burgess et al v narconon: appeal brief

Appeal No. 14-11214-FF

IN THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT

BENJAMIN BURGESS, RHONDA BURGESS, HEIDI HOWARD, JOYCE MARTIN, BETH KARAMPELAS, TERRI DACY, and MICHAEL DACY,

Plaintiffs-Appellants,

v.

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

INTERNATIONAL, and NARCONON OF GEORGIA, INC., Defendants-Appellees.

ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA, ATLANTA DIVISION

Case No. 1:13-cv-02217-SCJ

BRIEF OF PLAINTIFFS-APPELLANTS

JEFFREY R. HARRIS

Georgia Bar No. 330315 REBECCA C. FRANKLIN

Georgia Bar No. 141350 YVONNE S. GODFREY Georgia Bar No. 318567

HARRIS PENN LOWRY LLP 400 Colony Square

1201 Peachtree St. NE, Suite 900 Atlanta, GA 30361

(404) 961-7650 Counsel for Plaintiffs-Appellants

Case: 14-11214 Date Filed: 05/06/2014 Page: 1 of 46

Appeal No. 14-11214-FF, Benjamin Burgess, et al. v. Religious Tech. Ctr., et al.

Page A of C

Certificate of Interested Persons and Corporate Disclosure Statement

Pursuant to Federal Rule of Appellate Procedure 26.1 and Eleventh Circuit

Rule 26.1-1, counsel for Appellants Benjamin Burgess, Rhonda Burgess, Heidi

Howard, Joyce Martin, Beth Karampelas, Terri Dacy, and Michael Dacy hereby

certifies that, to the best of counsel’s knowledge, the following individuals, firms,

governmental entities, and corporations have an interest in the above- captioned

appeal:

Alston & Bird, LLP Association for Better Living and Educational International Barton, Thomas M. Burgess, Benjamin Burgess, Rhonda Carpenter, David B. Chilvis, Cochran, Larkins & Bever LLP Coles Barton LLP Coles, Matthew S. Dacy, Michael Dacy, Terri Dalbey, J.D. Dawson, Cari K.



Page B of C

Diffley, Dan F. Fleming, John H. Franklin, Rebecca C. Godfrey, Yvonne S. Goodman McGuffey Lindsey & Johnson, LLP Hankins, James T. Harris, Jeffrey R. Harris Penn Lowry LLP Howard, Heidi Jones, The Honorable Steve C. Karampelas, Beth Larkins, John K. Lindsey, Edward H. Martin, Joyce McNeil, William Taylor Mohr, Stacey M. Narconon International Narconon of Georgia, Inc. Religious Technology Center, Inc. Sanders, Valerie S.



Page C of C

Sutherland Asbill & Brennan LLP Tady, Aaron P.M.


i

Statement Regarding Oral Argument

Plaintiffs-Appellants Benjamin Burgess, et al. request oral argument. This

case raises significant legal issues regarding the appropriate application of the

pleading standards contained in Federal Rules of Civil Procedure 8 and 9, the proper

interpretation of Georgia’s Long Arm statute, and the implications of denying leave

to amend a complaint pursuant to Federal Rule of Civil Procedure 15(a) where there

has been no evidence of bad faith, undue delay, prejudice to the defendants, or

futility. Oral argument will allow this Court the fullest opportunity to explore those

legal issues with counsel.


ii

Table of Contents

Certificate of Interested Persons and Corporate Disclosure Statement .................... A

Statement Regarding Oral Argument ........................................................................ i

Table of Contents ...................................................................................................... ii

Table of Citations ..................................................................................................... iv

Statement of Subject-Matter and Appellate Jurisdiction ....................................... viii

I. STATEMENT OF THE ISSUES .......................................................................... 1

II. STATEMENT OF THE CASE ............................................................................ 1

Course of the Proceedings. ..................................................................................... 1

Statement of the Facts ............................................................................................. 3

Standard of Review ................................................................................................. 5

III. SUMMARY OF THE ARGUMENT ................................................................. 5

IV. ARGUMENT AND CITATION OF AUTHORITY ......................................... 7

A. Class Representatives stated a plausible claim for relief for breach of

contract, quasi-contract, and negligence per se. ..................................................... 7

1. Breach of contract ...................................................................................... 8

2. Unjust Enrichment.................................................................................... 11

3. Detrimental Reliance/Promissory Estoppel ............................................ 12

4. Negligence Per Se..................................................................................... 14


iii

B. Class Representatives stated with particularity claims sounding in fraud

and Georgia’s RICO statute. ................................................................................. 15

1. Fraudulent Misrepresentation ................................................................. 17

2. Georgia RICO Claims .............................................................................. 19

C. Class Representatives made a showing sufficient to warrant the exercise of

personal jurisdiction over RTC or, at a minimum, jurisdictional discovery. ...... 22

D. The district court abused its discretion by denying leave for Class

Representatives to amend their original complaint. ............................................. 28

V. Conclusion .......................................................................................................... 30

Certificate of Compliance .......................................................................................... a

Certificate of Service ................................................................................................. b


iv

Table of Citations

Cases

Am. Dental Ass’n v. Cigna Corp., 605 F.3d 1283 (11th Cir. 2010) .......................... 8

Ambrosia Coal & Const. Co. v. Pages Morales, 482 F.3d 1309 (11th Cir.2007) ... 16

Artzner v. A & A Exterminators, Inc., 531 S.E.2d 200 (Ga. Ct. App. 2000) ........... 17

Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937 (2009) ........................................7, 8

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955 (2007) ............................ 8

Brooks v. Blue Cross & Blue Shield of Fla., Inc., 116 F.3d 1364 (11th Cir. 1997) 16

Bryant v. Dupree, 252 F.3d 1161 (11th Cir. 2001) ........................................... 29, 30

Corsello v. Lincare, Inc., 428 F.3d 1008 (11th Cir. 2005) ...................................... 29

Diamond Crystal Brands, Inc. v. Food Movers Int’l, Inc., 593 F.3d 1249 (11th Cir.

2010) ..................................................................................................................... 24

Durham v. Bus. Mgmt. Assocs., 847 F.2d 1505 (11th Cir. 1988) ............................ 16

Evans v. McClain of Ga., Inc., 131 F.3d 957 (11th Cir. 1997) ........................ 13, 14

Fisher v. Toombs Cnty. Nursing Home, 479 S.E.2d 180 (Ga. Ct. App. 1996) ... 9, 10

Foman v. Davis, 371 U.S. 178, 83 S.Ct. 227 (1962) ............................................... 29

Handy v. DeKalb Med. Ctr., 679 S.E.2d 107 (Ga. Ct. App. 2009) ......................... 25

Hatmarker v. Mem’l Med. Ctr., 619 F.3d 741 (7th Cir. 2010) ................................ 14

Houston v. Houston, 600 S.E.2d 395 (Ga. Ct. App. 2004) ...................................... 13


v

Kuritzky v. Emory Univ., 669 S.E.2d 179 (Ga. Ct. App. 2008) ................................. 8

Lee v. Just Scott Designs, Inc., 754 S.E.2d 616 (Ga. Ct. App. 2014) ...................... 25

Madara v. Hall, 916 F.2d 1510 (11th Cir. 1990) ...................................................... 5

Maddox v. S. Eng'g Co., 453 S.E.2d 70 (Ga. Ct. App. 1994) .................................. 22

Morris v. SSE, Inc., 843 F.2d 489 (11th Cir. 1988) .......................................... 23, 24

Regional Pacesetters v. Eckerd Drugs of Ga., 358 S.E.2d 481 (Ga. Ct. App. 1987)

............................................................................................................................... 10

Satisfaction & Serv. Hous., Inc. v. SouthTrust Bank, Inc., 642 S.E.2d 364 (Ga. Ct.

