burgess et al v. rtc, narconon: order to dismiss

8/13/2019 Burgess et al v. RTC, Narconon: Order to Dismiss

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UNITED STATES DISTRICT COURTNORTHERN DISTRICT OF GEORGIA

ATLANTA DIVISION

BENJAMIN BURGESS; RHONDABURGESS; HEIDI HOWARD; JOYCEMARTIN; BETH KARAMPELAS;TERRI DACY; and MICHAEL DACY,individually and on behalf of all otherssimilarly situated,

Plaintiffs, CIVIL ACTION

No. 1:13-cv-02217-SCJ

v.

RELIGIOUS TECHNOLOGYCENTER, INC.; ASSOCIATION FORBETTER LIVING AND EDUCATIONINTERNATIONAL; NARCONONINTERNATIONAL; andNARCONON OF GEORGIA, INC.,

Defendants.

O R D E R

This matter is before the Court on Defendant Religious Technology Center,

Inc.s (RTC) Motion to Dismiss [Doc. No. 7], Defendant Narconon Internationals

(International) Motion to Dismiss [Doc. No. 4], Defendant Association for Better

Living and Education Internationals (ABLE) Motion to Dismiss [Doc. No. 5], and

Defendant Narconon of Georgia, Inc.s (NNGA) Motion to Dismiss [Doc. No. 9].

Case 1:13-cv-02217-SCJ Document 40 Filed 02/19/14 Page 1 of 28


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1 The named plaintiffs allege that International is the parent/licensor of NNGA andexercises direct control over the time, manner, and method of NNGAs operations [id.at 13]. The named plaintiffs further allege that ABLE is a subsidiary of RTC that overseesthe alcohol rehabilitation activities of the Church of Scientology and controls the time,

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For the reasons explained in this order, RTCs, Internationals, ABLEs, and NNGAs

(collectively Defendants) respective motions are GRANTED.

I. FACTUAL AND PROCEDURAL BACKGROUND

NNGA is a nonprofit corporation that provides a drug and alcohol

rehabilitation service known as the Narconon program [Doc. No. 1-1, 16]. The

Narconon program is based on the writings of L. Ron Hubbard, the founder of the

Church of Scientology [id.]. Benjamin Burgess, Rhonda Burgess, Heidi Howard,

Joyce Martin, Beth Karampelas, Terri Dacy, and Michael Dacy (collectively, the

named plaintiffs) each enrolled their respective relatives in the Narconon program

at NNGA [id. at 8-11].

On June 4, 2013, the named plaintiffs, on behalf of themselves and others

similarly situated, filed this action the State Court of Gwinnett County, Georgia [id.

at 46]. In their complaint, the named plaintiffs allege that Defendants made several

misleading and false claims, through their respective advertising and marketing

materials, about the Narconon programs treatment of drug and alcohol addicts [id.

at 23].1Specifically, the named plaintiffs allege that Defendants misrepresented, inter



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manner, and method of Internationals and NNGAs businesses [id.]. Also, according tothe named plaintiffs, RTC oversees Church of Scientology activities and oversees andapproves the activities of International and NNGA [id. at 12]. In summary, the namedplaintiffs allege that Defendants collectively control and are connected with the NNGAsuse and advertising of the Narconon program.

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alia, the Narconon progams connection to Scientology, the Narconon programs

success rate, the certifications of its staff members, and NNGAs government

licensing [id. at 31]. Based on these allegations, the named plaintiffs assert claims

for fraud and misrepresentation, breach of contract, unjust enrichment, detrimental

reliance, negligenceper se and violations of the Georgia Racketeer Influenced and

Corrupt Organizations Act (RICO), O.C.G.A. 16-14-1, et seq.[id. at 7]. The named

plaintiffs further assert that they and their potential class members suffered actual

physical, mental, and economic harm as a result of Defendants false, deceptive,

or misleading business practices [id. at 15].

On July 2, 2013, International properly removed this action to this Court

pursuant to the Class Action Fairness Act, 28 U.S.C. 1711 et seq., and 28 U.S.C.

