geanacopulos v. narconon: plaintiffs response to motion to dismiss

8/12/2019 Geanacopulos v. Narconon: Plaintiffs Response to Motion to Dismiss

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Ryan A. HamiltonNEVADA BAR NO. 11587HAMILTON LAW5125 S. Durango Dr., Ste. CLas Vegas, NV 89113(702) 818-1818

(702) [email protected]

Attorney for the plaintiffs

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEVADA

HARRY GEANACOPULOS, a Massachusetts

Citizen; LAUREN GEANACOPULOS, aMassachusetts Citizen; and PETERGEANACOPULOS, a Massachusetts Citizen,

Plaintiffs,

vs.

NARCONON FRESH START d/b/a RAINBOWCANYON RETREAT; ASSOCIATION FORBETTER LIVING AND EDUCATION

INTERNATIONAL; NARCONONINTERNATIONAL; and DOES 1-100, ROECorporations IX, inclusive,

Defendants.

Case No.:2:14-CV-00629-JCM-NJK

PLAINTIFFSRESPONSE TO ABLE AND NARCONON INTERNATIONALS

MOTION TO DISMISS PURSUANT TO FRCP RULE 12(b)(2) AND12(b)6

Plaintiffs, Harry Geanacopulos, Lauren Geanacopulos, and Peter Geanacopulos, by and

through their counsel of record, hereby answer Defendants Association for Better Living and

Education International and Narconon InternationalsMotion under the authority of FRCP Rule

12(b)(2) [lack of personal jurisdiction] and 12(b)(6) [failure to state a claim] (hereinafter Motion

to Dismiss).

Case 2:14-cv-00629-JCM-NJK Document 17 Filed 07/24/14 Page 1 of 30


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This Response is based on factual evidence presently available to Plaintiffs, the Points and

Authorities which follow, the records, pleadings and files herein, together with any oral argument

the Court may entertain.

DATED this 24thday of July, 2014.

HAMILTON LAW

By:RYAN A. HAMILTON, ESQ.NV BAR NO. 11587HAMILTON LAW5125 S. Durango Dr., Ste. CLas Vegas, NV 89113

(702) 818-1818(702) [email protected]

Attorney for Plaintiffs

MEMORANDUM OF POINTS AND AUTHORITIES

I. INTRODUCTION

On at least seventeen distinct websites, Narconon International (hereafter NI) and

Association For Better Living and Education International (hereafter ABLE) (collectively

referred to as Defendants)have specifically directed advertisements for the Narconon treatment

program at Nevada residents. This number does not even include the ten websites Narconon Fresh

Start d/b/a Rainbow Canyon Retreat (hereafter Fresh Start) owns. But Defendants numerous

websites directed at Nevada are just the tip of the iceberg.

Defendants operations manuals for Fresh Start and other individual Narconon centers

reveal that Defendants control nearly every aspect of Fresh Starts business. In stark contrast to

the image of mere licensors Defendants seek to portrayin their Motion to Dismiss, their own

documents show they control the day-to-day operations at Fresh Start. These documents



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demonstrate that Defendants have ultimate authority over all decisions related to Fresh Starts

hiring and firing, advertising, delivery of services, financial decisions, procedures, and general

operation.

Based on Defendants absolute control over Fresh Starts operations, their Internet

advertising campaign targeting Nevada, and their licensing of the Narconon program to Fresh

Start, they have purposefully availed themselves of the privilege of conducting activities in

Nevada. There is little question that Plaintiffs injuries stem directly from DefendantsNevada-

related activities. But for Defendants licensing the Narconon program for use at Fresh Start, Peter

Geanacopulos would not have gone there for treatment and sustained heart-related injuries. But for

NIs promotion of a false success rate and other false claims about the Narconon program,

Plaintiffs would not have been duped into paying for treatment services that Fresh Start was not

even capable of delivering.

Defendants operations manuals indicate such a high degree of control over and contact

with Fresh Start, Defendants could fairly be regarded as at homein Nevada.

Under any analysis, the Courts assertion of personal jurisdiction over Defendants is

proper. The Court should therefore deny Defendants Motion to Dismiss for lack of personal

jurisdiction under Fed. R. Civ. P. 12(b)(2).

The Court should likewise deny Defendants Motion to Dismiss under Fed. R. Civ. P.

12(b)(6). Plaintiffs have alleged sufficient facts to state each of their claims. Plaintiffs may hold

Defendants liable on these claims as principals of Fresh Start or as Fresh Starts alter ego.

Plaintiffs also state claims for direct liability against Defendants.

II. DEFENDANTS CONTACTS WITH NEVADA

In addition to seven training manuals, NI publishes two detailed operations manuals for

individual Narconon centers such as Fresh Start. These operations manuals are titled Running An

Effective Narconon Center (hereafter theRunning Manual) and Opening A Successful



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Narconon Center(hereafter the OpeningManual).Fresh Start has produced these manuals in a

related case also pending before this Court, Welch v. Narconon et al.,2:14-cv-0017-JCM-CWH.

These manuals indicate that NI and ABLE have authority over Fresh Starts hiring and firing,

advertising, delivery of services, financial decisions, procedures, and general operation. Relevant

portions of theRunningManualand the Opening Manualare attached hereto as Exhibits A and B,

respectively.

These manuals establish that NI and ABLE are intimately involved in the daily operations

of individual Narconon centers such as Fresh Start. The attached affidavit from a former Executive

Director of a Narconon centerthe highest position at such a centersupports this conclusion.

Affidavit of Eric Tenorio, attached hereto as Exhibit C (Tenorio Affidavit). Mr. Tenorio worked

for Narconon over twelve years at five different facilities in various capacities. Tenorio Affidavit,

2.

A. Narconon International/ABLE have ultimate authority over Fresh Start

employees

TheRunning Manualindicates that a permanent staff member at Fresh Start cannot be

transferred, demoted, or dismissed without the approval of the Senior Director of Administration

at NI:

A permanent staff member staff member may not be demoted,transferred or dismissed with a full justice proceeding known as aCommittee of Evidence. The Committee of Evidence must besubmitted to the Senior Director of Administration at NarcononInternational and must be approved before a permanent staffmember is dismissed or demoted. (Running Manual, Exhibit A atpg.118.)

NI likewise has ultimate authority over the hiring of staff at Fresh Start:

If there are current staff who do not meet any of the qualificationsbut feel they are honestly contributing to the production of aNarconon center, they may petition the Senior Director ofAdministration Narconon International to remain on staff. Thepetition is to have attached to it a production and ethics record,attested as being correct by the local Director of Inspections andReports. (Id. at pg. 91.)



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Accordingly, the Director of Administration at NI has the final word over the hiring of any staff

member at Fresh Start facilities as well as other Narconon Centers. These excerpts from the NI

Manuals directly contradict the assertions made in Defendants Motion asserting they have no

oversight or control of the operations of Fresh Start.

B. Defendants serve Human Resources functions for Fresh Start

TheRunning Manualalso indicates that NI conducts Human Resource functions for

individual Narconon centers such as Fresh Start. For example, if a staff member at a Narconon

center believes he or she has been given orders or directions or denied materials that make it hard

or impossible for the staff member to do his job, the staff member may file a Job Endangerment

Chit with Ethics atNI. (Id. at pg.177). On receiving the Job Endangerment Chit, NI will then

take action to resolve the staff members issue.

Further, theRunning Manualimposes requirements to report misconduct and even

nonoptimum conduct to the Quality Control Supervisor atNI. The manual also requires that:

Fresh Start staff advise Narconon International of serious ethicalcharges by submitting Knowledge Reports (Id. at pg. 169);

persons with knowledge of nonoptimum conduct by other groupmembers cannot be stopped from informing Narconon International(Id.);

if anyone observes any out-ethics activitieslisted above, and theyare not being handled immediately by appropriate facility staff, theyare to report the matter to the Quality Control Supervisor NarcononInternational (Id. at pg. 372).

NI then investigates matters contained in the reports and may take disciplinary action against staff

members at individual Narconon centers. (Tenorio Affidavit, Exhibit C at 6).