App. 2007) ............................................................................................................ 27

Liquidation Comm’n of Banco Intercontinental, S.A. v. Renta, 530 F.3d 1339 (11th

Cir. 2008) .............................................................................................................. 19

Cable News Network, Inc. v. Video Monitoring Servs. of Am., Inc., 723 F. Supp.

765 (N.D. Ga. 1989) ............................................................................................. 28

Smith Serv. Oil Co. v. Parker, 549 S.E.2d 485 (Ga. Ct. App. 2001) ....................... 11

Sosa v. Airprint Sys., Inc., 133 F.3d 1417 (11th Cir. 1998)....................................... 5

Stires v. Carnival Corp., 243 F. Supp. 2d 1313 (M.D. Fla. 2002) .......................... 17

Surowtiz v. Hilton Hotels Corp., 383 U.S. 363, 86 S.Ct. 845 (1966) ........................ 8

TechBios, Inc. v. Champagne, 688 S.E.2d 592 (Ga. Ct. App. 2009) ........................ 9

United States v. Gen. Dynamics, 315 F. Supp. 2d 939 (N.D. Ill. 2004). .......... 16, 18

United Techs. Corp. v. Mazer, 556 F.3d 1260 (11th Cir. 2009) .............................. 11


vi

United States v. Ward, 486 F.3d 1212 (11th Cir. 2007) .......................................... 20

Walter v. Orkin Exterminating Co., 385 S.E.2d 725 (Ga. Ct. App. 1989). ............. 14

Welch v. Laney, 57 F.3d 1004 (11th Cir. 1995) ......................................................... 5

Williams Gen. Corp. v. Stone, 614 S.E.2d 758 (Ga. 2005) ...................................... 19

Ziemba v. Cascade Int’l, Inc., 256 F.3d 1194 (11th Cir. 2001) ........................ 16, 19

Statutes

28 U.S.C. § 1332 ........................................................................................................ 2

28 U.S.C. § 1441 ........................................................................................................ 2

28 U.S.C. § 1446 ........................................................................................................ 2

O.C.G.A. § 10-6-1 .................................................................................................... 25

O.C.G.A. § 13–3–1 .................................................................................................... 9

O.C.G.A. § 16-10-20 ................................................................................................ 21

O.C.G.A. § 16-14-1 .................................................................................................... 2

O.C.G.A. § 16-14-2 .................................................................................................. 19

O.C.G.A. § 16-14-3 .................................................................................................. 21

O.C.G.A. § 16-14-5 .................................................................................................. 19

O.C.G.A. § 16-8-3 .................................................................................................... 20

O.C.G.A. § 16-9-121 ................................................................................................ 20

O.C.G.A. § 16-9-31 .................................................................................................. 20

O.C.G.A. § 26-5-1 .................................................................................................... 15


vii

O.C.G.A. § 26-5-2 .................................................................................................... 15

O.C.G.A. § 26-5-5 .................................................................................................... 15

O.C.G.A. § 26-5-6 .................................................................................................... 15

O.C.G.A. § 9-10-91 .................................................................................................. 25

Rules

Fed.R.Civ.P. 12 ......................................................................................................2, 6

Fed.R.Civ.P. 15 ............................................................................................... 2, 6, 29

Fed.R.Civ.P. 8 ........................................................................................................6, 7

Fed.R.Civ.P. 9 ............................................................................................... 6, 15, 16


viii

Statement of Subject-Matter and Appellate Jurisdiction

The district court had subject matter jurisdiction over this action under 28

U.S.C. §§ 1332, 1441, 1446, and 1453, pursuant to the Class Action Fairness Act of

2005.

This Court has appellate jurisdiction pursuant to 28 U.S.C. § 1291. The

district court entered final judgment disposing of all claims on February 19, 2014.

(Docs. 40, 41). Plaintiffs-Appellants timely filed their Notice of Appeal on March

20, 2014, pursuant to Federal Rules of Appellate Procedure 3 and 4. (Doc. 42).


1

I. STATEMENT OF THE ISSUES

A. Whether Class Representatives stated a plausible claim for relief for

breach of contract, quasi-contract, and negligence per se.

B. Whether Class Representatives stated with requisite particularity claims

sounding in fraud and Georgia’s RICO statute.

C. Whether Class Representatives made a showing sufficient to warrant the

exercise of personal jurisdiction over RTC or, at a minimum,

jurisdictional discovery.

D. Whether the district court abused its discretion by denying leave for Class

Representatives to amend their original complaint.

II. STATEMENT OF THE CASE

Course of the Proceedings: On June 4, 2013, Benjamin Burgess, Rhonda

Burgess, Heidi Howard, Joyce Martin, Beth Karampelas, Terri Dacy, and Michael

Dacy (“Class Representatives”) filed suit against Religious Technology Center, Inc.

(“RTC”), Association for Better Living and Education International (“ABLE”),

Narconon International (“International”), and Narconon of Georgia, Inc. (“NNGA”)

(referred to collectively as “Defendants”), in the State Court of Gwinnett County,

Georgia, individually and on behalf of a class of individuals who paid money to

Defendants to procure drug or alcohol rehabilitation services at NNGA, asserting


2

claims of fraud, breach of contract, unjust enrichment, detrimental reliance,

negligence per se, and Georgia’s Racketeer Influence and Corrupt Organizations

(“RICO”) statute, O.C.G.A. § 16-14-1 et seq. (Doc. 1-1, hereinafter “Compl.”). On

July 2, 2013, International filed a notice of removal to the Northern District of

Georgia, pursuant to the Class Action Fairness Act, 28 U.S.C. § 1332(d), and 28

U.S.C. §§ 1441 and 1446. (Doc. 1).

On July 9, 2013, ABLE, International, and NNGA filed motions to dismiss

the complaint for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6). (Docs.

4, 5, 9). On the same day, RTC filed a motion to dismiss for lack of personal

jurisdiction, pursuant to Fed.R.Civ.P. 12(b)(2), or alternatively, for failure to state a

claim pursuant to Rule 12(b)(6). (Doc. 7). Class Representatives filed a response

in opposition to each motion on July 23, 2013. (Docs. 14, 15, 16, 19). In their

responses, Class Representatives sought leave to amend the complaint pursuant to

Fed.R.Civ.P. 15(a) and jurisdictional discovery with respect to RTC’s motion to

dismiss. (Id.). Defendants filed their reply briefs on August 9, 2013. (Docs. 28, 29,

30, 31).

