STATE A CLAIM with the Clerk of Court using the CM/ECF system

which will automatically send e-mail notification of such filing to the following

attorneys of record:



29/29

Jeffrey R. Harris, Esq.

Darren W. Penn, Esq.

Stephen G. Lowry, Esq.Jed D. Manton, Esq.

Yvonne Godfrey, Esq.

Harris, Penn & Lowry, LLP

1201 Peachtree Street, N.E.

400 Colony Square, Suite 900

Atlanta, GA 30361

Rebecca C. Franklin, Esq.

Franklin Law, LLC

1201 Peachtree Street, N.E.400 Colony Square, Suite 900

Atlanta, GA 30361

This 9th day of July, 2013.

S/ JAMEST. HANKINS, III

JAMES T. HANKINS, III

GA State Bar No. [email protected]

Goodman McGuffey Lindsey & Johnson, LLP



Phone: (404) 264-1500

Fax: (404) 264-1737

2224-0168/Doc ID #2283243

mailto:[email protected]:[email protected]

Documents

Burgess: Narconon Georgia Memo in Support of Motion Dismiss