Defendants NI and ABLE have final say over the human resource decisions and

operational structure at the Fresh Start facility, allowing them to operate the facility as if they were

the immediate owners of record, in direct contradiction of Defendants Motion.



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C. Narconon International and ABLE Control Fresh Starts Advertising

TheRunningManualalso requires that Fresh Start must obtain approval as to its Internet

websites stating all internet websites need to be approved by Narconon International by the

trademark holders, Association for Better Living and Education International.(Id.at pg.239)

In addition, Fresh Start is required to send copies of all promotions to Narconon

International once it is produced. TheRunningManualexplains:

[Narconon International] will be able to help you promote your localactivities, help you maintain and improve the quality of yourpromotion and help guarantee that the Narconon trademarks areprotected in your area and country. (Id.at pg.255).

According to the manual, NI not only checks promotional materials to ensure correct use

of the Narconon trademark, but also assists in promoting a Narconon center, and assists in

developing the content of promotional materials. (Id.at pg.230)

Further, the NI Director of Technology & Approval demands and ensures that there are

good photos of L. Ron Hubbard visible in every center and that materials are available to brief

students and staff on his work and contributions in the field of alcohol and drug rehabilitation

(Running Manual, Exhibit A at pg.558).

D. Narconon and ABLE monitor and control Fresh Starts finances and accounting

As stated in Clark Carrs Amended Affidavit, NI receives ten percent of Fresh Starts gross

income. TheRunningManualindicates that individual centers also are required to maintain a

building fund accountcontrolled by NI. The purpose of the building fund account is to set

aside weekly monies from the gross income which are used to purchase new premises, and also

as a cushion to salvage the organization in dire circumstances. (Running Manual, Exhibit A at pg.

333). TheRunningManualfurther requires the precise manner in which Fresh Start is to conduct

its accounting.



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E. Defendants counter negative publicity for Fresh Start

As indicated in the Opening Manual, NI works with individual centers to combat negative

publicity, what NI refers to as Black PR. An example of this is seen in e-mail correspondence

from the Director of Legal Affairs for NI, Claudia Arcabascio, in which she advised the Narconon

Freedom Center in Albion, Michigan, on how to respond to a Better Business Bureau complaint.

(See Claudia Arcabascio Email, Exhibit D). Of relevance to the merits of the instant lawsuit, Ms.

Arcabascio advised the Center do not say we have 70% success (we do not have scientific

evidence of it). (Id).

F. Control over Fresh Starts delivery of services

Each Narconon center is required send detailed reports to NI every week. (Tenorio

Affidavit, at 11). These reports provide the centers statistics for the week which include the

number of students who started the program during the week, the amount of money received and

paid out, and 40 or so other statistics which are graphed. (Id.) The purpose of this is so that

Narconon International and ABLE can monitor the trends of the organizations statistics and then

order changes in the areas that are not doing well . (Id.)

Defendants micro-managing of facilities like Fresh Start extends all the way to the manner

in which the individual facilities run their bookstores. NI regularly publishes lists of the exact

materials authorized to be sold in facility book stores (Running Manual,Exhibit A at pg. 257).

G. Defendants Internet advertising directed at Nevada

Defendants activities related to Internet advertising directed at Nevada are far more

extensive than they let on in their Motion. There are at least seventeen websites advertising for

persons to attend the Narconon program in Nevada. This does not even include the ten websites

that Fresh Start has said it owns in response to Plaintiffs discovery requests in a related case. In

response to Plaintiffs interrogatories in another case pending before this Court, Defendant Fresh



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Start has said that it owns ten websites devoted to advertising the Fresh Start facility in Nevada.

See Exhibit E, Defendant Fresh Starts Interrogatory No. 6. These websites are:

WEBSITE

COPYRIGHT

OWNER

USE WITH

ABLES

PEMISSIO

N? YESOR NO

TOLL

FREE

NUMBER

INCLUDED? YES

OR NO

1

www.drugrehab.tv Narconon of Nevada YES YES

2

http://www.narconon-news.org/narconon/nevada-drug-rehab-

activities.htmlNarconon YES YES

3

http://www.drugrehab.net/directory/nevada/ Narconon YES YES

4

http://www.rainbowcanyonretreat.org/ Narconon Southern

California dba RainbowCanyon Retreat

YES YES

5

http://www.drugabusesolution.com/nevada-drug-abuse-rehab

Narconon New LifeRetreat, Inc.

YES YES

6

http://pastthetippingpoint.net/tag/drug-rehab-nevada/

Not Listed Not Listed NO

7

http://www.freedomdrugrehab.com/drug-rehab/nevada-drug-rehab/

Not Listed Not Listed YES

8

http://treatmentsolutionsonline.com/find-a-drug-and-alcohol-treatment/narconon-fresh-

start-rehabilitation-programs-rainbow-canyon-retreat/

Treatment Solutions Online Not Listed YES

9

http://www.usdrugrehabcenters.com/drug-rehab-centers/nevada-drug-rehab-centers/rainbow-canyon-113917/

Not Listed Not Listed YES

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http://www.drug-detox-rehab.org/states/archives/2006/nevada-drug-rehab-