On February 19, 2014, the district court issued its order granting RTC’s

motion to dismiss pursuant to Rule 12(b)(2) for lack of personal jurisdiction, and

granting ABLE, International, and NNGA’s motions to dismiss for failure to state a

claim pursuant to Rule 12(b)(6). (Doc. 40). The district court denied Class


3

Representatives leave to amend and denied their request for jurisdictional discovery.

(Id.). The district court dismissed with prejudice Class Representatives’ complaint

and closed the action. (Docs. 40, 41).

Statement of the Facts: Class Representatives paid money to Defendants to

enroll themselves or their loved ones in the Narconon program at NNGA, and to

cover costs associated with books, housing, and related goods and services. (Compl.

¶ 31). The Narconon program was established in 1966 as a drug and alcohol

rehabilitation program based on the writings of L. Ron Hubbard, a science-fiction

writer and the founder of the Church of Scientology. (Id. ¶ 38). Narconon’s

treatment for drug and alcohol addicts is based exclusively on Hubbard’s writings,

also known as “technology” or “tech.” (Id. ¶ 41). Narconon’s proponents believe

that strict adherence to the Hubbard technology alone will completely address the

rehabilitation needs of its patients. (Id. ¶ 46). Therefore, patients receive no

counseling or education in drug and alcohol rehabilitation, and the therapeutic

discussion of drugs and their effects is actually discouraged. (Id.).

ABLE operates as an umbrella group that oversees the drug and alcohol

rehabilitation activities of the Church of Scientology. (Id. ¶ 24). ABLE is responsible

for ensuring that programs using Hubbard’s technology, including Narconon, meet

the Church of Scientology’s and RTC’s exacting standards. (Id. ¶ 65). To that end,

ABLE licenses the Narconon materials to International, conducts inspections of


4

Narconon centers, and otherwise actively manages the daily operations of

International and NNGA. (Id. ¶¶ 24, 64-66). International owns, licenses, operates,

and otherwise directs drug and alcohol rehabilitation services at Narconon centers,

including NNGA. (Id. ¶ 38). As the parent/licensor of NNGA, International

exercises direct control over the time, manner, and method of NNGA’s operations.

(Id. ¶ 27). Finally, ABLE, International, and NNGA are controlled by RTC, which

oversees Church of Scientology activities and serves as the final arbiter and enforcer

of orthodoxy for all Scientology-related activities and organizations. (Id. ¶¶ 21-22).

RTC’s Chairman of the Board, David Miscavige, is the current leader of the

Church of Scientology and its many affiliated organizations, having assumed that

role shortly after Hubbard’s death in 1986. (Doc. 19 at 4). Under Miscavige’s

leadership, management, and control, Defendants function as an interrelated and

interdependent network of entities that aim to expand the reach of the Church of

Scientology. (Id.)

As alleged in the complaint, Defendants have repeatedly made a vast array of

false and misleading claims and employed other deceptive techniques in their

dealings with drug and alcohol addicts and their families, through websites,

marketing materials, advertising, and personnel. (Compl. ¶ 74). These

misrepresentations pertain to, among other things: the effectiveness of the Narconon

program, which consists of a “sauna and vitamin” program and written “training


5

routines” originally devised to teach communication skills to Scientologists;

Narconon’s purported success rate; Narconon’s connection to Scientology; the

certifications of NNGA’s staff; NNGA’s housing and “drug-free” environment; and

the nature of its government licensing. (Id. ¶¶ 74-105). By reason of their justified

reliance on Defendants’ false statements and material misrepresentations, Class

Representatives filed the complaint, seeking restitution, compensatory damages, and

punitive damages, for their actual physical, mental, and economic harm. (Id. ¶¶ 170-

72).

Standard of Review: Where a district court dismisses the complaint for

failure to state a claim, this Court will determine whether, considering the facts in

the light most favorable to the plaintiffs, “it appears beyond doubt that [they] can

prove no set of facts that would entitle [them] to relief.” Welch v. Laney, 57 F.3d

1004, 1008 (11th Cir. 1995) (citation omitted). This Court will review a dismissal

for lack of personal jurisdiction de novo. Madara v. Hall, 916 F.2d 1510, 1514 (11th

Cir. 1990). This Court reviews a district court’s refusal to allow the plaintiffs to

amend the complaint for an abuse of discretion. See Sosa v. Airprint Sys., Inc., 133

F.3d 1417, 1419 (11th Cir. 1998).

III. SUMMARY OF THE ARGUMENT


6

First, Class Representatives stated plausible claims for relief for breach of

contract, unjust enrichment, promissory estoppel, and negligence per se. In

dismissing these claims, the district court applied an erroneous understanding of both

Rule 8(a)’s pleading standard and the required elements of these claims under

Georgia law.

Second, given the blurred and concealed relationship among the Defendants,

combined with the extent and scope of the perpetrated fraud, Class Representatives

pleaded their fraud and civil RICO claims with sufficient specificity under Rule 9(b),

and the district court erred in dismissing these claims.

Third, the district court erred in dismissing Class Representatives’ claims

against RTC pursuant to Rule 12(b)(2) because it applied an incorrect understanding

of agency law to determine that RTC was not subject to personal jurisdiction through

Georgia’s Long Arm Statute. Correspondingly, the district court erred by denying

jurisdictional discovery.

Finally, Class Representatives were entitled to at least one opportunity to

amend their original complaint pursuant to Rule 15(a), as they sought leave to do so,

they had no notice of the defects in the complaint, and there was no evidence of bad

faith, delay, or prejudice to Defendants. The district court abused its discretion by

denying Class Representatives the opportunity to amend their complaint.


7

IV. ARGUMENT AND CITATION OF AUTHORITY

This Court should reverse the district court’s dismissal of Class

Representatives’ complaint and remand for further proceedings. The district court

erred in dismissing the complaint because Class Representatives: (A) stated a claim

for relief with respect to their contract, quasi-contract, and negligence per se claims;

(B) pleaded their claims sounding in fraud with the requisite specificity; and (C)

alleged a sufficient basis to exercise personal jurisdiction over RTC or, at a

minimum, to warrant jurisdictional discovery. Alternatively, (D) the district court

abused its discretion by denying Class Representatives leave to amend their original

complaint.

A. Class Representatives stated a plausible claim for relief for breach of contract, quasi-contract, and negligence per se.

A pleading in a civil action must contain “a short and plain statement of the

claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). When

reviewing a motion to dismiss, a court, as a general rule, must accept the plaintiff’s

allegations as true and evaluate all plausible inferences derived from those facts in

favor of the plaintiff. See Ashcroft v. Iqbal, 556 U.S. 662, 680, 129 S.Ct. 1937,

1951 (2009) (holding that a court should deny a motion to dismiss where the

pleading asserts non-conclusory, factual allegations that, if true, would push the

claim “across the line from conceivable to plausible” (quoting Bell Atl. Corp. v.


