Daugherty et al v. Adams et al

MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM with Brief In Support

N.D. Ga.October 26, 2016

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION MICHAEL J. DAUGHERTY and LABMD, INC., Plaintiffs, v. JOEL P. ADAMS; DAVID J. BECKER; ROBERT J. BOBACK; ANJU S. CHOPRA; WESLEY K. CLARK, SR.; JOHN C. HANSBERRY; SAM P. HOPKINS; M. ERIC JOHNSON; ERIC D. KLINE; DANIEL J. KOPCHAK; LARRY PONEMON; HOWARD SCHMIDT; KEITH E. TAGLIAFERRI; BRIAN J. TARQUINIO; MORGAN, LEWIS AND BOCKIUS, LLP; PEPPER HAMILTON LLP; TIVERSA HOLDING CORP.; TRUSTEES OF DARTMOUTH COLLEGE; and DOES 1 - 10, Defendants. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) CIVIL ACTION FILE NO. 1:16-cv-2480-LMM DEFENDANTS PEPPER HAMILTON LLP’S AND JOHN C. HANSBERRY’S MOTION TO DISMISS PLAINTIFFS’ COMPLAINT Defendants Pepper Hamilton LLP (“Pepper Hamilton”) and John C. Hansberry (“Hansberry”), by and through their undersigned counsel, hereby move the Court to enter an Order dismissing with prejudice Counts I, II, III, IV, VII, VIII, IX, X, XI, and XII pursuant to Federal Rule of Procedure 12(b)(6). Case 1:16-cv-02480-LMM Document 99 Filed 10/26/16 Page 1 of 4 2 In support of their Motion, Pepper Hamilton and Hansberry rely upon, and incorporate by reference, their Brief in Support, which is filed contemporaneously herewith. Respectfully submitted this 26th day of October, 2016. /s/ William R. Mitchelson Jr. WILLIAM R. MITCHELSON JR. Georgia Bar No. 513811 MICHAEL P. KENNY Georgia Bar No. 415064 ALSTON & BIRD LLP 1201 West Peachtree Street Atlanta, Georgia 30309-3424 Telephone: 404-881-7000 Facsimile: 404-881-7777 mitch.mitchelson@alston.com mike.kenny@alston.com Attorneys for Defendants Pepper Hamilton LLP and John C. Hansberry Case 1:16-cv-02480-LMM Document 99 Filed 10/26/16 Page 2 of 4 3 CERTIFICATE OF COMPLIANCE Pursuant to LR 7.1D, the undersigned certifies that the foregoing complies with the font and point selections permitted by LR 5.1B. This document was prepared on a computer using the Times New Roman font (14 point). Respectfully submitted, this 26th day of October, 2016. By: /s/ William R. Mitchelson Jr. WILLIAM R. MITCHELSON JR. Georgia Bar No. 513811 Case 1:16-cv-02480-LMM Document 99 Filed 10/26/16 Page 3 of 4 4 CERTIFICATE OF SERVICE The undersigned hereby certifies that a true and correct copy of the foregoing was filed on October 26, 2016, with the Court and served electronically through the CM/ECF system to all counsel of record registered to receive a Notice of Electronic Filing for this case. By: /s/ William R. Mitchelson Jr. WILLIAM R. MITCHELSON JR. Georgia Bar No. 513811 Case 1:16-cv-02480-LMM Document 99 Filed 10/26/16 Page 4 of 4 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION MICHAEL J. DAUGHERTY and LABMD, INC., Plaintiffs, v. JOEL P. ADAMS; DAVID J. BECKER; ROBERT J. BOBACK; ANJU S. CHOPRA; WESLEY K. CLARK, SR.; JOHN C. HANSBERRY; SAM P. HOPKINS; M. ERIC JOHNSON; ERIC D. KLINE; DANIEL J. KOPCHAK; LARRY PONEMON; HOWARD SCHMIDT; KEITH E. TAGLIAFERRI; BRIAN J. TARQUINIO; MORGAN, LEWIS AND BOCKIUS, LLP; PEPPER HAMILTON LLP; TIVERSA HOLDING CORP.; TRUSTEES OF DARTMOUTH COLLEGE; and DOES 1 - 10, Defendants. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) CIVIL ACTION FILE NO. 1:16-cv-2480-LMM MEMORANDUM OF LAW IN SUPPORT OF DEFENDANTS PEPPER HAMILTON LLP’S AND JOHN C. HANSBERRY’S MOTION TO DISMISS PLAINTIFFS’ COMPLAINT Case 1:16-cv-02480-LMM Document 99-1 Filed 10/26/16 Page 1 of 39 TABLE OF CONTENTS INTRODUCTION .....................................................................................................1 FACTUAL BACKGROUND....................................................................................3 STANDARD OF REVIEW .......................................................................................4 ARGUMENT AND CITATION OF AUTHORITIES..............................................6 I. Plaintiffs’ RICO Claims Fail as a Matter of Law (Counts I, II, III and IV)..............................................................................................6 A. Plaintiffs’ Federal RICO Claims are Barred by the Statute of Limitations..................................................................6 B. Plaintiffs Fail to Plead Essential RICO Elements.......................8 1. Plaintiffs’ allegations of two acts in less than a year are insufficient to establish a “pattern of racketeering activity”........................................................9 2. Plaintiffs fail to adequately allege that Hansberry and Pepper Hamilton proximately caused their injuries ............................................................................11 3. Plaintiffs fail to allege an association in fact involving Hansberry and Pepper Hamilton ....................13 C. Plaintiffs’ RICO Conspiracy Claim Fails as a Matter of Law (Count II & IV) .................................................................16 II. Plaintiffs’ Fraud, Negligence, Fraudulent Misrepresentation and Negligent Misrepresentation Claims Fail as a Matter of Law Because Plaintiffs Cannot Plead Essential Elements of those Claims (Counts VII, VIII, IX, and X) .................................................17 A. Plaintiffs Did Not Actually Rely on the Alleged Misrepresentations and Were Not Justified in Relying on the Misrepresentations as a Matter of Law...............................17 1. Plaintiffs fail to allege that they relied on any supposed representation made by Hansberry and Pepper Hamilton .............................................................19 2. Even if Plaintiffs alleged that they relied on the supposedly false statements, which they do not, their reliance would be unreasonable .............................20 Case 1:16-cv-02480-LMM Document 99-1 Filed 10/26/16 Page 2 of 39 - 1 - B. Hansberry and Pepper Hamilton Did Not Owe a Legal Duty to Plaintiffs and Thus Plaintiffs Cannot State a Claim for Negligence................................................................22 C. Plaintiffs Have Not Alleged Damages Proximately Caused by the Purportedly False Statements............................23 III. Plaintiffs Cannot State a Claim for Conspiracy Because They Have Failed to Adequately Allege Any Underlying Actionable Claims..................................................................................................26 CONCLUSION........................................................................................................27 Case 1:16-cv-02480-LMM Document 99-1 Filed 10/26/16 Page 3 of 39 TABLE OF AUTHORITIES Page(s) Cases Am. Dental Ass’n v. Cigna. Corp., 605 F.3d 1283 (11th Cir. 2010) ......................................................................8, 16 Anderson v. Athene Annuity & Life Assurance Co., No. 1:16-cv-1637, 2016 WL 3883031 (N.D. Ga. June 23, 2016) ........................5 Anza v. Ideal Steel Supply Corp., 547 U.S. 451 (2006)............................................................................................13 Ashcroft v. Iqbal, 556 U.S. 662 (2009)..........................................................................................3, 4 Azrielli v. Cohen Law Offices, 21 F.3d 512 (2d Cir. 1994) .................................................................................15 Baumer v. Pachl, 8 F.3d 1341 (9th Cir. 1993) ................................................................................16 Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007)..........................................................................................4, 5 BMC-The Benchmark Mgmt. Co. v. Ceebraid-Signal Corp., 292 F. App’x 784 (11th Cir. 2008) .....................................................................26 Boyle v. United States, 556 U.S. 938 (2009)............................................................................................14 Brooks v. Blue Cross and Blue Shield of Fla., Inc., 116 F.3d 1364 (11th