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Appeal No. 14-11214-FF, Benjamin Burgess, et al. v. Religious Tech. Ctr., et al.
Appeal No. 14-11214-FF
IN THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT
BENJAMIN BURGESS, RHONDA BURGESS, HEIDI HOWARD, JOYCE MARTIN, BETH KARAMPELAS, TERRI DACY, and MICHAEL DACY,
Plaintiffs-Appellants,
v.
RELIGIOUS TECHNOLOGY CENTER, INC., ASSOCIATION FOR BETTER LIVING AND EDUCATION INTERNATIONAL, NARCONON
INTERNATIONAL and NARCONON OF GEORGIA, INC., Defendants-Appellees.
ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA, ATLANTA DIVISION
Case No. 1:13-cv-02217-SCJ
REPLY BRIEF OF PLAINTIFFS-APPELLANTS
JEFFREY R. HARRIS
Georgia Bar No. 330315 REBECCA C. FRANKLIN
Georgia Bar No. 141350 YVONNE S. GODFREY Georgia Bar No. 318567
HARRIS PENN LOWRY LLP 400 Colony Square
1201 Peachtree St. NE, Suite 900 Atlanta, GA 30361
(404) 961-7650 Counsel for Plaintiffs-Appellants
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ii
Table of Contents
Table of Contents ...................................................................................................... ii
Table of Citations ..................................................................................................... iv
I. ARGUMENT AND CITATION OF AUTHORITY ............................................ 1
A. The district court applied an improper, elevated standard to Class
Representatives’ claims of breach of contract, quasi-contract, and negligence per
se, and abrogated the concepts of notice pleading when dismissing Class
Representatives’ fraud and civil RICO allegations. ............................................... 2
1. Breach of contract ...................................................................................... 3
2. Unjust Enrichment...................................................................................... 5
3. Detrimental Reliance/Promissory Estoppel .............................................. 6
4. Negligence Per Se....................................................................................... 7
5. Fraud and Civil RICO .............................................................................. 10
B. The district court erred when it found that Georgia’s Long-Arm statute did
not warrant the exercise of personal jurisdiction over RTC. ................................ 11
C. The district court abused its discretion by denying Class Representatives
leave to amend their original complaint, despite the fact that they expressly
sought leave to do so. ............................................................................................ 18
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iii
II. Conclusion .......................................................................................................... 19
Certificate of Compliance .......................................................................................... a
Certificate of Service ................................................................................................. b
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iv
Table of Citations
Cases
Ashcroft v. Iqbal, 556 U.S. 662, 129 S. Ct. 1937 (2009) .......................................2, 5
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S. Ct. 1955 (2007) .......................2, 5
Bryant v. Dupree, 252 F.3d 1161 (11th Cir. 2001) .................................................. 20
Burger King Corp. v. Rudzewicz, 471 U.S. 462, 105 S. Ct. 2174 (1985) ........ 16, 18
Combs v. Atlanta Auto Auction, Inc., 650 S.E.2d 709 (Ga. Ct. App. 2007) ..... 10, 11
Corsello v. Lincare, Inc., 428 F.3d 1008 (11th Cir. 2005) ...................................... 22
Daimler AG v. Bauman, 571 U.S. __, 134 S. Ct. 746 (2014) .................................. 16
Diamond Crystal Brands, Inc. v. Food Movers Int’l, Inc., 593 F.3d 1249 (11th Cir.
2010) ..................................................................................................................... 15
Doe v. Fulton-Dekalb Hosp. Auth., 628 F.3d 1325 (11th Cir. 2010) ........................ 8
Durham v. Bus. Mgmt. Assocs., 847 F.2d 1505 (11th Cir. 1988) ............................ 11
Evans v. McClain of Ga., Inc., 131 F.3d 957 (11th Cir. 1997) ................................. 7
Groover v. Johnston, 625 S.E.2d 406 (Ga. Ct. App. 2005) ..................................... 10
Liquidation Comm’n of Banco Intercont’l, S.A. v. Renta, 530 F.3d 1339 (11th Cir.
2008) ..................................................................................................................... 12
Lucas v. W.W. Grainger, Inc., 257 F.3d 1249 (11th Cir. 2001) ................................ 6
Meier v. Sun Int’l Hotels, Ltd., 288 F.3d 1264 (11th Cir. 2002) ............................. 17
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v
Paul, Hastings, Janofsky & Walker, LLP v. Tulsa, 245 F. Supp. 2d 1248 (N.D. Ga.
