Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-alsd-1_15-cv-00469/USCOURTS-alsd-1_15-cv-00469-1/pdf.json

Parties Involved:
Netsmart Technologies, Inc.
Counter Claimant
Southwest Alabama Behavioral Health Care Systems
Counter Defendant

Document Text:

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF ALABAMA

SOUTHERN DIVISION

SOUTHWEST ALABAMA BEHAVIORAL :

HEALTH CARE SYSTEMS, :

 :

Plaintiff, :

 :

vs. : CIVIL ACTION NO. 15-00469-KD-B

 : 

NETSMART TECHNOLOGIES, INC., :

 :

Defendant. :

REPORT AND RECOMMENDATION

This case is before the Court on the “Motion to Dismiss 

Plaintiff’s Fraud Claim” filed by Defendant, Netsmart 

Technologies, Inc. (Doc. 3). The motion, which has been fully 

briefed and is ripe for resolution, has been referred to the 

undersigned for a report and recommendation pursuant to 28 

U.S.C. § 636(b)(1)(B) and Local Rule 72.2(c). Upon 

consideration of all matters presented, the undersigned 

RECOMMENDS, for the reasons stated herein, that Defendant’s 

motion to dismiss be granted.

I. Background Facts

This action was filed on September 11, 2015, in the Circuit 

Court of Conecuh County, Alabama, by Plaintiff, Southwest 

Alabama Behavioral Health Care Systems (“Southwest”) against 

Defendant, Netsmart Technologies, Inc. (“Netsmart”), alleging 

that Netsmart entered into a contract with Southwest on August 

Case 1:15-cv-00469-KD-B Document 24 Filed 12/01/15 Page 1 of 10
2

16, 2013, “to provide software and hardware in computer services 

to assist [Southwest] for the purpose of maintaining the 

operations of [Southwest], including [any] and all maintenance 

regarding health information for clients of [Southwest].” (Doc. 

1-1 at 2). Southwest claims that despite repeated requests, 

Netsmart “failed to honor the terms of the agreement and the 

supplemental agreements” and “repeatedly misrepresented material 

facts regarding their providing of services,” causing Southwest 

to suffer financial loss, inconvenience, and the ability to 

service its clients. (Id.). Southwest demands that the 

agreements between the parties be terminated and seeks 

compensatory and punitive damages. (Id. at 2-3). 

On September 25, 2015, Defendant timely removed the case to 

this Court pursuant to 28 U.S.C. §§ 1332, 1441, and 1446. (Doc. 

1). On September 30, 2015, Defendant filed the present motion 

to dismiss Plaintiff’s fraud claim pursuant to Rule 12(b)(6) of 

the Federal Rules of Civil Procedure. (Doc. 3). Despite being 

ordered to file a response to the motion by October 26, 2015 

(Doc. 8), to date, Plaintiff has failed to do so. The motion 

being fully briefed by Defendant, it is now ready for 

resolution.

II. Analysis

A defendant may move to dismiss a complaint pursuant to 

Federal Rule of Civil Procedure 12(b)(6) if the plaintiff has 

Case 1:15-cv-00469-KD-B Document 24 Filed 12/01/15 Page 2 of 10
3

failed to state a claim upon which relief may be granted. “The 

standard of review for a motion to dismiss is the same for the 

appellate court as it [is] for the trial court.” Stephens v. 

Dep’t of Health & Human Servs., 901 F.2d 1571, 1573 (11th Cir.

1990). “When considering a motion to dismiss, all facts set 

forth in the plaintiff’s complaint ‘are to be accepted as true 

and the court limits its consideration to the pleadings and 

exhibits attached thereto.” Grossman v. Nationsbank, N.A., 225 

F.3d 1228, 1231 (11th Cir. 2000) (quoting GSW, Inc. v. Long 

County, 999 F.2d 1508, 1510 (11th Cir. 1993)). All “reasonable 

inferences” are drawn in favor of the plaintiff. St. George v. 

Pinellas County, 285 F.3d 1334, 1337 (11th Cir. 2002).

To survive a 12(b)(6) motion to dismiss for failure to 

state a claim, the complaint “does not need detailed factual 

allegations”; however, the “plaintiff’s obligation to provide 

the ‘grounds’ of his ‘entitle[ment] to relief’ requires more 

than labels and conclusions, and a formulaic recitation of the 

elements of a cause of action will not do. . . . Factual 

allegations must be enough to raise a right to relief above the 

speculative level . . ., on the assumption that all the 

allegations in the complaint are true (even if doubtful in 

fact).” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)

(internal citations omitted). The plaintiff must plead “enough 

facts to state a claim that is plausible on its face.” Id. at 

Case 1:15-cv-00469-KD-B Document 24 Filed 12/01/15 Page 3 of 10
4

570. Unless a plaintiff has “nudged [his] claims across the 

line from conceivable to plausible,” the complaint “must be 

dismissed.” Id.

“[U]unsupported conclusions of law or of mixed fact and 

law” will not defeat a Rule 12(b)(6) motion for dismissal. 