Cir. 1997) ............................................................................5 Brown v. SunTrust Bank, No. 2:14-cv-0014, 2014 WL 4925719 (N.D. Ga. Sept. 30, 2014) .......................5 Bryant v. Mortg. Capital Res. Corp., No. 1:00-cv-671, 2002 WL 34720249 (N.D. Ga. May 31, 2002) ......................24 Case 1:16-cv-02480-LMM Document 99-1 Filed 10/26/16 Page 4 of 39 - 1 - Cascardo v. Stacchini, 100 A.D.3d 675 (N.Y. App. Div. 2012) .............................................................21 Chancey v. State, 349 S.E.2d 717 (Ga. 1986) ...................................................................................8 Collins v. Regions Bank, 639 S.E.2d 626 (Ga. Ct. App. 2006)...................................................................17 CSX Transp., Inc. v. Williams, 608 S.E.2d 208 (Ga. 2005) .................................................................................22 Douglas Asphalt Co. v. QORE, Inc., 657 F.3d 1146 (11th Cir. 2011) ..........................................................................16 Duke Galish, LLC v. Manton, 662 S.E.2d 880 (Ga. Ct. App. 2008)...................................................................25 Duncan v. Klein, 720 S.E.2d 341 (Ga. Ct. App. 2011)...................................................................24 Ferrell v. Durbin, 311 F. App’x 253 (11th Cir. 2009) .....................................................................11 Fletcher v. Water Applications Distrib. Grp., Inc., 773 S.E.2d 859 (Ga. Ct. App. 2015)...................................................................22 Fluorine On Call, Ltd. v. Fluorogas Ltd., 380 F.3d 849 (5th Cir. 2004) ..............................................................................26 Freeman v. Wheeler, 627 S.E.2d 86 (Ga. Ct. App. 2006).....................................................................27 G&G TIC, LLC v. Ala. Controls Inc., No. 4:07-cv-126, 2008 WL 4457876 (M.D. Ga. Sept. 29, 2008) ......................11 Garcia v. Rodey, Dickason, Sloan, Akin & Robb, P.A., 750 P.2d 118 (N.M. 1988) ..................................................................................21 Greenwald v. Odom, 723 S.E.2d 305 (Ga. Ct. App. 2012)...................................................................24 Case 1:16-cv-02480-LMM Document 99-1 Filed 10/26/16 Page 5 of 39 - 2 - H.J. Inc. v. Nw. Bell Tel. Co., 492 U.S. 229 (1989)............................................................................................10 Hardaway Co. v. Parsons, Brinckerhoff, Quade & Douglas, Inc., 479 S.E.2d 727 (Ga. 1997) .................................................................................18 Harris v. Orange S.A., 636 F. App’x 476 (11th Cir. 2015) .....................................................................17 Hemispherx Biopharma, Inc. v. Mid-S. Capital, Inc., 690 F.3d 1216 (11th Cir. 2012) ..........................................................................17 Holmes v. Sec. Investor Prot. Corp., 503 U.S. 258 (1992)............................................................................................12 J & D Int’l Trading (Hong Kong) Ltd. v. MTD Equipment, LLC, 2014 WL 1683375 (N.D. Ga. April 28, 2014) ...................................................15 Jackson v. BellSouth Telecomm., 372 F.3d 1250 (11th Cir. 2004) ......................................................................9, 11 John Crane, Inc. v. Jones, 604 S.E.2d 822 (Ga. 2004) .................................................................................22 Jones v. Childers, 18 F.3d 899 (11th Cir. 1994) ................................................................................9 Kelly v. Palmer, Reifler, & Associates, P.A., 681 F. Supp. 2d 1356 (S.D. Fla. 2010) ...............................................................15 In the Matter of LabMD, Inc., FTC No. 9357 (F.T.C. 2016) ..............................................................................12 LabMD, Inc. v. Tiversa, Inc., et al., No. 1:11-cv-4044 (N.D. Ga. Jan. 13, 2012), ECF No. 17 ........................7, 19, 25 Lehman v. Lucom, 727 F.3d 1326 (11th Cir. 2013) ........................................................................6, 7 Lockheed Martin Corp. v. Boeing Co., 357 F. Supp. 2d 1350 (M.D. Fla. 2005)..............................................................14 Case 1:16-cv-02480-LMM Document 99-1 Filed 10/26/16 Page 6 of 39 - 3 - Mbigi v. Wells Fargo Home Mortg., 785 S.E.2d 8 (Ga. Ct. App. 2016).........................................................................9 McKenna Long & Aldridge v. Keller, 598 S.E.2d 892 (Ga. Ct. App. 2004)...................................................................22 Megens v. Dreyfoos, 166 F.3d 1114 (11th Cir. 1999) ....................................................................18, 21 Minnifield v. Johnson & Freedman, LLC, 448 F. App’x 914 (11th Cir. 2011) .....................................................................18 Next Century Commc’ns Corp. v. Ellis, 214 F. Supp. 2d 1366 (N.D. Ga. 2002), aff’d, 318 F.3d 1023 (11th Cir. 2003) ............................................................................................................17 Nolte v. Pearson, 994 F.2d 1311 (8th Cir. 1993) ............................................................................16 Okada v. Bank of Am., N.A., No. 15-cv-00981, 2015 WL 5556937 (C.D. Cal. Sept. 16, 2015)......................26 Oswell v. Nixon, 620 S.E.2d 419 (Ga. Ct. App. 2005)...................................................................22 Premier/Ga. Mgmt. Co. v. Realty Mgmt. Corp., 613 S.E.2d 112 (Ga. Ct. App. 2005)...................................................................26 Prince Heaton Enters., Inc. v. Buffalo’s Franchise Concepts, Inc., 117 F. Supp. 2d 1357 (N.D. Ga. 2000).................................................................9 Rasnick v. Krishna Hospitality, Inc., 713 S.E.2d 835 (Ga. 2011) .................................................................................22 Ray v. Spirit Airlines, Inc., No. 15-13792, 2016 WL 4578347 (11th Cir. Sept. 2, 2016)..............................15 Raysoni v. Payless Auto Deals, LLC, 766 S.E.2d 24 (Ga. 2014) ...................................................................................18 Case 1:16-cv-02480-LMM Document 99-1 Filed 10/26/16 Page 7 of 39 - 4 - Rep. of Pan. v. BCI Holdings (Luxembourg) S.A., 119 F.3d 935 (11th Cir. 1997) ..............................................................................8 Reves v. Ernst & Young, 507 U.S. 170 (1993)............................................................................................15 Rogers v. Nacchio, 241 F. App’x 602 (11th Cir. 2007) .......................................................................8 S. Intermodal Logistics, Inc. v. D.J. Powers Co., 10 F. Supp. 2d 1337 (S.D. Ga. 1998) .................................................................10 Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479 (1985)........................................................................................9, 13 Serpentfoot v. Rome City Comm’n, 426 F. App’x 884 (11th Cir. 2011) .......................................................................7 Simpson v. Sanderson Farms, Inc., 744 F.3d 702 (11th Cir. 2014) ..................................................................8, 11, 13 Simpson v. Sanderson Farms, Inc., No. 7:12-cv-28, 2012 WL 4049435 (M.D. Ga. Sept. 13, 2012).........................16 Steimer v. Northside Bldg. Supply Co., 415 S.E.2d 688 (Ga. Ct. App. 1992)...................................................................20 Sundale, Ltd. v. Fla. Assocs. Capital Enters., LLC, No. 11-cv-20635, 2012 WL 488110 (S.D. Fla. Feb. 14, 2012), aff’d sub nom., 499 F. App’x 887 (11th Cir. 2012) ..............................................18, 21 Tarver v. Wills, 330 S.E.2d 896 (Ga. Ct. App. 1985)...................................................................23 