1332(d)(2) [Doc. No. 1, 2-3]. After removal, International, ABLE, and NNGA filed

motions to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure

[Doc. No. 4, 1; Doc. No. 5, 1; Doc. No. 9, 1]. RTC, a California nonprofit corporation,

also filed a motion to dismiss, requesting that this action be dismissed for lack of



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personal jurisdiction pursuant to Rule 12(b)(2) of the Federal Rules of Civil

Procedure [Doc. No. 7, 1-2]. In the alternative, RTC requests that this action be

dismissed pursuant to Rule 12(b)(6) [id.].Below, as they are ripe for adjudication, the

Court addresses the Defendants respective motions to dismiss.

II. RTCS MOTION TO DISMISS

In its motion to dismiss, RTC challenges the existence of personal jurisdiction

and, therefore, requests that this action be dismissed pursuant to Rule 12(b)(2). In

the alternative, RTCs motion requests that this action be dismissed pursuant to Rule

12(b)(6) for failure to state a claim. As a decision under Rule 12(b)(6) constitutes a

decision on the merits of the named plaintiffs claims, the Court must first address

RTCs arguments under Rule 12(b)(2). See Republic of Panama v. BCCI Holdings

(Luxembourg) S.A., 119 F.3d 935, 940 (11th Cir. 1997) (As a general rule, courts

should address issues relating to personal jurisdiction before reaching the merits of

a plaintiff's claims.). Therefore, the Court addresses RTCs motion to dismiss under

Rule 12(b)(2).

A. Legal Standard

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

determining whether personal jurisdiction exists: the exercise of jurisdiction must



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(1) be appropriate under the state long-arm statute and (2) not violate the Due

Process Clause of the Fourteenth Amendment to the United States Constitution.

United Techs. Corp. v. Mazer, 556 F.3d 1260, 1274 (11th Cir. 2009). Further, [a]

plaintiff seeking the exercise of personal jurisdiction over a nonresident defendant

bears the initial burden of alleging in the complaint sufficient facts to make out a

prima facie case of jurisdiction. Id. In the event a defendant, in response to a

complaint, makes an evidentiary showing that personal jurisdiction is lacking, the

plaintiff then has the burden of producing evidence that supports the existence of

jurisdiction. Id.

B. Discussion

The Georgia long arm-statute provides in pertinent part that:

A court of this state may exercise personal jurisdiction over anynonresident or his or her executor or administrator, as to a cause ofaction arising from any of the acts, omissions, ownership, use, orpossession enumerated in this Code section, in the same manner as ifhe or she were a resident of this state, if in person or through an agent,he or she:(1) Transacts any business within this state;(2) Commits a tortious act or omission within this state, except as to acause of action for defamation of character arising from the act;

(3) Commits a tortious injury in this state caused by an act or omissionoutside this state if the tort-feasor regularly does or solicits business, orengages in any other persistent course of conduct, or derivessubstantial revenue from goods used or consumed or services renderedin this state[.]



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O.C.G.A. 9-10-91(1)-(3). Here, the named plaintiffs, while conceding that RTC itself

has no direct presence in Georgia, argue that personal jurisdiction exists over RTC

pursuant to subsection (1)-(3) of O.C.G.A. 9-10-91 because ABLE, International,

and NNGA are its agents [Doc. No. 19, 18]. With its motion to dismiss, RTC attaches

the declaration of its President Warren McShane (Mr. McShane) which challenges

the existence of personal jurisdiction [Doc. No. 7-2, 2]. Specifically, Mr. McShane

asserts in his declaration that ABLE, International, and Narconon are not, and never

have been, agents of RTC [id. at 4] (Neither ABLE, [ ] International, nor NNGA

have ever been agents of RTC.). As a result of this declaration, the burden shifts

back to the named plaintiffs to produce evidence establishing International, ABLE,

and NNGA are RTCs agents.Mazer, 556 F.3d at 1274.

Under Georgia law, an agency relationship can arise in three distinct ways:

expressly, by implication, or through subsequent ratification by the principal of the

agent's conduct.JCarpc, LLC v. Wilkins, 545 F. Supp. 2d 1330, 1337 (N.D. Ga. 2008)

(citing O.C.G.A. 10-6-1). In summary, an agency relationship is created by the

actions of the principal. Ellis v. Fuller, 282 Ga. App. 307, 309, 638 S.E.2d 433, 435

(2006).