centers.org/states/archives/2006/nevada_drug_detox_rehab_ info~Pioche.html

Narconon Drug Prevention& Education, Inc. YES YES

11

http://narconon-socal.org/rainbow-canyon-retreat-addiction-recovery-in-nevada/

Narconon Socal. No YES

http://www.drugrehab.tv/http://www.drugrehab.tv/http://www.narconon-news.org/narconon/nevada-drug-rehab-activities.htmlhttp://www.narconon-news.org/narconon/nevada-drug-rehab-activities.htmlhttp://www.narconon-news.org/narconon/nevada-drug-rehab-activities.htmlhttp://www.narconon-news.org/narconon/nevada-drug-rehab-activities.htmlhttp://www.drugrehab.net/directory/nevada/http://www.drugrehab.net/directory/nevada/http://www.rainbowcanyonretreat.org/http://www.rainbowcanyonretreat.org/http://www.drugabusesolution.com/nevada-drug-abuse-rehabhttp://www.drugabusesolution.com/nevada-drug-abuse-rehabhttp://www.drugabusesolution.com/nevada-drug-abuse-rehabhttp://pastthetippingpoint.net/tag/drug-rehab-nevada/http://pastthetippingpoint.net/tag/drug-rehab-nevada/http://pastthetippingpoint.net/tag/drug-rehab-nevada/http://www.freedomdrugrehab.com/drug-rehab/nevada-drug-rehab/http://www.freedomdrugrehab.com/drug-rehab/nevada-drug-rehab/http://www.freedomdrugrehab.com/drug-rehab/nevada-drug-rehab/http://treatmentsolutionsonline.com/find-a-drug-and-alcohol-treatment/narconon-fresh-start-rehabilitation-programs-rainbow-canyon-retreat/http://treatmentsolutionsonline.com/find-a-drug-and-alcohol-treatment/narconon-fresh-start-rehabilitation-programs-rainbow-canyon-retreat/http://treatmentsolutionsonline.com/find-a-drug-and-alcohol-treatment/narconon-fresh-start-rehabilitation-programs-rainbow-canyon-retreat/http://treatmentsolutionsonline.com/find-a-drug-and-alcohol-treatment/narconon-fresh-start-rehabilitation-programs-rainbow-canyon-retreat/http://treatmentsolutionsonline.com/find-a-drug-and-alcohol-treatment/narconon-fresh-start-rehabilitation-programs-rainbow-canyon-retreat/http://www.usdrugrehabcenters.com/drug-rehab-centers/nevada-drug-rehab-centers/rainbow-canyon-113917/http://www.usdrugrehabcenters.com/drug-rehab-centers/nevada-drug-rehab-centers/rainbow-canyon-113917/http://www.usdrugrehabcenters.com/drug-rehab-centers/nevada-drug-rehab-centers/rainbow-canyon-113917/http://www.usdrugrehabcenters.com/drug-rehab-centers/nevada-drug-rehab-centers/rainbow-canyon-113917/http://www.drug-detox-rehab.org/states/archives/2006/nevada-drug-rehab-centers.org/states/archives/2006/nevada_drug_detox_rehab_%20info~Pioche.htmlhttp://www.drug-detox-rehab.org/states/archives/2006/nevada-drug-rehab-centers.org/states/archives/2006/nevada_drug_detox_rehab_%20info~Pioche.htmlhttp://www.drug-detox-rehab.org/states/archives/2006/nevada-drug-rehab-centers.org/states/archives/2006/nevada_drug_detox_rehab_%20info~Pioche.htmlhttp://www.drug-detox-rehab.org/states/archives/2006/nevada-drug-rehab-centers.org/states/archives/2006/nevada_drug_detox_rehab_%20info~Pioche.htmlhttp://www.drug-detox-rehab.org/states/archives/2006/nevada-drug-rehab-centers.org/states/archives/2006/nevada_drug_detox_rehab_%20info~Pioche.htmlhttp://www.drug-detox-rehab.org/states/archives/2006/nevada-drug-rehab-centers.org/states/archives/2006/nevada_drug_detox_rehab_%20info~Pioche.htmlhttp://narconon-socal.org/rainbow-canyon-retreat-addiction-recovery-in-nevada/http://narconon-socal.org/rainbow-canyon-retreat-addiction-recovery-in-nevada/http://narconon-socal.org/rainbow-canyon-retreat-addiction-recovery-in-nevada/http://narconon-socal.org/rainbow-canyon-retreat-addiction-recovery-in-nevada/http://narconon-socal.org/rainbow-canyon-retreat-addiction-recovery-in-nevada/http://www.drug-detox-rehab.org/states/archives/2006/nevada-drug-rehab-centers.org/states/archives/2006/nevada_drug_detox_rehab_%20info~Pioche.htmlhttp://www.drug-detox-rehab.org/states/archives/2006/nevada-drug-rehab-centers.org/states/archives/2006/nevada_drug_detox_rehab_%20info~Pioche.htmlhttp://www.drug-detox-rehab.org/states/archives/2006/nevada-drug-rehab-centers.org/states/archives/2006/nevada_drug_detox_rehab_%20info~Pioche.htmlhttp://www.drug-detox-rehab.org/states/archives/2006/nevada-drug-rehab-centers.org/states/archives/2006/nevada_drug_detox_rehab_%20info~Pioche.htmlhttp://www.drug-detox-rehab.org/states/archives/2006/nevada-drug-rehab-centers.org/states/archives/2006/nevada_drug_detox_rehab_%20info~Pioche.htmlhttp://www.usdrugrehabcenters.com/drug-rehab-centers/nevada-drug-rehab-centers/rainbow-canyon-113917/http://www.usdrugrehabcenters.com/drug-rehab-centers/nevada-drug-rehab-centers/rainbow-canyon-113917/http://www.usdrugrehabcenters.com/drug-rehab-centers/nevada-drug-rehab-centers/rainbow-canyon-113917/http://treatmentsolutionsonline.com/find-a-drug-and-alcohol-treatment/narconon-fresh-start-rehabilitation-programs-rainbow-canyon-retreat/http://treatmentsolutionsonline.com/find-a-drug-and-alcohol-treatment/narconon-fresh-start-rehabilitation-programs-rainbow-canyon-retreat/http://treatmentsolutionsonline.com/find-a-drug-and-alcohol-treatment/narconon-fresh-start-rehabilitation-programs-rainbow-canyon-retreat/http://treatmentsolutionsonline.com/find-a-drug-and-alcohol-treatment/narconon-fresh-start-rehabilitation-programs-rainbow-canyon-retreat/http://www.freedomdrugrehab.com/drug-rehab/nevada-drug-rehab/http://www.freedomdrugrehab.com/drug-rehab/nevada-drug-rehab/http://pastthetippingpoint.net/tag/drug-rehab-nevada/http://pastthetippingpoint.net/tag/drug-rehab-nevada/http://www.drugabusesolution.com/nevada-drug-abuse-rehabhttp://www.drugabusesolution.com/nevada-drug-abuse-rehabhttp://www.rainbowcanyonretreat.org/http://www.drugrehab.net/directory/nevada/http://www.narconon-news.org/narconon/nevada-drug-rehab-activities.htmlhttp://www.narconon-news.org/narconon/nevada-drug-rehab-activities.htmlhttp://www.narconon-news.org/narconon/nevada-drug-rehab-activities.htmlhttp://www.drugrehab.tv/


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12

http://narconon.wordpress.com/tag/drug-rehab/ Narconon International YES NO

13

http://narcononlocations.com/locations/west-us/ Narconon Locations YES NO

14

http://www.inhalant-abuse.org/state_rehabs/nevada.htm

Narconon Louisiana NewLife Retreat, Inc.

YES YES

15

http://www.about-drugs.org/catalog/Western-United-States-Drug-Rehabilitation-Centers-sp-

32.htmlNarconon International YES YES

16

http://narconon-fresh.blogspot.com/2013/05/narconon-

locations.htmlNot Listed Not Listed NO

17

http://www.narconon.org/drug-rehab/nevada/las-vegas.html

Narconon International YES YES

Screen shots of these websites are attached hereto as Exhibit F. These sites clearly indicate

that they use the NI logo and trademark with ABLEs permission. The copyright holders of these

sites are a variety of different Narconon corporations. The sites

http://www.drugrehab.net/directory/nevada/andhttp://www.narconon-news.org/narconon/nevada-

drug-rehab-activities.htmlsimply indicate that Narcononis the copyright holder.

For example, the sitewww.drugrehab.tv.This site advertises Narconon of Nevada and

urges visitors to call an 800 number or enter their contact information and a brief description of

their situation into a prompt on the site. The site contains a photo of and a message from the

International spokesperson for NI, the actress Kirstie Alley. The bottom of the site indicates that

the Narconon logo and trademarks are owned by ABLE and used with its permission.

Likewise, the sitehttp://www.drugrehab.net/directory/nevada/is another example of

Defendants purposefully targeting Nevada with an interactive site for the Narconon Program. The

http://narconon.wordpress.com/tag/drug-rehab/http://narconon.wordpress.com/tag/drug-rehab/http://narcononlocations.com/locations/west-us/http://narcononlocations.com/locations/west-us/http://www.inhalant-abuse.org/state_rehabs/nevada.htmhttp://www.inhalant-abuse.org/state_rehabs/nevada.htmhttp://www.inhalant-abuse.org/state_rehabs/nevada.htmhttp://www.about-drugs.org/catalog/Western-United-States-Drug-Rehabilitation-Centers-sp-32.htmlhttp://www.about-drugs.org/catalog/Western-United-States-Drug-Rehabilitation-Centers-sp-32.htmlhttp://www.about-drugs.org/catalog/Western-United-States-Drug-Rehabilitation-Centers-sp-32.htmlhttp://www.about-drugs.org/catalog/Western-United-States-Drug-Rehabilitation-Centers-sp-32.htmlhttp://narconon-fresh.blogspot.com/2013/05/narconon-locations.htmlhttp://narconon-fresh.blogspot.com/2013/05/narconon-locations.htmlhttp://narconon-fresh.blogspot.com/2013/05/narconon-locations.htmlhttp://narconon-fresh.blogspot.com/2013/05/narconon-locations.htmlhttp://www.narconon.org/drug-rehab/nevada/las-vegas.htmlhttp://www.narconon.org/drug-rehab/nevada/las-vegas.htmlhttp://www.narconon.org/drug-rehab/nevada/las-vegas.htmlhttp://www.drugrehab.net/directory/nevada/http://www.drugrehab.net/directory/nevada/http://www.narconon-news.org/narconon/nevada-drug-rehab-activities.htmlhttp://www.narconon-news.org/narconon/nevada-drug-rehab-activities.htmlhttp://www.narconon-news.org/narconon/nevada-drug-rehab-activities.htmlhttp://www.narconon-news.org/narconon/nevada-drug-rehab-activities.htmlhttp://www.drugrehab.tv/http://www.drugrehab.tv/http://www.drugrehab.tv/http://www.drugrehab.net/directory/nevada/http://www.drugrehab.net/directory/nevada/http://www.drugrehab.net/directory/nevada/http://www.drugrehab.net/directory/nevada/http://www.drugrehab.tv/http://www.narconon-news.org/narconon/nevada-drug-rehab-activities.htmlhttp://www.narconon-news.org/narconon/nevada-drug-rehab-activities.htmlhttp://www.drugrehab.net/directory/nevada/http://www.narconon.org/drug-rehab/nevada/las-vegas.htmlhttp://www.narconon.org/drug-rehab/nevada/las-vegas.htmlhttp://narconon-fresh.blogspot.com/2013/05/narconon-locations.htmlhttp://narconon-fresh.blogspot.com/2013/05/narconon-locations.htmlhttp://narconon-fresh.blogspot.com/2013/05/narconon-locations.htmlhttp://www.about-drugs.org/catalog/Western-United-States-Drug-Rehabilitation-Centers-sp-32.htmlhttp://www.about-drugs.org/catalog/Western-United-States-Drug-Rehabilitation-Centers-sp-32.htmlhttp://www.about-drugs.org/catalog/Western-United-States-Drug-Rehabilitation-Centers-sp-32.htmlhttp://www.inhalant-abuse.org/state_rehabs/nevada.htmhttp://www.inhalant-abuse.org/state_rehabs/nevada.htmhttp://narcononlocations.com/locations/west-us/http://narconon.wordpress.com/tag/drug-rehab/


