Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_14-cv-00588/USCOURTS-casd-3_14-cv-00588-0/pdf.json

Nature of Suit Code: 370
Nature of Suit: Other Fraud
Cause of Action: 28:1332 Diversity-Fraud

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

ANGELO AMATO,

Plaintiff,

CASE NO. 3:14-cv-0588-GPC-BLM

ORDER:

(1) GRANTING IN PART AND

DENYING IN PART DEFENDANT

NARCONON FRESH START D/B/A

SUNSHINE SUMMIT LODGE’S

MOTION TO DISMISS;

[ECF No. 12]

(2) GRANTING DEFENDANTS’

NARCONON INTERNATIONAL

AND ASSOCIATION FOR BETTER

LIVING AND EDUCATION

INTERNATIONAL MOTION TO

DISMISS

[ECF No. 13]

v.

NARCONON FRESH START d/b/a

Sunshine Summit Lodge et al.,

Defendants.

I. INTRODUCTION

Before the Court are defendant Narconon Fresh Start d/b/a Sunshine Summit

Lodge’s (“Fresh Start”) Motion to Dismiss, (ECF No. 12), and defendants Narconon

International (“NI”) and Association for Better Living and Education International’s

(“ABLE”) Motion to Dismiss, (ECF No. 13). Plaintiff Angelo Amato (“Plaintiff”)

opposed both motions to dismiss. (ECF Nos. 20, 21.) Fresh Start, NI, and ABLE

(collectively, “Defendants”) responded to Plaintiff’s opposition. (ECF Nos. 23, 24.)

The parties have fully briefed the motion. (ECF Nos. 12, 13, 20, 21, 23, 24.) The

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Court findsthe motion suitable for disposition without oral argument pursuant to Civil

Local Rule 7.1(d)(1). Upon review of the moving papers, admissible evidence, and

applicable law, the Court GRANTS IN PART AND DENIES IN PART Fresh Start’s

motion to dismiss and GRANTS NI and ABLE’s motion to dismiss.

II. PROCEDURAL HISTORY

On March 13, 2014, Plaintiff filed a complaint alleging three causes of action.

(ECF No. 1.) On June 9, 2014, Plaintiff filed a Fourth Amended Complaint (“FAC”)

alleging nine causes of action against Fresh Start, NI, and ABLE. (ECF No. 10.) On

August 11, 2014, this case was assigned to the Honorable Gonzalo P. Curiel. (ECF No.

16.)

On July 31, 2014, Fresh Start filed a motion to dismiss Plaintiff’s complaint.

(ECF No. 12.) On August 6, 2014, NI and ABLE filed a motion to dismiss Plaintiff’s

complaint. (ECF No. 13.) On August 6, 2014, NI and ABLE filed a request for judicial

notice. (ECF No. 14.) On August 29, 2014, Plaintifffiled oppositions to Fresh Start and

NI and ABLE’s motions. (ECF Nos. 20, 21.) On August 29, Plaintiff filed a request for

judicial notice. (ECF No. 22.) On September 12, 2014, Fresh Start and NI and ABLE

filed responses to Plaintiff’s oppositions. (ECF No. 23, 24.)

III. FACTUAL BACKGROUND

Plaintiff alleges that he is a mixed martial arts fighter who became addicted to

Vicodin prior to December 19, 2013. (FAC ¶ 15.) On approximately December 19,

2013, Plaintiff alleges that he spoke to Fresh Start employee Dan Carmichael

(“Carmichael”). (Id. ¶ 13–14.) Plaintiff alleges that Carmichael told Plaintiffthat Fresh

Start’s Narconon “Treatment” Program(the “Narconon Program”) is effective because

its “New Life Detoxification Program” (the “NLD Program”) makes patientssweat out

“residual drug toxins” that cause drug cravings. (Id. ¶ 15.) Plaintiff alleges that

Carmichael told Plaintiff that: (1) the NLD Program had been scientifically and

medically proven effective; (2) if Plaintiff underwent the Narconon Program, he would

be under the care of a nurse or doctor at all times; (3) if Plaintiff underwent the

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Narconon Program, Fresh Start would provide Plaintiff with “extensive” drug and

addiction counseling; (4) Fresh Start staff are properly trained to care for and treat

addicts; and (5) Plaintiff’s insurance would reimburse 50% of the cost of the Narconon

Program. (Id. ¶ 16–17.) Plaintiff alleges that Carmichael directed Plaintiff to Fresh

Start’s website for its Warner Springs, California facility,

(http://www.sunshinesummitlodge.com),which represented that theNarconon Program

had a 76% success rate. (Id. ¶ 18.)