2002) .............................................................................................................. 17, 18
See, e.g., Romacorp v. Prescient, Inc., No. 1:10-cv-22872, 2011 WL 1430277
(S.D. Fla. Apr. 14, 2011) ........................................................................................ 5
Surowtiz v. Hilton Hotels Corp., 383 U.S. 363, 86 S. Ct. 845 (1966) ....................... 3
Vibratech v. Frost, 661 S.E.2d 185 (Ga. Ct. App. 2008) ........................................ 19
Wagner v. Daewoo Heavy Indus. Am. Corp., 289 F.3d 1268 (11th Cir. 2002) ....... 21
Wagner v. Daewoo Heavy Indus. Am. Corp., 314 F.3d 541 (11th Cir. 2002) (en
banc)............................................................................................................... 21, 22
Walter v. Orkin Exterminating Co., 385 S.E.2d 725 (Ga. Ct. App. 1989). ............... 9
Ziemba v. Cascade Int’l, Inc., 256 F.3d 1194 (11th Cir. 2001) ............................... 11
Statutes
O.C.G.A. § 26-5-1 et seq. .......................................................................................... 8
O.C.G.A. § 26-5-2 ...................................................................................................... 9
O.C.G.A. § 9-10-91 ........................................................................................... 13, 14
Rules
Fed. R. Civ. P. 8 ............................................................................................ 2, 3, 5, 7
Fed. R. Civ. P. 9 .................................................................................................. 3, 11
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1
I. ARGUMENT AND CITATION OF AUTHORITY
Plaintiffs-Appellants (“Class Representatives”) urge this Court to remedy
the errors made by the district court in its order granting Defendants-Appellees’
(“Defendants”) motions to dismiss. While this Court may affirm the district court
for any reason supported by the record, both the record and the law require reversal
and remand in the instant case.
(A) First, the district court misapplied federal pleading standards and
employed flawed reasoning when it dismissed Class Representatives’ claims
against Defendants-Appellees Religious Technology Center, Inc. (“RTC”),
Association for Better Living and Education International (“ABLE”), Narconon
International (“International”), and Narconon of Georgia (“NNGA”), sounding in
(1) breach of contract, (2) unjust enrichment, (3) promissory estoppel,
(4) negligence per se, and (5) fraud and civil RICO.
(B) Second, the district court erred when it applied an incorrect
understanding of agency law to determine that Georgia’s Long-Arm statute did not
warrant the exercise of personal jurisdiction over RTC. At a minimum, the
evidence introduced by Class Representatives to rebut an RTC representative’s
self-serving affidavit presented a conflict of evidence that should have been
resolved in Class Representatives’ favor.
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(C) Finally, the district court abused its discretion by denying Class
Representatives leave to amend their original complaint, despite the fact that Class
Representatives expressly sought leave to do so.
A. The district court applied an improper, elevated standard to Class Representatives’ claims of breach of contract, quasi-contract, and negligence per se, and abrogated the concepts of notice pleading when dismissing Class Representatives’ fraud and civil RICO allegations.
The district court misapplied federal pleading standards in at least four ways
when dismissing Class Representatives’ complaint. First, the district court
consistently required Class Representatives to show more than is required by the
legal elements of their claims under Georgia law and by the federal pleading
standards articulated by Federal Rule of Civil Procedure 8(a) and the United States
Supreme Court’s decisions in Ashcroft v. Iqbal, 556 U.S. 662, 680, 129 S. Ct.
1937, 1951 (2009), and Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 570,
127 S. Ct. 1955, 1965, 1974 (2007). Second, the district court dismissed some of
Class Representatives’ claims because they were inconsistent, despite the fact that
the Fed. R. Civ. P. 8(d) allows a party to state “as many separate claims or
defenses as it has, regardless of consistency.” Third, the district court dismissed
one of Class Representatives’ claims solely because it was mislabeled, even though
Fed. R. Civ. P. 8 specifies that “no technical form” is required in a pleading, and
that “[p]leadings must be construed so as to justice.” Fed.R.Civ.P. 8(d)(1), (e).
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Fourth, the district court applied a standard to Class Representatives’ fraud claims
that effectively extended Fed. R. Civ. P. 9’s particularity requirements at the cost
of Rule 8’s concept of notice pleading and the requirement to give defendants
notice of the misconduct alleged. The district court’s errors ultimately resulted in
what the United States Supreme Court cautioned against in Surowtiz v. Hilton
Hotels Corp.: “The basic purpose of the Federal Rules is to administer justice
through fair trials, not through summary dismissals . . . .” 383 U.S. 363, 373, 86 S.