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site says Narconon across the top and displays the Narconon Jumping Man logo. The site

purports to provide information about Drug Rehab[s] in Nevada How to Get Help. Although

the site purports to provide information about a number of different rehabs, no matter what link a

visitor clicks on the site, the Narconon banner and information about the Narconon program

remain on the top of the screen. This site also directs visitors to call an 800 number to speak

with a Registered Addiction Specialist. The bottom of the site indicates that Narcononholds the

copyright for the site and that the Narconon trademarks on the site were used with ABLEs

permission.

Similarly, the sitewww.drugabusesolution.com/nevada-drug-abuse-rehabadvertises

Nevadas Narconon Drug Abuse Rehabilitation. This site tells visitorsthat [i]ndividuals from

all over the state of Nevada enroll in our drug and substance abuse rehab specifically because of

our track record. The site is peppered with the word Nevada throughout, presumably so that

will come up when persons search for drug rehabilitation facilities in Nevada. Like the other sites,

this site directs visitors to call an 800 number or to enter their contact information so the visitor

can receive a call from a Rehab Specialist.

This is in stark contrast to Defendants claim that it does not advertise specifically in

Nevada and that Fresh Start merely is listed on its website as one of the many Narconon centers in

the world.

III. PERSONAL JURISDICTION

A. Standard of Review

Plaintiffs have the burden of establishing that the Court has personal jurisdiction over

Defendants.Pfister v. Selling Source, LLC, 931 F. Supp. 2d 1109, 1115 (D. Nev. 2013)

Where a motion to dismiss is based on written materials instead of an evidentiary hearing, a

plaintiff need only make aprimafacieshowing of jurisdiction to survive the motion.Id.

http://www.drugabusesolution.com/nevada-drug-abuse-rehabhttp://www.drugabusesolution.com/nevada-drug-abuse-rehabhttp://www.drugabusesolution.com/nevada-drug-abuse-rehabhttp://www.drugabusesolution.com/nevada-drug-abuse-rehab


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Nevada's long-arm statute authorizes the exercise of personal jurisdiction to the extent

allowed by federal due process. SeeRio Props., Inc. v. Rio Int'l Interlink, 284 F.3d 1007, 1019

(9th Cir.2002) (citing Nev.Rev.Stat. 14.065 (2001)). As a result, the analysis before the Court

collapses into one: whether the exercise of personal jurisdiction comports with due process. Id.

Based on the above evidence, Plaintiffs have made a prima facie showing that jurisdiction is

proper.

B. Specific jurisdiction over Defendants is proper

The Ninth Circuit has established a three-prong test for analyzing an assertion of specific

personal jurisdiction: (1) The non-resident defendant must purposefully direct his activities or

consummate some transaction with the forum or resident thereof; or perform some act by which he

purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking

the benefits and protections of its laws; (2) the claim must be one which arises out of or relates to

the defendant's forum-related activities; and (3) the exercise of jurisdiction must comport with fair

play and substantial justice, i.e., it must be reasonable. SeeSchwarzenegger v. Fred Martin Motor

Co., 374 F.3d 797, at 802 (9th Cir.2004).

The central question in this case is going to be whether the nature and quality of

Defendants' contacts with the forum are sufficient to justify the exercise of specific jurisdiction.

SeeData Disc, Inc. v. Sys. Tech. Associates, Inc.,557 F.2d 1280, 1287 (9th Cir.1977). The

plaintiff bears the burden of satisfying the first two prongs of the test. If the plaintiff fails to satisfy

either of these prongs, personal jurisdiction is not established in the forum state. Schwarzenegger

374 F.3d 797(internal citations omitted). The purposeful availment prong of the minimum

contacts test requires a qualitative evaluation of the defendant's contact with the forum state, in

order to determine whether [the defendant 's] conduct and connection with the forum State are

such that [the defendant] should reasonably anticipate being hauled into court there. SeeHarris

Rutsky & Co. Ins. Servs., Inc. v. Bell & Clements Ltd., 328 F.3d 1122, 1130 (9th Cir.2003)



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(internal quotations omitted). The Defendants should have reasonably anticipated being haled into

a Nevada court based on the control exerted through their Manuals, the active nature of their

websites, and the data gathered through their global network of facilities.

1. Defendants have purposefully directed their activities at Nevada

The conduct engaged in by NI in Nevada is sufficient to satisfy specific jurisdiction. NI

advertised in the state of Nevada, entered into a long-term arrangement with a licensed subsidiary

facility using its name, trademark, and materials with the expectation that the customers would

come from Nevada, sent representatives to Nevada to supervise whether the licensed rehabilitation

center was appropriately set up and using its materials, and had the expectations that its materials

would be used by customers in Nevada. NI had and continues to have ultimate control of hiring

and firing at their facilities and even controlled the bookstore at the Fresh Start Facility.

There is generally no jurisdiction if a corporations only activity is to posta passive home

page on a website that is read by a consumer in another jurisdiction. See, e.g.,Cybersell, Inc. v.

Cybersell, Inc., 130 F.3d 414, 419-20 (9th Cir. 1997).But seeInset Sys., Inc. v. Instruction Set,

Inc., 937 F. Supp. 161, 164 (D. Conn. 1996) (holding that advertising via the Internet is

solicitation of a sufficient repetitive nature to . . . confer[] long-arm jurisdiction). But operating

even a passive website in conjunction with something more conduct directly targeting the

forumis sufficient to confer personal jurisdiction. (Id.). Here, Defendants conduct provides

that something more to confer personal jurisdiction several times over.

First, Defendants own website,www.narconon.org,is not merely a passive website that

merely lists the Fresh Start facility in Caliente, Nevada. Defendants actively solicit consumers in

Reno and Las Vegas to come to Fresh Start in Caliente for treatment. (SeeG, Screen Captures of

Defendants website athttp://www.narconon.org/drug-rehab/nevada/reno.htmland

http://www.narconon.org/drug-rehab/nevada/las-vegas.html.) For example, Defendants website

expressly advertises that it is a Drug Rehab for Reno, Nevada and tells visitors on the site that

http://www.narconon.org/http://www.narconon.org/http://www.narconon.org/http://www.narconon.org/drug-rehab/nevada/reno.htmlhttp://www.narconon.org/drug-rehab/nevada/reno.htmlhttp://www.narconon.org/drug-rehab/nevada/reno.htmlhttp://www.narconon.org/drug-rehab/nevada/las-vegas.htmlhttp://www.narconon.org/drug-rehab/nevada/las-vegas.htmlhttp://www.narconon.org/drug-rehab/nevada/las-vegas.htmlhttp://www.narconon.org/drug-rehab/nevada/reno.htmlhttp://www.narconon.org/


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Fresh Start is only 429 miles from Reno This level of interaction clearly shows that

Defendants are not operating a passive website despite assertions made by them in Defendants

Motion.

Secondly,Zippo Manufacturing Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119 (W.D. Pa.