Tribeca Homes, LLC v. Marathon Inv. Corp., 745 S.E.2d 806 (2013) ........................................................................................25 Walker v. CSX Transp. Inc., 650 F.3d 1392 (11th Cir. 2011) ..........................................................................24 Case 1:16-cv-02480-LMM Document 99-1 Filed 10/26/16 Page 8 of 39 - 5 - Williams v. Mohawk Indus., Inc., 465 F.3d 1277 (11th Cir. 2006) ..........................................................................13 Statutes 18 U.S.C. § 1961(4) .................................................................................................14 18 U.S.C. § 1962(c) .............................................................................................8, 16 18 U.S.C. § 1962(d) .................................................................................................16 18 U.S.C. § 1964(c) .................................................................................................27 Computer Fraud and Abuse Act ..............................................................................27 FTC Act Section 5....................................................................................................12 O.C.G.A. § 13-6-11..................................................................................................27 O.C.G.A. § 16-14-4....................................................................................................8 O.C.G.A. § 16-14-4(c) .............................................................................................16 Case 1:16-cv-02480-LMM Document 99-1 Filed 10/26/16 Page 9 of 39 INTRODUCTION Plaintiffs have been waging a seemingly never-ending litigation war in many courts with Tiversa, Inc. (“Tiversa”) and its CEO Robert J. Boback (“Boback”). They now seek dramatically to expand the scope of their targets by suing a host of others, including the law firm Pepper Hamilton LLP (“Pepper Hamilton”) and one of its partners, John C. Hansberry (“Hansberry”). Yet Plaintiffs’ long and rambling shotgun complaint contains only two allegations of wrongdoing on the part of Hansberry and, derivatively, Pepper Hamilton: (1) submission in court filings of a yet-to-be-proven false declaration by Boback and (2) transmittal of a letter to Plaintiffs that contained allegedly false information provided to Hansberry and Pepper Hamilton by their client Tiversa. This isolated conduct does not support a single claim against Pepper Hamilton or Hansberry. Rather it is a failed attempt to recover against lawyers for simply doing their job of representing their client, whose interests are adverse to those of Plaintiffs. Plaintiffs attempt to assert ten causes of action against Hansberry and Pepper Hamilton. Each alleged claim fails as a matter of law. First, Plaintiffs’ alleged predicate act of wire fraud, allegedly committed when Hansberry and Pepper Hamilton filed three legal briefs that cite the Boback Declaration, occurred more than four years from the filing of the complaint and is therefore barred by federal RICO’s statute of limitations. Case 1:16-cv-02480-LMM Document 99-1 Filed 10/26/16 Page 10 of 39 2 Second, substantively, Plaintiffs do not come close to satisfying any of the exacting pleading requirements for stating a sufficient claim under the federal or Georgia RICO statutes. For example, Plaintiffs do not allege facts sufficient to show that the two supposed predicate acts committed in less than one year constitute a “pattern of racketeering activity.” Nor have Plaintiffs alleged that their injuries were proximately caused by Hansberry’s or Pepper Hamilton’s alleged acts. And, based on the allegations in the Complaint, Hansberry and Pepper Hamilton share no common purpose with the rest of the arbitrary and implausible “enterprise” Plaintiffs have alleged. Third, Plaintiffs’ RICO conspiracy claims collapse without substantive RICO claims to support them. Fourth, Plaintiffs fail to plead essential elements of their alleged state common law causes of action. As to the fraud-based claims, Plaintiffs fail to plead reliance on Hansberry’s and Pepper Hamilton’s supposedly false statements or that any purported reliance would have been reasonable. Plaintiffs’ negligence claim omits an essential element too, because Plaintiffs fail to identify any legal duty owed by Hansberry and Pepper Hamilton to Plaintiffs. Finally, Plaintiffs have not adequately pled that any conduct by Hansberry and Pepper Hamilton proximately caused an injury recognized by the law. Case 1:16-cv-02480-LMM Document 99-1 Filed 10/26/16 Page 11 of 39 3 Fifth, Plaintiffs’ common law conspiracy claim cannot be sustained in the absence of a single cause of action to serve as its object. FACTUAL BACKGROUND1 In 2011, Hansberry and Pepper Hamilton represented Tiversa in an action in the United States District Court for the Northern District of Georgia, No. 1:11-cv- 04044 (together with the subsequent appeal, No. 12-14504, the “Prior Action”). Compl. ¶ 324.2 In the Prior Action, Tiversa contended that it was not subject to personal jurisdiction in the State of Georgia because it did not conduct or regularly solicit business in Georgia and had not committed a tort in Georgia. See, e.g., id. at ¶¶ 341, 344-45, 349, 357. To support those arguments, Hansberry and Pepper 1 Hansberry and Pepper Hamilton summarize the allegations in the Complaint because they must be taken as true for purposes of this Motion. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). But Hansberry and Pepper Hamilton do not concede the veracity of the Complaint’s allegations. 2 Hansberry, a partner at Pepper Hamilton, was counsel of record for Tiversa in the Prior Action. Id. at ¶ 338. Plaintiffs allege that Eric D. Kline also represented Tiversa, even though he was not counsel of record and did not sign any of the papers in which the alleged misrepresentations appear. See id. at ¶ 339. Mr. Kline, although currently a partner at Pepper Hamilton, was a partner at Morgan, Lewis & Bockius LLP (“Morgan Lewis”) prior to his joining Pepper Hamilton in the fall of 2011. Because the majority of the alleged conduct regarding Mr. Kline pertains to his time at Morgan Lewis, he is represented by counsel for Morgan Lewis. Counsel for Morgan Lewis has indicated that Mr. Kline has adopted the arguments in this brief regarding any alleged conduct that occurred during his tenure at Pepper Hamilton. Because Mr. Kline did not enter an appearance in the Prior Action and did not sign the papers in which the alleged misrepresentations appear, he did not make or adopt any statements that could serve as the basis for any fraud- or negligence-based claims against Mr. Kline personally. Case 1:16-cv-02480-LMM Document 99-1 Filed 10/26/16 Page 12 of 39 4 Hamilton - as counsel defending Tiversa in the Prior Action - allegedly helped Tiversa prepare the sworn Boback Declaration, which was filed on December 1, 2011. Id. at ¶¶ 343-45. Hansberry and Pepper Hamilton cited the Boback Declaration in two district court briefs and, eventually, an Eleventh Circuit brief. Id. at ¶¶ 356-57. Through these briefings, Tiversa successfully established that it was not subject to personal jurisdiction in Georgia. Id. at ¶¶ 349, 354. On November 8, 2012, Hansberry (on behalf of Tiversa) also sent a letter to Plaintiffs in connection with the Prior Action, demanding that Plaintiffs stop publishing defamatory comments. Id. at ¶¶ 369-70. Plaintiffs allege - on “information and belief” alone - that Hansberry and Pepper Hamilton were aware that statements in the Boback Declaration and November 8 letter were false at the time they made or relied on them. Id. at ¶¶ 348-49, 354, 359, 360, 369. This is the only alleged conduct upon which Plaintiffs attempt to assert 10 causes of action against Pepper Hamilton and Hansberry. STANDARD OF REVIEW A district court should dismiss a complaint under Rule 12(b)(6) if the facts as pled do not state a claim for relief that is plausible on its face. Iqbal, 556 U.S. at 679; Bell Atl. Corp. v. Twombly, 550 U.S. 544, 561-62, 570 (2007). As the Supreme Court confirmed in Iqbal, Fed. R. Civ. P. 8 demands “more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Iqbal, 556 U.S. at Case 1:16-cv-02480-LMM Document 99-1 Filed 10/26/16 Page 13 of 39 5 678. It also “requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555. A complaint’s factual allegations, moreover, “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).” Id. (internal citations and emphasis omitted). Fraud-based claims, including claims for negligent misrepresentation, are subject to a heightened pleading standard under Rule 9(b),3 which requires that plaintiffs 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 [p]laintiffs; and (4) what the defendants gained by the alleged fraud.” Brown v. SunTrust Bank, No. 2:14-cv- 0014, 2014 WL 4925719, at *9 (N.D. Ga. Sept. 30, 2014) (quoting Brooks v. Blue Cross and Blue Shield of Fla., Inc., 116 F.3d 1364, 1380-81 (11th Cir. 1997)). 