Plaintiff alleges that, based on these representations, he signed a contract to enter

the Narconon Program at the Warner Springs facility. (Id. ¶ 19.) Plaintiff alleges that

the contractstated that the “Narconon Program” wasfounded by WilliamBenitez, after

Benitez was inspired by the philosophy contained in L. Ron Hubbard’s book “The

Fundamentals of Thought,” and that the “Narconon Program” is “secular (NONRELIGIOUS) . . . and . . . does not include participation in any religious studies of any

kind.” (Id. ¶ 19.) Plaintiff alleges that the full title of L. Ron Hubbard’s book is

Scientology: The Fundamentals of Thought. (Id. ¶ 20.)

Plaintiff alleges that Carmichael stated that the Narconon Program’s fee was

$31,000.00 and that it needed to be paid in full prior to starting the program. (Id. ¶ 21.)

Plaintiff alleges thatCarmichael told Plaintiffthat Plaintiff needed to enter the program

quickly because “if [Plaintiff] did not get help immediately, [Plaintiff] would end up

dead” and there were only two spots left in the program. (Id. ¶ 22.) Plaintiff alleges that

he was told over the phone that he would have his own room during the Narconon

Program. (Id. ¶ 24.)

Plaintiff alleges that there were “numerous empty beds” when he started the

Narconon Program. (Id. ¶ 22.) Plaintiff alleges that he started detox after entering the

Warner Springs facility and was only supervised by a 19-year-old who did not have

medical training and slept during the majority of Plaintiff’s detox. (Id. ¶ 23.) Plaintiff

alleges that after he finished detox, he began the Narconon Program and was placed in

a room with three people. (Id. ¶ 24.)

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Plaintiff alleges that the Narconon Program had two required components: (1)

course materials consisting of eight L. Ron Hubbard books, and (2) the NLD Program

consisting of a sauna and vitamin regimen. (Id. ¶ 25.) Plaintiff alleges that the course

materials taught Scientology doctrines and concepts. (Id. ¶ 27.) Plaintiff alleges that the

NLD Program isidentical to a Scientology ritual known as “Purification Rundown” or

the “Purif.” (Id. ¶ 29.)

Plaintiff alleges that Fresh Start’s rationale for the NLD Programisthat: (1) drug

residue remains in fatty tissue long after drug use has stopped; (2) drug residue is

occasionally released from fatty tissue causing drug cravings and possible relapse; and

(3) the sauna flushes drug residue out of fatty tissue. (Id. ¶ 30.) Plaintiff alleges that the

NLD Program contains the following steps repeated daily for five weeks: (1) vigorous

exercise; (2) ingestion of increasing doses of Niacin and a “vitamin bomb”; and (3) six

hours of sauna at temperatures of 160 to 180 degrees Fahrenheit. (Id. ¶ 31–32.)

Plaintiff alleges that the Niacin doses were well beyond the recommended daily

allowance. (Id. ¶ 31.) Plaintiff alleges that no medical personnel oversaw him during

the sauna and that the Warner Springs facility was staffed with recent Narconon

Program patients. (Id. ¶ 33, 39.) Plaintiff alleges that the claimed benefits of the NLD

Program are false and do not withstand scientific scrutiny. (Id. ¶ 34.) Plaintiff alleges

that there is no support for the 76% claimed success rate and that NI was aware that

there is no support for that claimed success rate. (Id. ¶ 38.) Plaintiff alleges that no

Fresh Start staff spoke to Plaintiff about substance abuse and instead Plaintiff only

received instruction in Scientology. (Id. ¶ 42–43.) Plaintiff alleges that Fresh Start did

not send the required papers to Fresh Start’s insurance company, causing Plaintiff to

be unable to receive reimbursement from his insurance company. (Id. ¶ 44.)

Plaintiff alleges that Fresh Start and the Church of Scientology consider the

Narconon Program to be an initial step towards a key spiritual journey taken by

Scientologists. (Id. ¶ 41.) Plaintiff alleges that Fresh Start documentsstate that patients

who complete the Narconon Program are to be sent to the nearest Scientology church

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“if the individual so desires,” indicating that the Narconon Program is used to recruit

patients to the Church of Scientology. (Id. ¶ 40.) Plaintiff alleges that, on January 22,

2014, he left the Narconon Program for several reasons, including that he did not feel

safe and that he felt that the Fresh Start staff were not fit to treat him. (Id. ¶ 46.)

