Five on Fifty, Llc et al v. Bean et alMOTION TO DISMISS FOR FAILURE TO STATE A CLAIM with Brief In SupportN.D. Ga.June 26, 2017 NITED STATES DISTRICT COURT NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION FIVE ON FIFTY, LLC; GATE INDUSTRIES, LLC; and SOUTHERN FILM REGIONAL CENTER-ATLANTA, LLC, Plaintiffs, -vs.- F. RAYMON BEAN; DAVID SHAFFER; JEFFREY KUEHR; GREENFUELS ENERGY, LLC; GEORGIA RENEWABLE POWER, LLC; GRP FRANKLIN, LLC; GRP MADISON, LLC; GRP NORTH CAROLINA, LLC; NORTH CAROLINA RENEWABLE POWER-LUMBERTON, LLC; and NORTH CAROLINA RENEWABLE POWER- ELIZABETHTOWN, LLC, Defendants. Civil Action No. 1:16-cv-3690-TCB (JURY TRIAL DEMANDED) DEFENDANTS’ MOTION TO DISMISS THE FIRST AMENDED COMPLAINT Defendants, by way of special appearance and without waiving but specifically reserving all defenses as to the jurisdiction of this Court, respectfully move this Court to dismiss Plaintiffs’ First Amended Complaint (“FAC”) with prejudice for three reasons. First, Plaintiffs’ claims against GRP North Carolina, Case 1:16-cv-03690-TCB Document 36 Filed 06/26/17 Page 1 of 5 - 2 - LLC, North Carolina Renewable Power-Lumberton, LLC, and North Carolina Renewable Power-Elizabethtown, LLC are subject to dismissal under Fed. R. Civ. P. 12(b)(2) because the FAC fails to allege sufficient minimum contacts for each Defendant. Second, the FAC fails to comply with Fed. R. Civ. P. 8 and 9(b) and this Court’s Order because it continues to improperly assert allegations and claims against Defendants in a collective manner and does not allege with particularity Plaintiffs’ RICO, fraud, and negligent misrepresentation claims. Third, the FAC fails to state a claim upon which relief can be granted under Fed. R. Civ. P. 12(b)(6). For these reasons as set forth more fully in the memorandum of law accompanying this Motion, attached hereto as Exhibit “A,” Defendants respectfully request that the Court grant their Motion and dismiss Plaintiffs’ FAC with prejudice. For the Court’s convenience, a redline comparison of the initial Complaint and the FAC, showing the changes made by Plaintiffs, is attached hereto as Exhibit “B.” This 26th of June, 2017. GREENBERG TRAURIG /s/ Janna S. Nugent Ernest L. Greer Georgia Bar No. 309180 greere@gtlaw.com Case 1:16-cv-03690-TCB Document 36 Filed 06/26/17 Page 2 of 5 - 3 - Mark G. Trigg Georgia Bar No. 716295 triggm@gtlaw.com Janna S. Nugent Georgia Bar No. 940465 nugentj@gtlaw.com Counsel for Defendants Terminus 200 3333 Piedmont Road, NE, Suite 2500 Atlanta, Georgia 30305 Telephone: (678) 553-2100 Facsimile: (678) 553-2212 Case 1:16-cv-03690-TCB Document 36 Filed 06/26/17 Page 3 of 5 - 4 - UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION FIVE ON FIFTY, LLC; GATE INDUSTRIES, LLC; and SOUTHERN FILM REGIONAL CENTER-ATLANTA, LLC, Plaintiffs, -vs.- F. RAYMON BEAN; DAVID SHAFFER; JEFFREY KUEHR; GREENFUELS ENERGY, LLC; GEORGIA RENEWABLE POWER, LLC; GRP FRANKLIN, LLC; GRP MADISON, LLC; GRP NORTH CAROLINA, LLC; NORTH CAROLINA RENEWABLE POWER-LUMBERTON, LLC; and NORTH CAROLINA RENEWABLE POWER- ELIZABETHTOWN, LLC, Defendants. Civil Action No. 1:16-cv-3690-TCB (JURY TRIAL DEMANDED) CERTIFICATE OF SERVICE I hereby certify that on June 26, 2017 the foregoing document titled DEFENDANTS’ MOTION TO DISMISS THE FIRST AMENDED COMPLAINT was filed with the Court through its CM/ECF service which shall send electronic notice of said filing to the following attorneys of record: Case 1:16-cv-03690-TCB Document 36 Filed 06/26/17 Page 4 of 5 - 5 - Thomas C. Grant, Esq. LEWIS BRISBOIS BISGAARD & SMITH, LLP 1180 Peachtree Street, N.E. Suite 2900 Atlanta, Georgia 30309 /s/ Janna S. Nugent Janna S. Nugent Georgia Bar No. 940465 Counsel for Defendants ATL 22166304v1 Case 1:16-cv-03690-TCB Document 36 Filed 06/26/17 Page 5 of 5 EXHIBIT A Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 1 of 60 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION FIVE ON FIFTY, LLC; GATE INDUSTRIES, LLC; and SOUTHERN FILM REGIONAL CENTER-ATLANTA, LLC, Plaintiffs, -vs.- F. RAYMON BEAN; DAVID SHAFFER; JEFFREY KUEHR; GREENFUELS ENERGY, LLC; GEORGIA RENEWABLE POWER, LLC; GRP FRANKLIN, LLC; GRP MADISON, LLC; GRP NORTH CAROLINA, LLC; NORTH CAROLINA RENEWABLE POWER-LUMBERTON, LLC; and NORTH CAROLINA RENEWABLE POWER- ELIZABETHTOWN, LLC, Defendants. Civil Action No. 1:16-cv-3690-TCB (JURY TRIAL DEMANDED) MEMORANDUM OF LAW IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS THE FIRST AMENDED COMPLAINT Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 2 of 60 - i - TABLE OF CONTENTS INTRODUCTION ..................................................................................................... 1 ARGUMENT AND CITATION OF AUTHORITY ................................................. 3 I. THE COURT LACKS PERSONAL JURISDICTION OVER THE NORTH CAROLINA DEFENDANTS. ...................................... 3 II. THE FAC FAILS TO COMPLY WITH RULES 8 AND 9(B) AND THIS COURT’S ORDER. ........................................................... 4 A. Plaintiffs Continue to Group Defendants Together. ................... 5 B. Plaintiffs Fail to Plead RICO, Fraud, and Negligent Misrepresentation Claims with Required Specificity. ................ 7 1. Plaintiffs’ Deficient Boiler Allegations ............................ 8 2. Plaintiffs’ Deficient Output Allegations .........................10 3. Plaintiffs’ Deficient Permitting Allegations ...................12 4. Plaintiffs’ Deficient Key Personnel Allegations ............13 5. Plaintiffs’ Deficient Mail and Wire Fraud Allegations ......................................................................14 III. THE FAC FAILS TO STATE A CLAIM UPON WHICH RELIEF CAN BE GRANTED PURSUANT TO RULE 12(b)(6). ...............................................................................................17 A. Plaintiffs Fail to State a RICO Claim Under Georgia and Federal Law. ..............................................................................17 1. Plaintiffs fail to allege a compensable injury. ................18 2. Plaintiffs fail to allege a RICO violation under 18 U.S.C. § 1962 or Georgia law. .......................................21 (a) Plaintiffs do not allege “racketeering activity.” ...............................................................22 (b) Plaintiffs do not allege a “pattern.” ......................24 (c) Plaintiffs do not allege an “enterprise.” ...............26 (d) Plaintiffs do not allege a “conspiracy.” ................28 3. Plaintiffs fail to allege proximate cause. ........................30 Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 3 of 60 - ii - B. Plaintiffs Fail to State a Claim for Fraud and Negligent Misrepresentation. .....................................................................32 C. Plaintiffs Fail to State a Claim for Breach of Contract. ............37 1. Plaintiffs fail to state a claim for breach of contract based on the Engagement Agreements. ..........................37 2. Plaintiffs fail to state a claim for breach of contract based on the Term Sheet. ................................................42 D. Plaintiffs Fail to State a Claim for Breach of the Implied Covenant of Good Faith and Fair Dealing. ...............................43 E. Plaintiffs Fail to State a Claim for Quantum Meruit or Unjust Enrichment. ...................................................................43 CONCLUSION ........................................................................................................45 Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 4 of 60 - iii - TABLE OF AUTHORITIES Cases Adkins v. Cagle Foods JV, LLC, 411 F.3d 1320 (11th Cir. 2005) .................................................................... 40, 42 Ageloff v. Kiley, 318 F. Supp. 2d 1157 (S.D. Fla. 2004) ............................................................... 25 Alan’s of Atlanta, Inc. v. Minolta Corp., 903 F.2d 1414 (11th Cir. 1990) .......................................................................... 43 Allstate Ins. Co. v. Sutton, 290 Ga. App. 154, 658 S.E.2d 909 (2008) ......................................................... 33 Almanza v. United Airlines, Inc., 162 F. Supp. 3d 1341 (S.D. Ga. 2016) ............................................................... 28 Am. Casual Dining, L.P. v. Moe’s Sw. Grill, L.L.C., 426 F. Supp. 2d 1356 (N.D. Ga. 2006) ............................................................... 33 Am. Dental Ass’n v. Cigna Corp., 605 F.3d 1283 (11th Cir. 2010) ................................................................ 7, 17, 28 Anderson v. Deutsche Bank Nat’l Trust Co., No. 1:11-CV-4091-TWT-ECS, 2012 WL 3756512 (N.D. Ga. 2012), report and recommendation adopted, No. 1:11- CV-4091-TWT, 2012 WL 3756435 (N.D. Ga. Aug. 27, 2012) ......................... 37 Ashcroft v. Iqbal, 556 U.S. 662 (2009) ............................................................................................ 44 Barnes v. Burger King Corp., 932 F. Supp. 1420 (S.D. Fla. 1996) .............................................................. 40, 42 Beck v. Prupis, 162 F.3d 1090 (11th Cir. 1998), aff’d, 529 U.S. 494 (2000) ............................. 28 Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) ............................................................................................ 29 Bowen & Bowen Constr. Co. v. Fowler, 265 Ga. App. 274, 593 S.E.2d 668 (2004) ......................................................... 33 Boyle v. United States, 556 U.S. 938 (2009) ............................................................................................ 26 Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 5 of 60 - iv - Brady v. State, 267 Ga. App. 351, 599 S.E.2d 313 (2004) ......................................................... 23 Burgess v. Religious Tech. Ctr., Inc., 600 F. App’x 657 (11th Cir. 2015) ....................................................... 5, 9, 13, 39 Camp Creek Hospitality Inns, Inc. v. Sheraton Franchise Corp., 139 F.3d 1396 (11th Cir. 1998) .......................................................................... 44 Carter v. MGA, Inc., 189 F. App’x. 893 (11th Cir. 2006) .................................................................... 29 U.S. ex rel. Clausen v. Lab. Corp. of Am., 290 F.3d 1301 (11th Cir. 2002) ............................................................................ 7 Cleveland v. United States, 531 U.S. 12 (2000) .............................................................................................. 23 Cofacredit, S.A. v. Windsor Plumbing Supply Co., 187 F.3d 229 (2d Cir. 1999) ............................................................................... 25 Commercial Union Assur. Co. v. Milken, 17 F.3d 608 (2d Cir. 1994) ................................................................................. 