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In their response to RTCs motion to dismiss, the named plaintiffs do not

directly address whether RTCs agency relationship with ABLE, International, and

NNGA is established through express authority, implied authority, or through

ratification. By failing to make this distinction, it is difficult to decipher the named

plaintiffs basis for the existence of an agency relationship. In general, the named

plaintiffs assert that a principal/agent relationship exists because RTC has control

over ABLE, International, and NNGA. However, in making this argument, the

named plaintiffs concede that RTC has kept itself formally separate from

Defendants ABLE, International, and NNGA [Doc. No. 19, 7]. Therefore, the named

plaintiffs essentially concede that express agency, which arises when the principal

expressly confers authority on the agent to act on its behalf, is not present here.

Further, the named plaintiffs do not reference any ratification by RTC of ABLEs,

Internationals, or NNGAs conduct that would allow an inference of an agency

relationship.See O.C.G.A. 10-6-1 (stating an agency relationship can be established

when the principal ratifies the acts of another in his behalf.). Also, the named

plaintiffs fail to establish apparent authority is present, as they do not address how

RTCs exercise of control would allow a third party to reasonably believe that it

consents to ABLE, International, and NNGA acting on its behalf. See Morris v.



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Williams, 214 Ga. App. 526, 527, 448 S.E.2d 267, 269 (1994) (Apparent authority is

an agency concept which refers to an agents authority as it is apparent to third

parties.); see also Hinely v. Barrow, 169 Ga. App. 529, 530, 313 S.E.2d 739, 741 (1984)

(stating it must be emphasized that apparent authority to do an act is created as to

a third person when the statements or conduct of the alleged principalreasonably

cause the third person to believe that the principal consents to have the act done on

his behalf by the purported agent.).

In summary, the named plaintiffs argument that an agency relationship is

present because RTC effectively controls ABLE, International, and NNGA is

misplaced. Again, agency is determined by the actions of the principal and how said

actions lead a third party to reasonably believe an agency relationship exists. Simply

arguing that RTC internally controls ABLE, International, and NNGA does not,

standing alone, establish that this alleged control conveys to third parties that an

agency relationship exists. As the named plaintiffs fail to establish that third parties

are aware of, and relied on, RTCs alleged control, no principal/agent relationship

is established between RTC and ABLE, International, and NNGA. Therefore, as the

named plaintiffs do not establish RTC has an agency relationship with ABLE,



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2As it determines it does not have personal jurisdiction over RTC pursuant to the Georgialong-arm statute, the Court does not need to address whether or not exercise of personaljurisdiction over RTC would violate due process.

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International, and NNGA, the Court determines that it does not have personal

jurisdiction over RTC under the Georgia long-arm statute.2

In their response to RTCs motion to dismiss, the named plaintiffs request, in

the event the Court determines lack of personal jurisdiction over RTC is unresolved,

that they be allowed the opportunity to conduct jurisdictional discovery [Doc. No.

19, 24]. However, the Court determines that it lacks personal jurisdiction over RTC,

not that the issue of personal jurisdiction is unresolved. Therefore, the named

plaintiffs will not be awarded the opportunity to conduct discovery directed at this

Courts personal jurisdiction over RTC.

The named plaintiffs only argue that this Court has personal jurisdiction over

RTC through the acts of ABLE, International, and NNGA. However, for the reasons

explained supra, the named plaintiffs fail to establish RTC has a principal/agency

relationship with ABLE, International, and NNGA. As no agency relationship is

established, the Court does not have personal jurisdiction over RTC. Accordingly,

RTCs Motion to Dismiss [Doc. No. 7] is hereby GRANTED pursuant to Rule

12(b)(2).



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3 ABLEs, Internationals, and NNGAs motions to dismiss all argue that the namedplaintiffs complaint should be dismissed pursuant to Rule 12(b)(6). In their respectivemotions, ABLE, International, and NNGA make similar arguments regarding the claimscontained within the named plaintiffs complaint. Therefore, the Court will addressABLEs, Internationals, and NNGAs motions to dismiss collectively.

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III. ABLES, INTERNATIONALS, AND NNGAS RESPECTIVE MOTIONSTO DISMISS3

A. Legal Standard

A complaint may be dismissed under a Rule 12(b)(6) motion to dismiss if the

facts as pled do not state a claim for relief that is plausible on its face.Ashcroft v.