Plaintiff alleges that Fresh Start, NI, and ABLE are California corporations.

(FAC ¶¶ 2, 3, 7.) Plaintiff alleges that ABLE “governs and controls nearly every aspect

of” Fresh Start and NI’s business activities. (Id. ¶ 50.) Plaintiff alleges that the

“separate corporate existences of [Fresh Start], NI, and Able” constitute “a design or

scheme to perpetrate fraud” for the purposes of enrolling people in treatment facilities

at the cost of “substantial funds” and to promote Scientology. (Id. ¶ 52.)

Plaintiff alleges nine causes of action against Fresh Start, NI, and ABLE: (1)

breach of contract; (2) fraud; (3) negligence; (4) intentional infliction of emotional

distress (“IIED”); (5) negligent misrepresentation; (6) injunctive relief; (7) violation

of the Racketeering Influence and Corrupt Organizations Act (“RICO”), 18 U.S.C. §

1964(c); (8) breach of the implied covenant of good faith and fair dealing; and (9)

negligence per se. (FAC.)

IV. LEGAL STANDARD

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests the

sufficiency of a complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001).

Dismissal is warranted under Rule12(b)(6) where the complaint lacks a cognizable

legal theory. Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 534 (9th Cir.

1984); see Neitzke v. Williams, 490 U.S. 319, 326 (1989) (“Rule12(b)(6) authorizes

a court to dismiss a claim on the basis of a dispositive issue of law.”). Alternatively,

a complaint may be dismissed where it presents a cognizable legal theory yet fails to

plead essential facts under that theory. Robertson, 749 F.2d at 534. 

While a plaintiff need not give “detailed factual allegations,” a plaintiff must

plead sufficient facts that, if true, “raise a right to relief above the speculative level.”

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 545 (2007). “To survive a motion to

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dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state

a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678

(2009) (quoting Twombly, 550 U.S. at 547). A claim is facially plausible when the

factual allegations permit “the court to draw the reasonable inference that the defendant

is liable for the misconduct alleged.” Id. In other words, “the non-conclusory ‘factual

content,’ and reasonable inferences from that content, must be plausibly suggestive of

a claim entitling the plaintiff to relief.” Moss v. U.S. Secret Service, 572 F.3d 962, 969

(9th Cir. 2009). “Determining whether a complaint states a plausible claim for relief

will . . . be a context-specific task that requires the reviewing court to draw on its

judicial experience and common sense.” Iqbal, 556 U.S. at 679.

In reviewing a motion to dismiss under Rule 12(b)(6), the court must assume the

truth of all factual allegations and must construe all inferences from them in the light

most favorable to the nonmoving party. Thompson v. Davis, 295 F.3d 890, 895 (9th

Cir. 2002); Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337–38 (9th Cir. 1996). Legal

conclusions, however, need not be taken as true merely because they are cast in the

form of factual allegations. Ileto v. Glock, Inc., 349 F.3d 1191, 1200 (9th Cir. 2003);

W. Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981).

Generally, on a motion to dismiss, courts limit review to the contents of the

complaint and may only consider extrinsic evidence that is properly presented to the

court as part of the complaint. See Lee v. City of L.A., 250 F.3d 668, 688-89 (9th Cir.

2001) (court may consider documents physically attached to the complaint or

documents necessarily relied on by the complaint if their authenticity is not contested).

However, a court may take notice of undisputed “matters of public record” subject to

judicial notice without converting a motion to dismiss into a motion for summary

judgment. Id. (citing FED. R. EVID. 201; MGIC Indem. Corp. v. Weisman, 803 F.2d

500, 504 (9th Cir. 1986)). Under Federal Rule of Evidence 201, a district court may

take notice of facts not subject to reasonable dispute that are capable of accurate and

ready determination by resort to sources whose accuracy cannot reasonably be

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questioned. FED. R. EVID. 201(b); see also Lee, 250 F.3d at 689.

V. DISCUSSION

A. Judicial Notice

NI and ABLE ask the Court to take judicial notice of two documents: (1) a

federal district court order, and (2) a license to operate a drug rehabilitation facility

issued by the California Department of Alcohol and Drug Programs. (ECF No. 14, at

1–2.) Plaintiff asks the Court to take judicial notice of one document: a federal district

court order. (ECF No. 22, at 2.)