Ct. 845, 851 (1966).
1. Breach of contract
The district court dismissed Class Representatives’ breach of contract claim,
finding, essentially, they did not sufficiently establish the existence of a valid
contract and did not show a breach of a specific contract provision. (Doc. 40 at 19-
21). As discussed in Class Representatives’ principal brief, Class Representatives
made a plausible showing that they entered into a contract with Defendants for
legitimate and legal drug and alcohol rehabilitation services, but Defendants failed
to provide those services, depriving Class Representatives of the benefit for which
they contracted.
Defendants’ briefs, like the district court’s order, disregard Class
Representatives’ argument that Defendants breached the entire contract for drug
and rehabilitation services. Instead, Defendants argue, essentially, that their
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misrepresentations and misconduct had nothing to do with their contract with Class
Representatives.1 (See, e.g., ABLE and International Br. at 11).
For example, NNGA points to Class Representatives’ allegation that NNGA
concealed its connection to Scientology and argues that this was not a breach of an
express contractual provision. (NNGA Br. at 11). Defendants also argue that, in
providing drug and alcohol rehabilitation services, it was not contractually required
to maintain an environment free of drugs and alcohol--the recovering addicts
themselves had sole responsibility for maintaining an environment free of drugs
and alcohol. (Id. at 12-13; ABLE and International Br. at 12). These arguments
attempt to shift the focus from the point of Class Representatives’ allegations: that
NNGA was not legally licensed or properly certified to provide rehabilitation
treatment, that NNGA did not provide any legitimate rehabilitation treatment, and
that this failure was a breach of the contract to provide such treatment. (See, e.g.,
Compl. ¶¶ 115-18). Class Representatives have alleged that they contracted for a
service that was never provided at all, and their allegations are sufficient to allege a
1 ABLE and International also argue that they were not parties to a contract with Class Representatives. (Def. Br. at 9-10). However, the district court addressed Defendants collectively in its order with respect to Class Representatives’ breach of contract claim and did not dismiss on this basis. (R2-40 at 18-22). Moreover, Class Representatives sufficiently alleged in their Complaint and argued before the district court that ABLE and International were parties to the contract. (See, e.g., R1-1, Ex. A (“Compl.”) ¶¶ 67-71; R1-14 at 12).
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breach of contract, and the corresponding duty of good faith and fair dealing, under
Georgia Law, Fed. R. Civ. P. 8, Iqbal, and Twombly.2
2. Unjust Enrichment
As discussed in Class Representatives’ principal brief, the district court
dismissed the unjust enrichment claim for the sole reason that, by alleging a breach
of contract claim, Class Representatives had conceded the validity of the contract.
This is a complete misapplication of Fed. R. Civ. P. 8(d), which allows Class
Representative to proceed on seemingly inconsistent theories of recovery, and
reversal of the district court on this basis is required.
ABLE and International argue that they did not receive a benefit from Class
Representatives, and, therefore, dismissal of the unjust enrichment claim against
them was warranted on this basis. (ABLE and International Br. at 16). However,
the district court addressed the unjust enrichment claim against Defendants
collectively and did not dismiss on the basis that no benefit was conferred. (See
R2-40 at 22-24). Moreover, as Class Representatives argued in response to
2 Defendants also argue that Class Representatives’ allegation that they paid money to Defendants, and Defendants’ breach of contract proximately caused them damages, was insufficient under Twombly. (See NNGA Br. at 13-14). However, to survive a motion to dismiss in a breach of contract claim, all that the Federal Rules of Civil Procedure require is that Class Representatives state sufficient facts to make a plausible claim for relief, not that they “set out in detail the facts upon which their breach of contract claim is based,” or “plead with the greatest specificity they can.” See, e.g., Romacorp v. Prescient, Inc., No. 1:10-cv-22872, 2011 WL 1430277, at *4 (S.D. Fla. Apr. 14, 2011) (quotations omitted).