Iqbal, 556 U.S. 662, 679 (2009) (explaining only a complaint that states a plausible

claim for relief survives a motion to dismiss.); Bell Atlantic Corp. v. Twombly, 550

U.S. 544, 56162, 570 (2007) (retiring the prior Conley v. Gibson, 355 U.S. 41, 4546

(1957), standard which provided that in reviewing the sufficiency of a complaint, the

complaint should not be dismissed unless it appears beyond doubt that the plaintiff

can prove no set of facts in support of his claim which would entitle him to relief.).

In Iqbal, the Supreme Court reiterated that although Rule 8 of the Federal Rules of

Civil Procedure does not require detailed factual allegations, it does demand more

than an unadorned, the-defendant-unlawfully-harmed-me accusation. Iqbal, 556

U.S. at 678.



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In their respective motions to dismiss, International and ABLE argue that the namedplaintiffs do not have standing to assert the aforementioned claims. Specifically,International and ABLE argue that the named plaintiffs have no injury because the named[p]laintiffs paid for NNGA program services, which were provided [Doc. No. 4-1, 24].However, the named plaintiffs claims hinge on the allegation that they were fraudulentlyinduced into enrolling their relatives in the Narconon program. If this allegation is true, the

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In Twombly, the Supreme Court emphasized a complaint requires more than

labels and conclusions, and a formulaic recitation of the elements of a cause of action

will not do. 550 U.S. at 555. Factual allegations in a complaint need not be detailed

but must be enough to raise a right to relief above the speculative level on the

assumption that all the allegations in the complaint are true (even if doubtful in

fact). Id. at 555 (internal citations and emphasis omitted).

B. Discussion

In their complaint, the named plaintiffs assert the following claims: 1.

Fraudulent Misrepresentation; 2. Breach of Contract; 3. Unjust Enrichment; 4.

Detrimental Reliance; 5. Negligence Per Se; 6. Civil RICO for Theft by Deception; 7.

Civil RICO for Mail and Wire Fraud; 8. Civil RICO for False Statements to a

Government Agency; 9. Civil RICO for Credit Card Fraud; and 10. Civil RICO for

Identity Fraud [Doc. No. 1-1, 3-4]. Below, where practical, the Court will discuss

certain claims asserted by the named plaintiffs collectively. Where a specific claim

cannot be discussed in relation to another, the Court will address such a claim

individually.4



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named plaintiffs injury would be the harm suffered as a result of paying for a service theyotherwise would not have. Any argument that the Narconon program was effective wouldspeak to the issue of damages. Therefore, the Court determines the named plaintiffs havestanding to assert the claims listed in their complaint.

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1. Fraudulent Misrepresentation Claim

Under Georgia law, to prevail on a claim of fraud or fraudulent

misrepresentation, a plaintiff must prove the following five elements: (1) that the

defendant made representations; (2) that at the time he knew they were false; (3) that

he made them with the intention and purpose of deceiving the plaintiff; (4) that the

plaintiff relied on the representations; and (5) that the plaintiff sustained the alleged

loss and damage as the proximate result of their having been made. Bacote v.

Wyckoff, 251 Ga. 862, 865, 310 S.E.2d 520, 523 (1984). While state law governs the

burden of proving fraud, a claim of fraud in federal court is subject to the

heightened pleading requirements established under Rule 9(b) of the Federal Rules

of Civil Procedure. To properly allege fraud under Rule 9(b), a plaintiff must state

with particularity the circumstances constituting fraud or mistake. Fed. R. Civ. P.

9(b). To satisfy this particularity requirement of Rule 9(b), a plaintiff must allege: (1)

the precise statements, documents, or misrepresentations made; (2) the time, place,

and person responsible for the statement; (3) the content and manner in which these

statements misled the [p]laintiffs; and (4) what the defendants gained by the alleged

fraud. White v. Americas Servicing Co., 461 F. Appx 841, 843 (11th Cir. 2012) (internal



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citation omitted); U.S. ex rel. Matheny v. Medco Health Solutions, Inc., 671 F.3d 1217,

1222 (11th Cir. 2012) (The particularity requirement of Rule 9(b) is satisfied if the

complaint alleges facts as to time, place, and substance of the defendant's alleged

fraud, specifically the details of the defendants' allegedly fraudulent acts, when they

occurred, and who engaged in them.) (internal quotations and citation omitted).