8

Twombly, 550 U.S. 544, 555, 570, 127 S.Ct. 1955, 1965, 1974 (2007))); Am. Dental

Ass’n v. Cigna Corp., 605 F.3d 1283, 1289 (11th Cir. 2010) (quoting Twombly, 550

U.S. at 570) (explaining that allegations in a complaint must “contain sufficient

factual matter, accepted as true, to ‘state a claim to relief that is plausible on its

face.’”). A claim is facially plausible when the plaintiff’s factual allegations “allow[

] the court to draw the reasonable inference that the defendant is liable for the

misconduct alleged.” Iqbal, 556 U.S. at 678.

“The basic purpose of the Federal Rules is to administer justice through fair

trials, not through summary dismissals . . . .” Surowtiz v. Hilton Hotels Corp., 383

U.S. 363, 373, 86 S.Ct. 845, 851 (1966). With this background in mind, determining

whether a complaint states a plausible claim for relief will “be a context-specific task

that requires the reviewing court to draw on its judicial experience and common

sense.” Iqbal, 556 U.S. at 678-79.

1. Breach of contract

“The elements for a breach of contract claim in Georgia are the (1) breach

and the (2) resultant damages (3) to the party who has the right to complain about

the contract being broken.” Kuritzky v. Emory Univ., 669 S.E.2d 179, 181 (Ga. Ct.

App. 2008). “To 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–


9

3–1. Under Georgia contract law, a complaint that alleges a more than de minimus

breach of contract and resultant damages is sufficient to allege breach of contract—

“any dispute regarding the existence of an enforceable contract [does] not present

grounds for dismissal.” TechBios, Inc. v. Champagne, 688 S.E.2d 592, 595 (Ga. Ct.

App. 2009). Moreover, an agreement “impose[s] upon each party a duty of good

faith and fair dealing in the performance and completion of their respective duties

and obligations,” which includes “substantial compliance with the spirit, and not

merely the letter, of a contract.” Fisher v. Toombs Cnty. Nursing Home, 479 S.E.2d

180, 184 (Ga. Ct. App. 1996).

The district court dismissed Class Representatives’ breach of contract claim

because they “fail[ed] to establish the existence of a valid contract.” (Doc. 40 at 19).

The district court reasoned that Class Representatives were required to show the

breach of specific contract provision. (Id. at 19-20). The district court found that,

without pointing to a specific contract provision, there can be no breach of the duty

of good faith and fair dealing. (Id. at 20-21). The district court’s decision was in

error for several reasons.

First, Class Representatives were required to make a plausible showing, with

all inferences made in their favor, as to the existence of a contract— they were not

required to attach a copy of the contract to their complaint. Second, Class

Representatives sufficiently alleged breach of contract by asserting that, despite their


10

contract with Defendants for drug and alcohol rehabilitation services, those services

were never provided. Specifically, Class Representatives alleged that Defendants

breached their contractual duty to provide drug and alcohol rehabilitation services

by, inter alia, misrepresenting Narconon’s connection to Scientology, providing

false information to regulators to avoid oversight, misrepresenting the addiction-

treating properties of the sauna, mega-doses of niacin, and other components of

Narconon “treatment,” falsely representing the scientific evidence and success rate

of Narconon, misrepresenting the training given to its staff members, and failing to

provide a drug-free environment for its patients. (Id. ¶¶ 115-18). Defendants’

breach deprived Class Representatives of the benefit for which they contracted,

namely, legitimate drug and alcohol rehabilitation treatment. (Id. ¶ 18).

Moreover, to fulfill its agreement to actually and legally treat drug and

alcohol addiction and to discharge its duty in good faith, NNGA was required to

comply with the aforementioned criteria. See, e.g., Regional Pacesetters v. Eckerd

Drugs of Ga., 358 S.E.2d 481, 483 (Ga. Ct. App. 1987) (“[W]hatever may be fairly

implied by the terms of the agreement is in the eyes of the law embodied in the

agreement.” (quotation omitted)). Given that a defendant’s compliance with the

“spirit” of contract may be a jury question, see Fisher, 479 S.E.2d at 184, the district

court erred in finding that Class Representatives failed to state a claim as a matter of

law.


11

Moreover, as Class Representatives argued in response to NNGA’s motion to

dismiss, specific provisions of the contracts at issue were breached. For example,

the “Rules of Conduct,” incorporated into the “Financial Policy and Agreement

Form,” contained provisions prohibiting the possession, use, exchange, or sale of

drugs and alcohol. (Doc. 16 at 7-11, citing Doc. 9-2). Yet, NNGA failed to provide

a safe and sober facility for its patients. (Compl. ¶ 117). This was a breach of a

specific contractual provision.

2. Unjust Enrichment

Class Representatives also alleged that Defendants unlawfully, unjustly, and

directly obtained payment from them, resulting in unjust enrichment. (See Compl.

¶¶ 119-21). “The theory of unjust enrichment applies when there is no legal contract

and when there has been a benefit conferred which would result in an unjust

enrichment unless compensated.” Smith Serv. Oil Co. v. Parker, 549 S.E.2d 485,

487 (Ga. Ct. App. 2001). Class Representatives’ allegation of a breach of contract

did not prevent them from alleging unjust enrichment. See United Techs. Corp. v.

Mazer, 556 F.3d 1260, 1273 (11th Cir. 2009) (noting that Fed.R.Civ.P. 8(d)

expressly permits the pleading of both alternative and inconsistent claims”).

The district court dismissed the unjust enrichment claim for the sole reason

that, because Class Representatives pointed to specific contractual provisions in

response to NNGA’s motion to dismiss the breach of contract claim, “all parties


12

concede[d] that the contracts at issue in the named plaintiffs’ breach of contract

claim are valid,” and therefore, there can be no unjust enrichment claim as a matter

of law. (Doc. 40 at 23-24). This is reversible error for several reasons.

First, the district court rejected Class Representatives’ breach of contract

claim in part because they “fail[ed] to establish [ ] the specific contract at issue in

this action . . . .” (Id. at 21). However, the district court then rejected the unjust

enrichment claim, determining that Class Representatives had conceded the validity

of the contract. (Id. at 23). It is nonsensical that Class Representatives could have

failed to sufficiently identify a contract, and yet have also conceded the validity of a

contract sufficient to bar their unjust enrichment claim.

Second, Class Representatives’ argument regarding the sufficiency of its

breach-of-contract claim at the motion to dismiss phase must not be construed to bar

an unjust enrichment claim. Under the district court’s reasoning, any complaint that

pointed to a breached contract would have essentially conceded the validity of that

contract, therefore preventing any party from alleging both a breach of contract and

unjust enrichment claim in the same action. This is directly contrary to the Rules of

Civil Procedure and Eleventh Circuit law, which allow Class Representatives to

proceed on seemingly inconsistent theories of recovery.