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ABLE’s and International’s motions to dismiss, below, Class Representatives
alleged in the complaint that ABLE and International unlawfully and directly
obtained payment from them. (See, e.g., R1-14 at 14-15, n.2). ABLE and
International’s argument as to whether they actually received a benefit is
essentially a factual dispute upon which the record has not been developed, and
this Court should not affirm the district court’s dismissal on this basis. See Lucas
v. W.W. Grainger, Inc., 257 F.3d 1249, 1256 (11th Cir. 2001) (noting that this
Court may affirm the district court’s judgment “on any ground that finds support in
the record” (quotation omitted)).
3. Detrimental Reliance/Promissory Estoppel
Before the district court, Class Representatives conceded that, while they
alleged in their complaint the elements of promissory estoppel under Georgia law,
they mislabeled the claim as one of “detrimental reliance.” Despite this Court’s
holding that “[a] complaint need not specify in detail the precise theory giving rise
to recovery,” provided that the defendant receives “notice as to the claim being
asserted against it,” see Evans v. McClain of Ga., Inc., 131 F.3d 957, 964 n.2 (11th
Cir. 1997), the district court dismissed this claim for the sole reason that a
“detrimental reliance” claim did not exist under Georgia law, (R2-40 at 24-25).
This amounted to reversible error, as it was contrary to this Court’s reasoning in
Evans, as well as Fed. R. Civ. P. 8’s cautions that “no technical form” is required
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in a pleading, and that “[p]leadings must be construed so as to justice.” See Fed.
R. Civ. P. 8(d)(1), (e).
Additionally, this Court should reject NNGA’s argument that Class
Representatives could not allege a promissory estoppel claim because they alleged
the existence of a contract (NNGA Br. at 15-16), as the Federal Rules of Civil
Procedure allow Class Representatives to proceed on inconsistent theories of
recovery. See Fed. R. Civ. P. 8(d). This Court should also reject any argument
that Class Representatives failed to allege the elements of promissory estoppel for
the reasons set forth in their principal brief. (See Class Representatives’ Br. at 13-
14).
4. Negligence Per Se
As set forth in their principal brief, when they enrolled themselves or their
loved ones at NNGA, Class Representatives believed that they were securing drug
and alcohol rehabilitation services at a facility that was legally and properly
licensed. NNGA’s failure to comply with Georgia Department of Community
Health (“DCH”) regulations directly injured the class of persons the Drug Abuse
Treatment and Education Act (“the Act”), O.C.G.A. § 26-5-1 et seq., was designed
to protect, in the manner in which the Act was designed to prevent.
Defendants argue that this case is controlled by Doe v. Fulton-Dekalb
Hospital Authority, 628 F.3d 1325 (11th Cir. 2010). However, while Doe
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addressed record-keeping requirements imposed on narcotic treatment programs,
Class Representatives’ negligence per se claim is factually and legally distinct.
For the violation of a statute or regulation to amount to negligence per se,
Georgia courts look to the purposes of the legislation to determine: (1) whether the
injured person falls within the class of persons it was intended to protect; and
(2) whether the harm complained of was the harm it was intended to guard against.
Walter v. Orkin Exterminating Co., 385 S.E.2d 725, 728 (Ga. Ct. App. 1989)
(emphasis added). The Act authorized the DCH to develop and enforce licensing
and inspection regulations for drug-abuse treatment programs. The Act clearly
states that the regulations’ purposes are, inter alia, “to ensure that every governing
body which operates a drug abuse treatment and education program is licensed to
do so[,] and to meet the rehabilitative needs of drug dependent persons while
safeguarding their individual liberties.” O.C.G.A. § 26-5-2.
Class Representatives believed that they were securing drug and alcohol
rehabilitation services at a facility that was legally and properly licensed. NNGA’s
failure to comply with Georgia regulations resulted in the failure to “safeguard” the
liberties of its patients, as explicitly required by and stated in the Act. See
O.C.G.A. § 26-5-2. As a result, NNGA’s negligent acts directly injured the class
of persons the Act was designed to protect, in the manner in which the Act was
designed to protect against.
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In Doe, this Court did not address O.C.G.A. § 26-5-2, the statute stating the
purpose of the Act and its accompanying regulations, and therefore, Doe does not
directly address the basis upon which Class Representatives are arguing that
Defendants committed negligence per se. Moreover, Georgia decisions suggest
that rules and regulations in a medical context create a corresponding standard of
conduct, the breach of which may render a provider liable for negligence per se.
See, e.g., Groover v. Johnston, 625 S.E.2d 406, 408-10 (Ga. Ct. App. 2005).