Here, the named plaintiffs do not adequately plead their claim for fraudulent

misrepresentation. Specifically, the named plaintiffs assert Defendants made several

fraudulent misrepresentations, including misrepresent[ing] the success rate of the

Narconon program and misrepresent[ing] the nature of the training given to their

staff members [Doc. No. 1-1, 31]. However, these are mere generalized allegations

that fail to specify with particularity the time and place these misrepresentations

were made. More importantly, named plaintiffs do not allege with specificity the

party that actually engaged in each specific fraudulent misrepresentation. In short,

the named plaintiffs make no distinction between the Defendants in regards to who

actually committed the alleged acts of fraud. As a general rule, when a plaintiff

claims fraud by several defendants, the complaint should contain specific

allegations with respect to each defendant; generalized allegations lumping

multiple defendants together are insufficient.W. Coast Roofing & Waterproofing, Inc.

v. Johns Manville, Inc., 287 F. Appx 81, 86 (11th Cir. 2008). In their complaint, the



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named plaintiffs simply assert that the alleged misrepresentations were made by

the Defendants [Doc. No. 1-1, 31]. In summary, the named plaintiffs do not

attribute any specific misrepresentation to any specific Defendant. By failing to

establish when each misrepresentation was made, and who made each

misrepresentation, the named plaintiffs do not satisfy the heightened particularity

pleading standard of Rule 9(b). Therefore, the named plaintiffs fraudulent

misrepresentation claim must be dismissed.

2. RICO Claims

To establish a civil RICO claim under Georgia law, in addition to showing the

defendant has committed an act of racketeering, a plaintiff must also show his injury

flowed from one or more predicate acts. Cox v. Mayan Lagoon Estates Ltd., 319 Ga.

App. 101, 109, 734 S.E.2d 883, 891 (2012). However, when the predicate act alleged

sounds in fraud, the plaintiff must plead said predicate act in compliance with the

particularly requirement of Rule 9(b). Curtis Inv. Co., LLC v. Bayerische Hypo-und

Vereinsbank, AG, 341 F. Appx 487, 493 (11th Cir. 2009). Again, to meet the

particularity standard of Rule 9(b) in a case involving multiple defendants, a

complaint must, inter alia, inform each defendant of the nature of his alleged

participation in the fraud. Brooks v. Blue Cross & Blue Shield of Fla., Inc., 116 F.3d

1364, 1381 (11th Cir. 1997) (citation omitted).



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In support of their RICO claims, the named plaintiffs make generalized

allegations that Defendants improperly obtained money by creating or confirming

a false impression about, inter alia, the Narconon programs success rate, the

qualifications of NNGAs staff, and NNGAs compliance with applicable law and

regulations [Doc. No. 1-1, 38]. The named plaintiffs further allege that

Defendants committed the following acts: improperly transmitted written

communication by wire or mail that was devised in a scheme to defraud [id. at 39];

improperly provided false statements and writings to a government agency [id.

at 41]; improperly opened several high interest credit cards in the name of NNGAs

patients [id. at 43]; and fraudulently used the identities of NNGAs patients

and/or patients family members, without permission [id. at 44]. Again, however,

these generalized allegations do not properly plead fraud as they do not identify the

time or place of these misrepresentations, nor do they articulate which specific

Defendant committed each specific act of fraud. See Brooks, 116 F.3d at 1381

(Because fair notice is perhaps the most basic consideration underlying Rule 9(b)

. . . the plaintiff who pleads fraud must reasonably notify the defendants of their

purported role in the scheme.) (alterations, internal quotations, and citation

omitted). In summary, the named plaintiffs allegations of predicate acts of fraud in



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5 In their responses to Defendants motions to dismiss, the named plaintiffs do notchallenge that the particularity pleading standard under Rule 9(b) applies to their RICOclaims for mail and wire fraud (Count 7), credit card fraud (Count 9), and identity fraud(Count 10). Further, the named plaintiffs responses do not make an argument that theysufficiently plead these RICO claims under Rule 9(b).

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support of their RICO claims are too vague and generalized to satisfy the heightened

particularity standard of Rule 9(b).

In response to Defendants respective motions to dismiss, the named plaintiffs

contend that the Rule 9(b) pleading standard does not apply to its RICO claims of

theft by deception (Count 6) and false statements to a government agency (Count

8), as said claims do not sound in fraud [Doc. No. 14, 19].5However, a claim

sounds in fraud when a plaintiff alleges a unified course of fraudulent conduct

and rel[ies] entirely on that course of conduct as the basis of [that] claim. Vess v.