NI and ABLE and Plaintiff’s three requests for judicial notice are properly

noticeable. Orders in federal court cases and state licenses are matters of public record

and are capable of accurate and ready determination. Finding the two orders and license

relevant, the Court takes judicial notice of all three documents.

B. Fresh Start

1. Breach of Contract

Under California law, there are four elements to a breach of contract: “(1) the

existence of a contract, (2) plaintiff’s performance or excuse for nonperformance, (3)

defendant’s breach, and (4) the resulting damages to the plaintiff.” Oasis West Realty,

LLC v. Goldman, 250 P.3d 1115, 1121 (Cal. 2011) (citation omitted). Fresh Start

argues that Plaintiff has failed to allege breach because Plaintiff allegedly received

“course materials, and a sauna and vitamin regimen” and Plaintiff has failed to allege

his own performance because Plaintiff allegedly left the Narconon Program prior to its

completion. (ECF No. 24, at 3.)

The alleged contract between Fresh Start and Plaintiff contains a section titled

“THE NARCONON PROGRAM DEFINED” states that Fresh Start “delivers a

comprehensive residential drug and alcohol treatment program.” (FAC, Ex. A.) The

alleged contract in a section titled “PROGRAM FEES” statesthat Fresh Start “charges

a flat rate of $35,000 for its program.” (Id.) Plaintiff further alleges that Carmichael

told him the fee was $31,000 and it needed to be paid “in full upfront.” (FAC ¶ 21.)

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Nowhere in the alleged contract does it state that Plaintiff is required to stay for the

entire duration and even includes a provision titled “VOLUNTARY CESSATION OF

PROGRAM.” (FAC, Ex. A.) Plaintiff alleges that he exchanged “consideration” and

that he “suffer[ed] damages in excess of $75,000.” (FAC ¶¶ 55, 57.) Plaintiff argues

that he “paid $31,000.00,” (see ECF No. 20, at 4), however nowhere in Plaintiff’s

complaint does he allege that he paid that sum to Fresh Start.

While Plaintiff has alleged the existence of a contract and Fresh Start’s breach

through the failure to provide drug treatment, he has failed to allege his own

performance or excuse for his own performance and has failed to allege damages

flowing from the breach. Plaintiff does not allege that he performed what he was

required to by the alleged contract with Fresh Start, or was excused from performing,

and does not allege how Fresh Start’s breach damaged him. Accordingly, Plaintiff’s

first cause of action for breach of contract is DISMISSED with leave to amend as to

Fresh Start.

2. Fraud

Under California law, there are five elements to fraud, which serves as the basis

for the tort of deceit: (1) misrepresentation, (2) knowledge of falsity, (3) intent to

induce reliance, (4) justifiable reliance, and (5) damages. Small v. Fritz Companies,

Inc., 65 P.3d 1255, 1258 (Cal. 2003). Misrepresentation can be either “false

representation, concealment, or nondisclosure.” Id. Federal Rule of Civil Procedure

9(b) requiresthat a plaintiff’s allegations “be specific enough to give defendants notice

of the particular conduct . . . so that they can defend against the charge and not just

deny that they have done anything wrong.” Kearns v. Ford Motor Co., 567 F.3d 1120,

1124 (9thCir. 2009) (citations and international quotation marks omitted); FED.R.CIV.

P. 9(b). To plead fraud against a corporate defendant, California law further requires

that plaintiffs “allege the names of the persons who made the allegedly fraudulent

representations, their authority to speak, to whom they spoke, what they said or wrote,

and when it was said or written.” Tarmann v. State Farm Mut. Auto. Ins. Co., 2 Cal.

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Rptr. 2d 861, 862–63 (1991) (citations omitted).

Plaintiff alleges six misrepresentations made by Fresh Start through its employee

Carmichael and its website: (1) the Narconon Program’s 76% success rate; (2) that the

Narconon Program is secular and does not involve religion; (3) that Plaintiff would

receive drug treatment counseling; (4) that the NLD Program is safe and scientifically

proven effective; (5) that Plaintiff would be supervised by medical professionals at all

times during detox; and (6) that Fresh Start would assist Plaintiff in obtaining a 50%

insurance reimbursement. (FAC ¶¶ 59–60.) Plaintiff alleges that had he relied on these

statementsin contracting for the Narconon Programand subsequently suffered “mental

anguish, including intense paranoia, and pecuniary damages.” (FAC ¶¶ 61–62.)

Fresh Start argues that Plaintiff has not alleged that certain of these statements

were false or that Fresh Start made these statements with knowledge of their falsity.