NNGA disputes whether its negligence per se could have proximately
caused Class Representatives’ injuries and corresponding damages. (NNGA Br. at
19-20). In support, NNGA cites Combs v. Atlanta Auto Auction, Inc., 650 S.E.2d
709 (Ga. Ct. App. 2007), in which the court determined that the defendant’s failure
to obtain a certificate of occupancy for its facility did not proximately cause the
accident resulting in plaintiff’s injuries, because the accident would have occurred
without the certificate.
However, in the instant case, Defendants failed to comply with applicable
regulations requiring, inter alia, a drug-free environment, qualified staff, safe living
conditions, and effective rehabilitation programs – the lack of which directly led to
Class Representatives’ injuries. Therefore, the injuries that Class Representatives
suffered were the “natural and probable consequence” of Defendants’ negligence.
See id. at 715 (“In determining what is proximate cause the true rule is, that the
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injury must be the natural and probably consequence of the negligence, such [that
it] might and ought to have been foreseen by the wrong-doer . . . .”). Class
Representatives’ complaint contained sufficient facts in support of their allegation
that their injuries were a direct and proximate result of NNGA’s violation of the
Act and corresponding DCH regulations, rendering dismissal for failure to state a
claim inappropriate. (See Compl. ¶¶ 101-05, 150-53).
5. Fraud and Civil RICO While Fed. R. Civ. P. 9(b) requires that “a party must state with particularity
the circumstances constituting fraud or mistake,” Rule 9’s particularity
requirements are to be read in conjunction with Rule 8 “so as not to abrogate the
concept of notice pleading.” Durham v. Bus. Mgmt. Assocs., 847 F.2d 1505, 1511
(11th Cir. 1988). The purpose of this particularity requirement is to “alert[ ]
defendants to the precise misconduct with which they are charged and protect[ ]
defendants against spurious charges of immoral and fraudulent behavior.” Ziemba
v. Cascade Int’l, Inc., 256 F.3d 1194, 1202 (11th Cir. 2001) (quotations omitted).
As set forth at length in Class Representatives’ principal brief, the complaint
sufficiently alerted Defendants of the precise misconduct they were alleged and
contained sufficient information to show that Class Representatives’ claims were
legitimate, not spurious. Moreover, as argued in Class Representatives’ principal
brief, Rule 9(b)’s elevated pleading standard does not apply to their civil RICO
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claim for false statements to a government agency. As acknowledged by
Defendants, civil RICO claims do not have to be pled with particularity when the
misrepresentations pertaining to the fraud and non-fraud claims are distinct. See
Liquidation Comm’n of Banco Intercont’l, S.A. v. Renta, 530 F.3d 1339, 1355-56
(11th Cir. 2008). Class Representatives’ complaint contained a section dedicated
to NNGA’s licensing, its failure to comply with those requirements, and the false
statements made to the State of Georgia. (See Compl. ¶¶ 90-105). These
allegations were separate and distinct from the fraud allegations made on behalf of
the Class Representatives, and were therefore not subject to Rule 9(b)’s elevated
pleading standard.
Class Representatives submit that the remaining issues pertaining to their
claim of fraudulent misrepresentation and their claims under Georgia’s civil RICO
statute, and the pleading of those claims in the complaint, have been sufficiently
argued and briefed both below, in response to Defendants’ motions to dismiss, and
on appeal. As a result, and due to space limitations, Class Representatives hereby
incorporate and rely on the arguments made and the authority cited previously.
B. The district court erred when it found that Georgia’s Long-Arm statute did not warrant the exercise of personal jurisdiction over RTC.
The district court decided not to exercise personal jurisdiction over
RTC based solely on an incorrect application of Georgia agency law to Georgia’s
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Long Arm statute, O.C.G.A. § 9-10-91. As argued in Class Representatives’
principal brief, first, contrary to the district court’s order, Class Representatives
could proceed under a theory that there was an express, actual agency relationship
between RTC and ABLE, International, and NNGA. Second, the district court
erred by requiring Class Representatives to show that they were “aware of, and
relied on” an agency relationship, an element not required by Georgia law for an
action based on express or implied agency. Third, while the district court
disregarded Class Representatives’ assertions of RTC’s control over ABLE,
International, and NNGA in its agency analysis, the issue of control is directly
relevant and central to the actual agency analysis. As a result, the district court
erred when it determined that Class Representatives failed to allege an agency
relationship sufficient to exercise jurisdiction under O.C.G.A. § 9-10-91(1), (2),
and (3).