20 Crichton v. Golden Rule Ins. Co., 576 F.3d 392 (7th Cir. 2009) .............................................................................. 27 Efron v. Embassy Suites (P. R.), Inc., 223 F.3d 12 (1st Cir. 2000) ................................................................................. 25 Ellerbee v. State, 256 Ga. App. 848, 569 S.E.2d 902 (2002) ......................................................... 23 Ferrell v. Durbin, 311 F. App’x 253 (11th Cir. 2009) ..................................................................... 24 Fin. Sec. Assur., Inc. v. Stephens, Inc., 500 F.3d 1276 (11th Cir. 2007) .......................................................................... 34 First Data POS, Inc. v. Willis, 273 Ga. 792, 546 S.E.2d 781 (2001) .................................................................. 36 Frank Briscoe Co. v. Ga. Sprinkler Co., 713 F.2d 1500 (11th Cir. 1983) .......................................................................... 33 Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 6 of 60 - v - Functional Prods. Trading, S.A. v. JITC, LLC, No. 1:12-CV-0355-WSD, 2014 WL 3749213 (N.D. Ga. July 29, 2014) ..................................................................................... 26 H.J. Inc. v. Nw. Bell Tel. Co., 492 U.S. 229 (1989) ............................................................................................ 22 Harmon v. Innomed Techs., Inc., 309 Ga. App. 265, 709 S.E.2d 888 (2011) ......................................................... 42 Hemi Grp. v. City of New York, 559 U.S. 1 (2010) ................................................................................................ 31 Holmes v. Sec. Inv’r Prot. Corp., 503 U.S. 258 (1992) ...................................................................................... 30, 31 Infrasource, Inc. v. Hahn Yalena Corp., 272 Ga. App. 703, 613 S.E.2d 144 (2005) ......................................................... 34 Ironworkers Local Union 68 v. AstraZeneca Pharm., LP, 634 F.3d 1352 (11th Cir. 2011) .......................................................................... 18 Ivar v. Elk River Partners, LLC, 705 F. Supp. 2d 1220 (D. Colo. 2010)................................................................ 19 Jackson v. BellSouth Telecomms., 372 F.3d 1250 (11th Cir. 2004) .......................................................................... 24 Kaesemeyer v. Angiogenix, Inc., 278 Ga. App. 434, 629 S.E.2d 22 (2006) ..................................................... 37, 38 Legacy Acad., Inc. v. Doles-Smith Enters., Inc., 337 Ga. App. 575, 789 S.E.2d 194 (2016) ......................................................... 36 Lerner v. Fleet Bank, N.A., 459 F.3d 273 (2d Cir. 2006) ............................................................................... 30 Liberty v. Storage Trust Props., L.P., 267 Ga. App. 905, 600 S.E.2d 841 (2004) ................................................... 36, 40 Longino v. Bank of Ellijay, 228 Ga. App. 37, 491 S.E.2d 81 (1997) ............................................................. 30 Lorenz v. CSX Corp., 1 F.3d 1406 (3d Cir. 1993) ................................................................................. 27 Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 7 of 60 - vi - Maio v. Aetna, Inc., 221 F.3d 472 (3d Cir. 2000) ............................................................................... 19 Maiz v. Virani, 253 F.3d 641 (11th Cir. 2001) ............................................................................ 19 Martin v. Pierce, 140 Ga. App. 897, 32 S.E.2d 170 (1977) ..................................................... 37, 42 McCulloch v. PNC Bank Inc., 298 F.3d 1217 (11th Cir. 2002) .......................................................................... 21 McLaughlin v. Am. Tobacco Co., 522 F.3d 215 (2d Cir. 2008) ......................................................................... 19, 20 Mendelovitz v. Vosicky, 40 F.3d 182 (7th Cir. 1994) ................................................................................ 31 Next Century Commc’ns Corp. v. Ellis, 318 F.3d 1023 (11th Cir. 2003) .......................................................................... 34 Nurse v. Sheraton Atlanta Hotel, 618 F. App’x 987 (11th Cir. 2015) ....................................................................... 7 O’Connell v. Cora Bett Thomas Realty, Inc., 254 Ga. App. 311, 563 S.E.2d 167 (2002) ................................................... 37, 42 Open Rivers Media Grp. Inc. v. S. Film Reg’l Ctr. LLC, No. 1:15-CV-724SCJ (N.D. Ga. May 31, 2016), aff’d, 671 F. App’x 750 (11th Cir. 2016) .............................................................................. 2, 7 Pelletier v. Zweifel, 921 F.2d 1465 (11th Cir. 1991) ............................................................................ 2 Perry Golf Course Dev., LLC v. Hous. Auth. of City of Atlanta, 294 Ga. App. 387, 670 S.E.2d 171 (2008) ......................................................... 44 Ray v. Spirit Airlines, Inc., 126 F. Supp. 3d 1332, 1340 (S.D. Fla. 2015), aff’d, 836 F.3d 1340 (11th Cir. 2016) ................................................................................................... 26 Ray v. Spirit Airlines, Inc., 836 F.3d 1340 (11th Cir. 2016) .......................................................................... 31 Reg’l Pacesetters, Inc. v. Halpern Enters. Inc., 165 Ga. App. 777, 300 S.E.2d 180 (1983) ......................................................... 44 Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 8 of 60 - vii - Regenicin, Inc. v. Lonza Walkersville, Inc., 997 F. Supp. 2d 1304 (N.D. Ga. 2014) ............................................................. 5, 9 Republic of Panama v. BCCI Holdings (Luxembourg) S.A., 119 F.3d 935 (11th Cir. 1997) ................................................................ 22, 23, 28 Reves v. Ernst & Young, 507 U.S. 170 (1993) ............................................................................................ 26 Rowe v. Gary, Williams, Parenti, Watston & Gary, P.L.L.C., 181 F. Supp. 3d 1161 (N.D. Ga. 2016) ............................................................... 11 Scott v. State, 277 Ga. App. 876, 627 S.E.2d 904 (2006) ......................................................... 23 Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479 (1985) ............................................................................................ 30 Sikes v. Teleline, Inc., 281 F.3d 1350 (11th Cir. 2002) .......................................................................... 20 Simpson v. Sanderson Farms, Inc., 744 F.3d 702 (11th Cir. 2014) ............................................................................ 18 Smith Serv. Oil Co. v. Parker, 250 Ga. App. 270, 549 S.E.2d 485 (2001) ......................................................... 45 Smith v. Morris, Manning & Martin, LLP, 293 Ga. App. 153, 666 S.E.2d 683 (2008) ......................................................... 30 Tart v. IMV Energy Sys. of Am., Inc., 374 F. Supp. 2d 1172 (N.D. Ga. 2005) ............................................................... 43 In re Taxable Mun. Bond Sec. Litig., 51 F.3d 518 (5th Cir. 1995) ................................................................................ 19 Thompson v. Enter. Leasing Co. of Ga., 240 Ga. App. 222, 522 S.E.2d 670 (1999) ......................................................... 40 Tidikis v. Network for Med. Commc’ns & Research LLC, 274 Ga. App. 807, 619 S.E.2d 481 (2005) ......................................................... 44 Tri-State Consumer Ins. Co., Inc. v. LexisNexis Risk Solutions Inc., 823 F. Supp. 2d 1306 (N.D. Ga. 2011) ................................................... 14, 17, 35 In re Tri-State Crematory Litig., 215 F.R.D. 660 (N.D. Ga. 2003) ........................................................................ 33 Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 9 of 60 - viii - United States v. Browne, 505 F.3d 1229 (11th Cir. 2007) .......................................................................... 24 United States v. Goldin Indus., Inc., 219 F.3d 1271 (11th Cir. 2000) .......................................................................... 26 United States v. Maxwell, 579 F.3d 1282 (11th Cir. 2009) .......................................................................... 22 United States v. Ward, 486 F.3d 1212 (11th Cir. 2007) .......................................................................... 22 Vemco, Inc. v. Camardella, 23 F.3d 129 (6th Cir. 1994) ................................................................................ 25 Walden v. Fiore, 134 S. Ct. 1115, 188 L. Ed. 2d 12 (2014) ......................................................... 4, 5 Whelan v. Winchester Prod. Co., 319 F.3d 225 (5th Cir. 2003) .............................................................................. 26 Williams Gen. Corp. v. Stone, 279 Ga. 428, 614 S.E.2d 758 (2005) .................................................................. 21 Williams v. Mohawk Indus., Inc., 465 F.3d 1277 (11th Cir. 2006) .......................................................................... 30 Statutes 18 U.S.C. § 1961(1) ................................................................................................. 21 18 U.S.C. § 1962 ................................................................................................ 17, 18 18 U.S.C. § 1962(b) ........................................................................................... 17, 21 18 U.S.C. § 1962(c) ............................................................................... 17, 21, 29, 30 18 U.S.C. § 1962(d) ........................................................................................... 17, 21 18 U.S.C. § 1964(c) ........................................................................................... 18, 20 O.C.G.A. § 16-4-4(a) ......................................................................................... 17, 21 O.C.G.A. § 16-4-4(b) ......................................................................................... 17, 21 O.C.G.A. § 16-8-3 .................................................................................................... 23 O.C.G.A. § 16-14-3(8)(A) ....................................................................................... 24 O.C.G.A. § 16-14-3(9)(A)(i)-(xl) ............................................................................ 22 Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 10 of 60 - ix - O.C.G.A § 16-14-4 ................................................................................................... 30 O.C.G.A. § 16-14-6(c) ............................................................................................. 