(ECF No. 24, at 3–4.) However, Plaintiff has alleged that at least some of these

statements were made by Fresh Start with knowledge of their falsity, including that the

Narconon program does not involve religion, and has met the heightened pleading

standards of Rule 9(b) and California law. Plaintiff has specified the allegedly

fraudulent statements made by Fresh Start employee Carmichael and Fresh Start’s

website on approximately December 19, 2013. Accordingly, Fresh Start’s motion to

dismiss Plaintiff’s second cause of action for fraud is DENIED.

3. Negligence

Under California law, there are four elementsto negligence: (1) duty, (2) breach,

(3) causation, and (4) damages. Conroy v. Regents of Univ. of Cal, 203 P.3d 1127,

1132 (Cal. 2009) (citation omitted). First, Plaintiff alleges that Defendants owed

Plaintiff two duties: (1) “to render substance abuse treatment to [Plaintiff] that did not

subject [Plaintiff] to an unreasonable risk of harm”; and (2) “to render reasonably safe

and effective treatment.” (FAC ¶ 64.) Second, Plaintiff alleges that Defendants

breached these duties in four ways: (1) instructing Plaintiff to spend six hours per day

for five weeks in a sauna while ingesting “extreme dosages of Niacin and other

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vitamins”; (2) failing to staff the Warner Springs facility with qualified medical

professionals; (3) failing to provide qualified counselors to administer treatment; and

(4) instructing Plaintiffin Scientology rather than substance abuse treatment. (Id. ¶ 65.)

Third, Plaintiff alleges that these breaches caused Plaintiff “mental anguish, including

intense paranoia, and pecuniary injuries.” (Id. ¶ 66.)

Defendants argue that Plaintiff has not pled causation between the alleged

breaches of duties and the alleged damages. (ECF No. 12-1, at 5–6; ECF No. 13, at

7–8.) Fresh Start further argues that Plaintiff has not alleged any damages from the

treatment he did receiver. (ECF No. 12-1, at 5.) However, Plaintiff has pled causation

and damages. Plaintiff’s complaint alleges that Fresh Start owed a duty to himas a drug

treatment patient, that Fresh Start breached this duty, and that Fresh Start’s breaches

caused Plaintiff mental anguish in the form of paranoia. Accordingly, Fresh Start’s

motion to dismiss Plaintiff’s third cause of action for negligence is DENIED.

4. Intentional Infliction of Emotional Distress

Under California law, there are three elementsto a prima facie case ofintentional

infliction of emotional distress: “(1) extreme and outrageous conduct by the defendant

with the intention of causing, or reckless disregard of the probability of causing,

emotional distress; (2) the plaintiff's suffering severe or extreme emotional distress;

and (3) actual and proximate causation of the emotional distress by the defendant’s

outrageous conduct.” Davidson v. City of Westminster, 649 P.2d 894, 901 (Cal. 1982)

(quotation and citations omitted). Extreme and outrageous conduct is conduct that

exceeds all bounds of decency and may be found where “a defendant (1) abuses a

relation or position which gives himpower to damage the plaintiff’s interest;(2) knows

the plaintiff is susceptible to injuries through mental distress; or (3) acts intentionally

or unreasonably with the recognition that the acts are likely to result in illness through

mental distress.” Bogard v. Employers Casualty Co., 210 Cal. Rptr. 578, 587 (Cal. Ct.

App. 1985) (citations and internal quotation marks omitted).

Plaintiff alleges two instances of extreme and outrageous conduct: (1) “providing

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Scientology in lieu [of] drug treatment or substance abuse counseling”; and (2)

“preying on Plaintiff’s vulnerabilities and attempting to recruit Plaintiff into

Scientology under the guise of drug treatment.” (FAC ¶ 68.) Fresh Start argues that the

alleged conduct was not “directed specifically at plaintiff.” (ECF No. 12-1, at 6.) Fresh

Start further argues that the alleged conduct was not “extreme and outrageous.” (Id.)

However, just because Fresh Start allegedly offers its services to the public does not

mean that the servicesit allegedly provided to Plaintiff were not “directed specifically”

at him. Moreover, California has recognized that attempted religious conversion where

the defendant initially represented that an event would be secular may serve asthe basis

for an intentional infliction of emotional distress claim. See Molko v. Holy Spirit

Assn., 762 P.2d 46, 59–53, 61–63 (Cal. 1988) superseded by statute as stated in

Aguilar v. Atl. Richfield Co., 24 P.3d 493 (Cal. 2001). Plaintiff alleges that he was a

drug addict who had contracted with Fresh Start to serve as his drug treatment provider

and that instead Fresh Start attempted to convert Plaintiff to Scientology. Thus,

Plaintiff has alleged facts that, if true, could constitute the abuse of a position which

gave Fresh Start power to damage Plaintiff’s interests.

