Burgess v. Narconon: Reply Brief of Plaintiffs

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

Case: 14-11214 Date Filed: 06/30/2014 Page: 1 of 28

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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


iii

II. Conclusion .......................................................................................................... 19

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

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


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


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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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).


6

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


7

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


8

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


10

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


11

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


12

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


13

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


15

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


16

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


17

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.


18

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


20

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

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

Counsel for Plaintiffs-Appellants


a

Certificate of Compliance

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

32(a)(7)(B)(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.


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.


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


Burgess v. Narconon: Reply Brief of Plaintiffs

Documents

Transcript of Burgess v. Narconon: Reply Brief of Plaintiffs