Opinion ID: 3046497
Heading Depth: 2
Heading Rank: 1

Heading: Fraud and Georgia Civil RICO claims

Text: The plaintiffs argue that they sufficiently pleaded their fraud claims with specificity by identifying the time period of the alleged misrepresentations and the specific fraudulent statements the defendants made. They further contend that the RICO claims alleging theft by deception, mail and wire fraud, and false statements to a government agency were not subject to Rule 9’s specificity requirements because those claims do not arise from fraud. Under Georgia law, to state a claim for fraud, the plaintiffs must show “five elements: (1) false representation by defendant; (2) with scienter, or knowledge of falsity; (3) with intent to deceive plaintiff or to induce plaintiff into acting or refraining from acting; (4) on which plaintiff justifiably relied; (5) with proximate cause of damages to plaintiff.” Worsham v. Provident Cos., Inc., 249 F. Supp. 2d 1325, 1331 (N.D. Ga.2002); see also O.C.G.A. §§ 23–2–52, 51–6–2(a). 9 Case: 14-11214 Date Filed: 01/26/2015 Page: 10 of 19 In pleading a claim for fraud, the plaintiffs “must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person’s mind may be alleged generally.” Fed. R. Civ. P. 9(b). Rule 9 thus requires plaintiffs to allege (1) precisely what statements or omissions were made in which documents or oral representations; (2) the time and place of each such statement and the person responsible for making (or, in the case of omissions, not making) them; (3) the content of such statements and the manner in which they misled the plaintiff; and (4) what the defendant obtained as a consequence of the fraud. Findwhat Investor Grp. v. FindWhat.com, 658 F.3d 1282, 1296 (11th Cir. 2011). Specificity under Rule 9(b) does not, however, eliminate the concept of notice pleading. Ziemba v. Cascade Int’l, Inc., 256 F.3d 1194, 1202 (11th Cir. 2001) (internal quotation marks omitted). “Allegations of date, time or place satisfy the Rule 9(b) requirement that the circumstances of the alleged fraud must be pleaded with particularity, but alternative means are also available to satisfy the rule.” Durham v. Bus. Mgmt. Assocs., 847 F.2d 1505, 1512 (11th Cir. 1988). The particularity requirement may be relaxed for allegations of “prolonged multi-act schemes.” U.S. ex rel. Clausen v. Lab. Corp. of Am., Inc., 290 F.3d 1301, 1314 n.25 (11th Cir. 2002). The relaxed standard permits a plaintiff to plead the overall nature of the fraud and then to allege with particularity one or more illustrative instances of the fraud. See id. Even under the relaxed requirement, however, a 10 Case: 14-11214 Date Filed: 01/26/2015 Page: 11 of 19 plaintiff is still required to allege at least some particular examples of fraudulent conduct to lay a foundation for the rest of the allegations of fraud. See id. Under the Georgia civil RICO statute, “[i]t is unlawful for any person, through a pattern of racketeering activity or proceeds derived therefrom, to acquire or maintain, directly or indirectly, any interest in or control of any enterprise, real property, or personal property of any nature, including money.” O.C.G.A. § 1614-4(a). The statute does not require proof of an “enterprise.” Cobb Cnty. v. Jones Group, P.L.C., 460 S.E.2d 516, 520-21 (Ga. Ct. App. 1995). Rather, under the Georgia civil RICO statute, the plaintiffs need only establish racketeering activity; that is, “a plaintiff must show that the defendant committed predicate offenses (set forth in O.C.G.A. § 16-14-3(9)) at least twice.” Id. at 521 (quotation marks and citation omitted). Nevertheless, like any other fraud action, a RICO claim based on fraud must be pleaded with specificity. See Fed. R. Civ. P. 9(b); O.C.G.A. § 9- 11-9(b). The district court properly concluded that the plaintiffs failed to state their claims for fraudulent misrepresentation and civil RICO violations because the plaintiffs failed to plead these claims with specificity under Rule 9(b). Here, the plaintiffs identified eleven different misrepresentations, but none of the allegations indicated the date, time, or place of any misrepresentation. Nor did the plaintiffs 11 Case: 14-11214 Date Filed: 01/26/2015 Page: 12 of 19 identify which of the many defendants was responsible for the specific statement. For example, in paragraphs 2 and 3 of the complaint, the plaintiffs alleged: [i]n 2011, Mr. Burgess and Ms. Burgess sought the services of an inpatient drug and alcohol rehabilitation center . . . . The Burgesses found NNGA through an internet search, and . . . . spoke with one or more employees of NNGA and/or International, and/or were provided with marketing materials regarding NNGA’s program. The Burgesses relied upon the following representations made by NNGA and/or International . . . . These allegations fall short of the heightened pleading requirement in that they fail to specify which defendant was involved, what employee they spoke with and for whom the employee worked, when they conducted the internet search, where the misrepresentation appeared, and whether and what marketing materials they were given and by whom. And, in paragraph 111, the plaintiffs list the eleven misrepresentations, but again they do so only in generalities. In fact, the allegations in the complaint fail to meet even the relaxed standard; plaintiffs failed to identify any specific examples to illustrate the fraud while pleading the overall nature of the fraud generally. 2 See Clauson, 290 F.3d at 1314. Moreover, the plaintiffs lump all the defendants together as the sources of the misrepresentations, and they pleaded the who, what, and when elements of their fraud in the alternative. This court has repeatedly held that lumping multiple 2 Although at times the plaintiffs identified the specific misrepresentation, such as “NNGA had a success rate of over 70%,” the plaintiffs failed to specify who made the statement or what material it appeared in, or when they misrepresentation was made. 12 Case: 14-11214 Date Filed: 01/26/2015 Page: 13 of 19 defendants together in such generalities is insufficient under Rule 9(b). See, e.g., Ambrosia Coal & Constr. Co. v. Pages Morales, 482 F.3d 1309, 1317 (11th Cir. 2007) (“[I]n a case involving multiple defendants . . . the complaint should inform each defendant of the nature of his alleged participation in the fraud.” (internal citation omitted)). Accordingly, we agree with the district court that the plaintiffs’ fraud claim failed to meet the heightened pleading requirement of Rule 9(b). The plaintiffs’ civil RICO claims fail for the same lack of specificity. And although the plaintiffs argue to the contrary, a review of the complaint shows that the same misrepresentations alleged as fraudulent form the basis for the RICO claims. For example, in paragraph 142 setting out the claim for mail and wire fraud, the plaintiffs alleged that “Defendants distributed the following false statements and/or representations . . . through the mail, telephone wire facilities, and/or Internet.” They then list nine allegedly false statements. And although some of the alleged misrepresentations are specific, such as “NNGA offered a complete cure for addiction,” the plaintiffs failed to specify which defendant made the alleged misrepresentation, when that defendant made it, and through what medium. Thus, the district court properly dismissed the RICO claims as well.