However, Plaintiff alleges that he “suffered severe and extreme emotional

distress way beyond what any person in a civilized society should be expected to

endure.” (FAC ¶ 68.) First, the Court notes that under California law, it is the conduct,

not the emotional distress, that must be “beyond what any person in a civilized society

should be expected to endure.” Second, Plaintiff does not allege how instruction in

Scientology rather than drug treatment caused his emotional distress nor does Plaintiff

allege what severe or extreme emotional distress he suffered beyond the use of that

general phrase. Accordingly, Plaintiff’s fourth cause of action for intentional infliction

of emotional distress is DISMISSED with leave to amend as to Fresh Start.

5. Negligent Misrepresentation

Under California law,there are five elements to negligent misrepresentation: “(1)

a misrepresentation of past or existing material fact, (2) without reasonable grounds for

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believing it to be true, (3) with intent to induce another’s reliance on the fact

misrepresented, (4) ignorance of the truth and justifiable reliance thereon by the party

to whom the misrepresentation was directed, and (5) damages.” Fox v. Pollack, 226

Cal. Rptr. 532, 537 (Cal. Ct. App. 1986) (citation omitted). Further, the defendant must

owe “a duty to the plaintiff to exercise reasonable care in giving the information.”

Garcia v. Superior Court, 789 P.2d 960, 963 (Cal. 1990) (citation omitted).

California law also requires that negligent misrepresentation be plead with

specificity. Cadlo v. Owens-Illinois, Inc., 23 Cal. Rptr. 3d 1, 5 (Cal. Ct. App. 2004).

While the Ninth Circuit has not issued a precedential opinion on whether a negligent

misrepresentation cause of action must meet the heightened pleading requirements of

Rule 9(b), it has assumed as much in several unpublished opinions. See, e.g., Kelley

v. Rambus, Inc., 384 Fed. Appx. 570, 573 (9th Cir. 2010); Atl. Richfield Co. v.

Ramirez, 176 F.3d 481 (9th Cir. 1999); Eder v. Allstate Ins. Co., 60 F.3d 833 (9th Cir.

1995). There is a split among district courts in the Ninth Circuit as to whether a

negligent misrepresentation cause of action must satisfy Rule 9(b). Compare Petersen

v. Allstate Indem. Co., 281 F.R.D. 413, 416 (C.D. Cal. 2012) (holding that Rule 9(b)

does not apply to a negligent misrepresentation cause of action) with Glen Holly

Entm’t v. Tektronix, Inc., 100 F. Supp. 2d 1086, 1093, 1097–98 (C.D. Cal. 1999)

(dismissing a negligent misrepresentation cause of action for failure to meet the

requirements of Rule 9(b)). This Court need not decide whether a negligent

misrepresentation cause of action must satisfy Rule 9(b) because Plaintiff’s complaint

has met those heightened requirements.

Plaintiff alleges six misrepresentations made byFresh Start through its employee

Carmichael and its website: (1) the Narconon Program’s 76% success rate; (2) that the

Narconon Program is secular and does not involve religion; (3) that Plaintiff would

receive drug treatment counseling; (4) that the NLD Program is safe and scientifically

proven effective; (5) that Plaintiff would be supervised by medical professionals at all

times during detox; and (6) that Fresh Start would assist Plaintiff in obtaining a 50%

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insurance reimbursement. (FAC ¶¶ 70–71.)

Fresh Start argues that Plaintiff has not alleged misrepresentations by someone

with authority to speak or injury caused by such misrepresentations. (ECF No. 12-1,

at 7–8.) However, Plaintiff has alleged that at least some of these statements were made

by Fresh Start through its employee and its website, including that the Narconon

program does not involve religion, and has met the heightened pleading standards of

Rule 9(b) and California law. Plaintiff has specified the allegedly fraudulentstatements

made by Fresh Start employee Carmichael and Fresh Start’s website on approximately

December 19, 2013. Accordingly, Fresh Start’s motion to dismiss Plaintiff’s fifth cause

of action for negligent misrepresentation is DENIED.