3. Detrimental Reliance/Promissory Estoppel


13

In Count Four, Class Representatives alleged that they reasonably relied on

Defendants’ representations that NNGA patients would receive drug or alcohol

rehabilitation services, Defendants failed to live up to those representations, and

Class Representatives were “harmed by their reliance on Defendants’ promise to

perform,” entitling them to damages. (Compl. ¶ 125). Class Representatives

conceded below that this count should have been framed as one of promissory

estoppel, rather than “detrimental reliance.” See Houston v. Houston, 600 S.E.2d

395, 396 (Ga. Ct. App. 2004) (“The elements of a promissory estoppel cause of

action are: (1) defendant[s] made certain promises, (2) defendant[s] should have

expected that plaintiffs would rely on such promises, (3) the plaintiff[s] did in fact

rely on such promises, and (4) injustice can be avoided only by enforcement of the

promise.” (alterations omitted)). 1

“A complaint need not specify in detail the precise theory giving rise to

recovery,” Evans v. McClain of Ga., Inc., 131 F.3d 957, 964 n.2 (11th Cir. 1997),

and neither Twombly nor Iqbal changed this principle, Hatmarker v. Mem’l Med.

Ctr., 619 F.3d 741, 743 (7th Cir. 2010). “All that is required is that the defendant

1 Class Representatives sought to amend the complaint pursuant Fed.R.Civ.P. 15(a) to correct this phrasing. The district court denied leave because permission was sought in the response to dismiss rather than in a separate motion. This amounted to an abuse of discretion, as discussed in Part IV-D, infra.


14

be on notice as to the claim being asserted against it and the grounds on which it

rests.” Evans, 131 F.3d at 964 n.2.

While Class Representatives incorrectly categorized the legal theory

underlying their claim, they alleged the necessary elements of promissory estoppel,

putting Defendants on notice as to the nature of that claim. As a result, the district

court erred in dismissing with prejudice Class Representatives claim for promissory

estoppel.

4. Negligence Per Se

For the violation of a statute or regulation to amount to negligence per se,

Georgia courts look to the purposes of the legislation to determine: (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.

Walter v. Orkin Exterminating Co., 385 S.E.2d 725, 728 (Ga. Ct. App. 1989).

Here, the Georgia Department of Community Health (“DCH”) regulations

provide for minimal requirements for the licensing and inspection of drug abuse

treatment programs. Ga. Comp. R. & Regs. 290-4-2-.02. The Drug Abuse

Treatment and Education Act (“the Act”) authorized DCH to develop and enforce

these regulations. The Act tasks DCH with promulgating minimum standards of

quality and service, encompassing the qualifications of staff, the content and quality

of services, the safety of housing facilities, and the effectiveness of programs. See


15

O.C.G.A. §§ 26-5-5 to -6.2 The Act clearly states that the regulations’ purposes are,

inter alia, “to ensure that every governing body which operates a drug abuse

treatment and education program is licensed to do so[,] and to meet the rehabilitative

needs of drug dependent persons while safeguarding their individual liberties.”

O.C.G.A. §§ 26-5-1 to -6.

Class Representatives believed that they were securing drug and alcohol

rehabilitation services at a facility that was legally and properly licensed. NNGA’s

failure to comply with Georgia regulations resulted in the failure to “safeguard” the

liberties of its patients, as required by the Act. See O.C.G.A. § 26-5-2. As a result,

and contrary to the district court’s finding (Doc. 40 at 26), NNGA’s negligent acts

directly affected injured the class of persons the Act was designed to protect, in the

manner in which the Act was designed to protect against.

B. Class Representatives stated with particularity claims sounding in fraud and Georgia’s RICO statute. Pursuant to Fed.R.Civ.P. 9(b), “a party must state with particularity the

circumstances constituting fraud or mistake.” The purpose of this particularity

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

2 DCH’s regulations, in turn, require, among other things, that drug and alcohol rehabilitation centers create individualized treatment, discharge, and aftercare plans, employ clinical and medical directors, and implement policies and procedures for drug-testing employees and patients. (See Compl. ¶¶ 101-05).


16

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) (quotations omitted). Rule 9’s particularity requirements must be read in

conjunction with Rule 8 “so as not to abrogate the concept of notice pleading.”

Durham v. Bus. Mgmt. Assocs., 847 F.2d 1505, 1511 (11th Cir. 1988). Rule 9 does

not require the plaintiff to explain his entire case, only that he state the actions that

allegedly constitute fraud. United States v. Gen. Dynamics, 315 F. Supp. 2d 939,

945 (N.D. Ill. 2004).

To satisfy Rule 9(b)’s “particularity” standard, this Court generally requires a

complaint to identify (1) the precise statements or misrepresentations made; (2) the

time, place, and person responsible for the statement; (3) the content and manner in

which the statements misled the plaintiff; and (4) what the defendants gain by the

alleged fraud. Ambrosia Coal & Const. Co. v. Pages Morales, 482 F.3d 1309, 1316–

17 (11th Cir.2007). This Court has observed that Rule 9(b)’s requirements can be

flexible depending on the factual context. See, e.g., Brooks v. Blue Cross & Blue

Shield of Fla., Inc., 116 F.3d 1364, 1371 (11th Cir. 1997).

The district court dismissed Class Representatives’ fraud and civil RICO

claims, finding that Class Representatives failed to plead those claims with the

specificity Rule 9(b) requires. (Doc. 40 at 13-18). However, as demonstrated below,


17

Class Representatives sufficiently alleged their fraud and civil RICO claims in

keeping with the concepts of notice pleading.3

1. Fraudulent Misrepresentation

Under Georgia law, fraud has five elements: (1) a false representation by a

defendant; (2) scienter; (3) intention to induce the plaintiff to act; (4) justifiable

reliance by the plaintiff; and (5) damages. Artzner v. A & A Exterminators, Inc., 531

S.E.2d 200, 204 (Ga. Ct. App. 2000). Class Representatives alleged a time period

for Defendants’ fraud by specifying when they each sought the services of NNGA.

(See Compl. ¶¶ 2, 6, 10, 14, 17). Class Representatives then alleged the 11 specific

fraudulent statements and/or acts made by Defendants. (See id. ¶ 111). In so doing,

Class Representatives sufficiently alleged the “what” and “when” of the fraud. See,

e.g., Stires v. Carnival Corp., 243 F. Supp. 2d 1313, 1319-20 (M.D. Fla. 2002)

(finding that the plaintiffs sufficiently alleged fraud when complaint included, inter

alia, specific misrepresentations and where they occurred).

Likewise, Class Representatives set forth the relationship among the

Defendants as it pertains to the “who” for the perpetrated fraud. (See Compl. ¶¶ 20-

3 Because the district court dismissed Class Representatives’ fraud and RICO claims for the failure to specify the time and place of the misrepresentations, and the role of each Defendant in the fraud, this brief will not set forth each element of the fraud and civil-RICO claims as alleged in the complaint, except to the extent the district court found Class Representatives’ allegations insufficient.