3 “Although . . . some district courts in the Eleventh Circuit have not required a plaintiff to plead a negligent misrepresentation claim with particularity . . . this court concludes that a negligent misrepresentation claim under Georgia law is essentially a ‘legal fraud’ claim and thus must be pled in conformance with Rule 9(b).” Anderson v. Athene Annuity & Life Assurance Co., No. 1:16-cv-1637, 2016 WL 3883031, at *3 (N.D. Ga. June 23, 2016) (compiling N.D. Ga. cases). Case 1:16-cv-02480-LMM Document 99-1 Filed 10/26/16 Page 14 of 39 6 ARGUMENT AND CITATION OF AUTHORITIES I. Plaintiffs’ RICO Claims Fail as a Matter of Law (Counts I, II, III and IV) A. Plaintiffs’ Federal RICO Claims are Barred by the Statute of Limitations Federal civil RICO claims are subject to a four-year statute of limitations. See Lehman v. Lucom, 727 F.3d 1326, 1330 (11th Cir. 2013). Of the two predicate acts Plaintiffs attribute to Hansberry and Pepper Hamilton, only the alleged mail fraud - supposedly committed when Hansberry and Pepper Hamilton mailed a letter to LabMD on November 8, 2012 (Compl. ¶¶ 369-75) - occurred within the applicable statutory limitations period. The remaining predicate act of wire fraud relates to Hansberry’s and Pepper Hamilton’s submission of the Boback declaration in the Prior Action on December 1, 2011, and in subsequent court filings.4 Id. ¶¶ 342-68. Because the statutory limitations period began to run on December 1, 2011, and expired on December 1, 2015, Plaintiffs’ RICO claim based on this predicate act is barred.5 4 It is of no consequence that the last brief referencing the Boback Declaration was not filed until November 12, 2012, Compl. ¶ 362, because the predicate act of wire fraud allegedly occurred upon the initial transmission of the Boback Declaration, which was on December 1, 2011. 5 As explained infra in Section I.B.1, generally, more than two predicate acts are required to state a RICO claim. Because Plaintiffs cannot rely on the time-barred wire fraud allegation as a predicate act, they are left with the single predicate act of alleged mail fraud, which is insufficient alone to support a claim for RICO. Case 1:16-cv-02480-LMM Document 99-1 Filed 10/26/16 Page 15 of 39 7 For federal civil RICO claims, the limitations period begins “when the injury was or should have been discovered, regardless of whether or when the injury is discovered to be part of a pattern of racketeering.” Lehman, 727 F.3d at 1330. It does not begin to accrue “upon the eventual termination of defendants’ misdeeds,” but instead when the plaintiff “knew or should have known that she suffered the injury . . . .” Serpentfoot v. Rome City Comm’n, 426 F. App’x 884, 887 (11th Cir. 2011). Plaintiffs describe the injury they (indirectly) suffered as a result of Hansberry’s and Pepper Hamilton’s use of the Boback Declaration as the supposed deception of the court in the Prior Action, and the subsequent adverse ruling issued against Plaintiffs based on the court’s purported reliance on the Boback Declaration. Compl. ¶¶ 348-51, 354-55, 359-68. For Plaintiffs, that injury was immediately apparent at the onset. Indeed, Plaintiffs challenged the Boback Declaration and argued in their Opposition to Tiversa’s Motion to Dismiss that “[s]uch argument is wholly unsupported by the evidence.” See LabMD’s Response to Defendant Tiversa’s Motion to Dismiss at 9, LabMD, Inc. v. Tiversa, Inc., et al., No. 1:11-cv-4044 (N.D. Ga. Jan. 13, 2012), ECF No. 17. Thus, Plaintiffs knew or should have known of the alleged (indirect) injury - the alleged deception of the court - at the time the Boback Declaration was first submitted, which was, at the earliest, on December 1, 2011, and, at the latest, on January 13, 2012. See Compl. ¶ 343. Accordingly, any of Plaintiffs’ claims based on a Case 1:16-cv-02480-LMM Document 99-1 Filed 10/26/16 Page 16 of 39 8 predicate act of wire fraud arising out of legal briefs that cite to the Boback Declaration are time barred. B. Plaintiffs Fail to Plead Essential RICO Elements RICO’s pleading standards are exacting. To state a RICO claim under 18 U.S.C. § 1962(c) or O.C.G.A. § 16-14-4, Plaintiffs must allege that Hansberry and Pepper Hamilton “participated in an illegal enterprise ‘through a pattern of racketeering activity.’” Am. Dental Ass’n v. Cigna. Corp., 605 F.3d 1283, 1290 (11th Cir. 2010) (quoting 18 U.S.C. § 1962(c)). This means that “a plaintiff must allege facts sufficient to support each of the statutory elements for at least two of the pleaded predicate acts” of racketeering activity. Rogers v. Nacchio, 241 F. App’x 602, 607 (11th Cir. 2007) (quoting Rep. of Pan. v. BCI Holdings (Luxembourg) S.A., 119 F.3d 935, 949 (11th Cir. 1997)) (internal quotation marks omitted). A plaintiff must also plausibly allege an “injury to business or property” proximately caused by a defendant’s racketeering activity. Simpson v. Sanderson Farms, Inc., 744 F.3d 702, 705 (11th Cir. 2014). Georgia’s RICO statute “is patterned after the federal RICO statute.” Chancey v. State, 349 S.E.2d 717, 721 (Ga. 1986). Case 1:16-cv-02480-LMM Document 99-1 Filed 10/26/16 Page 17 of 39 9 Plaintiffs’ allegations of two acts in less than a year are insufficient to establish a “pattern of racketeering activity” Plaintiffs’ two isolated allegations regarding Hansberry and Pepper Hamilton fail to establish a “pattern of racketeering activity.”56 It is “well established that in order to prove a ‘pattern of racketeering activity’ it is not sufficient to simply establish two isolated predicate acts.” Jackson v. BellSouth Telecomm., 372 F.3d 1250, 1264 (11th Cir. 2004); see also Mbigi v. Wells Fargo Home Mortg., 785 S.E.2d 8, 16 (Ga. Ct. App. 2016). Although it is necessary to allege at least two acts, “two of anything do not generally form a ‘pattern.’” Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 496 n.14 (1985). Rather, a “pattern” requires “something beyond the two predicate” acts and “‘[t]hat something is the threat of continuing racketeering activity.’” BellSouth, 372 F.3d at 1265 (quoting Jones v. Childers, 18 F.3d 899, 912 (11th Cir. 1994)) (emphasis in original); see also Prince Heaton Enters., Inc. v. Buffalo’s Franchise Concepts, Inc., 117 F. Supp. 2d 1357, 1362 (N.D. Ga. 2000) (noting that Georgia RICO statute requires continuity). Here Plaintiffs allege only two acts by Hansberry and Pepper Hamilton - wire fraud through submission of and reliance on the Boback Declaration and mail fraud through a letter sent to LabMD. Compl. ¶¶ 342-70. These two acts are 6 Additionally, as explained supra in Section I.A, the alleged predicate act of wire fraud is time-barred for purposes of a federal RICO claim. Case 1:16-cv-02480-LMM Document 99-1 Filed 10/26/16 Page 18 of 39 10 legally insufficient to establish a “pattern” of racketeering activity. See S. Intermodal Logistics, Inc. v. D.J. Powers Co., 10 F. Supp. 2d 1337, 1359 (S.D. Ga. 1998) (Under Georgia RICO “predicate incidents must be sufficiently ‘linked’ to form a RICO pattern, but nevertheless sufficiently distinguishable so that they do not become two sides of the same coin.”) Plaintiffs, moreover, cannot satisfy RICO’s continuity requirement. To satisfy this element, Plaintiffs must either allege sufficient facts to establish (i) “a closed but substantial period of time that demonstrates a defendant’s long-term criminal activity” - i.e., closed-ended continuity; or (2) “a threat of continuity” - i.e., open-ended continuity. H.J. Inc. v. Nw. Bell Tel. Co., 492 U.S. 229, 230 (1989). Plaintiffs make no allegation that Hansberry and Pepper Hamilton pose a continuing threat, thus their sole focus is on whether there is closed-ended continuity in the alleged pattern of racketeering activity.7 Even under a closed-ended continuity analysis, Plaintiffs’ claims fall flat. Allegations regarding Hansberry and Pepper Hamilton are limited to the time period between December 1, 2011, when Tiversa first filed the Boback Declaration, and November 16, 2012, when Tiversa filed the last brief referring to the Boback Declaration. Compl. ¶¶ 342-53. All other alleged events occurred 7 Plaintiffs’ allegation that the supposedly false representations made by Hansberry and Pepper Hamilton have been fully undermined, (Compl. ¶ 365), further prevents Plaintiffs from relying on an open-ended continuity theory. Hansberry and Pepper Hamilton therefore cannot pose a continuing threat. Case 1:16-cv-02480-LMM Document 99-1 Filed 10/26/16 Page 19 of 39 11 within this timeframe - less than one year. Predicate acts extending over a few months are legally insufficient to constitute a pattern of racketeering activity. See BellSouth, 372 F.3d at 1266 (“[N]ine months is too short a period to establish a ‘substantial period of time.’”). More to the point, “closed-ended continuity cannot be met with allegations of schemes lasting less than a year.” Ferrell v. Durbin, 311 F. App’x 253, 256 (11th Cir. 2009) (rejecting alleged scheme that took place from late 2004 to mid-2006). Because Plaintiffs’ alleged scheme involving Hansberry and Pepper Hamilton lasted less than a year, it fails as a matter of law. Plaintiffs fail to adequately allege that Hansberry and Pepper Hamilton proximately caused their injuries Plaintiffs do not even try to allege any plausible injury that was proximately caused by Hansberry and Pepper Hamilton. Yet a plaintiff asserting a RICO claim must “allege[] enough facts plausibly to establish two things: first, that they were actually injured; and, second, that the claimed predicate RICO violations were a proximate cause of the injury.” Simpson, 744 F.3d at 704; see also G&G TIC, LLC v. Ala. Controls Inc., No. 4:07-cv-126, 2008 WL 4457876, at *6 (M.D. Ga. Sept. 29, 2008) (noting that Georgia’s RICO statute requires that predicate act be both the “but for” and proximate cause of the injury). Plaintiffs’ allegations must show a “direct relation” between the injury and the purported RICO violations. Simpson, 744 F.3d at 712. It is not enough to allege that a pattern of racketeering was a “but Case 1:16-cv-02480-LMM Document 99-1 Filed 10/26/16 Page 20 of 39 12 for” cause. Plaintiffs must also show that it was a proximate cause of their supposed injuries. See Holmes v. Sec. Investor Prot. Corp., 503 U.S. 258, 268 (1992). Plaintiffs do not even try to pin their real injury - the FTC investigation which led to the FTC concluding that LabMD’s data security standards are unreasonable and violate Section 5 of the FTC Act8 - on Hansberry and Pepper Hamilton. See, e.g., Compl. ¶ 223. Instead, they account for injury by claiming that Hansberry and Pepper Hamilton caused them to file the Pennsylvania Action. Id. at ¶ 364. But Plaintiffs cannot tether conduct by Hansberry and Pepper Hamilton to a daisy chain of events that ultimately result in Plaintiffs’ newly alleged injury. According to Plaintiffs, had Hansberry and Pepper Hamilton not submitted the Boback Declaration, (i) the Prior Action would not have been dismissed (Compl. ¶¶ 363, 366); (ii) then Plaintiffs would have learned of Tiversa’s alleged wrongdoing through discovery sooner (id. ¶ 365); and (iii) ultimately, Plaintiffs would not have needed to file an action in Pennsylvania court against Tiversa, Boback, and others (id. at ¶ 364). This hypothetical conjecture is the antithesis of proximate cause. 8 See In the Matter of LabMD, Inc., FTC No. 9357 (F.T.C. 2016). The Complaint references the decision of the FTC administrative law judge “in favor of LabMD and against the FTC.” ¶ 14. After the filing of the Complaint, the full FTC reversed the dismissal of the investigation in the cited decision. Case 1:16-cv-02480-LMM Document 99-1 Filed 10/26/16 Page 21 of 39 13 Indeed, “the central question” of proximate cause is “whether the alleged violation led directly to the plaintiff’s injuries.” Anza v. Ideal Steel Supply Corp., 547 U.S. 451, 461 (2006). Or, put differently, “the compensable injury flowing from a [RICO] violation . . . ‘necessarily is the harm caused by the predicate acts . . . , for the essence of the violation is the commission of those acts in connection with the conduct of an enterprise.’” Id. at 457 (quoting Sedima, 473 U.S. at 497). Plaintiffs “cannot plausibly establish proximate cause merely by tacking a conclusory allegation” onto their claim of injury, but the last progression of Plaintiffs’ strand of events is exactly that - a conclusory allegation of what could have happened. Simpson v. Sanderson Farms, Inc., 744 F.3d 702, 713 (11th Cir. 2014). Accordingly, Plaintiffs’ attenuated chain - beginning with the Prior Action not being dismissed absent the Boback Declaration and ending with the obviation of Plaintiffs’ need to file the Pennsylvania action - is insufficient to allege proximate cause. Plaintiffs fail to allege an association in fact involving Hansberry and Pepper Hamilton Plaintiffs’ “enterprise” allegation is incoherent and implausible.9 Indeed, it does not even include Tiversa, the primary target in Plaintiffs’ multi-front litigation war. Instead, Plaintiffs attempt to lump Hansberry and Pepper Hamilton into an 9 Civil RICO claims under the Georgia statute do not require allegations of an enterprise. See Williams v. Mohawk Indus., Inc., 465 F.3d 1277, 1292-93 (11th Cir. 2006). Case 1:16-cv-02480-LMM Document 99-1 Filed 10/26/16 Page 22 of 39 14 arbitrary association-in-fact enterprise of Defendants Kline, Tarquinio, Morgan Lewis, and Does 1-10 (Compl. ¶¶ 430-31). An association-in-fact enterprise is a “union or group of individuals associated in fact although not a legal entity.” 