Dalrymple v. Reno, 334 F.3d 991, 996 (11th Cir. 2003) (quoting 

Marsh v. Butler County, Ala., 268 F.3d 1014, 1036 n.16 (11th 

Cir. 2001)). “[W]here the well-pleaded facts do not permit the 

court to infer more than the mere possibility of misconduct, the 

complaint has alleged—but it has not ‘show[n]’ — that the 

pleader is entitled to relief.” Ashcroft v. Iqbal, 556 U.S. 

662, 679 (2009) (quoting Fed. R. Civ. P. 8(a)(2)). The U.S. 

Supreme Court has suggested that courts adopt a “two-pronged 

approach” when considering motions to dismiss: “1) eliminate any 

allegations in the complaint that are merely legal conclusions; 

and 2) where there are well-pleaded factual allegations, ‘assume 

their veracity and then determine whether they plausibly give 

rise to an entitlement to relief.’” American Dental Ass’n v. 

Cigna Corp., 605 F.3d 1283, 1290 (11th Cir. 2010) (quoting 

Iqbal, 556 U.S. at 664). Importantly, “courts may infer from 

the factual allegations in the complaint ‘obvious alternative 

explanation[s],’ which suggest lawful conduct rather than the 

unlawful conduct the plaintiff would ask the court to infer.” 

Id. (quoting Iqbal, 556 U.S. at 682).

Case 1:15-cv-00469-KD-B Document 24 Filed 12/01/15 Page 4 of 10
5

In the complaint, Plaintiff seeks damages for “fraud” and 

“misrepresentation” by Defendant Netsmart arising out of the

contract between Plaintiff and Defendant for computer services. 

(Doc. 1-1 at 3). Because Plaintiff alleges fraud, the 

substantive allegations in the complaint must comply not only 

with the plausibility criteria articulated in Twombly and Iqbal, 

but also with Federal Rule of Civil Procedure 9(b)’s heightened 

pleading standard. See Harris v. Hancock Bank, 2011 U.S. Dist. 

LEXIS 40834, *8, 2011 WL 1435500, *2 (S.D. Ala. Apr. 14, 2011)

(“Substantive fraud allegations ‘must comply not only with the

plausibility criteria articulated in Twombly and Iqbal but also 

with Fed. R. Civ. P. 9(b)’s heightened pleading standard, which 

requires that in alleging fraud or mistake, a party must state 

with particularity the circumstances constituting fraud or 

mistake.”). 

Rule 9(b) requires that “[i]n alleging fraud or mistake, a 

party must state with particularity the circumstances 

constituting fraud or mistake.” Fed. R. Civ. P. 9(b). Under 

Rule 9(b), a plaintiff must allege: “(1) the precise statements, 

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

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

in which these statements misled the Plaintiffs; and (4) what 

the defendants gained by the alleged fraud.” Ambrosia Coal & 

Const. Co. v. Pages Morales, 482 F.3d 1309, 1316-17 (11th Cir. 

Case 1:15-cv-00469-KD-B Document 24 Filed 12/01/15 Page 5 of 10
6

2007) (citing Brooks v. Blue Cross & Blue Shield of Fla., Inc., 

116 F.3d 1364, 1380–81 (11th Cir. 1997)). 

“Rule 9(b)’s heightened pleading standard may be applied 

less stringently . . . when specific ‘factual information [about 

the fraud] is peculiarly within the defendant’s knowledge or 

control.’” Hill v. Morehouse Med. Assocs., 2003 U.S. App. LEXIS 

27956, *10, 2003 WL 22019936, *3 (11th Cir. Aug. 15, 2003) 

(citations omitted). In addition, allegations of intent or 

knowledge “need only give rise to a strong inference that the 

defendants possessed the requisite fraudulent intent.” Id., 

2014 WL 5502464 at *12 (citations omitted). “[C]onditions of a 

person’s mind, such as intent or knowledge, may be alleged 

generally.” Id. (citations omitted).

The Court now turns to Plaintiff’s fraud claim in the 

present case. With the exception of Plaintiff’s demand for 

damages, the complaint in its entirety consists of five 

sentences, four of which are directed to Plaintiff’s breach of 

contract claim. In the sole, bare allegation of fraud against 

Defendant Netsmart, Plaintiff states: 

2. Despite repeated requests by the 

plaintiff, the defendant has failed to honor 

the terms of the agreement and the 

supplemental agreements and have repeatedly 

misrepresented material facts regarding 

their providing of [computer] services.

(Doc. 1-1 at 2) (emphasis added). In the demand for damages, 

Case 1:15-cv-00469-KD-B Document 24 Filed 12/01/15 Page 6 of 10
7

Plaintiff concludes that “due to the fraud and misrepresentation 

by the defendant, the plaintiff request[s] punitive damages from 

the defendant of $1,000,000.00.” (Id. at 3).