18

28, 62-73). Specifically, the complaint alleged that RTC, ABLE, and International

controlled the time, manner, and method of NNGA’s operations (id.); ABLE,

International, and NNGA misrepresented their connection to the Church of

Scientology (id. ¶¶ 80-81); and patients are referred to Narconon through

purportedly objective Internet and telephone services that are actually run and/or

paid for, in whole or in part, by International and/or NNGA (id. ¶¶ 87-89). Class

Representatives also alleged that ABLE actively ran each Narconon facility by,

among other things, overseeing the Church of Scientology’s secular activities,

licensing Hubbard’s material to Narconon International, inspecting Narconon

centers, including NNGA, to check for compliance, providing technical and

financial support to Narconon International, and promoting Narconon through

nationwide advertising and government lobbying (id. ¶¶ 62-66, 69-73), and that RTC

ultimately controlled the operations of ABLE, International, and NNGA (Doc. 19 at

4). Ultimately, Defendants acted in concert either as agents or principals of one

another, partners, joint venturers, or co-conspirators. (Id. at 5).

Given the blurred and concealed relationship among Defendants, combined

with the extent and scope of the fraud, Class Representatives satisfied Rule 9(b) by

providing Defendants with enough information to meaningfully respond. See, e.g.,

Gen. Dynamics, 315 F. Supp. 2d at 945 (finding that a qui tam relator alleging fraud

was not required to provide names of employees who allegedly defrauded the


19

government because those identities were in exclusive possession of employer).

Class Representatives provided further support for one of Defendants’ fraudulent

statements, regarding the Narconon program’s success rate, by attaching an email

acknowledging that the 70% success rate quoted to Class Representatives was not

supported by scientific evidence. (See Compl., Ex. B). As a result, Rule 9(b)’s

purposes of alerting Defendants of the “precise misconduct with which they are

charged” while preventing “spurious charges” have been satisfied. See Ziemba, 256

F.3d at 1202.

2. Georgia RICO Claims

The Georgia RICO Act was enacted to impose criminal penalties against those

engaged in an “interrelated pattern of criminal activity motivated by or the effect of

which is pecuniary gain or economic or physical threat or injury,” and to provide

civil remedies to compensate those injured by reason of such acts. O.C.G.A. §§ 16-

14-2(b) & 16-14-5; Williams Gen. Corp. v. Stone, 614 S.E.2d 758, 759 (Ga. 2005).

The Georgia RICO Act is to be liberally construed to effectuate the remedial

purposes embodied in its operative provisions. See O.C.G.A. § 16-14-2(b). While

a RICO predicate act sounding in fraud must be pleaded in accordance with Rule

9(b), a plaintiff is not required to plead a predicate act with particularity if it does

not sound in fraud. See Liquidation Comm’n of Banco Intercontinental, S.A. v.

Renta, 530 F.3d 1339, 1355-56 (11th Cir. 2008). Class Representatives alleged that


20

Defendants violated Georgia’s RICO statute through several predicate acts: theft by

deception; mail and wire fraud; credit card fraud and identity theft; and false

statements to a government agency.

a. Theft by Deception and Mail and Wire Fraud: “A person commits the

offense of theft by deception when he obtains property by any deceitful means or

artful practice with the intention of depriving the owner of the property.” O.C.G.A.

§ 16-8-3. The offenses of mail and wire fraud require that a person: (1) intentionally

participates in a scheme to defraud; and (2) uses or “causes” the use of the mail or

wires for the purpose of executing the scheme. United States v. Ward, 486 F.3d

1212, 1221-22 (11th Cir. 2007).

For the same reasons discussed in Part IV-B-1, supra, in connection with

Class Representatives’ fraudulent misrepresentation claim, the complaint’s

allegations are sufficiently specific to give Defendants notice of the basis for the

Georgia RICO claims based on theft by deception and mail or wire fraud. As a

result, the district court erred in dismissing the RICO claims based on theft by

deception and mail or wire fraud.

b. Credit-Card Fraud and Identity Theft: A defendant commits credit-card

fraud when he obtains and uses a card without the cardholder’s consent. O.C.G.A.

§§ 16-9-31 to -33. A defendant commits identity fraud when he willfully and

fraudulently, without authorization or consent, uses identifying information


21

concerning a person. O.C.G.A. § 16-9-121. Class Representatives sufficiently

pleaded credit card fraud and identity theft as it pertains to those who fell victim to

this aspect of Defendants’ fraud: the Burgesses and the Dacys. (See Compl. ¶¶ 4,

19). Specifically, Class Representatives alleged the time period when they enrolled

a patient in NNGA and that Defendants opened high-interest credit cards in their

names to fund NNGA’s services, without their knowledge or permission. (Id. ¶¶ 4,

19, 154-69). Particularly in the context of identity theft, where the nature of the

fraud entails concealment from the victims, Class Representatives alleged their

claims with sufficient specificity to survive a motion to dismiss.

c. False Statements to a Government Agency: Class Representatives alleged

that Defendants engaged in racketeering activity by providing false statements and

writings to a government agency, in violation of O.C.G.A. §§ 16-10-20 and 16-14-

3, by knowingly and willfully concealing from the State of Georgia on its license

applications NNGA’s illegal operation as a residential drug and alcohol

rehabilitation facility without the proper licensing, and while concealing its failure

to, inter alia, create individualized treatment plans, update patient files, retain a

Clinical Director and Medical Director, and ensure a drug-free environment.

(Compl. ¶¶ 145-153).

The district court dismissed Class Representatives’ RICO claim based on the

submission of false statements to the government Georgia for the sole reason that


22

the claim “sounded in fraud, thereby necessitating application of the Rule 9(b)

pleading standard.” (Doc. 40 at 17-18). However, Georgia law provides that a

Georgia RICO claim based on a violation of O.C.G.A. § 16-10-20 may go forward

even where a plaintiff’s fraud claim is not pled with specificity. In Maddox v.

Southern Engineering Co., 453 S.E.2d 70, 72 (Ga. Ct. App. 1994), the court held

that the plaintiff’s “inability to show that he was actually misled by the false

statements” and his inability to specify “what false statements were made to state

agencies” did not warrant dismissal of his Georgia RICO claim, and the trial court’s

dismissal for failure to plead with specificity was reversible error.

Moreover, even if this Court were to determine that Rule 9(b) applies, Class

Representatives’ allegations met this elevated standard. The complaint alleged

specific false statements, the government agency to which the statements were made,

and the timeframe when the statements took place. (Compl ¶¶ 90-105, 150).

C. Class Representatives made a showing sufficient to warrant the exercise of personal jurisdiction over RTC or, at a minimum, jurisdictional discovery. Class Representatives’ allegations against RTC stem from RTC’s complete

control over the Church of Scientology, including Scientology’s “secular social

betterment organizations,” ABLE, International, and NNGA. (Doc. 19 at 2). RTC

holds out the Narconon rehabilitation program as its own, promotes the Narconon

program to the public, and exercises control over the way in which individual


23

Narconon centers operate. (Id.). Ultimately, RTC has sought to promote and expand

the Narconon program as part of its goal to expand the reach of Scientology and

“clear the planet” of non-Scientologists. (Id.). The facts, as alleged in the complaint

and further supported in response to RTC’s motion to dismiss, show that the district

court erred by finding that it could not exercise personal jurisdiction over RTC and

declining to allow jurisdictional discovery on the issue.