Instead of addressing Class Representatives’ arguments regarding the district
court’s erroneous application of agency law, RTC primarily argues that this Court
should affirm the district court’s decision for two reasons. First, RTC argues that,
based on one self-serving affidavit filed by RTC in support of its motion to
dismiss, this Court should make a factual determination, giving that affidavit
weight over the allegations and evidence presented by Class Representatives, to
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determine that RTC was not actually in an agency or alter-ego relationship with
ABLE, International, or NNGA.
Given that the district court did not weigh or consider on the record the
evidence presented by RTC and Class Representatives, this Court should abstain
from making fact-findings to which none of the parties had the opportunity to
respond below. Moreover, in considering the exercise of personal jurisdiction,
when the evidence presented by the parties conflicts, the court must construe all
reasonable inferences in favor of the non-movant plaintiff. Morris v. SSE, Inc.,
843 F.2d 489, 492 (11th Cir. 1988). Thus, to the extent this Court determines that
it may weigh the evidence introduced by the parties below, any conflict and all
inferences should be resolved in Class Representatives’ favor.
Second, RTC argues at length that the exercise of personal jurisdiction over
it would be contrary to due process. As pointed out in Class Representatives’ and
RTC’s briefs, a federal court sitting in diversity undertakes a two-step inquiry in
determining whether personal jurisdiction exists. First, the district court will look
at whether the exercise of jurisdiction is appropriate under the state long-arm
statute. Diamond Crystal Brands, Inc. v. Food Movers Int’l, Inc., 593 F.3d 1249,
1257-58 (11th Cir. 2010). Second, the court will analyze whether the exercise of
personal jurisdiction would violate the Due Process Clause of the Fourteenth
Amendment to the United States Constitution.” Id. (quotation omitted).
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The district court expressly stated that it was not conducting a due process
analysis. (R2-40 at 9 n.2 (“[T]he Court does not need to address whether or not
exercise of personal jurisdiction over RTC would violate due process.”)). In fact,
as stated above, the district court did not even address the evidence introduced by
Class Representatives in support of the exercise of personal jurisdiction, as it ended
its analysis after addressing (with a misapplication of the law) the issue of agency.
Nevertheless, the RTC cites Daimler AG v. Bauman, 571 U.S. __, 134 S. Ct. 746
(2014), a case decided after the district court’s order, dealing with the issue of due
process, and spends a significant portion of its brief arguing why the exercise of
personal jurisdiction would offend due process.
Class Representatives respectfully submit that, given that the district court
did not address any of the evidence that they introduced in support of the exercise
of personal jurisdiction, nor did it conduct a complete analysis under Georgia’s
Long-Arm statute, or any due-process analysis, this Court should decline to act as
the fact-finder in the first instance, and should instead reverse and remand to the
district court. However, in the event that this Court conducts a due-process
analysis, Class Representatives maintain that the exercise of personal jurisdiction
over RTC would comport with due process.
In Burger King Corp. v. Rudzewicz, the Supreme Court stated that due
process dictates that a nonresident defendant may be subject to personal
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jurisdiction when “the defendant’s conduct and connection with the forum State
are such that he should reasonably anticipate being haled into court there.” 471
U.S. 462, 474, 105 S. Ct. 2174, 2183 (1985) (quotation omitted). “Due process
contemplates two types of jurisdiction over the person: general and specific
jurisdiction.” Paul, Hastings, Janofsky & Walker, LLP v. Tulsa, 245 F. Supp. 2d
1248, 1253 (N.D. Ga. 2002). A nonresident defendant’s “contacts with the forum
that are unrelated to the litigation must be substantial in order to warrant the
exercise of general personal jurisdiction.” Meier v. Sun Int’l Hotels, Ltd., 288 F.3d
1264, 1274 (11th Cir. 2002) (also stating that “[t]he due process requirements for
general personal jurisdiction are more stringent than for specific personal
jurisdiction, and require a showing of continuous and systematic general business
contacts between the defendant and the forum state” (quotation omitted)).
However, a nonresident defendant may be subject to specific jurisdiction in
a state, even when it is not subject to general jurisdiction, when: “(1) it has
purposefully established minimum contacts with the forum state; and (2) the
exercise of jurisdiction will not offend traditional notions of fair play and
substantial justice.” Paul, Hastings, 245 F.Supp.2d at 1255 (citations omitted). To
show minimum contacts, the plaintiff must meet three criteria. Id. First, the
plaintiff’s cause of action must arise out of, or relate to, the nonresident
defendant’s contacts with the forum state. Second, the contacts must show that the
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nonresident defendant purposefully availed itself of the privilege of conducting
activities within the forum state. Third, the defendant’s contacts must demonstrate
that the nonresident could reasonably anticipate being haled into court in the
forum. Id.