18 U.S.C. § 1961(4). Such an enterprise “must have three structural features - a purpose, relationships among those associated with the enterprise, and longevity sufficient to permit those associates to pursue the enterprise’s purpose.” Boyle v. United States, 556 U.S. 938, 946 (2009). In order to do so, the alleged enterprise must actually be working together to accomplish the predicate acts; it is not enough that the individuals were “acting independently . . . .” Lockheed Martin Corp. v. Boeing Co., 357 F. Supp. 2d 1350, 1363 (M.D. Fla. 2005). Moreover, an association-in-fact must be “a continuing unit that functions with a common purpose.” Boyle, 556 U.S. at 939. Plaintiffs’ allegations regarding Hansberry and Pepper Hamilton simply cannot be squared with the enterprise Plaintiffs allege. Here the alleged members of the enterprise share no “common purpose.” Plaintiffs allege that Hansberry, Kline, Tarquinio, Morgan Lewis, Pepper Hamilton and Does 1-10’s shared a common purpose to “commercially benefit by making misrepresentations about data privacy and security breach to unsuspecting customers, the media, and the public . . . .” Compl. ¶ 430. But Hansberry and Pepper Hamilton have no connection to that alleged conduct and, even if they did, it relates only to Boback Case 1:16-cv-02480-LMM Document 99-1 Filed 10/26/16 Page 23 of 39 15 and Tiversa, who are not part of the alleged enterprise.10 The two predicate acts tied to Hansberry and Pepper Hamilton make no mention of this common purpose and Plaintiffs do not attempt to link Hansberry and Pepper Hamilton with this common purpose anywhere else in the Complaint. Underscoring this point even more is Plaintiffs’ complete failure to allege any relationship between Hansberry and Pepper Hamilton and the remaining members of the alleged enterprise, let alone to include an allegation that the members of the enterprise acted together to accomplish the alleged common purpose.11 Without a common purpose to the 10 Nor can Plaintiffs create a common purpose by separating Hansberry and Pepper Hamilton from the other members of the alleged enterprise. For purposes of an association-in-fact enterprise, an entity - like Pepper Hamilton - cannot be distinct from its agents - like Hansberry - when they are acting in their official capacities. See Ray v. Spirit Airlines, Inc., No. 15-13792, 2016 WL 4578347, at *11-*12 (11th Cir. Sept. 2, 2016). Hansberry and Pepper Hamilton are thus substantively identical for purposes of establishing a RICO enterprise. 11 Equally damaging to Plaintiffs’ cause of action is their failure to allege that Hansberry and Pepper Hamilton were anything more than peripheral actors in the alleged conspiracy. Compl. ¶ 430. More is needed to state a valid RICO cause of action - Plaintiffs must allege that defendants “participated in the operation or management of the enterprise itself.” Reves v. Ernst & Young, 507 U.S. 170, 183 (1993); see also J & D Int’l Trading (Hong Kong) Ltd. v. MTD Equipment, LLC, 2014 WL 1683375, at *14 (N.D. Ga. April 28, 2014) (Georgia RICO, like federal RICO, “requires that a defendant ‘conduct or participate in . . . [the] enterprise through a pattern of racketeering activity”). And a lawyer or law firm acting within the scope of their representation is not part of the operation or management of an enterprise. See Kelly v. Palmer, Reifler, & Associates, P.A., 681 F. Supp. 2d 1356, 1380 (S.D. Fla. 2010) (“Courts following Reves have generally held that the provision of traditional legal services does not constitute the ‘operation or management’ of an enterprise”); Azrielli v. Cohen Law Offices, 21 F.3d 512, 521- 522 (2d Cir. 1994) (dismissing RICO claim against attorney who “acted as no Case 1:16-cv-02480-LMM Document 99-1 Filed 10/26/16 Page 24 of 39 16 alleged enterprise or any action taken by the members of the alleged enterprise while working together, Plaintiffs’ federal RICO claim fails as a matter of law. C. Plaintiffs’ RICO Conspiracy Claim Fails as a Matter of Law (Count II & IV) Plaintiffs’ conspiracy claims under 18 U.S.C. § 1962(d) and O.C.G.A. § 16- 14-4(c) fail for all the same reasons that their substantive RICO claims fail. Proof of a RICO conspiracy requires a showing that (i) the defendant agreed to the overall objective of the conspiracy; or (ii) that the defendant agreed to commit two predicate acts. See Am. Dental Ass’n v. Cigna Corp., 605 F.3d 1283, 1293 (11th Cir. 2010). But a plaintiff has “no standing to bring a civil RICO claim unless their injuries resulted from violation of a substantive provision of RICO.” Douglas Asphalt Co. v. QORE, Inc., 657 F.3d 1146, 1153 (11th Cir. 2011) (concluding that plaintiff could not prevail on conspiracy claim because plaintiff could not state a claim under section 1962(c)); Simpson v. Sanderson Farms, Inc., No. 7:12-cv-28, 2012 WL 4049435, at *1 at n.3 (M.D. Ga. Sept. 13, 2012) (applying the same analysis to Georgia RICO claim). Because Plaintiffs fail to plead essential elements of their substantive RICO claim, their conspiracy claim also fails. more than [an] attorney”); see also Nolte v. Pearson, 994 F.2d 1311, 1316-17 (8th Cir. 1993) (same); Baumer v. Pachl, 8 F.3d 1341, 1344 (9th Cir. 1993) (same). Case 1:16-cv-02480-LMM Document 99-1 Filed 10/26/16 Page 25 of 39 17 II. Plaintiffs’ Fraud, Negligence, Fraudulent Misrepresentation and Negligent Misrepresentation Claims Fail as a Matter of Law Because Plaintiffs Cannot Plead Essential Elements of those Claims (Counts VII, VIII, IX, and X) Plaintiffs attempt to assert claims for common law fraud (Count VII), common law negligence (Count VIII), fraudulent misrepresentation (Count IX), and negligent misrepresentation (Count X) based on allegedly false statements that Hansberry and Pepper Hamilton either knowingly made or negligently failed to investigate during the course of the Prior Action. Compl. ¶¶ 530-559. For the following reasons, these claims are deficient and must be dismissed. A. Plaintiffs Did Not Actually Rely on the Alleged Misrepresentations and Were Not Justified in Relying on the Misrepresentations as a Matter of Law Under Georgia law, claims for both fraud - whether styled as common law fraud or fraudulent misrepresentation - and negligent misrepresentation require a showing of justifiable reliance. See Hemispherx Biopharma, Inc. v. Mid-S. Capital, Inc., 690 F.3d 1216, 1234 (11th Cir. 2012) (explaining elements of fraud claim);12 Harris v. Orange S.A., 636 F. App’x 476, 484 (11th Cir. 2015) (internal citation omitted) (listing the same elements for fraudulent misrepresentation); Next Century Commc’ns Corp. v. Ellis, 214 F. Supp. 2d 1366, 1372 (N.D. Ga. 2002), 12 “A claim for fraud requires proof of ‘1) a false representation or omission of material fact; 2) scienter; 3) intent to induce the party claiming fraud to act or refrain from acting; 4) justifiable reliance; and 5) damages.’” Id. (quoting Collins v. Regions Bank, 639 S.E.2d 626, 628 (Ga. Ct. App. 2006)). Case 1:16-cv-02480-LMM Document 99-1 Filed 10/26/16 Page 26 of 39 18 aff’d, 318 F.3d 1023 (11th Cir. 2003) (explaining elements of negligent misrepresentation claim).13 Courts applying Georgia law have held that there is no justifiable reliance to support a fraud or negligent misrepresentation claim where the plaintiff did not actually rely on a representation, see Minnifield v. Johnson & Freedman, LLC, 448 F. App’x 914, 917 (11th Cir. 2011), or where the unreasonableness of plaintiff’s alleged reliance “appear[ed] so clearly that the question [could] be decided by a court as a matter of law,” Raysoni v. Payless Auto Deals, LLC, 766 S.E.2d 24, 26 (Ga. 2014). Further, “[a]s a matter of law, any reliance on misrepresentations made in the context of an adversarial relationship is unreasonable.” Sundale, Ltd. v. Fla. Assocs. Capital Enters., LLC, No. 11-cv- 20635, 2012 WL 488110, at *8 (S.D. Fla. Feb. 14, 2012), aff’d sub nom., 499 F. App’x 887 (11th Cir. 2012) (citing Megens v. Dreyfoos, 166 F.3d 1114, 1118-19 (11th Cir. 1999)). Here, Plaintiffs have failed to plead justifiable reliance because: (i) they have not made a threshold showing that they actually relied on any representation of Hansberry or Pepper Hamilton and (ii) any reliance on representations made by an adversary in litigation is not reasonable as a matter of law. 13 “The essential elements of a claim for negligent misrepresentation are: (1) the defendant’s negligent supply of false information to foreseeable persons, known or unknown; (2) such persons’ reasonable reliance upon that false information; and (3) economic injury proximately resulting from such reliance.” Id. (citing Hardaway Co. v. Parsons, Brinckerhoff, Quade & Douglas, Inc., 479 S.E.2d 727 (Ga. 1997)). Case 1:16-cv-02480-LMM Document 99-1 Filed 10/26/16 Page 27 of 39 19 Plaintiffs fail to allege that they relied on any supposed representation made by Hansberry and Pepper Hamilton Plaintiffs have not pled a single fact that could show that they took any action or changed their