Ciba-Geigy Corp. USA, 317 F.3d 1097, 1103 (9th Cir. 2003). Here, the named plaintiffs

RICO theft by deception claim relies on the generalized allegation that Defendants

created or confirmed several false statements and material misrepresentations in

order to induce enrollment in the Narconon program [Doc. No. 1-1, 39]. In support

of their RICO false statements to a government agency claim, the named plaintiffs

assert that Defendants knowingly and willfully falsified, concealed, or covered up

pertinent licensing information from the State of Georgia in order to maintain

NNGAs ability to operate the Narconon program [id. at 41]. Therefore, while



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6 In their motions to dismiss, Defendants make additional arguments regarding thedismissal of the named plaintiffs RICO claims. As it determines the named plaintiffs RICOclaims fail to satisfy the pleading standard of Rule 9(b), the Court does not need to addressthese arguments.

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excluding the use of the word fraud, both of these claims rely exclusively on the

allegation that Defendants engaged in fraudulent conduct. Based on these

allegations, the Court determines that the named plaintiffs RICO theft by deception

(Count 6) and false statements to a government agency (Count 8) claims are

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

pleading standard. As explained supra, these claims are improperly pled as they do

not properly allege the time and place where each act of fraud took place. In

addition, the named plaintiffs RICO claims simply lump all the Defendants

together, failing to articulate the specific act of fraud committed by each of the

Defendants. Therefore, these claims, like the named plaintiffs other RICO claims,

must be dismissed for failure to meet the particularity pleading standard of Rule

9(b).6

3. Breach of Contract Claim

Under Georgia law, [t]o constitute a valid contract, there must be parties able

to contract, a consideration moving to the contract, the assent of the parties to the

terms of the contract, and a subject matter upon which the contract can operate.

O.C.G.A. 13-3-1. Once a plaintiff establishes a valid contract between himself and



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a defendant, the elements of a breach of contract claim are (1) breach and the (2)

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

being broken. Duke Galish, LLC v. Manton, 308 Ga. App. 316, 320, 707 S.E.2d 555, 559

(2011) (citation omitted). Additionally, in order to be properly pled, a breach of

contract claim must sufficiently allege a provision of the contract at issue has been

breached.Am. Casual Dining, L.P. v. Moes Sw. Grill, LLC, 426 F. Supp. 2d 1356, 1369

(N.D. Ga. 2006) (citingAdkins v. Cagle Foods JV, LLC, 411 F.3d 1320, 1327 (11th Cir.

2005)).

In support of their breach of contract claim, the named plaintiffs simply assert

that Defendants, by and through its agents, employees, or representatives, entered

into a written contract with the [named plaintiffs] and the class members [Doc. No.

1-1, 32]. However, the named plaintiffs do not articulate a specific contract at issue

in this action. Based on this generalized and conclusory allegation, the named

plaintiffs complaint fails to establish the existence of a valid contract. See Textiles

Morales, S.A. de C.V. v. Green Paradigm Partners, LLC, No. 8:10-cv-2298-T-30EAJ, 2011

WL 2881666, at *2 (M.D. Fla. July 19, 2011) (The Court agrees that merely alleging

the existence of a contract and stating that it was breached would be inadequate

under Iqbal.). In addition to failing to establish which contract each Defendant has

entered, the named plaintiffs complaint fail to articulate a contractual obligation



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that Defendants have actually breached. Specifically, the named plaintiffs assert

Defendants have breached their contractual duties by committing ten separate acts,

most of which concern misrepresentations made in order to induce enrollment in the

Narconon program [Doc. No. 1-1, 33]. However, the named plaintiffs complaint

does not articulate that the contract contains provisions that were breached as a

result of these misrepresentations.