6. Injunctive Relief for Unfair Competition

California’s unfair competition law (the “UCL”), CAL. BUS. & PROF. CODE §

17200 etseq., provides a cause of action to “any ‘person who has suffered injury in fact

and has lost money or property’ as a result of unfair competition.” Clayworth v. Pfizer,

Inc., 233 P.3d 1066, 1086 (Cal. 2010) (citations omitted). To pursue injunctive relief

under the § 17203 of the UCL, a plaintiff must meet the requirements of California

Code of Civil Procedure § 382 and California Business and Professions Code § 17204.

In re Tobacco II Cases, 207 P.3d 20, 25 (Cal. 2009) (citations omitted).

Fresh Start argues that Plaintiff: (1) has failed to first establish a claim under

California Business and Professions Code § 17200; (2) may not enjoin future conduct

for the benefit of others; and (3) Plaintiff cannot plead a claim under California

Business and Professions Code § 17200. (ECF No. 12-1, at 8–9.) Plaintiff’s complaint

pleads for injunctive relief pursuant to§ 17203 of the UCL. (FAC ¶¶ 76–82.) Plaintiff

alleges that he “has been injured by relying on Defendants’ false advertisements.”

(FAC ¶ 80.)

Plaintiff’s complaint fails to allege what the alleged injury is, whether monetary

or otherwise, and merely alleges that he was “injured.” Further, Plaintiff has not plead

allegations that would meet the requirements under § 17203. Accordingly, Plaintiff’s

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sixth cause of action for injunctive relief is DISMISSED with leave to amend as to

Fresh Start.

7. Civil RICO

Under federal law, there are four elements to a RICO violation: (1) conduct, (2)

of an enterprise, (3) through a pattern, (4) of racketeering activity. Howard v. Am.

Online Inc., 208 F.3d 741, 746 (9th Cir. 2000) (citation omitted); 18 U.S.C. § 1962. 18

U.S.C. § 1964(c) provides a cause of action to “[a]ny person injured in his business or

property” by a RICO violation. 18 U.S.C. § 1964(c). In the Ninth Circuit, damages for

personal injury, including pecuniary losses, are excluded from the definition of

“business or property” under 18 U.S.C. § 1964(c). Berg v. First State Ins. Co., 915 F.2d

460, 464 (9th Cir. 1990). Plaintiff bases his civil RICO cause of action on allegations

of “pecuniary damages and other injuries.” (FAC ¶ 91.) Plaintiff also states that he

abandons his civil RICO cause of action. (ECF No. 20, at 13 n.1.) Accordingly,

Plaintiff’s seventh cause of action for civil RICO is DISMISSED without leave to

amend.

8. Breach of the Implied Covenant of Good Faith and Fair Dealing

Under California law, every contract contains “an implied convenant of good

faith and fair dealing . . . that neither party will do anything which will injure the right

of the other to receive the benefits of the agreement.” Foley v. Interactive Data Corp.,

765 P.2d 373, 390 (Cal. 1988) (citation omitted). There are five elements to a breach

of the implied covenant of good faith and fair dealing: “(1) the parties entered into a

contract; (2) the plaintiff fulfilled his obligations under the contract; (3) any conditions

precedent to the defendant’s performance occurred; (4) the defendant unfairly

interfered with the plaintiff’s rights to receive the benefits of the contract; and (5) the

plaintiff was harmed by the defendant’s conduct.” Rosenfeld v. JPMorganChase Bank,

N.A., 732 F. Supp. 2d 952, 968 (N.D. Cal. 2010) (citation omitted). A plaintiff need not

plead or even prove a breach of a specific contractual provision. Carma Developers

(Cal.), Inc. v. Marathon Dev. Cal., Inc., 826 P.2d 710, 727 (Cal. 1992).

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Plaintiff alleges that Defendants breached the implied covenant of good faith and

fair dealing through three actions: (1) having Plaintiff study Scientology rather than

receive drug treatment; (2) “attempting to have [Plaintiff] surrender his legal rights in

exchange for services for which he had already provided consideration”; and (3)

persuading Plaintiff to enter the Narconon Program and then asking Plaintiff “to sign

an acknowledgment that the sauna program is not a medical program and that it

provides no physical gains.” (FAC ¶ 94.) Fresh Start argues that Plaintiff must plead

the specific contractual provision which was frustrated. (ECF No. 12-1, at 12–13.)

While Plaintiff has alleged a contract and an interference with Plaintiff’s right

to receive benefits under the contract, namely drug treatment, Plaintiff has failed to

allege fulfillment of his obligations under the contract as he has not alleged that he

fulfilled his obligations to Fresh Start under the contract. Accordingly, Plaintiff’s

eighth cause of action for breach of the implied covenant of good faith and fair dealing

is DISMISSED with leave to amend as to Fresh Start.