In the motion to dismiss and accompanying brief, Defendant

argues that Plaintiff’s fraud claim is due to be dismissed 

because Plaintiff “has failed to allege its fraud claim ‘with 

particularity’ as required by Rule 9(b) of the Federal Rules of 

Civil Procedure.” (Doc. 4 at 1). The Court agrees.

As Defendant correctly points out, Plaintiff’s bare 

allegation of fraud, quoted above, does not identify “(1) the 

precise statements, documents, or misrepresentations made; (2) 

the time, place, and person responsible for the statement; (3) 

the content and manner in which these statements misled the 

Plaintiffs; and (4) what the defendants gained by the alleged 

fraud,” as required by Rule 9(b). See Ambrosia, 482 F.3d at 

1317. To the contrary, the single fraud allegation in 

Plaintiff’s complaint falls well short of Rule 9(b)’s baseline 

requirements. Furthermore, the complaint, as pleaded, does not 

comport with Twombly and Iqbal because it lacks sufficient 

factual matter, accepted as true, to state a plausible claim for 

fraud. The Complaint does not identify any Netsmart

representative who ever made a fraudulent statement, much less 

set forth the specific content and context of such a statement, 

but instead “trades in conclusory labels and generalities, which 

Case 1:15-cv-00469-KD-B Document 24 Filed 12/01/15 Page 7 of 10
8

simply are not sufficient to satisfy threshold pleading 

requirements.” Harris, 2011 U.S. Dist. LEXIS 40834 at *9, 2011 

WL 1435500 at *3. 

Last, the Court observes that courts in the Eleventh 

Circuit have held that the failure of a party to respond or 

oppose a pending motion may constitute an abandonment of the 

claims at issue in that motion. See Johnson v. City of Mobile, 

2010 U.S. Dist. LEXIS 106304, *3, 2010 WL 3748412, *1 (S.D. Ala. 

Sept. 1, 2010), report and recommendation adopted, 2010 WL 

3768366 (S.D. Ala. Sept. 17, 2010) (citing cases: Coalition for 

the Abolition of Marijuana Prohibition v. City of Atlanta, 219 

F.3d 1301, 1326 (llth Cir. 2000)(finding that a party’s failure 

to brief and argue an issue before the district court is grounds 

for declaring it abandoned); Hooper v. City of Montgomery, 482 

F. Supp. 2d 1330, 1334 (M.D. Ala. 2007)(concluding that a 

plaintiff’s failure to respond to Plaintiff’s motion to dismiss

warranted dismissal of those claims as abandoned); Northern 

Assur. Co. of America v. Bayside Marine Constr., Inc., 2009 U.S. 

Dist. LEXIS 4033 (S.D. Ala. January 20, 2009) ([a party’s] 

decision not to proffer argument or authority in response to the 

Motion [to dismiss] is at his peril.”). Thus, while the Court 

finds, separately, that Plaintiff’s fraud claim is due to be 

dismissed on the merits for failure to state a claim upon which 

relief can be granted, Plaintiff’s failure to oppose the motion 

Case 1:15-cv-00469-KD-B Document 24 Filed 12/01/15 Page 8 of 10
9

to dismiss provides an additional ground for dismissing the 

claim on the basis of abandonment. Id.

V. Conclusion

Based on the foregoing, the undersigned finds that 

Defendant’s motion to dismiss Plaintiff’s fraud claim is due to 

be granted.

NOTICE OF RIGHT TO FILE OBJECTIONS

A copy of this report and recommendation shall be served on 

all parties in the manner provided by law. Any party who objects 

to this recommendation or anything in it must, within fourteen 

(14) days of the date of service of this document, file specific 

written objections with the Clerk of this Court. See 28 U.S.C. § 

636(b)(1); Fed. R. Civ. P. 72(b); S.D. ALA. GenLR 72(c). The 

parties should note that under Eleventh Circuit Rule 3-1, “[a] 

party failing to object to a magistrate judge's findings or 

recommendations contained in a report and recommendation in 

accordance with the provisions of 28 U.S.C. § 636(b)(1) waives 

the right to challenge on appeal the district court's order 

based on unobjected-to factual and legal conclusions if the 

party was informed of the time period for objecting and the 

consequences on appeal for failing to object. In the absence of 

a proper objection, however, the court may review on appeal for 

plain error if necessary in the interests of justice.” 11th 

Cir. R. 3-1. In order to be specific, an objection must 

Case 1:15-cv-00469-KD-B Document 24 Filed 12/01/15 Page 9 of 10
10

identify the specific finding or recommendation to which 

objection is made, state the basis for the objection, and 

specify the place in the Magistrate Judge’s report and 

recommendation where the disputed determination is found. An 

objection that merely incorporates by reference or refers to the 

briefing before the Magistrate Judge is not specific. 

DONE this 1st day of December, 2015.

 /s/ SONJA F. BIVINS 

 UNITED STATES MAGISTRATE JUDGE

Case 1:15-cv-00469-KD-B Document 24 Filed 12/01/15 Page 10 of 10