1997), provides useful and well-respected information about when a website can confer personal

jurisdiction on a company in the state in which the consumer receives the information. Zippo

involved a company based in California that had an interactive website. It entered into contracts

with providers to give services to Pennsylvania residents. TheZippocourt found that the

California company made a conscious choice to conduct business in Pennsylvania, and was

subject to jurisdiction there. The court offered the following instructive analysis:

At one end of the spectrum are situations where a defendant clearly

does business over the Internet. If the defendant enters into contracts

with residents of a foreign jurisdiction that involve the knowing and

repeated transmission of computer files over the Internet, personal

jurisdiction is proper. At the opposite end are situations where a

defendant has simply posted information on an Internet Web site

which is accessible to users in foreign jurisdictions. A passive Web

site that does little more than make information available to those

who are interested in it is not grounds for the exercise [of] personaljurisdiction. The middle ground is occupied by interactive Web sites

where a user can exchange information with the host computer. In

these cases, the exercise of jurisdiction is determined by examining

the level of interactivity and commercial nature of the exchange of

information that occurs on the Web site. (Id.at 1126.)

In this case, there was not just a passive home website; there was solicitation plus much

more. There was an express marketing campaign that included Nevada as one of NIs one

hundred drug rehabilitation centers. Rio Props., Inc. v. Rio Int'l Inter link,284 F.3d 1007, 1019

21 (9th Cir. 2002). NIs main website is interactive, with a routing of customers from the main NI

website into geographically specific locations, including Nevada and includes repeated solicitation

of business through the individual website targeted toward Nevada consumers.



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The main Narconon website claims that it has 100 drug rehab centers and drug

prevention/education centers around the world, and we have helped millions of people. (See

http://www.narconon.org/.) This is the sort of solicitation of business that provides a sufficient

basis for jurisdiction. SeeEvanston Ins. Co. v. W. Cmty. Ins. Co., 2:13-CV-1268-GMN-CWH,

2014 WL 1302100 (D. Nev. Mar. 31, 2014) (holding that even though an insurance company did

not have any owner or agents in Nevada, a defendant insurance company purposely availed itself

of the benefits of conducting business in Nevada through its policy's nationwide territorial

coverage clause).

NI admits that representatives of the national company visited the subsidiary in 2010

(allegedly for purposes of inspection to see if there was compliance with the license agreement).

There are continuous and systematic contacts between NI and its local facilities. It prescribes

the drug and alcohol program and dictates the reading material, which it claims results in the

successes. The success rates claimed by the local facilities are national success rates. NI regularly

promotes its subsidiary centers and claims their successes as its own.All of these connections can

create jurisdiction. See Weintraub v. Walt Disney World Co., 825 F. Supp. 717, 720-21 (E.D. Pa.

1993).

Under Ninth Circuit precedent, Defendants website alone provides purposeful availment.

But Defendants go much further. ABLE granted permission for the Narconon logo and

trademarks to be used on at least ten websites that advertise for the Narconon program in Nevada.

Narconon International appears to be the copyright owner of three websites that solicit business

for Narconon in Nevada. All in all, this evidence shows Defendants participation in a broad

marketing campaign for Narconon directed at Nevada with all Defendants benefiting from the

patients attending the Fresh Start Facility.

///

///

http://www.narconon.org/http://www.narconon.org/http://www.narconon.org/


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a. The contacts of Fresh Start may be imputed to Defendants

under an alter ego theory since Defendants exercise so much

control over Fresh Start

For purposes of determining jurisdiction, if the parent and subsidiary are not really

separate entities, or one acts as an agent of the other, the local subsidiarys contacts with the forum

may be imputed to the foreign parent corporation. SeeDoe v. Unocal Corp., 248 F.3d 915, 926

(9th Cir. 2001). An alter ego or agency relationship is typified by parental control of the

subsidiary's internal affairs or daily operations.Id. Plaintiffs have provided ample evidence from

Defendants own documents that Defendants control nearly every detail of Fresh Starts

operations.

To show that a parent and subsidiary are alter egos, a plaintiff must make aprima facie

showing (1) that there is such unity of interest and ownership that the separate personalities [of

the two entities] no longer exist and (2) that failure to disregard [their separate identities] would

result in fraud or injustice.SeeDoe v. Unocal Corp.,248 F.3d 915, 926 (9th Cir.2001). The

UnocalCourt indicated that the first prong of this test may be alternately stated as requiring a

showing that the parent controls the subsidiary to such a degree as to render the latter the mere

instrumentality of the former.Id.at pg. 926. The foregoing evidence amply demonstrates that

Defendants control Fresh Start to such a high degree as to render it a mere instrumentality of

Defendants. Fresh Start cannot even transfer or demote staff members without approval from

Defendants.

With regard to the second prong of the alter ego test, failing to disregard the separate

corporate identities of Defendants and Fresh Start would result in severe fraud and injustice.

Defendants are the source of the false representations that were made to Plaintiffs in this case and

in a number of others. These include the false representations about the Narconon programs 76%

success rate, the false representations that Narconons sauna program has been scientifically



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shown to reduce or eliminate an addicts drug cravings, and the false representation that the

Narconon program is secular when, in fact, the entire Narconon program consists of Scientology

teachings and rituals.

Defendants use the Narconon program to introduce people to Scientology as part of

Scientologys plan to clear the planet. (To go clear is the ultimate spiritual goal for a

Scientologist, achieved after one goes up the Bridge to Total Freedom.) The document attached

hereto as Exhibit H, shows a Church of Scientology, or an Org as its known, with anarrow

directed at the Narconon Jumping Man logo. The document reads:

The question is not how to clear an individual, its how to clear acivilization by making every one of our orgs a central

organization responsible for every sector of Scientology activitiesacross its [sic] entire geographic zone.

In other words, the Church of Scientology is supposed to direct Narconon to achieve Scientologys

spiritual goal of clearing the planet.

Returning the second prong of the alter ego doctrine, Defendants continue to direct

individual centers to make false claims about the Narconon program long after even their own

expert witnesses admit under oath the claims are untrue. For Defendants, representations about

Narconons sauna program being able to eliminate drug cravings are matters of faithbecause L.

Ron Hubbard developed this theory. More importantly, they are part of Defendants spiritual

mission. To that end, Defendants use the individual Narconon centers as shield from liability so

they can continue working to clear the planet.Allowing Defendants to hide behind Fresh Start

and not be held accountable for the fraud they originate works an injustice. The Ninth Circuit has

indicated that in such a situation , the second prong of alter ego is satisfied and piercing the veil is

appropriate. Unocal Corp.,248 F.3d at 926 (where a parent uses subsidiary as market conduit and

attempts to shield self from liability, piercing the veil is appropriate).



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b. The contacts of Fresh Start may be imputed to Defendants

under an agency theory

The agency test is satisfied, where a subsidiary functions as the parent corporations

representative in that it performs services that are sufficiently important to the foreign

corporation that if it did not have a representative to perform them, the corporation's own officials

would undertake to perform substantially similar services. Doe v. Unocal Corp., 248 F.3d 915,

928 (9th Cir. 2001). By Defendants account, they do not provide rehabilitation services. Because

Fresh Start staff performs this service and without which there would be no Narconon patients to

sell the program, the agency test is satisfied here. This provides an alternate basis for the Court to

impute Fresh Starts contacts to Defendants.

2. Plaintiffsclaims arise out Defendants contacts with Nevada

The second requirement for specific jurisdiction is that the plaintiffs claims arise out of

the defendants forum-related activities. SeePanavision Intl, L.P. v. Toeppen, 141 F.3d 1316,

1322 (9th Cir. 1998). District Courts apply a but-for test to determine whether the second

requirement is satisfied.Id. That is, if the plaintiffs claims would not have arisen but for the

defendants activities directed at the forum, the second requirement is satisfied.

Plaintiffs easily satisfy this requirement. Plaintiffsclaims arise directly out of the drug

rehabilitation program that ABLE based on the teachings of Scientology and then repackaged and

licensed to NI who then delivered to Nevada. NI granted Fresh Start a perpetual license to use its

materials and prescribed treatment methods. Plaintiff Peter Geanacopolus sustained heart-related

injuries while participating in the Narconon sauna program at Fresh Start. By Defendants own

account, they licensed the Narconon program to the Fresh Start facility in Nevada. But for

Defendants licensing the Narconon Program to Fresh Start and expressly controlling the

application of the Narconon Program at that facility, Peter would not have sustained injuries there.