position based on the purported veracity of the statements made in the Prior Action. In fact, the opposite is alleged - Plaintiffs challenged the statements at the time they were made in the Prior Action. See LabMD’s Response to Defendant Tiversa’s Motion to Dismiss at 9, LabMD, Inc. v. Tiversa, Inc., et al., No. 1:11-cv-4044 (N.D. Ga. Jan. 13, 2012), ECF No. 17. For example, in response to Tiversa’s assertion that it was not subject to personal jurisdiction in the State of Georgia, Plaintiffs argued to the district court “that [Tiversa] committed a tort in Georgia . . . or alternatively caused injury in Georgia and regularly solicited business in Georgia” and therefore was subject to the court’s jurisdiction. LabMD, Inc. v. Tiversa, Inc., et al., No. 1:11-cv-4044 (N.D. Ga. Aug. 15, 2012) [ECF No. 23]. When the district court ruled against Plaintiffs, they again challenged the allegedly false statements by appealing the Court’s order to the Eleventh Circuit. Compl. ¶ 352. Plaintiffs also did not rely on any of the statements in the November 8, 2012 letter from Hansberry. In that letter, Hansberry, on behalf of Tiversa, demanded that LabMD “take down and cease publishing . . . false statements against Tiversa” and warned that Tiversa would be forced to file suit for trade libel, defamation, and tortious interference if “LabMD, Mr. Daugherty, and/or Mr. Daugherty’s upcoming book . . . propagate[d] false information about Case 1:16-cv-02480-LMM Document 99-1 Filed 10/26/16 Page 28 of 39 20 the Tiversa business.” Id. ¶ 370. By Plaintiffs’ own admission, Daugherty published the highly critical book, and Tiversa followed through with its threat to file a defamation suit. Id. ¶ 220-21, 372. Plaintiffs’ own allegations therefore show that they never relied on any of the representations at issue. Indeed, Plaintiffs dismissed them. Where a plaintiff “never acted” on misrepresentations, “disputed them as soon as it had knowledge thereof” and “maintained its position consistently thereafter,” the plaintiff cannot state a claim sounding in fraud. Steimer v. Northside Bldg. Supply Co., 415 S.E.2d 688, 689 (Ga. Ct. App. 1992). Even if Plaintiffs alleged that they relied on the supposedly false statements, which they do not, their reliance would be unreasonable The nature of the statements Plaintiffs allege to have “acted in reasonable reliance upon” precludes any such reasonable reliance. Plaintiffs readily admit that Hansberry and Pepper Hamilton made (or failed to properly vet) all of the statements at issue during the course of or in connection with the Prior Action, while Hansberry and Pepper Hamilton were serving as opposing counsel to Plaintiffs. See Compl. ¶¶ 343, 347, 353, 369. The statements directly refute positions that Plaintiffs had taken in the Prior Action. The statements in the Boback Declaration, incorporated in the reply and appellate briefs, challenged the sufficiency of Plaintiffs’ assertion that a Georgia court could properly exercise Case 1:16-cv-02480-LMM Document 99-1 Filed 10/26/16 Page 29 of 39 21 jurisdiction over Tiversa in the Prior Action. The statements in Hansberry’s letter expressly repudiated published statements Plaintiffs had made in connection with the Prior Action. Compl. ¶ 369-70. The unreasonableness of Plaintiffs’ supposed reliance on statements made by opposing counsel that directly undermine Plaintiffs’ positions in an adversarial proceeding is manifest and self-evident. Courts across the country, including the Eleventh Circuit, consistently have held that reliance on the representations of an opposing party or its counsel during adversarial proceedings is unreasonable as a matter of law. See, e.g., Megens, 166 F.3d at 1118-19 (affirming district court’s holding that reliance on adversary’s representations was unreasonable as a matter of law under Florida law); Sundale, 2012 WL 488110, at *8.14 Plaintiffs’ claims here should fare no better. The Court should dismiss Counts VII, IX, and X because Plaintiffs cannot plead that they have actually or justifiably relied on any Hansberry or Pepper Hamilton representation at issue. 14 See also Garcia v. Rodey, Dickason, Sloan, Akin & Robb, P.A., 750 P.2d 118, 123 (N.M. 1988) (“The very nature of the adversary process precludes justifiable reliance by an opposing party.”); Cascardo v. Stacchini, 100 A.D.3d 675, 676 (N.Y. App. Div. 2012) (“Likewise, the plaintiff cannot properly plead reasonable reliance on the representations of another party’s counsel so as to support her claim of fraud.”). Case 1:16-cv-02480-LMM Document 99-1 Filed 10/26/16 Page 30 of 39 22 B. Hansberry and Pepper Hamilton Did Not Owe a Legal Duty to Plaintiffs and Thus Plaintiffs Cannot State a Claim for Negligence To state a claim for negligence, Plaintiffs must allege: (i) a duty flowing from the defendants to Plaintiffs; (ii) a negligent act or omission by the defendants; (iii) injury to Plaintiffs; and (iv) a proximate relationship between the negligent act or omission and the resulting injury to Plaintiffs. John Crane, Inc. v. Jones, 604 S.E.2d 822, 825 (Ga. 2004). Accordingly, “[b]efore negligence can be predicated upon a given act, some duty to the individual complaining must be sought and found, the observance of which duty would have averted or avoided the injury or damage.” Fletcher v. Water Applications Distrib. Grp., Inc., 773 S.E.2d 859, 863 (Ga. Ct. App. 2015) (quoting CSX Transp., Inc. v. Williams, 608 S.E.2d 208, 209 (Ga. 2005)). That duty can arise “by statute[] or be imposed by a common law principle recognized in the caselaw.” Fletcher, 733 S.E. at 863 (quoting Rasnick v. Krishna Hospitality, Inc., 713 S.E.2d 835, 837 (Ga. 2011)). “The existence of a legal duty is a question of law for the court.” Id. Georgia caselaw makes clear that a lawyer does not owe a legal duty to his or her client’s adversary. E.g., McKenna Long & Aldridge v. Keller, 598 S.E.2d 892, 894-95 (Ga. Ct. App. 2004) (holding that alleged failure of law firm to investigate adequately its client’s allegations before sending demand letter to adverse party did not give rise to negligence action because firm owed no legal duty to non-client); Oswell v. Nixon, 620 S.E.2d 419, 421 (Ga. Ct. App. 2005) Case 1:16-cv-02480-LMM Document 99-1 Filed 10/26/16 Page 31 of 39 23 (holding that plaintiff could not file unauthorized practice of law suit against opponent’s lawyers from prior case because there was “no basis for any purported duty”); Tarver v. Wills, 330 S.E.2d 896, 898 (Ga. Ct. App. 1985) (“[T]he attorney owed no legal duty to the appellee . . . to investigate fully the client’s claim prior to filing suit . . . or to avoid filing a suit which he knew or should have known was frivolous.” (citation omitted)). Here, Plaintiffs only allege that Hansberry and Pepper Hamilton “had a duty to refrain from making the . . . false representations.” Compl. ¶¶ 547, 556. Plaintiffs make this conclusory allegation in reference to its fraudulent misrepresentation and negligent misrepresentation claims - not common law negligence. However, even assuming Plaintiffs intended for that allegation to apply to all of their negligence claims, Plaintiffs have not alleged a single fact that would allow Plaintiffs to overcome the general rule that an attorney owes no legal duty to his or her client’s adversary. Without alleging any basis for a purported duty owed by Hansberry and Pepper Hamilton to Plaintiffs, Plaintiffs’ negligence claim fails as a matter of law. C. Plaintiffs Have Not Alleged Damages Proximately Caused by the Purportedly False Statements Under Georgia law, proximately caused damages sustained as a result of Hansberry’s and Pepper Hamilton’s alleged conduct are essential to Plaintiffs’ claims for fraud, negligence, fraudulent misrepresentation, and negligent Case 1:16-cv-02480-LMM Document 99-1 Filed 10/26/16 Page 32 of 39 24 misrepresentation. See Greenwald v. Odom, 723 S.E.2d 