Again, the crux of the named plaintiffs complaint is that they were

fraudulently induced into enrolling their respective relatives in the Narconon

program at NNGA. Further, the named plaintiffs assert that they fulfilled their

contractual obligations with Defendants by providing payment for drug or alcohol

rehabilitation services at NNGA [id. at 32]. Based on these generalized allegations,

Defendants, in their respective motions to dismiss, infer that the contract

referenced in the complaint is the named plaintiffs respective Financial Policy and

Agreement contracts, which is the enrollment contract that provides payment for

the Narconon program with NNGA. In essence, in an effort to formulate a response,

Defendants attempt to rectify the deficiencies in the named plaintiffs complaint by

asserting the actual contracts at issue in this action. In response, the named plaintiffs

appear to concede that the Financial Policy and Agreement contracts are in fact at

issue in this action. However, the named plaintiffs responses further assert that



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their breach of contract claim actually concerns the breach of several implied

terms contained in multiple documents that are incorporated with the Financial

Policy and Agreement contracts [Doc. No. 16, 7-9]. Further, while maintaining that

their breach of contract claim actually concerns multiple documents or contracts

incorporated with the Financial Policy and Agreement contracts, the named

plaintiffs responses still do not identify the actual contractual provisions that

Defendants have breached. Instead, the named plaintiffs claim that Defendants have

only breached the implied duty of good faith and fair dealing present in the

contracts at issue in this action. This argument is insufficient as, under Georgia law,

a party cannot establish a claim based on the implied covenant of good faith and fair

dealing absent the breach of an express term in the contract at issue. Morrell v.

Wellstar Health Sys., Inc., 280 Ga. App. 1, 5, 633 S.E.2d 68, 72 (2006) (stating there is

no independent cause of action for violation of the covenant [of good faith and fair

dealing] apart from breach of an express term of the contract.). By failing to

articulate an actual contract provision that Defendants have breached, the named

plaintiffs have failed to properly plead a breach of contract claim.

In summary, the named plaintiffs do not sufficiently plead their breach of

contract claim. In their complaint, the named plaintiffs fail to establish both the

specific contract at issue in this action and the specific provisions within said



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7In their complaint, the named plaintiffs do not articulate their claim for unjust enrichmentas an alternative claim. However, in response to Defendants respective motions to dismiss,the named plaintiffs do articulate their claim of unjust enrichment as an alternative to theirbreach of contract claim. Accordingly, the Court considers the named plaintiffs unjustenrichment claim as an alternative claim.

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contract that Defendants have allegedly breached. In response to Defendants

motion to dismiss, the named plaintiffs concede that the contracts at issue in this

action are the Financial Policy and Agreement contracts, the contracts that enrolled

their respective relatives in the Narconon program with NNGA. The named

plaintiffs further maintain through their responses that, by making several

misrepresentations to induce enrollment in the Narconon program, Defendants

breached the duty of good faith in fair dealing present in these Financial Policy and

Agreement contracts. However, as explained inMorrell, the duty of good faith and

fair dealing cannot be breached independently from the breach of an express term

in a contract. Again, the named plaintiffs do not articulate an actual provision in a

contract that Defendants have breached. Accordingly, the named plaintiffs breach

of contract claim must be dismissed.

4. Unjust Enrichment Claim

In the alternative to their breach of contract claim,7the named plaintiffs assert

a claim for unjust enrichment. The named plaintiffs are correct in their assertion that

a claim for unjust enrichment is an equitable form of relief that serves as an



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alternative theory of recovery if a contract claim fails. Wachovia Ins. Servs., Inc. v.

Fallon, 299 Ga. App. 440, 449, 682 S.E.2d 657, 665 (2009) (citation omitted). However,

a plaintiff may not plead an unjust enrichment claim in the alternative to a claim

for breach of contract when it is undisputed (or when the court has found) that a

valid contract exists. Clark v. Aarons Inc., 914 F. Supp. 2d 1301, 1310 (N.D. Ga.

2012); see also Goldstein v. Home Depot U.S.A., Inc., 609 F. Supp. 2d 1340, 1347 (N.D.

Ga. 2009) (While a party may plead equitable claims in the alternative, the party

may only do so if one or more of the parties contests the existence of an express

contract governing the subject of the dispute.). Again, the crux of this action is the

named plaintiffs allegation that they were fraudulently induced into enrolling their

respective relatives in the Narconon program. As discussed supra, all parties concede

that the Financial Policy and Agreement contracts are valid agreements that

effectively enrolled the named plaintiffs relatives in the Narconon program with

NNGA. In summary, all parties concede that the contracts at issue in the named

plaintiffs breach of contract claim are valid. Therefore, the named plaintiffs unjust

enrichment claim cannot serve as an alternative to their breach of contract claim.