30 Other Authorities Fed. R. Civ. P. 8 ......................................................................................................... 2 Fed. R. Civ. P. 9(b) .................................................................................................... 1 Fed. R. Civ. P. 12(b)(2) .............................................................................................. 3 Fed. R. Civ. P. 12(b)(6) .............................................................................................. 3 Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 11 of 60 INTRODUCTION Plaintiffs’ First Amended Complaint (“FAC”) disregards applicable Federal Rules of Civil Procedure and this Court’s April 28, 2017 Order, which explicitly instructed Plaintiffs to: (1) “be more specific about the role that each individual Defendant played in the events giving rise to the suit”; (2) “take care when repleading to avoid referring to themselves in a collective manner”; (3) “more specifically allege the minimum contacts of each [North Carolina] Defendant”; and (4) “do more than cite a litany of communications between the parties and then allege that some of those communications were false or misleading, without specifying which communications or the manner in which they were false or misleading.” [Dkt. 30 at pp. 11, 12.] The Court further warned Plaintiffs that this was “not an exhaustive recitation of every flaw in [the Complaint], and Plaintiffs should not presume that an amended complaint that addresses only the few examples discussed . . . will be impervious to dismissal under Rule 9(b) or 12(b)(6).” [Id. at pp. 14-15.] Despite this warning, Plaintiffs fail to assert sufficient facts to establish minimum contacts over certain Defendants. Plaintiffs also continue to assert allegations and claims against Defendants in a collective manner; fail to provide the necessary factual details under Federal Rule 9(b) to support their RICO, fraud, Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 12 of 60 - 2 - and negligent misrepresentation claims; and mischaracterize various agreements and other communications between the parties in an attempt to manufacture baseless claims against Defendants. Plaintiffs’ failure to cure the deficiencies of their initial Complaint confirms that they brought this lawsuit in bad faith for an improper motive. Plaintiffs have no reasonable excuse for their repeated disregard for the applicable pleading standards and this Court’s instructions since certain Plaintiffs (and their counsel) recently relied on Rules 8 and 9(b) to secure dismissal of RICO claims against them and sought sanctions against the opposing parties. See Open Rivers Media Grp. Inc. v. S. Film Reg’l Ctr. LLC, No. 1:15-CV-724SCJ (N.D. Ga. May 31, 2016) (Dkt. 35), aff’d, 671 F. App’x 750 (11th Cir. 2016); id. at Dkt. 52 (denying sanctions motion). Accordingly, Defendants respectfully request that the Court dismiss the FAC with prejudice and require Plaintiffs to show cause why Defendants should not be entitled to recover reasonable attorney’s fees and expenses incurred in defending this frivolous action. See Pelletier v. Zweifel, 921 F.2d 1465, 1517 (11th Cir. 1991) (awarding fees where “[i]t is apparent to [the court] that [the plaintiff] brought th[e] suit purely to harass [the defendant] and, in Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 13 of 60 - 3 - the process, to extract a settlement from him.”) (abrogated on other grounds). 1 ARGUMENT AND CITATION OF AUTHORITY Dismissal is appropriate for at least three reasons. First, Plaintiffs’ claims against GRP North Carolina, LLC, North Carolina Renewable Power-Lumberton, LLC, and North Carolina Renewable Power-Elizabethtown (collectively, “North Carolina Defendants”) are subject to dismissal under Fed. R. Civ. P. 12(b)(2) because the FAC fails to allege sufficient minimum contacts for each Defendant. Second, the FAC fails to comply with Rules 8 and 9(b) and this Court’s Order because it continues to improperly assert allegations and claims against Defendants in a collective manner and does not allege with particularity Plaintiffs’ RICO, fraud, and negligent misrepresentation claims. Third, the FAC fails to state a claim upon which relief can be granted under Fed. R. Civ. P. 12(b)(6). I. THE COURT LACKS PERSONAL JURISDICTION OVER THE NORTH CAROLINA DEFENDANTS. In its Order, this Court specifically stated that, “with respect to the North Carolina Defendants’ personal-jurisdiction challenge, Plaintiffs must more specifically allege the minimum contacts of each Defendant.” [Dkt. 30 at p. 11.] Plaintiffs have not done so. Rather, Plaintiffs merely allege that this Court has 1 Defendants contemporaneously filed a redline comparison of the initial Complaint and the FAC, showing the changes made by Plaintiffs, for the Court’s convenience. Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 14 of 60 - 4 - jurisdiction over these Defendants because: (1) they “are each subsidiaries of Defendant GreenFuels and are each affiliates of GreenFuels”; and (2) “as parties to the venture to fund and operate the Projects, the Individual Defendants (acting on behalf of the North Carolina Defendants) performed many actions and communications, in and around Atlanta, to prepare and submit EB-5 applications, including communications with, and presence at, the offices of Seyfarth Shaw in Atlanta and meetings in and around Atlanta with representatives of Plaintiffs.” [FAC ¶ 25.] These bare, conclusory allegations that lump the North Carolina Defendants together directly disregard this Court’s instructions and are insufficient to establish minimum contacts over each of them. Walden v. Fiore, 134 S. Ct. 1115, 1122, 188 L. Ed. 2d 12 (2014) (“But a defendant’s relationship with a plaintiff or third party, standing alone, is an insufficient basis for jurisdiction.”). II. THE FAC FAILS TO COMPLY WITH RULES 8 AND 9(B) AND THIS COURT’S ORDER. Plaintiffs also disregard this Court’s instructions with regard to Rules 8 and 9(b). In its Order, this Court found “Plaintiffs’ grouping of Defendants” was “objectionable” and instructed Plaintiffs to “be more specific about the role that each individual Defendant played in the events giving rise to this suit.” [Dkt. 30 at p. 10.] The Court also noted that, to “satisfy Rule 9(b) . . . Plaintiffs must do more than cite a litany of communications between the parties and then allege that some Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 15 of 60 - 5 - of those communications were false and misleading, without specifying which communications or the manner in which they were false or misleading.” [Id. at p. 12.] Plaintiffs failed to cure either defect. A. Plaintiffs Continue to Group Defendants Together. Despite the Court’s instruction, the FAC fails to specify which Defendant is responsible for each act alleged, as required by Rules 8 and 9(b). Instead, for the majority of the allegations, Plaintiffs merely separated the Defendants into two general categories: the “Individual Defendants” and the “Entity Defendants.” [See, e.g., FAC ¶¶ 3, 5, 8-11, 67, 69, 70, 74, 100-110, 112, 113, 116-118, 155, 159, 170, 172, 173.] These group labels do not satisfy this Court’s instructions or the requirements under Rules 8 or 9(b) because they prevent each Defendant from receiving adequate notice of the allegations asserted against them. See Regenicin, Inc. v. Lonza Walkersville, Inc., 997 F. Supp. 2d 1304, 1313-14 (N.D. Ga. 2014) (finding plaintiff’s complaint was a shotgun pleading because “[i]t repeatedly refers to ‘Defendants’ as a group rather than specifying which Defendant engaged in what conduct”); Burgess v. Religious Tech. Ctr., Inc., 600 F. App’x 657, 663 (11th Cir. 2015) (“This court has repeatedly held that lumping multiple defendants together in such generalities is insufficient under Rule 9(b).”). In fact, by separating the ten Defendants into these two general groups, it is even more Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 16 of 60 - 6 - difficult to determine what Defendant is responsible for what conduct, and on whose behalf. Even more troubling, the FAC still incorporates a number of allegations from the original Complaint that refer to all ten Defendants collectively. [See, e.g., FAC ¶¶ 6 (“Defendants had fraudulently misrepresented”); 10 (“Another key example of Defendants’ misrepresentations”); 11 and 12 (“Defendants’ fraudulent activities”); 34 (“Defendants (primarily through the Individual Defendants) engaged in interstate communications”); 79 and 144 (“Defendants knew and/or should have known”); 80 (“Another key misrepresentation and omission of Defendants”); 145 (“Defendants’ misrepresentations and omissions”); 177 and 178 (“Defendants’ actions”).] To further compound matters, Plaintiffs assert several new allegations against all ten Defendants in a collective manner. [Id. at ¶¶ 7 (“The Defendants represented”); 12 (“Defendants’ actions have also harmed Plaintiffs”); 69 (“Based entirely upon information provided and confirmed by Defendants”); 118(f) and (i) (“Defendants caused”); 148 (“Many of these misrepresentations, which Defendants knew (or should have known) were false”); 150 (“Defendants repeatedly represented”).] 2 2 In addition, to give the appearance of compliance with the Court’s instructions, Plaintiffs creatively remove numerous references to “Defendants” without altering the substantive allegations. [See, e.g., FAC ¶¶ 50, 61, 73, 77-79, 84, 90-91, 128.] Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 17 of 60 - 7 - Plaintiffs’ continued failure to comply with Rules 8 and 9(b) and disregard for this Court’s Order warrants the dismissal of the FAC with prejudice and arguably an award of attorney’s fees in favor of Defendants for bringing a claim in bad faith for an improper purpose. Nurse v. Sheraton Atlanta Hotel, 618 F. App’x 987, 990 (11th Cir. 2015) (“Where, as here, ‘the plaintiff fails to comply with the court’s order-by filing a repleader with the same deficiency-the court should . . . dismiss his case and consider the imposition of monetary sanctions.”). Plaintiffs’ specious motives are particularly apparent since Gate and Southern Film (and their counsel) successfully relied on Rules 8 and 9(b) to defeat RICO claims in Open Rivers, No. 1:15-CV-724SCJ (Dkt. 35), but repeatedly chose to ignore them here. B. Plaintiffs Fail to Plead RICO, Fraud, and Negligent Misrepresentation Claims with Required Specificity. The FAC also does not comply with the heightened pleading standard under Rule 9(b) with regard to the RICO, fraud, and negligent misrepresentation claims. As this Court previously noted, Plaintiffs must set forth “(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.” Am. Dental Ass’n v. Cigna Corp., 605 F.3d 1283, 1291 (11th Cir. 2010) (citation and internal quotations omitted). In addition, Plaintiffs must inform each Defendant of the Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 18 of 60 - 8 - nature of his alleged participation in the fraud. Id. Dismissal of a complaint that fails to satisfy these requirements is appropriate. U.S. ex rel. Clausen v. Lab. Corp. of Am., 290 F.3d 1301, 1310 (11th Cir. 2002). In the FAC, Plaintiffs generally allege that Defendants made misrepresentations or omissions about the type of equipment to be used at the power plants, the amount of electrical power and profits that each Project would produce, the status of certain environmental permits, and the employment of key personnel working on the Projects. Plaintiffs also accuse Defendants of committing mail and wire fraud. Plaintiffs, however, fail to provide sufficient details under Rule 9(b) to support these accusations. 