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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. 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.

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

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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.

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.
1

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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
2

Other 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 Detoxification Program 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 insuring a 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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facility. The contract, however, shows that Plaintiffs and the students repeatedly acknowledged that NNGA was not a residential facility. The Financial Policy and Agreement states: Any supportive living arrangements are made with the facility of your choice, Narconon of Georgia may provide a list of preferred providers, all financial and living arrangements will be contracted for by the student and the facility of their choice; there is no warranty expressed or implied with regard to the housing arrangement.4 In light of these provisions of the contract, there can be no valid claim that NNGA breached its contract because of actions that occurred at a students residence. Third, there is no allegation in the Complaint that any of the Plaintiffs suffered any damages as a result of any alleged breach.
4

The Admission and Services Agreement and the Ambulatory Detoxification Program Admission and Services Agreement state in essentially identical language: Narconon of Georgia Inc. is an outpatient drug rehabilitation and education facility in the State of Georgia and as such, provides drug rehabilitation and education services on a non-residential basis. The student agrees to be fully responsible for his or her own housing, clothing, meals and other incidentals. Narconon will provide all materials, supplies and facilities related to the delivery of the Narconon program. Any assistance Narconon of Georgia [New Life Ambulatory Detoxification Program] provides concerning housing and meals is strictly limited to referral of places of business that can provide these services. Transactions concerning referred services are entirely the students responsibility. (emphasis added.)
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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. 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 and regulatory 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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(Compl. 127.)

This supposed negligence is

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Under Georgia law, a statute or regulation may create a duty requiring an actor to conform to a certain standard of conduct for the protection of others against unreasonable risks, the breach of which may be negligence per se. E.g., Donaldson v. DOT, 236 Ga. App. 411, 511 S.E.2d 210 (1999). As stated in Doe v. FultonDeKalb Hosp. Auth., 628 F.3d 1325 (11th Cir. 2010): Georgia law allows the adoption of a statute as a standard of conduct so that its violation becomes negligence per se. In determining whether the violation of a statute or ordinance is negligence per se as to a particular person, it is necessary to examine the purposes of the legislation and decide (1) whether the injured person falls within the class of persons it was intended to protect and (2) whether the harm complained of was the harm it was intended to guard against. Id. at 1339 (quoting Brown v. Belifante, 252 Ga. App. 856, 557 S.E.2d 399, 403 (2001)). This case is controlled by Doe, which involved claims against a hospital by persons being treated for addiction and is thus analogous to the present case. The Doe plaintiffs asserted that the defendants were negligent per se because the defendants violated a regulation of the Georgia Department of Human Services, Ga. Comp. R. & Regs 290-9-12-.09(8). The Eleventh Circuit, examining the purpose of the regulations, held that the regulation was intended for licensing and inspection purposes and not for the creation of a standard of conduct to protect individuals, finding that its purpose was clearly set forth in the regulations: The purpose of these

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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

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 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. 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. 1614-3(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
6

Because 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
7

Plaintiffs 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
8

It 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
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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 direct result 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 & Chilivis, Cochran, Larkins & Bever LLP Attorneys for Defendant Narconon of Johnson, LLP Attorneys for Defendant Narconon of Georgia, Inc. Georgia, Inc. By:S/ JAMES T. HANKINS, III EDWARD H. LINDSEY, JR. GA State Bar No. 453075 elindsey@gmlj.com JAMES T. HANKINS, III GA State Bar No. 188771 jhankins@gmlj.com 3340 Peachtree Road NE, Suite 2100 Atlanta, GA 30326-1084 Phone: (404) 264-1500 Fax: (404) 264-1737 By: S/ JOHN K. LARKINS, JR. JOHN K. LARKINS, JR. GA State Bar No. 438425 jkl@cclblaw.com WILLIAM TAYLOR MCNEILL GA State Bar No. 239540 tmcneill@cclblaw.com 3127 Maple Dr. NE Atlanta, GA 30305 Phone: 404-233-4171 Fax: 404-261-2842

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Case 1:13-cv-02217-JOF Document 9-1 Filed 07/09/13 Page 26 of 29

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. RELIGIOUS TECHNOLOGY CENTER, INC., ASSOCIATION FOR BETTER LIVING AND EDUCATION INTERNATIONAL, 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.

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

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Case 1:13-cv-02217-JOF Document 9-1 Filed 07/09/13 Page 27 of 29

S/JAMES T. HANKINS, III

James T. Hankins, III Goodman McGuffey Lindsey & Johnson, LLP 3340 Peachtree Road NE, Suite 2100 Atlanta, GA 30326-1084 Phone: (404) 264-1500 Fax: (404) 264-1737 Email: jhankins@gmlj.com

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Case 1:13-cv-02217-JOF Document 9-1 Filed 07/09/13 Page 28 of 29

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. RELIGIOUS TECHNOLOGY CENTER, INC., ASSOCIATION FOR BETTER LIVING AND EDUCATION INTERNATIONAL, 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:

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

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Case 1:13-cv-02217-JOF Document 9-1 Filed 07/09/13 Page 29 of 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/ JAMES T. HANKINS, III

JAMES T. HANKINS, III GA State Bar No. 188771 jhankins@gmlj.com Goodman McGuffey Lindsey & Johnson, LLP 3340 Peachtree Road NE, Suite 2100 Atlanta, GA 30326-1084 Phone: (404) 264-1500 Fax: (404) 264-1737
2224-0168/Doc ID #2283243

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