Class Representatives have alleged and introduced evidence to support the
conclusion that, at a minimum, RTC has sufficient contacts in Georgia to support
the exercise of personal jurisdiction under specific jurisdiction. First, the events
described in Class Representatives’ complaint arise directly out of RTC’s contacts
in Georgia—specifically, its involvement in the Narconon program and its control
over ABLE, International, and NNGA. Second, as illustrated by the evidence
introduced in response to RTC’s motion to dismiss, RTC purposefully availed
itself of doing business in Georgia through its extensive promotion and expansion
of the Narconon program as a means to spread Scientology and “clear the planet.”
See Burger King, 471 U.S. at 475 (noting that the purposeful availment
requirement ensures that a defendant will not be subject to jurisdiction solely as a
result of “random, fortuitous, or attenuated contacts” or the “unilateral activity of
another party or a third person,” but that jurisdiction will be proper when “the
contacts proximately result from actions by the defendant himself that create a
substantial connection with the forum State” (quotations omitted)). Third, given its
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extensive control over Scientology-related activities and Narconon in particular,
RTC could reasonably anticipate being haled into court in Georgia.
As to traditional notions of fair play and substantial justice, these concerns
weigh heavily in favor of exercising personal jurisdiction over RTC. See id. at
476-77 (providing that considerations relevant to this inquiry are “the burden on
the defendant, the forum state’s interest in adjudicating the dispute, the plaintiff’s
interest in obtaining convenient and effective relief, the interstate judicial system’s
interest in obtaining the most efficient resolution of controversies, and the shared
interest of the several States in furthering fundamental substantive social polices”
(quotations omitted)).
As set forth in the notice of removal, NNGA brought in over $7,000,000 of
revenue over five years in the State of Georgia. (R1-1, Ex. C); see Vibratech v.
Frost, 661 S.E.2d 185, 189 (Ga. Ct. App. 2008) (“[I]t is not unfair to require a
corporation to respond to a suit in a state from which it derives the benefits and
privileges of conducting business.” (quotation omitted)). Defendants’
documentation provided in support of removal of the instant action establishes that
NNGA also enrolled 724 students in the Narconon program over the same time
period. (R1-1, Ex. C) Based on Class Representatives’ allegations, that means that
at least 724 students, as well as their families and loved ones, fell victim to fraud,
breach of contract, negligence, and civil racketeering, within the state of Georgia.
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Finally, given the extent of RTC’s control over the other named Defendants’
activities, as a matter of fairness, RTC should have to answer in the state of
Georgia for the acts of its agents.
C. The district court abused its discretion by denying Class Representatives leave to amend their original complaint, despite the fact that they expressly sought leave to do so.
In their principal brief, Class Representatives cited this Court’s decision in
Bryant v. Dupree, 252 F.3d 1161, 1163 (11th Cir. 2001), in which this Court held
that a district court may abuse its discretion by denying leave to amend a
complaint, even when the plaintiffs included a request to amend in their response
to a motion to dismiss rather than by filing a separate motion. Defendants
responded that Bryant’s holding is no longer good law, and has been replaced by
this Court’s decision in Wagner v. Daewoo Heavy Industries America Corp., 314
F.3d 541 (11th Cir. 2002) (en banc). In Wagner, this Court held, “A district court
is not required to grant a plaintiff leave to amend his complaint sua sponte when
the plaintiff, who is represented by counsel, never filed a motion to amend nor
requested leave to amend before the district court.” Id. at 543 (emphasis added).
However, in Wagner, the plaintiff “never sought to amend his complaint in
the district court, either before or after the motion to dismiss was granted[.]
Wagner v. Daewoo Heavy Indus. Am. Corp., 289 F.3d 1268, 1273 (11th Cir. 2002).
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The facts presented and rule on by this Court’s en banc decision in Wagner are,
therefore, factually distinct from the instant case.
Furthermore, Defendants’ argument essentially ignores a portion of
Wagner’s holding. Defendants argue, based on the district court’s decision, that
Class Representatives were not entitled to leave to amend the complaint because
they did not request leave in a separate motion. However, Wagner makes clear
that this Court will consider whether a motion for leave to amend was filed or if
leave was requested. See Wagner, 314 F.3d at 543.