1. Plaintiffs’ Deficient Boiler Allegations In paragraphs 7, 68-70, 102, and 118(y) of the FAC, Plaintiffs generally allege Defendants misrepresented information concerning the boiler at the Lumberton facility. However, none of these paragraphs provide the requisite specificity to satisfy Rule 9(b). For example, paragraph 7 merely states that “Defendants misrepresented the type and size of a boiler that was a key part of the Lumberton plant’s ability to generate the requisite amount of electrical power to meet the requirement of a Power Purchase Agreement with Duke Energy . . . and in doing so greatly exaggerated the amount of power that would in fact be Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 19 of 60 - 9 - generated.” Paragraph 7 does not provide (1) the precise statements or misrepresentation made; (2) the time, place, and person responsible for the alleged statement(s); (3) the content and manner in which the statement misled the Plaintiffs; or (4) what Defendants purportedly gained thereby. Similarly, paragraph 70 vaguely alleges that the “Entity Defendants ultimately decided (on their own and without promptly informing Plaintiffs) against replacing the boiler as planned.” Paragraph 102 likewise provides only vague and unclear references to alleged misrepresentations made by the “Defendant Entities” about a “more efficient boiler” in various, unidentified “pro formas.” Plaintiffs do not allege the specific representation allegedly made in unidentified pro formas, who on behalf of the “Entity Defendants” made the statements, when Plaintiffs received the pro formas, or what the Defendants purportedly gained by the alleged misrepresentations. Nor do Plaintiffs allege how they “were harmed by Defendants’ failure to inform them of a decision that Plaintiffs nevertheless became aware of prior to the submission deadline.” [Dkt. 30 at p. 14.] Without these details, Plaintiffs fail to meet Rule 9(b)’s requirements. Regenicin, 997 F. Supp. 2d at 1314. Accordingly, Plaintiffs’ RICO, fraud, and negligent misrepresentation claims based on these alleged misrepresentations about the boiler fail as a matter of law. Burgess, 600 F. App’x at 663. Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 20 of 60 - 10 - Paragraph 118(y), which discusses a purported email from Defendant Kuehr to “various professionals working on the Projects,” does not change this result. Plaintiffs do not allege that the email was sent to them or that Defendant Kuehr made any false representations in the email. They also fail to identify what specific prior statements were allegedly false at the time they were made, when they were made, and what was gained from the alleged fraud. Instead, they merely claim the email “recognizes that the Entity Defendants had in fact decided not to purchase a new boiler for the Lumberton plant.” 2. Plaintiffs’ Deficient Output Allegations Plaintiffs’ RICO, fraud, and negligent misrepresentation claims likewise fail to the extent they are based on Defendants’ alleged misrepresentations about output levels at the power plants. The only paragraphs in the FAC that refer to alleged misrepresentations or omissions concerning output levels are 10, 69, 76, 101, 103-106, and 118(aa). None of these paragraphs satisfy Rule 9(b). Paragraphs 10, 69, and 118(aa) do not satisfy Rule 9(b) because they refer to “Defendants” collectively and do not provide any specific information about the alleged misrepresentations. [See FAC ¶¶ 10 (alleging the Lumberton plant “consistently failed to generate the amount of the electricity that Defendants represented that it would”); 69 (“Based entirely upon information provided and Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 21 of 60 - 11 - confirmed by the Defendants, the numbers and other representations in the EB-5 application for the Lumberton plant assumed and represented that the plant would generate an output of 40mw”); 118(aa) (“the Lumberton plant was rated as having an output of only 25 megawatts (more than 10 megawatts less than Defendants had repeatedly represented…).] Paragraph 76 also fails to comply with Rule 9(b) because it does not specify any alleged misrepresentation made by any Defendant. In addition, it is based “[u]pon information and belief” but fails to disclose the facts upon which the belief is formed. Accordingly, the Court should disregard this paragraph. Rowe v. Gary, Williams, Parenti, Watston & Gary, P.L.L.C., 181 F. Supp. 3d 1161, 1187 (N.D. Ga. 2016) (“While some courts in the Eleventh Circuit have held that an allegation of fraud may be based on information and belief, ‘the allegations must then be accompanied by a statement of facts upon which the belief is founded.’”). Lastly, paragraphs 101 and 103-106 only generally allege that the “Entity Defendants” made misrepresentations about output levels and other issues “in the pro formas” but fail to specify what specific representations were made in the pro formas, who on behalf of the Entity Defendants made the representations, when Plaintiffs received the pro formas, what Defendants gained as a result of the alleged misrepresentations, or how Plaintiffs were purportedly injured. [See, e.g., Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 22 of 60 - 12 - FAC ¶¶ 103 (“the Entity Defendants produced and provided pro formas for the Franklin, Georgia plant that were inaccurate and misrepresented the amount of output””); 105 (“the Defendant Entities had failed to disclose known problems with the Lumberton plant”).] Moreover, as this Court previously found, “[t]he mere fact that one or more of the plants have not performed consistent with the parties’ hopes or expectations does not give rise to an inference that any of Defendants knew in advance that that would be the case.” [Dkt. 30 at p. 13.] 3. Plaintiffs’ Deficient Permitting Allegations In paragraph 107 of the FAC, Plaintiffs generally allege that “[a]nother significant misrepresentation and omission by the Entity Defendants regarding the Lumberton Project concerned the availability of needed environmental permits.” Plaintiffs also allege that, “[b]ecause the Entity Defendants failed to obtain the environmental permits, they were repeatedly forced to shut down the Lumberton plant because it repeatedly exceeded emissions allowed by the permits” but did “not disclose this material fact to Plaintiffs.” [FAC ¶ 108.] Neither allegation provides any detail required under Rule 9(b). Accordingly, Plaintiffs’ RICO, fraud, and negligent misrepresentation claims fail as a matter of law to the extent they are based on any alleged misrepresentation concerning permitting issues. Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 23 of 60 - 13 - 4. Plaintiffs’ Deficient Key Personnel Allegations In paragraph 8 of the FAC, Plaintiffs allege “the Individual Defendants withheld from Plaintiffs that two key personnel who were overseeing the Projects had quit because of their dissatisfaction with Defendants’ handling of Projects.” Paragraphs 80-82 likewise contain general allegations about alleged misrepresentations concerning “key personnel” but provide no details about who made the alleged misrepresentations, how and when they were made, what Defendants gained by the alleged misrepresentations, or how Plaintiffs were allegedly injured. [FAC ¶¶ 80 (“Another key misrepresentation and omission of Defendants … concerns the continued involvement and employment of persons identified by Defendants as ‘key personnel’….”); 81 (“The Entity Defendants’ solicitations, disclosures, and other materials used to seek involvement and investment in the Projects have routinely stressed that the Projects were being overseen by key personnel”); 82 (“Nic Applegate . . . began to ask the Individual Defendants about the continuing involvement of the Key Personnel on Projects.”).] Such bare, conclusory allegations fall woefully short of Rule 9(b). Burgess v. Religious Tech. Ctr., Inc., 600 F. App’x 657, 665 (11th Cir. 2015). So, too, does paragraph 83. Nowhere do Plaintiffs provide the dates of the alleged conversations between Mr. Applegate and Defendants Kuehr, Bean, and Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 24 of 60 - 14 - Shaffer. Nor do Plaintiffs allege the manner in which the alleged communication between Mr. Kuehr and Mr. Applegate occurred such as by telephone, email, letter, or in person. Plaintiffs also fail to allege how they were harmed by these alleged misrepresentations. Absent these facts, Plaintiffs have failed to comply with Rule 9(b). Tri-State Consumer Ins. Co., Inc. v. LexisNexis Risk Solutions Inc., 823 F. Supp. 2d 1306, 1320 (N.D. Ga. 2011) (Judge Batten) (concluding plaintiff failed to meet the Rule 9(b) heightened pleading standard where it did “not specify whether the representations were oral or written” and “only generally allege[d] the dates the statements were made”). 3 5. Plaintiffs’ Deficient Mail and Wire Fraud Allegations Plaintiffs continue to base their claims for mail and wire fraud on a litany of alleged communications between the parties without identifying the alleged fraudulent misrepresentations or omissions. [FAC ¶ 118 (a)-(dd).] For example, in paragraph 118(j), Plaintiffs claim generally claim that “[o]n August 31, 2015, Defendant Kuehr sent an email to persons including Defendant Shaffer, as well as Lowell Elliot, on behalf of Plaintiffs, that included a detailed list of information needed for, and outstanding tasks to be done for, the applications for the Projects.” 3 Throughout paragraphs 98-110, Plaintiffs also generally allege that the pro formas contained “inaccurate information” without specifying the specific representations Plaintiffs believe are false or how they were allegedly harmed. Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 25 of 60 - 15 - Nowhere do Plaintiffs contend that any information in this email was false. Even when Plaintiffs claim certain communications are false, they fail to identify the allegedly false information. For instance, in paragraph 118(t), Plaintiffs claim that “Defendants continued to discuss and supply data for the applications for the Projects, much of which was inaccurate and thus misstated the profitability and job-creation of the Projects.” Plaintiffs fail to identify what information was inaccurate, who made the statement, when the statements were made, or how Plaintiffs were damaged. The same is true for many of the other alleged communications listed in paragraph 118, including those in subparagraphs (a), (b), (e), (f), (g), (m), (o), (p), (q), (r), (s), (v), (x), (bb), (cc), and (dd). Moreover, Plaintiffs disregard that a number of the communications listed in paragraph 118 are emails sent from Plaintiffs to Defendants or other parties. [FAC ¶¶ 118(b), (c), (d), (l), (n), (u), (z).] Plaintiffs also mischaracterize a number of the communications. For example, Plaintiffs describe an email from Defendant Shaffer that reads, in its totality, “Thanks Dennis,” as “Defendant Shaffer acknowledged the issues raised . . . in the preceding paragraph of this Complaint.” [Id. at ¶ 118(m); Compl. Ex. L.] Similarly, Plaintiffs mischaracterize an email sent by “Defendant Kuehr . . . in which he requested copies of certain agreements regarding the Projects” as “one of many opportunities that Defendants had to see Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 26 of 60 - 16 - that certain of the facts and information contained in those agreements were not consistent with facts presently known to Defendants.” [FAC ¶ 118(r).] In fact, the email from Defendant Kuehr merely asks another person to forward copies of “fuel supply agreements for both fiber (wood) and chicken litter for Lumberton” as well as “fiber agreements . . . for Franklin / Madison” if they exist. [Compl. Ex. N.] In addition, littered throughout the FAC are other vague references to alleged misrepresentations purportedly made by Defendants. For instance, in paragraph 74, Plaintiffs allege they “came to learn about a diligence report, dated August 10, 2015, that outlined numerous discrepancies and concerns about the representations about the Projects being made in the EB-5 applications,” as well as a “‘bank book’ (dated 2015) which further demonstrated the inaccuracies that the Entity Defendants had allowed to remain in the EB-5 applications that they approved for submission.” Similarly, in paragraph 80, Plaintiffs generally alleged that “Defendants . . . chose to misrepresent information about the plants to the Plaintiffs and to hide material facts from the Plaintiffs.” None of these allegations provide any details of the contents of the alleged misrepresentations, the dates the alleged misrepresentations were made, the person who made the representations, or how Plaintiffs were harmed. To use Plaintiffs’ phrase, the FAC keeps Defendants “in the dark” about the allegations and claims asserted against them. Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 27 of 60 - 17 - These are just some of the many egregious examples of Plaintiffs’ failure to identify the alleged misrepresentations in the communications listed in paragraph 118 of the FAC and blatant mischaracterization of innocuous emails in an attempt to manufacture claims for mail and wire fraud. Because the FAC “provides a list of mailings and wires, without ever identifying any actual fraud,” Plaintiffs’ RICO, fraud, and negligent misrepresentation claims fail. Am. Dental Ass’n, 605 F.3d at 1291-92. III. THE FAC FAILS TO STATE A CLAIM UPON WHICH RELIEF CAN BE GRANTED PURSUANT TO RULE 12(b)(6). In addition to failing to comply with Rules 8 and 9(b) and this Court’s Order, the FAC fails to state a claim under the federal and Georgia RICO statutes (Counts I through V). It likewise fails to state claims for fraud, negligent misrepresentation, breach of contract, breach of the implied covenant of good faith and fair dealing, and unjust enrichment/quantum meruit (Counts VI through X). A. Plaintiffs Fail to State a RICO Claim Under Georgia and Federal Law. In Counts I through V of the FAC, Plaintiffs purport to assert claims under federal (18 U.S.C. § 1962(b), (c), and (d)) and Georgia (O.C.G.A. § 16-4-4(a) and (b)) RICO statutes. These claims fail from the outset because Plaintiffs have not pled the underlying fraud claims with requisite specificity. Tri-State, 823 F. Supp. Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 28 of 60 - 18 - 2d at 1324 n.13. Moreover, to prevail on the federal claims, Plaintiffs must establish three essential elements: (1) that they suffered a cognizable injury to business or property; (2) a violation under 18 U.S.C. § 1962; and (3) that the alleged injury was proximately caused by the purported violation(s) of 18 U.S.C. § 1962. Simpson v. Sanderson Farms, Inc., 744 F.3d 702, 705 (11th Cir. 2014). Plaintiffs fail to allege facts to satisfy any of these essential elements. 1. Plaintiffs fail to allege a compensable injury. Plaintiffs appear to allege three forms of damages: (1) “lost profits” during a year they allegedly worked exclusively for Defendants; (2) “money and other valuable resources” allegedly devoted to applying for and seeking investment in the Projects; and (3) “substantial fees and payments” they claim they “would have received in relation to the Projects, had the Projects been able to proceed.” [FAC ¶ 128.] “The problem here, however, is that the [P]laintiffs have pled injury at only the highest order of abstraction and with only conclusory assertions.” Simpson, 744 F.3d at 709. In addition, standing to assert a federal RICO claim requires a plaintiff to assert a cognizable injury to “business or property.” 18 U.S.C. § 1964(c). The “injury to business or property limitation on RICO standing has a ‘restrictive significance,’” which “‘helps to assure that RICO is not expanded to provide a Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 29 of 60 - 19 - federal cause of action and treble damages to every tort plaintiff.’” Ironworkers Local Union 68 v. AstraZeneca Pharm., LP, 634 F.3d 1352, 1361 (11th Cir. 2011). The Eleventh Circuit has recognized that “there is no automatic rule against the recovery of any type of lost profits or lost value damages if proximate cause is shown.” Maiz v. Virani, 253 F.3d 641, 662-63 (11th Cir. 2001) (district court did not err in permitting expert economist to testify what plaintiffs would have earned if the nearly $10 million they had actually been defrauded of had been invested in a real estate investment trust). Maiz did not, however, abrogate the threshold requirement of a concrete and quantifiable injury. Maio v. Aetna, Inc., 221 F.3d 472, 483 (3d Cir. 2000) (collecting cases requiring an actual, out-of-pocket loss). Intangible future interests, including lost opportunities to realize a profit at some future point, do not satisfy this requirement. In re Taxable Mun. Bond Sec. Litig., 51 F.3d 518, 523 (5th Cir. 1995) (no standing where plaintiffs’ damages “would have required extensive speculation and would not simply entail a calculation of present, actual damages”); Ivar v. Elk River Partners, LLC, 705 F. Supp. 2d 1220, 1232-35 (D. Colo. 2010) (lost opportunity to realize future profits, termed by the plaintiffs a “lost investment bargain,” did not represent actual RICO injury and collecting Second, Third, Fifth, Eighth, and Ninth Circuit cases). Expectancy or benefit-of-the-bargain damages where the alleged conduct Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 30 of 60 - 20 - constituting the RICO violation created the interest a plaintiff sues to recover are not cognizable. McLaughlin v. Am. Tobacco Co., 522 F.3d 215, 228 (2d Cir. 2008) (no RICO claim where the “property to which a plaintiff alleges injury . . . would not have existed but for the alleged RICO violation”) (abrogated in part on other grounds). These holdings comport with the fundamental principle that “compensation under RICO § 1964(c) for injury to property must, under the familiar rule of law, place appellants in the same position they would have been in but for the illegal conduct.” Commercial Union Assur. Co. v. Milken, 17 F.3d 608, 612 (2d Cir. 1994); Sikes v. Teleline, Inc., 281 F.3d 1350, 1365 (11th Cir. 2002) (“To allow recovery by persons who have not been injured or to allow recovery for an injury greater than that caused by the offending conduct would run counter to the plain language of [18 U.S.C. § 1964(c)].”) (abrogated in part on other grounds). Applying this principle, Plaintiffs’ claim for the “substantial fees and payments” they “would have received in relation to the Projects, had the Projects been able to proceed” is an intangible expectancy interest of a return on a potential future investment that was never made, not a concrete injury. McLaughlin, 522 F.3d at 228-29 (“While we need not and do not decide whether expectancy damages are ever available under RICO, [Cit.] in cases that sound in fraud in the inducement, they plainly are not.”). More importantly, Plaintiffs have suffered no Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 31 of 60 - 21 - economic loss in this regard: they did not pay or secure a single dollar of investment income for the Projects. Allowing Plaintiffs’ claim to proceed would give Plaintiffs an enormous windfall. 2. Plaintiffs fail to allege a RICO violation under 18 U.S.C. § 1962 or Georgia law. “To state a RICO claim [under federal law], a plaintiff must plead (1) that the defendant (2) through the commission of two or more acts (3) constituting a ‘pattern’ (4) of ‘racketeering activity’ (5) . . . maintains an interest in [§ 1962(b)], or participates in [§ 1962(c)] (6) an ‘enterprise’ (7) the activities of which affect interstate or foreign commerce.” McCulloch v. PNC Bank Inc., 298 F.3d 1217, 1225 (11th Cir. 2002). 4 Georgia RICO likewise prohibits any person from (1) using a “pattern of racketeering activity” or the proceeds to acquire or maintain any interest in or control of an enterprise or any property, including money, or (2) if “employed by or associated with” an enterprise, from conducting or participating in that enterprise through a pattern of racketeering activity. O.C.G.A. § 16-14-4(a), (b). 5 Here, Plaintiffs fail to allege: (a) “racketeering activity”; (b) a 4 Plaintiffs’ RICO conspiracy claim under 18 U.S.C. 1962(d) (Count III), and the deficiencies associated therewith, are discussed below. Plaintiffs do not allege a conspiracy claim under the Georgia RICO statute in the FAC. 5 The Georgia RICO Act is modeled on the federal RICO statute and, in the absence of Georgia authority, Georgia courts often look to federal decisions for Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 32 of 60 - 22 - “pattern” of racketeering activity; (c) an “enterprise”; and (d) a “conspiracy.” (a) Plaintiffs do not allege “racketeering activity.” 