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The Ninth Circuit approved of similar reasoning to satisfy the second requirement for

specific jurisdiction inBallard v. Savage, 65 F.3d 1495, 1500 (9th Cir. 1995). There, a class of

victims brought suit in California against an Austrian bank, Royal, for its alleged participation in a

Ponzi scheme. To satisfy the but for test under the second requirement, the class representative

plaintiff argued that if Royal had not done business in the United States, she would not have a

claim against it.Id. The Ninth Circuit concluded that the second requirement was satisfied and

characterized the plaintiffs logic as sound.Id.

Further, ABLE granted permission for the Narconon trademarks and logo to be used on the

website to which Dan Carmichael referred Plaintiffs,www.rainbowcanyonretreat.org.The false

representations Carmichael made to Plaintiffs were also on this website. Plaintiffs fraud-based

claims arise, in part, from false statements made on this website. As mentioned, this website is one

of the many websites Defendants have used to target Nevada in their marketing of the Narconon

program.

Moreover, the false representations that Carmichael and the

www.rainbowcanyonretreat.orgwebsite made to Plaintiffs emanate from Defendants. For

example, the false success rates that Fresh Start and other Narconon centers tout to prospective

clients comes from NI. Individual Narconon centers do not conduct research on the success of the

program for Narconon students. (Tenorio Affidavit, Exhibit 1 at 10). And, consistent with the

evidence presented that NI controls Fresh Starts advertising, individual Narconon centers must

advertise that the sauna program can eliminate an addicts drug cravings by flushing out residual

toxins stored in the addicts fatty tissue.Id.

For all these reasons, Plaintiffs have satisfied the second requirement for specific

jurisdiction.

http://www.rainbowcanyonretreat.org/http://www.rainbowcanyonretreat.org/http://www.rainbowcanyonretreat.org/http://www.rainbowcanyonretreat.org/http://www.rainbowcanyonretreat.org/http://www.rainbowcanyonretreat.org/http://www.rainbowcanyonretreat.org/


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3. The Courts exercise of jurisdiction over Defendants is reasonable

In their Motion to Dismiss, Defendants did not raise any argument that the Courts exercise

of personal jurisdiction over them would be unreasonable. In any case, such an argument would

fail. Defendants cannot carry the burden of presenting a compelling case against jurisdictionin

neighboring Nevada. SeeBallard v. Savage, 65 F.3d 1495, 1502 (9th Cir. 1995)

C. General jurisdiction over Defendants is proper

General jurisdiction exists where the businesscontacts with the forum state are so

substantial, continuous, and systematic that they approximate physical presence. SeeBancroft&

Masters, Inc. v. Augusta Natl Inc., 223 F.3d 1082, 1086 (9th Cir. 2000). General jurisdiction has

to be established through a physical manifestation of the business in a forum state. Simply

conducting commerce in a forum state does not approximate a physical presence on the soil of that

state.Id.at 1086. Plaintiffs currently, without even conducting discovery are able to show that

Defendants ABLE and NI have physically manifested operations on Nevada soil, by controlling

the curriculum, advertising, finances and human resource decisions of their Nevada alter ego Fresh

Start.

Plaintiff's case is distinguishable from the case law cited in Defendants Motion. The

Supreme Court recently clarified that the reach of general jurisdiction is narrower than had been

supposed in the lower courts for many years. See Daimler AG v. Bauman,134 S.Ct. 746, at 755

(2014)(citing Goodyear Dunlop Tires Operations, S.A. v. Brown,131 S.Ct. 2836, 2851 (2011))

(noting that general jurisdiction lies not simply where a defendant has continuous and systematic

contacts with the forum state, but where those contacts are so pervasive as to render the defendant

essentially at home in the forum State).InDaimler, the facts are in stark contrasted to those of

the current case because theDaimlerPlaintiffs named only one Defendant in the Complaint even

though the injuries occurred in a foreign country and that Defendant was a foreign Corporation not

residing in that country. Daimler was a clear example of forum shopping by the Plaintiffs because



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there was no actual nexus between the injuries, the defendants, and the jurisdiction in which it was

filed.

Moreover, Defendants have everything in Nevada that Defendants indicate in their Motion

confers general jurisdiction. MTD at 12. The operations manuals indicate Defendants are the

actual employers of Fresh Start staff, Defendants solicit business in Nevada, Defendants control

Fresh Starts building fund, and Fresh Start is Defendants general agent. Accordingly, the

Court may exercise general jurisdiction over Defendants.

D. At a minimum, jurisdictional discovery is warranted

If the above arguments are not sufficiently convincing, this Court should deny the motion

to dismiss and grant the Plaintiffs ninety days leave to conduct jurisdictional discovery. When

there are factual issues relating to jurisdiction that are not reasonably available to the plaintiff,

limited discovery relevant to facts supporting the exercise of personal jurisdiction is appropriate.

Jurisdictional discovery may be appropriately granted where pertinent facts bearing on the

question of jurisdiction are controverted or where a more satisfactory showing of the facts is

necessary.SeeMinelab Americas, Inc. v. UKR Trade, Inc., 2:12-CV-00827-GMN, 2013 WL

1314991 (D. Nev. Mar. 28, 2013) (quotingBoschetto v. Hansing, 539 F.3d 1011, 1020 (9th Cir.

2008)). Plaintiffs would use this limited discovery period to investigate specific instances of

Defendants control over Fresh Start as indicated by theRunningManual. Plaintiffs would also

seek to depose persons at ABLE and NI as to Defendants relationship with Fresh Start.

IV. DEFENDANTS12(b)(6) MOTION

It is worth noting at the outset that almost all of Defendants arguments for dismissal under

Fed. R. Civ. P. 12(b)(6) fail because they do not take into account that Plaintiffs have alleged

Defendants are alter egos of Fresh Start. Plaintiffs also allege Defendants are the principals of



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Fresh Start. Defendants operations manuals, discussed in detail above, show that Plaintiffs

allegations are well-grounded as Defendants control nearly every aspect of Fresh Start.

As set forth in Plaintiffs First Amended Complaint, Fresh Start is a mere instrumentality

of Defendants. ABLEs influence on Fresh Start and NI extinguishes the separation between these

entities, as both exist simply as vehicles for ABLEs operations (ECF 4 6-8). Because of the

blurred distinction between these companies, Plaintiffs alleged that they are acting as alter-egos of

one another in an attempt to evade liability for their collective action. (Id. 53 - 57) As such, the

acts of one of the Defendants may be imputed to the others. Where the alter ego doctrine

applies, multiple corporations are treated as one for purposes of determining liability.M/V Am.

Queen v. San Diego Marine Constr. Corp., 708 F.2d 1483, 1490 (9th Cir. 1983).

Nevada looks to three elements to pierce the corporate veil and find that companies are

alter-egos of one another or their owners. To state a claim for alter ego, a plaintiff must allege 1)

the corporation is influenced and governed by the person asserted to be its alter ego; 2) there is

unity of interest and ownership such that one is inseparable from the other; and 3) the facts are

such that treating the companies as separate entities would, under the circumstances, promote

fraud or injustice. Truck Ins. Exchange v. Palmer J. Swanson, Inc.,124 Nev. Adv. Op. 59, 189

P.3d 656, 660 (2008), quotingEcklund v. Nevada Wholesale Lumber Co., 93 Nev. 196, 197, 562

P.2d 479, 479-480 (1977);Brown v. Kinross Gold USA, Inc., 531 F. Supp. 2d 1234, 1240-1241.

The essence of the alter-ego doctrine is to do justice whenever it appears that the protections of

the corporate form will be abused.LFC Marketing Group v. Loomis, 116 Nev. 896, 903, 8 P.3d

841, 845-46 (2000). Alter-ego analysis is specialized and highly contextual; the circumstances and

facts of each case control its outcome, making it difficult to dispose of at the pleading stage. Id. at

847.