Finally, even after the en banc decision in Wagner, this Court has cited
Bryant and reasoned, “Ordinarily, a party must be given at least one opportunity to
amend before the district court dismisses the complaint.” Corsello v. Lincare, Inc.,
428 F.3d 1008, 1014 (11th Cir. 2005). Accordingly, the interests of justice weighed
in favor of permitting Class Representatives at least one opportunity to amend their
complaint before dismissing their claims with prejudice.
II. Conclusion
Based on the foregoing, Class Representatives request that this Court reverse
the district court’s dismissal of the complaint and remand for further proceedings.
Respectfully submitted,
/s/ Jeffrey R. Harris
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Jeffrey R. Harris Georgia Bar No. 330315 Yvonne S. Godfrey Georgia Bar No. 318567 HARRIS PENN LOWRY LLP 400 Colony Square 1201 Peachtree St. NE, Suite 900 Atlanta, GA 30361 (404) 961-7650
Rebecca C. Franklin Georgia Bar No. 141350 (admission to 11th Circuit pending) FRANKLIN LAW, LLC 400 Colony Square 1201 Peachtree St. NE, Suite 900 Atlanta, GA 30361 (404) 961-7650
Counsel for Plaintiffs-Appellants
Case: 14-11214 Date Filed: 06/30/2014 Page: 25 of 28
a
Certificate of Compliance
1. This brief complies with the type-volume limitation of Fed.R.App.P.
32(a)(7)(B)(ii) because it contains 4,406 words, excluding the parts of the Brief
exempted by Fed.R.App.P. 32(a)(7)(B)(iii) and 11th Cir. R. 32-4.
2. This brief complies with the type-face requirements of Fed.R.App.P.
32(a)(5) and the type style requirements of Fed.R.App.P. 32(a)(6) because it has
been prepared in a proportionally spaced type face using Word 2010 in 14-point
Times New Roman.
Case: 14-11214 Date Filed: 06/30/2014 Page: 26 of 28
b
Certificate of Service
This is to certify that on June 30, 2014, the foregoing brief was served upon
all parties to this matter via the CM/ECF system, as follows:
Cari K. Dawson, Esq. Daniel F. Diffley, Esq. David B. Carpenter, Esq. Alston & Bird LLP 1201 W. Peachtree Street Atlanta, GA 30309-3424 Attorneys for Narconon International and Association for Better Living and Education International
Matthew S. Coles, Esq. Thomas M. Barton, Esq. Aaron P.M. Tady, Esq. Coles Barton LLP 150 South Perry Street, Suite 100 Lawrenceville, GA 30046 Attorneys for Narconon International and Association for Better Living and Education International
Edward H. Lindsey, Jr., Esq. James T. Hankins, Esq. Goodman McGuffey Lindsey & Johnson, LLP 3340 Peachtree Road NE, Suite 2100 Atlanta, GA 30326-1084 Attorneys for Narconon of Georgia, Inc.
John K. Larkins, Jr., Esq. William Taylor McNeil, Esq. J.D. Dalbey, Esq. Chilivis, Cochran, Larkins & Bever LLP3127 Maple Drive NE Atlanta, GA 30305 Attorneys for Narconon of Georgia, Inc.
John H. Fleming, Esq. Valerie S. Sanders, Esq. Stacey M. Mohr, Esq. Sutherland Asbill & Brennan LLP 999 Peachtree Street NE, Suite 2300 Atlanta, GA 30309-3996 Attorneys for Religious Technology Center, Inc.
Case: 14-11214 Date Filed: 06/30/2014 Page: 27 of 28
c
This 30th day of June, 2014.
/s/ Jeffrey R. Harris
Jeffrey R. Harris Georgia Bar No. 330315 Yvonne S. Godfrey Georgia Bar No. 318567 HARRIS PENN LOWRY LLP 400 Colony Square 1201 Peachtree St. NE, Suite 900 Atlanta, GA 30361 (404) 961-7650
Rebecca C. Franklin Georgia Bar No. 141350 (admission to 11th Circuit pending) FRANKLIN LAW, LLC 400 Colony Square 1201 Peachtree St. NE, Suite 900 Atlanta, GA 30361 (404) 961-7650
Counsel for Plaintiffs-Appellants
Case: 14-11214 Date Filed: 06/30/2014 Page: 28 of 28