As background, RTC attached a declaration to its motion to dismiss for lack

of personal jurisdiction in which its president asserted that ABLE, International, and

NNGA were not agents of RTC. (Doc. 7-2 at 2). In response, Class Representatives

filed a brief and numerous exhibits citing specific examples of RTC’s association

with Narconon and its control over ABLE, International, and NNGA. (Doc. 19, Exs.

A-EE). The district court found that Class Representatives failed to allege an

express, implied, or apparent agency relationship between RTC and ABLE,

International, and NNGA, and declined to exercise personal jurisdiction or allow

jurisdictional discovery based solely on this determination. (Doc. 40 at 6-9).

“In the context of a motion to dismiss for lack of personal jurisdiction in which

no evidentiary hearing is held, the plaintiff bears the burden of establishing a prima

facie case of jurisdiction over the movant, non-resident defendant.” Morris v. SSE,

Inc., 843 F.2d 489, 492 (11th Cir. 1988). To evaluate whether plaintiff carried this

burden, the district court must construe the allegations in the complaint as true, to


24

the extent they are uncontroverted by defendant’s affidavits or deposition testimony.

Id. Where the evidence presented by the parties’ affidavits and deposition testimony

conflicts, the court must construe all reasonable inferences in favor of the non-

movant plaintiff. Id.

“A federal court sitting in diversity undertakes a two-step inquiry in

determining whether personal jurisdiction exists: the exercise of jurisdiction must

(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.”4

Diamond Crystal Brands, Inc. v. Food Movers Int’l, Inc., 593 F.3d 1249, 1257-58

(11th Cir. 2010) (quotation omitted). Georgia’s Long Arm statute provides as

follows:

A court of this state may exercise personal jurisdiction over any nonresident or his or her executor or administrator, as to a cause of action arising from any of the acts, omissions, ownership, use, or possession enumerated in this Code section, in the same manner as if he 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 a cause of action for defamation of character arising from the act; [or] (3) Commits a tortious injury in this state caused by an act or omission outside this state if the tort-feasor regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial

4 Because the district court did not reach the due-process issue, Class Representatives’ brief focuses on the inquiry under Georgia’s Long Arm statute.


25

revenue from goods used or consumed or services rendered in this state. . . .

O.C.G.A. § 9-10-91. As set forth above, Georgia’s Long Arm statute provides for

the exercise of personal jurisdiction over a nonresident defendant where one of the

statute’s subsections is satisfied by the acts or omissions of the non-resident

defendant or its agent. See id.

Under Georgia law, “[t]he relation of principal and agent arises wherever one

person, expressly or by implication, authorizes another to act for him or subsequently

ratifies the acts of another in his behalf.” O.C.G.A. § 10-6-1. The fact of agency

may be established by circumstantial evidence, such as the conduct of the parties.

Handy v. DeKalb Med. Ctr., 679 S.E.2d 107, 108 (Ga. Ct. App. 2009). “As a general

rule, the question of authority to do an act, when it is to be determined from disputed

facts or undisputed facts from which conflicting inferences may be drawn, must be

decided by the jury . . . .” Lee v. Just Scott Designs, Inc., 754 S.E.2d 616, 620 (Ga.

Ct. App. 2014).

The district court erred when it found that Class Representatives had not

alleged a basis to exercise long-arm jurisdiction for at least three reasons.5 First, the

district court found, erroneously, that Class Representatives conceded that express,

5 Class Representatives alleged that long-arm jurisdiction would be appropriate under O.C.G.A. § 9-10-91(1), (2), and (3). (Doc 19 at 18-20). Because the district court’s order addressed only the agency portion of O.C.G.A. § 9-10-91, this brief focuses on that analysis.


26

actual agency was not present. Specifically, the district court reasoned that Class

Representatives could not proceed under a theory of express agency because they

“concede[d] that RTC has ‘kept itself formally separate from Defendants ABLE,

International, and NNGA.” (Doc. 40 at 7 (quoting Doc. 19 at 7)). However, Class

Representatives actually alleged, “While Defendant RTC may have kept itself

formally separate . . . Plaintiffs have alleged, and can show, that the reality is quite

different.” (Doc. 19 at 7 (emphasis added)). Class Representatives did not concede

that no actual agency existed – to the contrary, they presented evidence that RTC

controlled ABLE, International, and NNGA to the extent that it created an agency

relationship, either express or implied, creating a conflict in evidence that the district

court should have construed in favor of Class Representatives.

Second, the district court erred by requiring Class Representatives to show

that they were “aware of, and relied on” an agency relationship, an element not

required by Georgia law for an action based on express or implied agency. In

reasoning that the complaint failed to allege any agency relationship, the district

court found, “As the named plaintiffs fail to establish that third parties are aware of,

and relied on, RTC’s alleged control, no principal/agent relationship is established .

. .” (Doc. 40 at 8). While a claim of apparent agency requires such a showing,6 there

6 “Apparent authority to do an act is created as to a third person when the statements or conduct of the alleged principal reasonably cause the third party to believe that the principal consents to have the act done on his behalf by the purported


27

is no requirement under Georgia law that a plaintiff be aware of an express or implied

agency relationship to hold the principal liable. To the contrary, “[t]o prove actual

agency, the purported principal must have assumed the right to control the method,

manner, and time of the purported agent’s work . . . .” Satisfaction & Serv. Housing,

Inc., 642 S.E.2d at 366. For an inquiry of actual, not apparent agency, the perception

of a third party is not part of the analysis. See id.

Third, while the district court disregarded Class Representatives’ assertions

of RTC’s control over ABLE, International, and NNGA in its agency analysis, the

issue of control is directly relevant and central to the actual agency analysis. See id.

Although not addressed in the district court’s order, Class Representatives

introduced extensive evidence regarding RTC’s involvement in Narconon and

control over ABLE, International, and NNGA. Class Representatives introduced

documents illustrating Narconon’s association with Scientology and its role in

expanding the reach of Scientology at the ultimate direction of RTC and its

Chairman, David Miscavige. (See Doc. 19 at 8-10, Exs. A, B, C, D, E, F, G, H, I, J,

K). They also introduced evidence demonstrating a chain of command extending

from Miscavige and RTC down through ABLE, International, and NNGA, in

support of allegations that RTC bypasses corporate structure to govern Scientology-

agent.” Satisfaction & Serv. Hous., Inc. v. SouthTrust Bank, Inc., 642 S.E.2d 364, 366 (Ga. Ct. App. 2007).