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Plaintiffs Complaint alleges all of these elements. In addition to outlining the means by

which ABLE controls Fresh Start and NI, the Complaint alleges that the three Defendants are

inseparable from one another in their conduct (ECF 4 29). ABLE completely controls

Narconon and NI. (Id. 49 ) All three companies have a unity of ownership, which Plaintiffs

allege is used for nefarious ends. Specifically, the three Defendants work together to offer sham

drug rehabilitation services, and defraud their customers by offering religious indoctrination in the

place of the promised treatment. (Id. at 24-52) If the corporate entities of these companies are not

disregarded, some or all of them may evade liability for their collective misconduct. (Id. 54

58) Thus, Plaintiffs complaint alleges the three elements necessary to allege an alter-ego theory of

liability.

A. Plaintiffs state a claim against Defendants for breach of contract under an alter ego

theory.

A plaintiff in a breach of contract action must show (1) the existence of a valid contract,

(2) a breach by the defendant, and (3) damage as a result of the breach. SeeBrown v. Kinross

Gold U.S.A., Inc., 531 F. Supp. 2d 1234, 1240 (D. Nev. 2008). Defendants seek dismissal of tthis

claim on the ground that they were not parties the contract. The court inBrownconcluded that

under Nevada law a party who was not a signatory to a contract could be held liable for its breach

under an alter ego theory. As made abundantly clear by Defendants operations manuals, and as

Plaintiffs alleged in the First Amended Complaint, Fresh Start is the alter ego of Defendants. As

such, Defendants request for dismissal of this claim should be denied.

B. Plaintiffs state claims for fraud, negligent misrepresentation, and intentional

infliction of emotional distress.

Plaintiffs state claims for fraud, negligent misrepresentation, and intentional infliction of

emotional distress against Defendants under alter ego and agency theories.

1. Fraud



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Defendants seek dismissal of the fraud claim as to them because, in their view, Plaintiffs

"do not identify the role of Narconon International and ABLE" in the fraud. MTD at 20.

Defendants are incorrect. Plaintiffs expressly allege in their First Amended Complaint that Fresh

Start is Defendants' agent. FAC, 45, 89. Plaintiffs allege that Defendants control the time,

manner, and method of Fresh Start's business by "actively managing [Fresh Start's] daily

operations, including conducting inspections of Narconon centers and creating, licensing, and

approving their marketing materials."Id. at 8. Plaintiffs allege that ABLE "governs and controls

nearly every aspect" of Fresh Start's business activities.Id. at 55. (Defendants' operations

manuals show that Plaintiffsallegations were well-grounded.)

Under Nevada law, a principal may be liable for its agent's fraudulent or illegal acts if the

principal ratifies the acts or expressly authorizes the acts. See Cardinal v. C. H. Masland & Sons,

495 P.2d 364 (Nev. 1972)(affirming summary judgment against plaintiff who waited 21 months to

file suit after learning of business partner's forgery on ground plaintiff ratified partner's forgery).

The decision inBaroi v. Platinum Condo. Dev., LLC, 2:09-CV-00671-PMP, 2012 WL 2847926

(D. Nev. July 11, 2012), is instructive on this point. There, plaintiffs brought suit for fraud and

other claims against a condo development company and its parent corporation. The parent

corporation moved for summary judgment, arguing that Nevada law would not allow a parent

corporation to ratify its subsidiary fraudulent actions.Id. at *910. TheBaroiCourt rejected this

argument, noting that the Nevada Supreme held had expressly held in Cardinalthat a principal

may ratify its agents illegal acts.Id. at *10. Consequently, the court denied summary judgment.

Id. As further support for its conclusion, the Court observed that Nevadas punitive damages

statutes, Nev.Rev.Stat. 42.007(1)(b), 42.005(1), provide for exemplary or punitive damages for

the fraudulent acts of employees if the employer "expressly authorized or ratified the wrongful act

of the employee for which the damages are awarded.



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The Ninth Circuit explained inKearns v. Ford Motor Co., 567 F.3d 1120, 1124 (9thCir.

2009), that to satisfy the heightened pleading requirements of Fed. R. Civ. P. 9(b), allegations of

fraud simply need to be "specific enough to give defendants notice of the particular misconduct so

that they can defend against the charge and not just deny that they have done anything wrong."

After reading Plaintiffsfraud claim, Defendants are left with no question as to the particular

misconduct alleged.

Defendants do not argue that Plaintiffs' failed to describe the circumstances constituting

the fraud and misrepresentation at issue in the First Amended Complaint with sufficient

Defendants argue that Plaintiffs have not satisfied Rule 9(b) heightened pleading standards with

respect to themand, therefore, the claim should be dismissed. Defendantsargument fails. Rule

9(b)'s heightened pleading requirement does not apply to pleading matters of agency. By its

express terms, Rule 9(b)'s heightened pleading requirement applies only to the "circumstances

constituting fraud or mistake." Plaintiffs state a fraud claim against Defendants based on their

agency relationship with Fresh Start.

Next, Carmichael was acting within the scope of his employment when he made the false

representations to Plaintiffs about the Fresh Start program. Defendants'Running Manualclearly

states that NI has ultimate authority over the hiring and firing of Fresh Start staff. Consequently,

NI is liable is to Plaintiffs for fraud under respondeat superior. Finally, Plaintiffs state a fraud

claim against Defendants under an alter ego theory of liability. "Where the alter ego doctrine

applies, ... the two corporations are treated as one for purposes of determining liability." SeeM/V

Am. Queen v. San Diego Marine Constr. Corp., 708 F.2d 1483, 1490 (9th Cir.1983). For these

reasons, Defendants argument fails.

2. Negligent misrepresentation

The only argument Defendants make in support of dismissal of Plaintiffs negligent

misrepresentation claim is that Fresh Start is a separate company from Defendants. As discussed



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above, Plaintiffs allege with good reason that Fresh Start is merely an instrumentality of

Defendants. And, as the Nevada Supreme Court made clear inLFC Marketing Group v. Loomis,

903, 8 P.3d 841, 847 (Nev. 2000), analysis of whether a company is an alter ego of another is a

fact-intensive inquiry, and ordinarily is not decided is at the pleading stage.

At this stage, because Plaintiffs have alleged that Fresh Start is an alter ego of Defendants

and those allegations are taken as true, Defendants argument for dismissal fails.

3. Intentional infliction of emotional distress

Defendants argument for dismissal of this claim is yet another variation of Defendants

claim that Fresh Start is a separate company. Once again, such a fact-dependent argument about

alter ego cannot carry the day at the pleading stage. And, as noted above, Nevada law expressly

provides for liability of corporations where they authorize or ratify an employees wrongfulacts.

C. Plaintiffs unquestionably have standing to bring their RICO claim based on the

money they paid Defendants.

Defendants urge dismissal of Plaintiffs RICO claim because, in their view, Plaintiffs have

not alleged that they were injured in [their] business or property. Defendants assert that

Plaintiffs allege only personal injury claims. Defendants are incorrect. Plaintiffs allege in their

First Amended Complaint that they lost $30,000.00the money they paid to Defendants for

treatment at Fresh Startas a result of Defendants RICO violations. As Defendants point out,

Plaintiffs are required to show a concrete financial loss. Plaintiffs have made that required

showing at the pleading stage and Defendants argument fails.

D. Although plaintiffs did not bring a deceptive trade practices claim they allege

sufficient facts to state a claim.

Defendants have moved to dismiss a claim for deceptive trade practices although Plaintiffs

did not expressly make that claim in their First Amended Complaint. Nevertheless, Plaintiffs do

allege facts that a state claim against Defendants for violations of Nevadas Deceptive Trade



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Practices Act (NDTPA), N.R.S. 41.600. Nevadas legislature enacted NRS 41.600 to empower

victims of consumer fraud to bring claims against individuals and entities who engage in

fraudulent business practices under NRS 598.0915-25, inclusive. NRS 41.600(e). NRS 41.600

provides a private right of action under certain sections of that chapter, and provides an award of

reasonable attorneys fees and costs to a successful claimant. NRS 41.600(2)(e), (3). Because

claims under NRS 598.0915-25 sound in fraud, they must be pled to meet the standards of Rule

9(b).Montes v. Bank of Am. N.A., 2014 WL 1494234at *14 (D. Nev. Apr. 15, 2014).