305, 317 (Ga. Ct. App. 2012) (noting that proximate cause is necessary to establish common law fraud or negligent representation); Bryant v. Mortg. Capital Res. Corp., No. 1:00-cv-671, 2002 WL 34720249, at *4 (N.D. Ga. May 31, 2002) (proximate cause is required to state claim for fraudulent misrepresentation); Walker v. CSX Transp. Inc., 650 F.3d 1392, 1398 (11th Cir. 2011) (negligence is not actionable without proximate cause). An injury was proximately caused by a defendant’s conduct if and only if the injury was the direct result of the misconduct charged and was reasonably foreseeable by the defendant. Duncan v. Klein, 720 S.E.2d 341, 347-48 (Ga. Ct. App. 2011). The court should make the determination of whether an injury was proximately caused by a defendant as a matter of law in “plain and undisputed cases.” Id. at 348. Here, Plaintiffs have failed to allege proximate cause as a matter of law. Plaintiffs’ claims also fail for the additional, independent reason that they have not alleged a legally recognized injury. Plaintiffs have only proffered a “but-for” theory of causation, which itself reveals how attenuated and disconnected Plaintiffs’ purported injuries were from Hansberry’s and Pepper Hamilton’s statements. As explained supra in Section I.B.2, Plaintiffs tenuously allege that if Hansberry and Pepper Hamilton had not submitted the Boback Declaration or sent the November 12, 2012 letter, (i) the Prior Action would not have been dismissed (Compl. ¶¶ 363, 366); (ii) so Plaintiffs Case 1:16-cv-02480-LMM Document 99-1 Filed 10/26/16 Page 33 of 39 25 would have learned of Tiversa’s alleged wrongdoing through discovery sooner (id. ¶ 365); and (iii) ultimately, Plaintiffs would not have needed to file an action in Pennsylvania court against Tiversa, Boback, and others (id. ¶ 364). Plaintiffs’ insufficient and attenuated proximate cause allegations impermissibly rest on nothing more than speculation and conjecture. See Duke Galish, LLC v. Manton, 662 S.E.2d 880, 885 n.2 (Ga. Ct. App. 2008). Additionally, where a causation theory depends on an independent decision- maker’s exercise of authority and discretion, a plaintiff cannot establish proximate cause. See Tribeca Homes, LLC v. Marathon Inv. Corp., 745 S.E.2d 806, 809 (2013) (holding that plaintiff failed to establish that defendant proximately caused injury in the form of lost opportunity to develop property where bank had sole power and discretion to dispose of property). Plaintiffs cannot show that the court would have ruled in their favor absent the allegedly false statements. Nor can they show that they would have discovered evidence inculpating Tiversa through discovery. Accordingly, Plaintiffs’ negligence- and fraud-based claims must fail for lack of proximate causation. Plaintiffs’ damages allegations are also legally insufficient. Because the Prior Action was dismissed without prejudice15 and could have been refiled at any 15 See LabMD, Inc. v. Tiversa, Inc., et al., No. 1:11-cv-4044 (N.D. Ga. Aug. 15, 2012) [ECF No. 23]. Case 1:16-cv-02480-LMM Document 99-1 Filed 10/26/16 Page 34 of 39 26 time - and indeed was refiled in the Western District of Pennsylvania - Plaintiffs “cannot be said to have ‘altered [their] . . . legal relations’ with [Defendants] in any meaningful way or to have incurred any damages by virtue of [their] reliance” on any purported false statements. Okada v. Bank of Am., N.A., No. 15-cv-00981, 2015 WL 5556937, at *6 (C.D. Cal. Sept. 16, 2015) (finding that “no injury” could be attributed to plaintiff’s voluntary dismissal of a pending suit against defendant based on defendant’s alleged misrepresentation because plaintiff could have refiled suit); see also Fluorine On Call, Ltd. v. Fluorogas Ltd., 380 F.3d 849, 859 (5th Cir. 2004) (“[Plaintiff] has no injury that can be attributed to the alleged fraudulent representations. . . . [I]t dismissed its first lawsuit without prejudice.”). Plaintiffs have not lost the right to assert any claim by virtue of the dismissal, and they therefore have not incurred damages as a matter of law. Because Plaintiffs have not adequately pled proximately caused damages, the Court should dismiss Counts VII, VIII, IX, and X. III. Plaintiffs Cannot State a Claim for Conspiracy Because They Have Failed to Adequately Allege Any Underlying Actionable Claims Georgia law requires a plaintiff to show “two or more persons, acting in concert, engaged in conduct that constitutes a tort” to state a viable claim for civil conspiracy. BMC-The Benchmark Mgmt. Co. v. Ceebraid-Signal Corp., 292 F. App’x 784, 787 (11th Cir. 2008) (citing Premier/Ga. Mgmt. Co. v. Realty Mgmt. Corp., 613 S.E.2d 112, 118 (Ga. Ct. App. 2005)). Plaintiffs allege that Hansberry, Case 1:16-cv-02480-LMM Document 99-1 Filed 10/26/16 Page 35 of 39 27 Pepper Hamilton, and the other defendants in this case violated the Computer Fraud and Abuse Act and Georgia Computer Crimes statute and committed acts of fraud, negligence, fraudulent and negligent misrepresentation, defamation, conversion, and tortious interference. Compl. ¶ 563. But, Plaintiffs do not allege a single fact showing that Hansberry or Pepper Hamilton violated the Computer Fraud and Abuse Act or Georgia Computer Crimes statute or engaged in any defamation, conversion, or tortious interference.16 Also, for the reasons above, Plaintiffs cannot sustain causes of action for fraud, negligence, fraudulent misrepresentation or negligent misrepresentation. Accordingly, the Court should dismiss the conspiracy claim.17 CONCLUSION For the reasons stated herein, the Court should dismiss Plaintiffs’ Complaint in its entirety and with prejudice. 16 In fact, Plaintiffs expressly state that they are bringing the claims for violation of the Computer Fraud and Abuse Act and Georgia Computer Crimes statute only against Boback, Johnson, Tiversa, and Dartmouth and accordingly omit Hansberry and Pepper Hamilton. Compl. ¶¶ 521, 526. 17 Because Plaintiffs cannot sustain a single cause of action, their claim for attorneys’ fees and court costs under O.C.G.A. § 13-6-11 also fails. See Freeman v. Wheeler, 627 S.E.2d 86, 90 (Ga. Ct. App. 2006) (“As to attorney fees and expenses of litigation under OCGA § 13-6-11, these damages are ancillary and recoverable only where other elements of damage are recoverable on the underlying claim.”). Likewise, Plaintiffs’ claims for fees pursuant to the RICO statute, 18 U.S.C. § 1964(c), fail without a viable underlying RICO claim. Case 1:16-cv-02480-LMM Document 99-1 Filed 10/26/16 Page 36 of 39 28 Respectfully submitted this 26th day of October, 2016. By: /s/ William R. Mitchelson Jr. WILLIAM R. MITCHELSON JR. Georgia Bar No. 513811 MICHAEL P. KENNY Georgia Bar No. 415064 ALSTON & BIRD LLP 1201 West Peachtree Street Atlanta, Georgia 30309-3424 Telephone: 404-881-7000 Facsimile: 404-881-7777 mitch.mitchelson@alston.com mike.kenny@alston.com Attorneys for Defendants Pepper Hamilton LLP and John C. Hansberry Case 1:16-cv-02480-LMM Document 99-1 Filed 10/26/16 Page 37 of 39 29 CERTIFICATE OF COMPLIANCE Pursuant to LR 7.1D, the undersigned certifies that the foregoing complies with the font and point selections permitted by LR 5.1B. This document was prepared on a computer using the Times New Roman font (14 point). Respectfully submitted, this 26th day of October, 2016. By: /s/ William R. Mitchelson Jr. WILLIAM R. MITCHELSON JR. Georgia Bar No. 513811 Case 1:16-cv-02480-LMM Document 99-1 Filed 10/26/16 Page 38 of 39 30 CERTIFICATE OF SERVICE The undersigned hereby certifies that a true and correct copy of the foregoing was filed on October 26, 2016, with the Court and served electronically through the CM/ECF system to all counsel of record registered to receive a Notice of Electronic Filing for this case. By: /s/ William R. Mitchelson Jr. WILLIAM R. MITCHELSON JR. Georgia Bar No. 513811 Case 1:16-cv-02480-LMM Document 99-1 Filed 10/26/16 Page 39 of 39