The named plaintiffs argue that their unjust enrichment claim should be

allowed to proceed if this Court determines they did not allege a plausible breach

of contract claim [Doc. No. 14, 13]. This argument would be persuasive if the Court



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dismissed the breach of contract claim on the basis that no valid contract actually

exists. However, that is not the case here. As explained supra, the breach of contract

claim at issue in this action is dismissed because the named plaintiffs fail to

plausibly establish that a provision within their relatives respective enrollment

contracts was actually breached. Accordingly, the named plaintiffs unjust

enrichment claim must be dismissed.

5. Detrimental Reliance Claim

In their complaint, the named plaintiffs assert a claim for Detrimental

Reliance [Doc. No. 1-1, 35]. However, in their responses to Defendants respective

motions to dismiss, the named plaintiffs concede that a claim for detrimental

reliance does not exist under Georgia law. Instead, the named plaintiffs assert in

their responses that their detrimental reliance claim is actually a mislabeled claim

for promissory estoppel [Doc. No. 14, 15]. Further, the named plaintiffs state in their

responses that [s]hould this Court determine that Count Four [for detrimental

reliance] was improperly pled, [the named plaintiffs] request the opportunity to

amend [pursuant to Rule 15(a)] [id. at 16]. However, it is procedurally improper to

request leave to amend under Rule 15 in a response to a motion to dismiss, rather

than in a separate motion. See Long v. Satz, 181 F.3d 1275, 1279 (11th Cir. 1999)

(stating that a request for leave to amend in a response opposing a Rule 12(b)(6) is



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procedurally improper under Rule 15, as [f]iling a motion is the proper method to

request leave to amend a complaint.). As they did not properly request leave to

amend, the Court must accept the named plaintiffs complaint in its current form

and cannot grant a request for leave to amend contained in a response to a motion

to dismiss. Again, a claim for detrimental reliance does not exist under Georgia

law. Accordingly, the named plaintiffs claim for detrimental reliance must be

dismissed.

6. Negligence Per Se Claim

Negligence per searises when a statute, ordinance, or mandatory regulation

that imposes a legal duty for the protection of others has been violated. Hubbard v.

Dept of Transp., 256 Ga. App. 342, 349-50, 568 S.E.2d 559, 566-67 (2002). To recover

on a claim of negligence per se, assuming there is a violation of a statute, a plaintiff

must show that (1) a person injured as the result of the violation falls within the

class of persons the statute was intended to protect, and (2) the harm complained of

is the harm the statute was intended to guard against. Swinney v. Schneider Natl

Carriers, Inc., 829 F. Supp. 2d 1358, 1367 (N.D. Ga. 2011). Additionally, in order to

prevail on a claim or defense of negligenceper se, there must be a causal connection

between the negligence and the injury. Id.



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11 As it does not provide a basis for a negligence per se claim, the Court does not need todetermine whether or not Defendants actually violated the Rules and Regulations for DrugAbuse Treatment and Education Programs.

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Regulations for Drug Abuse Treatment and Education Programs do not provide a

basis for a negligence per se claim.

11

Accordingly, the named plaintiffs negligence

per se claim must be dismissed.

In summary, the named plaintiffs complaint fails to establish a plausible

claim for relief. Accordingly, Internationals Motion to Dismiss [Doc. No. 4], ABLEs

Motion to Dismiss [Doc. No. 5], and NNGAs Motion to Dismiss [Doc. No. 9] are

hereby GRANTED pursuant to Rule 12(b)(6).

IV. CONCLUSION

For the above stated reasons, RTCs Motion to Dismiss [Doc. No. 7] is hereby

GRANTED pursuant to Rule 12(b)(2). Internationals Motion to Dismiss [Doc. No.

4], ABLEs Motion to Dismiss [Doc. No. 5], and NNGAs Motion to Dismiss [Doc.

No. 9] are hereby GRANTED pursuant to Rule 12(b)(6).

All pending motions not otherwise ruled upon are hereby DISMISSED AS

MOOT. As there are no further issues outstanding, the Clerk is hereby DIRECTED

toCLOSE THIS ACTION.



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IT IS SO ORDERED, this 19thday of February, 2014.

s/Steve C. JonesHONORABLE STEVE C. JONESUNITED STATES DISTRICT JUDGE


burgess et al v. rtc, narconon: order to dismiss

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