Of relevance here, under NRS 598.0915(5) and (9), it is a deceptive trade practice if a

defendant:

5. Knowingly makes a false representation as to the characteristics, ingredients, uses,benefits, alterations or quantities of goods or services for sale or lease or a falserepresentation as to the sponsorship, approval, status, affiliation or connection of aperson therewith. (emphasis added)

9. Advertises goods or services with intent not to sell or lease them as advertised.

Nev. Rev. Stat. Ann. 598.0915 (West).

To state a claim under the NDTPA, a plaintiff must show that (1) an act of consumer fraud

(2) caused (3) damages to the plaintiff. Picus v. Wal-Mart Stores, Inc., 256 F.R.D. 651, 658 (D.

Nev. 2009)(noting that the Supreme Court had not yet specified the elements of a claim under the

NDTPA). Plaintiffs here allege that Defendants, acting through their agent Dan Carmichael, on or

about November 27, 2013, made several false representations to them in convincing them to send

their son to Fresh Start for treatment. Plaintiffs allege that Carmichael knowingly made the

following the false representations: (a) that the Fresh Start program has a 76% success rate; (b)

that Peter would receive extensive counseling at Fresh Start; and (c) that there would be a licensed

physician on the premises. FAC, 1317. Further, Plaintiffs allege that Carmichael referred

them to a website that falsely represented that Narconons sauna program, the New Life



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Detoxification Program, removes all drug residues inthe body, which are the major causes of

cravings and relapse.Id. at 1819. Finally, Plaintiffs contract falsely represents that the

Narconon Program is secular and does not include participation in any religious studies of any

kind.Id. at 23.

Plaintiffs allege in the First Amended Complaint the solid bases for believing these

representations. With regard to the claimed success rate, Plaintiffs quote deposition testimony

from Narconon Internationals own expert witness in a prior case admitted he was skeptical of the

success rate: I I hope its true, but, I mean, I would need convincing.Id. at 42. The same

expert admitted that there was no scientific basis to support Narconons claimed benefits for the

sauna program.Id. at 39.

With respect to Defendants false claim that the program is secular, Plaintiffs allege that

Narconon misrepresented the title of the L. Ron Hubbard the book that inspired the Narconon

programs founding to conceal the programs basis in the Scientology religion.Id. at 2425.

Further, Plaintiffs allege that at Fresh Start Peter was made to study Scientology doctrines and

concepts and that Narconons sauna program is identical to a Scientology ritual known as the

Purification Rundown.

Defendants false representations about the secular nature of the treatment program, the

ability of the sauna program to eliminate drug cravings, and the success rate are false statements

about the characteristics, benefits, and quantities of Narconon. In addition, Defendants

representation that there would be a licensed physician at Fresh Start was an advertisement of

services with intent not to sell them as advertised.

Accordingly, Plaintiffs state a claim for deceptive trade practices and request leave to add

this claim formally to their Complaint.



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E. Plaintiffs state negligence claims against Defendants under both direct and alter ego

liability theories.

Defendants seek dismissal of Plaintiffs negligence claims because, in their view, Plaintiffs

cannot show that Defendants owed them a legal duty. Defendants position is untenable.

Defendants produce and license all materials and treatment methods for a putative drug treatment

program, Narconon. Defendants unquestionably had a legal duty to use to reasonable care to

ensure that their program is safe and effective for participants such as Plaintiff Peter

Geanacopulos. For breach of this duty, Defendants are directly liable.

In addition, as an alter ego of Fresh Start, Defendants had a duty to obtain a medical

license to engage in the treatment they were administering to Peter Geanacopulos.

Nevada law provides that violation of a statute constitutes negligenceper se if the injured

party belongs to the class of persons whom the statute was intended to protect, and the injury

suffered is of the type the statute was intended to prevent. SeeAtkinson v. MGM Grand Hotel,

Inc., 120 Nev. 639, 98 P.3d 678, 680 (Nev. 2004);Mazzeo v. Gibbons, 649 F. Supp. 2d 1182,

1200 (D. Nev. 2009). Plaintiffs allege that NRS 630.160 created a duty for individuals desiring to

engage in the practice of medicine to be licensed.

Defendants, NI and ABLE had control over Fresh Start, no one on site at the Fresh Start

Facility had a medical license, nor were any certified drug counselors on-site. Still the staff of

Fresh Start, who have been shown to be under the control of Defendants NI and ABLE, practiced

medicine by requiring Plaintiff Peter Geanacopulos to discontinue his prescription medication and

subjecting him to the dangerous sauna and niacin regime. Vulnerable persons in need of medical

care like Peter Geanacopulos are exactly the type of persons the Nevada legislature intended to

protect under NRS 630.160 (seeNRS 630.020), (all of Chapter 630 contemplates civil

enforcement of its provisions. SeeNRS 630.130).

.Once a duty has been established, actual negligence on the part of the defendant is an issue for

trial. Harrington v. Syufy Enters., 113 Nev. 246, 248, 931 P.2d 1378, 1380 (Ne.v 1997). All of



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the above duties were breached by Fresh Start, a facility under the absolute control of Defendants

NI and ABLE, with this many questions of material fact already showing, before any discovery

has been done, a dismissal of Plaintiffs negligence claims now would be extremely premature.

As such, Defendantsrequest for dismissal of this claim should be denied.

F. Plaintiffs state a claim for civil conspiracy.

The essence of civil conspiracy is damages.Flowers v. Carville, 266 F. Supp. 2d 1245,

1249 (D. Nev. 2003). In Nevada, civil conspiracy requires the allegation of 1) a combination of

two or more persons, who 2) by some concerted action, 3) intend to accomplish some unlawful

objective for the purpose of harming another, and 4) cause damage. Furthermore, a claim for civil

conspiracy based on torts other than fraud must only meet the pleading standards of Rule 8(a).

Flowers, 266 F. Supp. 2d at 1250-51; but see Goodwin v. Executive Tr. Servs., LLC, 680 F. Supp.

2d 1244, 1254 (D. Nev. 2010) (retreating from the Flowers courts position and requiring

heightened civil conspiracy pleading standard where underlying claim had heightened pleading

standard).

Plaintiffs Complaint states all four of Nevadas elements for this claim. Plaintiffs

articulate the acts Defendants took to come together and work in unison to harm Plaintiffs. The

Complaint alleges how A BLEd, NI, and Fresh Start work in unison to recruit and control

customers. (ECF 4 2-9). Plaintiffs allege that Defendants worked in unison to recruit Plaintiff

Peter Geanacopulos into Scientology under the guise of providing him treatment. (Id. 9699).

In doing so, Defendants injured Peter. Accordingly, Plaintiffs properly pled their cause of action

for civil conspiracy.

I. CONCLUSION

Based upon the foregoing, Plaintiffs respectfully request this Honorable Court deny

Defendants Motion to Dismiss.



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DATED this 24thday of July, 2014.

HAMILTON LAW

By:RYAN A. HAMILTON, ESQ.NV BAR NO. 11587

5125 S. Durango Dr., Ste. CLas Vegas, NV 89113(702) 818-1818(702) [email protected]

Attorney for Plaintiffs

CERTIFICATE OF SERVICE

Pursuant to FRCP 5(b), I certify that I am an employee of HAMILTON LAWW, LLC, and that on

this 24th day of July, 2014, I did cause a true copy of PLAINTIFFS RESPONSE TO ABLE AND

NARCONON INTERNATIONALS MOTION TO DISMISS PURSUANT TO FRCP RULE

12(b)(2) AND12(b)6 to be placed in the United States Mail, with first class postage prepaid

thereon, and addressed as follows:

S. Brent VogelAlayne M. OpieLEWIS BRISBOIS BISGAARD & SMITH, LLP6385 S. Rainbow Boulevard, Ste. 600Las Vegas, Nevada 89118

Kenneth M. WebsterJohn F. BemisKerry J. DoyleHALL PRANGLE & SCHOONVELD, LLC

1160 North Town Center Drive, Suite 200Las Vegas, NV 89144

By___________________________

An Employee of Hamilton Law, LLC


geanacopulos v. narconon: plaintiffs response to motion to dismiss

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