28

related activities as it sees fit. (See Doc. 19 at 10-13, Exs. L, M, N, O, P). Class

Representatives’ evidence in support of personal jurisdiction included evidence that

NNGA, ABLE, and International reported on their activities to RTC, illustrating

RTC’s control over individual Narconon centers. (See Doc. 19 at 13-14, Exs. Q, R).

The evidence also included various instances of RTC’s promotion and expansion of

the Narconon program. (See Doc. 19 at 14-18, Exs. S, T, U, V, W, X, Y, Z, AA,

BB, CC, DD, EE).

Finally, Class Representatives’ allegations and evidence in support of the

exercise of personal jurisdiction, at a minimum, warranted jurisdictional discovery

as to the extent of RTC’s contacts in Georgia. See, e.g., Cable News Network, Inc.

v. Video Monitoring Servs. of Am., Inc., 723 F. Supp. 765, 770 (N.D. Ga. 1989)

(noting that a court has discretion to allow the parties time to engage in discovery

relevant to the jurisdictional issue where there is a basis for believing that discovery

would be fruitful).

D. The district court abused its discretion by denying leave for Class Representatives to amend their original complaint. As background, Class Representatives filed the complaint in Georgia state

court. (Doc. 1). One week after Defendants removed the case to federal court, and

before any amendments to the complaint, Defendants filed their motions to dismiss.

(Docs. 1, 2). In their responses to those motions, Class Representatives requested


29

the opportunity to amend the complaint pursuant to Fed.R.Civ.P. 15(a). The district

court denied leave for the sole reason that Class Representatives requested leave in

their responses rather than in a separate motion. (Doc. 40 at 25).

A district court’s discretion to dismiss a complaint without leave to amend is

“severely restricted” by Rule 15(a), which directs that leave to amend “shall be freely

given when justice so requires.” Bryant v. Dupree, 252 F.3d 1161, 1163 (11th Cir.

2001) (quotations omitted). The Supreme Court has emphasized that “this mandate

is to be heeded,” Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 230 (1962), and

leave should be denied only when (1) the amendment would be prejudicial to the

opposing party, (2) there has been bad faith or undue delay on the part of the moving

party, or (3) the amendment would be futile. Id. “Ordinarily, a party must be given

at least one opportunity to amend before the district court dismisses the complaint.”

Corsello v. Lincare, Inc., 428 F.3d 1008, 1014 (11th Cir. 2005).

This Court has held that a district court abused its discretion by denying leave

to amend a complaint when the plaintiffs included a request to amend in their

response to a motion to dismiss. See Bryant, 252 F.3d at 1163. In Bryant, this Court

emphasized that, while the plaintiffs had amended their complaint once as a matter

of course, they had no notice of the defects for which the district court dismissed

their complaint and no opportunity to cure those defects. Id. at 1164. This Court

reasoned that an opportunity to amend the complaint was warranted even where the


30

litigation had been ongoing for over three years, where there was no other evidence

of prejudice to the defendants or bad faith on the part of the plaintiffs. Id.

Here, the district court abused its discretion by denying Class Representatives

leave to amend the complaint for the sole reason that they failed to seek leave in a

separate motion. First, like the plaintiffs in Bryant, Class Representatives had no

notice of the defects in the complaint and no opportunity to amend. Second, there

was no evidence of undue delay or bad faith on the part of Class Representatives or

prejudice to Defendants. Third, while Class Representatives filed their complaint in

state court, the complaint was removed and dismissed based entirely on federal

pleading standards. Accordingly, the interests of justice weighed in favor of

permitting Class Representatives at least one opportunity to amend their complaint

before dismissing their claims with prejudice.

V. Conclusion

Based on the foregoing, Class Representatives ask this Court to reverse the

district court’s dismissal of the complaint and remand for further proceedings.


31

Respectfully submitted,

/s/ Jeffrey R. Harris

Jeffrey R. Harris Georgia Bar No. 330315 Yvonne S. Godfrey Georgia Bar No. 318567 HARRIS PENN LOWRY LLP 400 Colony Square 1201 Peachtree St. NE, Suite 900 Atlanta, GA 30361 (404) 961-7650

Rebecca C. Franklin Georgia Bar No. 141350 (admission to 11th Circuit pending) FRANKLIN LAW, LLC 400 Colony Square 1201 Peachtree St. NE, Suite 900 Atlanta, GA 30361 (404) 961-7650

Counsel for Plaintiffs-Appellants


a

Certificate of Compliance

1. This brief complies with the type-volume limitation of Fed.R.App.P.

32(a)(7)(B)(iii) because it contains 6,985 words, excluding the parts of the Brief

exempted by Fed.R.App.P. 32(a)(7)(B)(iii) and 11th Cir. R. 32-4.

2. This brief complies with the type-face requirements of Fed.R.App.P. 32(a)(5)

and the type style requirements of Fed.R.App.P. 32(a)(6) because it has been

prepared in a proportionally spaced type face using Word 2010 in 14-point Times

New Roman.


b

Certificate of Service

This is to certify that on May 6, 2014, the foregoing brief was served upon

all parties to this matter via the CM/ECF system, as follows:

Cari K. Dawson, Esq. Daniel F. Diffley, Esq. David B. Carpenter, Esq. Alston & Bird LLP 1201 W. Peachtree Street Atlanta, GA 30309-3424 Attorneys for Narconon International and Association for Better Living and Education International

Matthew S. Coles, Esq. Thomas M. Barton, Esq. Aaron P.M. Tady, Esq. Coles Barton LLP 150 South Perry Street, Suite 100 Lawrenceville, GA 30046 Attorneys for Narconon International and Association for Better Living and Education International

Edward H. Lindsey, Jr., Esq. James T. Hankins, Esq. Goodman McGuffey Lindsey & Johnson, LLP 3340 Peachtree Road NE, Suite 2100 Atlanta, GA 30326-1084 Attorneys for Narconon of Georgia, Inc.

John K. Larkins, Jr., Esq. William Taylor McNeil, Esq. J.D. Dalbey, Esq. Chilivis, Cochran, Larkins & Bever LLP 3127 Maple Drive NE Atlanta, GA 30305 Attorneys for Narconon of Georgia, Inc.

John H. Fleming, Esq. Valerie S. Sanders, Esq. Stacey M. Mohr, Esq. Sutherland Asbill & Brennan LLP 999 Peachtree Street NE, Suite 2300 Atlanta, GA 30309-3996 Attorneys for Religious Technology Center, Inc.


c

This 6th day of May, 2014.

/s/ Jeffrey R. Harris

Jeffrey R. Harris Georgia Bar No. 330315 Yvonne S. Godfrey Georgia Bar No. 318567 HARRIS PENN LOWRY LLP 400 Colony Square 1201 Peachtree St. NE, Suite 900 Atlanta, GA 30361 (404) 961-7650

Rebecca C. Franklin Georgia Bar No. 141350 (admission to 11th Circuit pending) FRANKLIN LAW, LLC 400 Colony Square 1201 Peachtree St. NE, Suite 900 Atlanta, GA 30361 (404) 961-7650

Counsel for Plaintiffs-Appellants


burgess et al v narconon: appeal brief

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