9. Negligence Per Se

Under California law, negligence per se isthe “presumption of negligence [that]

arises from the violation of a statute which was enacted to protect a class of persons of

which the plaintiff is a member against the type of harm which the plaintiff suffered as

a result of the violation of the statute. Hoff v. Vacaville Unified Sch. Dist., 968 P.2d

522, 530 (Cal. 1998) (citations omitted). However, negligence per se is an evidentiary

doctrine and not an independent cause of action. People of Cal. v. Kinder Morgan

Energy Partners, L.P., 569 F. Supp. 2d 1073, 1087 (S.D. Cal. 2008) (citations omitted).

Plaintiff states that he abandons his negligence per se cause of action. (ECF No. 20, at

13 n.1.) Accordingly, Plaintiff’s ninth cause of action for negligence per se is

DISMISSED without leave to amend.

C. NI and ABLE

Plaintiff alleges that NI and ABLE are liable under all nine causes of action

based on the alter ego doctrine. (FAC ¶¶ 48–53.) As Plaintiff has abandoned his

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seventh cause of action for civil RICO and ninth cause of action for negligence per se,

these causes of action are DISMISSED without leave to amend as to NI and ABLE.

Under California law, there are two requirements to invoke the alter ego

doctrine: (1) “unity of interest and ownership between the corporation and its equitable

owner that the separate personalities of the corporation and the shareholder do not in

reality exist,” and (2) “an inequitable result if the acts in question are treated as those

of the corporation alone.” Sonora Diamond Corp. v. Superior Court, 99 Cal. Rptr. 2d

824, 836 (Cal. Ct. App. 2000) (citations omitted). In assessing unity of interest and

ownership, California courts consider the totality of the circumstances, including

factors such as: (1) “commingling of funds and other assets of the two entities,” (2)

“the holding out by one entity that it is liable for the debts of the other,” (3) “identical

equitable ownership in the two entities,” (4) “use of the same offices and employees,”

(5) “use of one as a mere shell or conduit for the affairs of the other,” (6) “inadequate

capitalization,” (7) “disregard of corporate formalities,” (8) “lack of segregation of

corporate records,” and (9) “identical directors and officers.” Id.

Plaintiff alleges that “Fresh Start and NI have all appearances of being a

corporate sham,” that “ABLE heavily influences [] Fresh Start and NI,” and . (FAC ¶¶

49–52.) Plaintiff’s complaint merely restates some of the factors that California courts

consider and does not allege any facts showing that he is entitled to recover from NI

and ABLE. Moreover, Plaintiff’s opposition to NI and ABLE’s motion to dismiss relies

heavily on agency as the basis for NI and ABLE’s liability. (See ECF No. 21 at 8–21.)

Plaintiff’s complaint does not allege any facts supporting an agency relationship

between any of the Defendants and merely contains conclusory allegations stating that

NI and Fresh Start are ABLE’s agents and Fresh Start is NI’s agent. (See FAC ¶ 5, 9.)

Accordingly, Plaintiff’s seven remaining causes of action are DISMISSED with leave

to amend as to NI and ABLE.

VI. CONCLUSION AND ORDER

Based on the foregoing, IT IS HEREBY ORDERED that:

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1. Fresh Start’s Motion to Dismiss, (ECF No. 12), is GRANTED IN PART

AND DENIED IN PART;

2. NI and ABLE’s Motion to Dismiss, (ECF No. 13), is GRANTED;

3. Plaintiff’s first cause of action for breach of contract, fourth cause of

action for intentional infliction of emotional distress, sixth cause of action

for injunctive relief, and eighth causes of action are DISMISSED WITH

LEAVE TO AMEND as to Fresh Start, NI, and ABLE;

4. Plaintiff’s second cause of action for fraud, third cause of action for

negligence, and fifth cause of action for negligent misrepresentation are

DISMISSED WITH LEAVE TO AMEND as to NI and ABLE;

5. Plaintiff’s seventh cause of action for civil RICO and ninth cause of

action for negligence per se are DISMISSED WITHOUT LEAVE TO

AMEND;

6. If Plaintiff wishes to cure the deficiencies noted herein, he may file an

amended complaint on or before November 7, 2014.

DATED: October 23, 2014

HON. GONZALO P. CURIEL

United States District Judge

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