18 U.S.C. § 1961(1) defines and limits “racketeering activity to include only certain “specified state-law crimes, any ‘act’ indictable under various specified federal statutes, and certain federal ‘offenses.’” H.J. Inc. v. Nw. Bell Tel. Co., 492 U.S. 229, 232 (1989). Under Georgia RICO, a “racketeering activity” is the commission, attempt, solicitation of another, or coercing of another to commit a “crime which is chargeable by indictment” under one of forty categories of offenses. O.C.G.A. § 16-14-3(9)(A)(i)-(xl). “[T]o survive a motion to dismiss, a plaintiff must allege facts sufficient to support each of the statutory elements for at least two of the pleaded predicate acts.” Republic of Panama v. BCCI Holdings (Luxembourg) S.A., 119 F.3d 935, 949 (11th Cir. 1997). Here, Plaintiffs contend Defendants have engaged in mail and wire fraud and theft by deception but have failed to set forth facts to support each statutory element of these predicate acts. Mail and wire fraud “require that a person (1) intentionally participates in a scheme or artifice to defraud another of money or property, and (2) uses or ‘causes’ the use of the mails or wires for the purpose of executing the scheme or artifice.” United States v. Ward, 486 F.3d 1212, 1222 (11th Cir. 2007). A scheme guidance on the interpretation of similar provisions of the Georgia RICO Act. Williams Gen. Corp. v. Stone, 279 Ga. 428, 430, 614 S.E.2d 758, 760 (2005). Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 33 of 60 - 23 - or artifice to defraud “requires proof of material misrepresentations, or the omission or concealment of a material fact.” United States v. Maxwell, 579 F.3d 1282, 1299 (11th Cir. 2009). Theft by deception (actionable only under Georgia RICO) occurs by obtaining property by any deceitful means or artful practice with the intention of depriving the owner of the property. Scott v. State, 277 Ga. App. 876, 878, 627 S.E.2d 904, 906 (2006). “The gravamen of theft by deception ‘lies in obtaining the property of another by intentionally creating a false impression as to an existing fact or past event. Creating a false impression as to a future event[,] . . . by a promise of future payment, is not sufficient.’” Brady v. State, 267 Ga. App. 351, 352, 599 S.E.2d 313, 314 (2004) (alteration in original). Here, the FAC’s general description of Defendants’ alleged conduct does not amount to actionable fraud. Moreover, Plaintiffs’ “allegations of scienter cannot be ‘merely conclusory and unsupported by any factual allegations.’” Republic of Panama, 119 F.3d at 949. And any alleged false representation as to matters of future performance cannot support theft by deception. Ellerbee v. State, 256 Ga. App. 848, 853, 569 S.E.2d 902, 906 (2002) (the element of a false representation cannot “bear on . . . future performance”). Finally, Plaintiffs do not allege an injury to money or property within the meaning of the mail or wire fraud or theft Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 34 of 60 - 24 - by deception statutes. Cleveland v. United States, 531 U.S. 12, 15 (2000) (“[F]or purposes of the mail fraud statute, the thing obtained must be property in the hands of the victim.”); O.C.G.A. § 16-8-3 (limiting theft by deception to obtaining of “property . . . with the intention of depriving the owner” thereof). This inability to assert essential elements of the predicate acts is fatal to Plaintiffs’ RICO claims. (b) Plaintiffs do not allege a “pattern.” To establish a pattern of racketeering activity, Plaintiffs must describe the relationship between the predicate acts alleged and assert facts sufficient to show how the commission of those predicate acts threatens to continue. Jackson v. BellSouth Telecomms., 372 F.3d 1250, 1265 (11th Cir. 2004). 6 This “continuity” prong requires Plaintiffs to allege facts showing: (1) an open set of predicates covering a shorter period of time but threatening to continue (“open-ended” continuity); or (2) a closed-set of repeated prior acts over a substantial period of time (“closed-ended” continuity). United States v. Browne, 505 F.3d 1229, 1259 (11th Cir. 2007). Plaintiffs fail to establish either circumstance. First, Plaintiffs cannot establish “open-ended continuity” because Defendants’ alleged “scheme” involves a singular objective (the Projects), toward 6 Georgia similarly defines a “pattern of racketeering activity” as “at least two acts of racketeering activity in furtherance of one or more incidents, schemes, or transactions” that are interrelated. O.C.G.A. § 16-14-3(8)(A). Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 35 of 60 - 25 - a singular, targeted “victim” (Plaintiffs). Without showing a “regular way of doing business” or a threat of repetition, “single schemes with a specific objective and a natural ending point can almost never present a threat of continuing racketeering activity.” Ferrell v. Durbin, 311 F. App’x 253, 257-58 (11th Cir. 2009). Second, Plaintiffs cannot establish “closed-ended continuity” because the alleged fraudulent activity spanned only a short period of time. Specifically, the alleged communications to support Plaintiffs’ RICO claims span a period from February 23, 2015 through April 2016. [FAC ¶ 118(a)-(dd).] Alleged sporadic communications over this limited period are insufficient to establish closed-ended continuity. Efron v. Embassy Suites (P. R.), Inc., 223 F.3d 12, 18 (1st Cir. 2000) (no closed-ended continuity where seventeen alleged predicate acts occurred over twenty-one month period); Cofacredit, S.A. v. Windsor Plumbing Supply Co., 187 F.3d 229, 242 (2d Cir. 1999) (the Second Circuit “has never held a period of less than two years to constitute a ‘substantial period of time’”); Vemco, Inc. v. Camardella, 23 F.3d 129, 134 (6th Cir. 1994) (“We cannot conclude that Flakt’s alleged actions here, involving a single victim and a single scheme for a single purpose over seventeen months, constitute the type of ‘long-term criminal conduct’ Congress sought to prohibit with RICO.”). Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 36 of 60 - 26 - (c) Plaintiffs do not allege an “enterprise.” A RICO plaintiff must allege with specificity “an enterprise that had a structure and goals separate from the predicate acts alleged.” Ageloff v. Kiley, 318 F. Supp. 2d 1157, 1159 (S.D. Fla. 2004) (enterprise allegations insufficient where the plaintiff “fail[ed] to allege that Defendants’ enterprise existed for any purpose other than to defraud Plaintiff”); Functional Prods. Trading, S.A. v. JITC, LLC, No. 1:12-CV-0355-WSD, 2014 WL 3749213, at *3 n.8 (N.D. Ga. July 29, 2014) (Judge Duffey). A plaintiff must identify the purpose of the enterprise, describe the relationships among its members, and explain how the enterprise has the longevity sufficient to permit its members to pursue that purpose. Boyle v. United States, 556 U.S. 938, 946 (2009). And RICO “liability depends on showing that the defendants conducted or participated in the conduct of the ‘enterprise’s affairs,’ not just their own affairs.” Reves v. Ernst & Young, 507 U.S. 170, 185 (1993). Moreover, the “person” alleged to have violated RICO and the “enterprise” cannot be the same. United States v. Goldin Indus., Inc., 219 F.3d 1271, 1275-76 (11th Cir. 2000). “In concert with the ‘structure’ requirements, a separate ‘distinctiveness’ requirement provides the necessary buffer against overly broad RICO claims.” Ray v. Spirit Airlines, Inc., 126 F. Supp. 3d 1332, 1340 (S.D. Fla. 2015), aff’d, 836 F.3d 1340 (11th Cir. 2016). “It is not enough to establish that a Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 37 of 60 - 27 - defendant corporation through its agents committed the predicate acts in the conduct of its own business. [Cit.] That officers or employees of a corporation, in the course of their employment, associate to commit predicate acts does not establish an association-in-fact enterprise distinct from the corporation.” Whelan v. Winchester Prod. Co., 319 F.3d 225, 229 (5th Cir. 2003). Similarly, the failure to plead any acts of a subsidiary other than merely those “on behalf of, or to the benefit of, its parent” is insufficient to state a RICO enterprise. Lorenz v. CSX Corp., 1 F.3d 1406, 1412 (3d Cir. 1993). Applying these principles, Plaintiffs’ allegations do not establish an “enterprise.” First, Plaintiffs fail to allege the roles of any member of the purported enterprise, or its organizational, decision-making structure. Instead, they allege in conclusory fashion that, because the Defendants are associated (the individuals, by virtue of their employment, and the entities, by virtue of being wholly-owned subsidiaries), they constitute an enterprise. [FAC ¶ 112.] Second, there is no showing how each Defendant conducted or participated in the conduct of the alleged enterprise’s affairs and not just their own affairs. Plaintiffs merely allege a series of common business relationships between individuals and entities that do not constitute a racketeering “enterprise.” Defendants’ collective relationship is “not the prototypical RICO violation in which the defendant seizes Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 38 of 60 - 28 - control of an enterprise to accomplish an illegal purpose by using the enterprise’s resources, contacts, and appearance of legitimacy.” Crichton v. Golden Rule Ins. Co., 576 F.3d 392, 399 (7th Cir. 2009). 7 (d) Plaintiffs do not allege a “conspiracy.” “A civil RICO conspiracy claim requires a showing of the existence of a conspiracy, and the commission of an overt act in furtherance of the conspiracy that causes injury to the plaintiff.” Beck v. Prupis, 162 F.3d 1090, 1098 (11th Cir. 1998), aff’d, 529 U.S. 494 (2000). “A plaintiff can establish a RICO conspiracy claim in one of two ways: (1) by showing that the defendant agreed to the overall objective of the conspiracy; or (2) by showing that the defendant agreed to commit two predicate acts.” Republic of Panama, 119 F.3d at 950. A plaintiff must allege 7 Plaintiffs demonstrate a fundamental misunderstanding of the arrangement they proposed in the Term Sheet. Plaintiffs contend Defendants GRP Franklin, LLC; GRP Madison, LLC; North Carolina Renewable Power-Lumberton, LLC; and North Carolina Renewable Power-Elizabethtown, LLC were intended to be listed as the “Lender” on the Term Sheet. [FAC ¶ 58.] This is nonsensical: as alleged by Plaintiffs, these entities were established to run each of the four power plants, not to lend money (to themselves), and the entities actually listed in the Term Sheet as the “Lender” were affiliated with Plaintiffs, not Defendants. [Compl. Ex. T at p. 1 n.1.] Plaintiffs also allege that these entities were never formed. This is demonstrably false, as at least one was formed and is active: GRP Franklin Fund, LLC, a Georgia limited liability company whose registered agent is Cameron Applegate and whose registered address is the same as that of all three Plaintiffs. https://ecorp.sos.ga.gov/BusinessSearch/BusinessInformation?businessId=2063751 &businessType=Domestic%20Limited%20Liability%20Company (last accessed June 26, 2017). Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 39 of 60 - 29 - the specifics of how those involved agreed among themselves to engage in the activity that violates RICO’s other substantive provisions, including when and where such an agreement occurred as well as its terms. Almanza v. United Airlines, Inc., 162 F. Supp. 3d 1341, 1353-54 (S.D. Ga. 2016). Mere allegations of knowledge of alleged predicate activity is insufficient to survive dismissal. Am. Dental Ass’n, 605 F.3d at 1294 (“[A] conclusory allegation of agreement at some unidentified point does not supply facts adequate to show illegality.” (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557 (2007))). Plaintiffs’ RICO conspiracy count is clearly an afterthought to their claims and an attempt to capture the broadest possible group of defendants. Plaintiffs allege, in conclusory fashion, that “the Individual Defendants agreed and conspired to violate 18 U.S.C. § 1962(c)”; “intentionally conspired and agreed to conduct and participate in the conduct of the affairs of the enterprise through a pattern of racketeering activity”; and “knew that their predicate acts were part of a pattern of racketeering activity and agreed to the commission of those acts to further the schemes described above.” [FAC ¶¶ 131-132.] Aside from the addition of a reference to the “Individual” Defendants, these allegations are identical to those in the original Complaint. [Compl. ¶¶ 110-111.] Plaintiffs still plead no facts regarding when any agreement was entered, by whom, the agreed-upon duration of Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 40 of 60 - 30 - the conspiracy, the scope of the agreement, what predicate acts Defendants agreed to commit, or how each participant in the alleged conspiracy had knowledge that acts being committed were part of a pattern of racketeering activity. Instead, Plaintiffs’ conspiracy claim improperly incorporates previous allegations and then provides a formulaic recitation of the elements of RICO conspiracy. Carter v. MGA, Inc., 189 F. App’x. 893, 895 (11th Cir. 2006) (general allegations that defendants conspired and agreed to violate 18 U.S.C. § 1962(c) with reference to violations described above were insufficient to maintain RICO conspiracy claim). 3. Plaintiffs fail to allege proximate cause. RICO “demand[s]” a “direct relation between the injury asserted and the injurious conduct alleged.” 8 Holmes v. Sec. Inv’r Prot. Corp., 503 U.S. 258, 268- 69 (1992). RICO plaintiffs are held “to a more stringent showing of proximate cause than would be required at common law. . . . in order to combat the specific mischiefs that the RICO statute was designed to address.” Lerner v. Fleet Bank, 8 Likewise, a civil cause of action under Georgia’s RICO Act is available to “[a]ny person who is injured by reason of any violation of Code Section 16-14-4.” O.C.G.A. § 16-14-6(c). Georgia RICO requires “a direct nexus between at least one of the predicate acts listed under the RICO Act and the injury [a plaintiff] purportedly sustained.” Smith v. Morris, Manning & Martin, LLP, 293 Ga. App. 153, 165, 666 S.E.2d 683, 695 (2008); Longino v. Bank of Ellijay, 228 Ga. App. 37, 40-41, 491 S.E.2d 81, 85 (1997) (individual’s RICO injuries “‘must flow from the commission of the predicate acts’”) (quoting Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479 (1985) (internal quotations omitted)). Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 41 of 60 - 31 - N.A., 459 F.3d 273, 285 n.5 (2d Cir. 2006). “[C]ourts should scrutinize proximate causation at the pleading stage and carefully evaluate whether the injury pled was proximately caused by the claimed RICO violations.” Williams v. Mohawk Indus., Inc., 465 F.3d 1277, 1287 (11th Cir. 2006). This requirement serves important purposes, for “the less direct an injury is, the more difficult it becomes to ascertain the amount of a plaintiff’s damages attributable to the [RICO] violation, as distinct from other, independent factors.” Holmes, 503 U.S. at 269. The causal connection “between the racketeering activity and the injury can be neither remote, purely contingent, nor indirect.” Ray v. Spirit Airlines, Inc., 836 F.3d 1340, 1349 (11th Cir. 2016). In other words, RICO liability does “not . . . go beyond the first step” in the causal chain. Holmes, 503 U.S at 271; see also Hemi Grp. v. City of New York, 559 U.S. 1, 9-10 (2010) (plurality) (plaintiff’s “theory of causation” may not involve more than one “step”). Yet that is exactly the case here. Plaintiffs’ alleged injuries are indirect, remote, and contingent by definition. The majority of the damages alleged appear to be made up of intangible expectancy interests and speculative and unfounded lost profits-entirely dependent upon future events. Plaintiffs allege no facts that (1) show loans were forthcoming, from whom, in what amount, or under what terms, or (2) support Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 42 of 60 - 32 - their claim that they turned down other potential business opportunities. Proximate cause as to these matters disappears where the claimed damages “pass through many intermediaries, both identified and unidentified” and “require actions and decisions by third parties before coming into being.” Mendelovitz v. Vosicky, 40 F.3d 182, 185 (7th Cir. 1994). Plaintiffs’ remaining claimed damages, consisting of vague references to increased costs incurred as a result of Defendants’ conduct, contain no supporting factual allegations, preventing Defendants and this Court from evaluating the existence or sufficiency of the causal link alleged. B. Plaintiffs Fail to State a Claim for Fraud and Negligent Misrepresentation. In Count VI of the Complaint, Plaintiffs attempt to assert a claim for fraud against “Defendants” based on alleged false representations . . . (and material omissions) about specific aspects of the complex power plants that were part of the Projects, such as the type of equipment to be used at the power plants, the amount of electrical power and profits that each of the Projects would produce, and the status of key personnel who were working (or continuing to work) on the Projects-including material omissions about the fact that certain key personnel had quit working for Defendants and thus on the Projects. [FAC ¶ 143.] Plaintiffs rely on these same alleged misrepresentations for their negligent misrepresentation claim in Count VII. [Id. at ¶ 148.] In addition to failing to satisfy Rule 9(b), none of the alleged Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 43 of 60 - 33 - misrepresentations or omissions supports a fraud or negligent misrepresentation claim. To state a claim for fraud under Georgia law, a plaintiff must adequately allege facts to establish: (1) false representations; (2) made with knowledge of the falsity of the representation; (3) made with the intent to induce the plaintiff to act or to refrain from acting; (4) justifiable reliance by the plaintiff; and (5) damages proximately caused by such reliance in the representation. Bowen & Bowen Constr. Co. v. Fowler, 265 Ga. App. 274, 276, 593 S.E.2d 668, 671 (2004). 9 These same elements apply to a claim for negligent misrepresentation, “the only difference being whether the defendant knowingly or negligently made the misrepresentations.” Am. Casual Dining, L.P. v. Moe’s Sw. Grill, L.L.C., 426 F. Supp. 2d 1356, 1366 (N.D. Ga. 2006) (Judge Thrash). As addressed below, Plaintiffs fail to adequately allege facts establishing the necessary elements. 1. Defendants’ alleged misrepresentations about equipment and output are assumptions about future events. Georgia courts have consistently found that a misrepresentation is not actionable if it is based upon a broken promise, an unfulfilled prediction, or an erroneous conjecture as to future events. Allstate Ins. Co. v. Sutton, 290 Ga. App. 9 Under Georgia choice of law principles, “[w]hen no statute is involved, Georgia courts apply the common law as developed in Georgia rather than foreign case law.” Frank Briscoe Co. v. Ga. Sprinkler Co., 713 F.2d 1500, 1503 (11th Cir. 1983). This choice of law limitation applies to tort and contract claims. In re Tri- State Crematory Litig., 215 F.R.D. 660, 679 (N.D. Ga. 2003) (Judge Murphy). Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 44 of 60 - 34 - 154, 161, 658 S.E.2d 909, 916 (2008) (“Some of the alleged misrepresentations were merely promises regarding future action or representations regarding matters of law that will not support a claim for fraud.”). This principle applies directly to Defendants’ alleged misrepresentations about “the type of equipment to be used at the power plants” and the “amount of electrical power and profits that each of the Projects would produce.” Plaintiffs’ use of the phrases “to be used” and “would” expressly denote predictions and conjectures about future events. Plaintiffs even repeatedly acknowledge that the type of equipment and output levels at the plants were merely “assumptions” and “expectations” and not statements about preexisting facts. [See FAC ¶¶ 66, 67, 71, 99.] Accordingly, Plaintiffs’ fraud and negligent misrepresentation claims fail as a matter of law to the extent they are based on the type of equipment and output levels at the facilities. Next Century Commc’ns Corp. v. Ellis, 318 F.3d 1023, 1027 (11th Cir. 2003). 2. Plaintiffs cannot justifiably rely on alleged misrepresentations about key personnel. Plaintiffs’ fraud and negligent misrepresentation claims also fail to the extent they are based on alleged misrepresentations or omissions concerning “key personnel.” As a preliminary matter, Plaintiffs fail to allege a legal obligation on any Defendant’s part to inform any Plaintiff about the status of “key personnel.” “In the absence of a confidential relationship, no duty to disclose exists when Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 45 of 60 - 35 - parties are engaged in arm’s-length business negotiations.” Infrasource, Inc. v. Hahn Yalena Corp., 272 Ga. App. 703, 705, 613 S.E.2d 144, 146 (2005). Moreover, “Georgia law places a significant due diligence burden on sophisticated parties engaged in arms-length transactions.” Fin. Sec. Assur., Inc. v. Stephens, Inc., 500 F.3d 1276, 1289 (11th Cir. 2007). Where a party relies on alleged misrepresentations without performing due diligence to investigate the truth of the representations, its claim fails. Tri-State, 823 F. Supp. 2d at 1321. Here, Plaintiffs cannot justifiably rely on Defendants’ alleged misrepresentations or failure to inform Plaintiffs about “key personnel” no longer working on the projects. Plaintiffs could have discovered whether the two “key personnel had quit” by contacting those individuals. Indeed, Plaintiffs admit that they knew the identities of the “key personnel” and noticed that they “had not been appearing in ongoing communications about the Projects . . . , as they had before.” [FAC ¶ 82.] Plaintiffs also admit that they were able to “subsequently learn [about the status of the key personnel] from another source.” [Id. at ¶ 83.] Plaintiffs’ lack of due diligence into the status of the “key personnel” is fatal to their fraud and negligent misrepresentation claims. Tri-State, 823 F. Supp. 2d at 1321 (“Tri-State could have easily discovered for itself whether Lexis had successfully integrated and implemented its software for Merastar by contacting Merastar itself.”). Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 46 of 60 - 36 - Moreover, any alleged misrepresentation or omission regarding “key personnel” is not a material fact upon which a fraud claim can be based. The Engagement Agreements do not even reference the “key personnel,” and the presence of a merger clause in the Engagement Agreements precludes Plaintiffs’ from claiming that they relied upon any alleged representation about “key personnel” when executing the Engagement Agreements. Liberty v. Storage Trust Props., L.P., 267 Ga. App. 905, 910, 600 S.E.2d 841, 846 (2004). Thus, any alleged omission about “key personnel” cannot “‘amount to actionable fraud.’” First Data POS, Inc. v. Willis, 273 Ga. 792, 795, 546 S.E.2d 781, 784 (2001). 3. Defendants’ alleged misrepresentations did not proximately cause Plaintiffs’ damages. Plaintiffs do not assert any facts showing how the alleged misrepresentations, if actionable, proximately caused any damages. Instead, Plaintiffs contend they incurred damages “in excess of $9,000,000.00” in the form of “lost fees, profits, and other amounts.” [FAC ¶¶ 146, 153.] Plaintiffs fail to connect the alleged damages to the purported misrepresentations-because the damages sought by Plaintiffs relate solely to Defendants’ termination of the parties’ relationship, not the alleged misrepresentations upon which Plaintiffs base their fraud and negligent misrepresentation claims. Absent a relationship between the alleged injuries and purported misrepresentations, Plaintiffs’ fraud and Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 47 of 60 - 37 - negligent misrepresentation claims fail. Legacy Acad., Inc. v. Doles-Smith Enters., Inc., 337 Ga. App. 575, 578, 789 S.E.2d 194, 199 (2016). C. Plaintiffs Fail to State a Claim for Breach of Contract. In Count VIII, Plaintiffs allege the “Entity Defendants” breached the Engagement Agreements and the Term Sheet by “failing to provide timely and accurate information needed for Plaintiffs to proceed with EB-5 applications for them and to seek funding for them.” [FAC ¶¶ 157-59.] Both claims lack merit. 10 1. Plaintiffs fail to state a claim for breach of contract based on the Engagement Agreements. Plaintiffs’ claim that the “Entity Defendants” breached the Engagement Agreements fails from the outset with regard to all Defendants except GreenFuels since no other Defendant is a party to the Engagement Agreements. Kaesemeyer v. Angiogenix, Inc., 278 Ga. App. 434, 437, 629 S.E.2d 22, 25 (2006) (“It is axiomatic that a person who is not a party to a contract is not bound by its terms.”); O’Connell v. Cora Bett Thomas Realty, Inc., 254 Ga. App. 311, 563 S.E.2d 167, 10 In paragraph 157, Plaintiffs allege that the “Parties’ contracts include, but are not limited to” the four Engagement Agreements and the Term Sheet. (Emphasis added.) To the extent Plaintiffs base their breach of contract claim on alleged, unidentified contracts between the parties, their claim fails. Anderson v. Deutsche Bank Nat’l Trust Co., No. 1:11-CV-4091-TWT-ECS, 2012 WL 3756512, at *5 (N.D. Ga. 2012), report and recommendation adopted, No. 1:11-CV-4091-TWT, 2012 WL 3756435 (N.D. Ga. Aug. 27, 2012) (recommending dismissal where plaintiffs did not “allege[] the existence of a specific contract”). Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 48 of 60 - 38 - 170 (2002) (finding an entity not a party to a contract could not be liable for its breach); Martin v. Pierce, 140 Ga. App. 897, 899, 32 S.E.2d 170, 172 (1977) (noting a “person who is not a party to a contract (i.e., is not named in the contract and has not executed it) is not bound by its terms”). Hoping to avoid this result, Plaintiffs rely on a March 29, 2016 letter from Defendant Shaffer to Gate to claim the other “Entity Defendants” were parties to the Engagement Agreements. The March 29 letter makes no mention of the Engagement Agreements, which expired by their own terms almost ten months beforehand. [Compl. Exs. A-D, p. 1, § 1 (“ending on 1 June 2015”).] Rather, the letter generally refers to a “draft Consulting Agreement that Gate Industries recently proposed” and GreenFuels’ decision “against pursuing EB-5 related financing for [its] current and prospective facilities,” making no mention of the Engagement Agreements. [Id. Ex. E.] Also, Section 17 of the Engagement Agreements contains a merger provision and requires any “amendment, alteration, or withdrawal of the Agreement” to be “in writing and signed by the parties. Any purported amendment, modification, or withdrawal that is oral will be void and of no effect whatsoever.” [Id. Exs. A-D at p. 4] Nowhere do Plaintiffs allege the existence of a written, signed amendment naming the other “Entity Defendants” as parties to Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 49 of 60 - 39 - the Engagement Agreements. The March 29 letter, then, constitutes inadmissible parol evidence. Kaesemeyer, 278 Ga. App. at 437-38, 629 S.E.2d at 25 (“[I]n light of the agreement’s . . . merger clause, the parol evidence allegedly supporting Kaesemeyer’s claim that he had standing was properly deemed inadmissible.”). Moreover, to plead a cause of action for breach of contract, Plaintiffs must point to the specific contractual provision the “Entity Defendants” allegedly breached by acting, or failing to act, in a certain manner. Burgess, 600 F. App’x at 664. Plaintiffs fail to do so, and instead generally refer to Sections 9 and 10 of the Engagement Agreements for the proposition that they “specified the types of information that the Entity Defendants would need to provide for all the Projects and the information that would be provided to the USCIS in regard to them.” [FAC ¶ 54.] This allegation directly contravenes the plain language of Section 9, which sets forth obligations of Plaintiffs (not Defendants). Moreover, Section 10 applies to information concerning foreign investors, such as their names, the amounts invested, and the terms of the investment. [Compl. Ex. A, pp. 2-3, §§ 9, 10.] At no point have Plaintiffs alleged that Defendants misrepresented the names or amounts of investments made by the foreign investors. Plaintiffs also refer to Section 15 of the Engagement Agreements but fail to assert any facts showing that Defendants breached this provision. [FAC ¶ 55.] Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 50 of 60 - 40 - Nor can they. Section 15 is an indemnification clause under which GreenFuels would be solely responsible for representations it made to the Plaintiffs Southern Film and Gate Industries in connection with any submission of information by Southern Film and Gate to the USCIS. Nowhere do Plaintiffs allege they incurred any such loss or liability in connection with submitting information for the Projects to the USCIS. This failure to point to a particular contract provision that the “Entity Defendants” purportedly breached is fatal to Plaintiffs’ breach of contract claim. See Adkins v. Cagle Foods JV, LLC, 411 F.3d 1320, 1327 (11th Cir. 2005) (affirming dismissal of breach of contract claim because plaintiffs could not identify any contractual provision breached by defendant); Barnes v. Burger King Corp., 932 F. Supp. 1420, 1435 (S.D. Fla. 1996) (breach of contract claim failed as a matter of law where plaintiff could not cite to an express contractual provision). 11 11 In paragraph 158, Plaintiffs allege, “[p]ursuant to the Breached Contracts and other agreements entered into by the Parties, Plaintiffs agreed to work, exclusively, for Defendants to prepare and submit EB-5 applications.” Yet nowhere in the Engagement Agreements or Term Sheet do Plaintiffs agree to work exclusively for Defendants. To the contrary, Section 12 specifically provides that “[GreenFuels] acknowledges that [Southern Film and Gate are] in the business of providing structured financing to others. Nothing contained in this Agreement is to be construed to limit or restrict the Regional Center in the conduct of its business with respect to others, or in rendering such advice to others.” [Compl. Exs. A-D, p. 3, § 12.] Moreover, the merger provision in Section 17 precludes Plaintiffs from justifiably relying on any alleged representations concerning exclusivity made prior to or contemporaneous with the Engagement Agreements. Liberty v. Storage Trust Props., L.P., 267 Ga. App. 905, 910, 600 S.E.2d 841, 846 (2004). Section 17 Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 51 of 60 - 41 - Finally, Plaintiffs fail to establish any plausible damages caused by GreenFuels’s alleged breach of the Engagement Agreements. In the FAC, Plaintiffs generally claim that the “Entity Defendants’ breach of the [Engagement Agreements] has proximately caused harm to Plaintiffs, including but not limited to Plaintiffs’ loss of fees, profits, and other payments that Plaintiffs should, and would, have received over the life of the contemplated Projects.” [FAC ¶ 161.] However, the Engagement Agreements do not permit recovery of these damages; rather, they expressly limit Plaintiffs’ compensation to the specific “expenses associated with the preparation and filing or the proposed EB-5 project” listed in the Appendix of each Agreement. [Compl. Exs. A-D, pp. 1-2, § 5.] Nowhere do Plaintiffs claim GreenFuels failed to pay these expenses. To the contrary, in the April 15, 2016 letter from Plaintiffs’ counsel to Raymon Bean attached as Exhibit T to the initial Complaint, Plaintiffs unequivocally admit that GRP “has accepted Gate’s work product and services for the Projects” and “has paid invoices from Gate for Gate’s work on the Projects.” (Emphasis added.) Without plausible damages, Plaintiffs’ claim for breach of the Engagement Agreements fails. of the Engagement Agreements also renders any alleged oral amendment, modification, or alteration of the Engagement Agreements “void.” Furthermore, any modification of the terms of the Engagement Agreements would require that the “subsequent agreement [be] founded on sufficient consideration.” Thompson v. Enter. Leasing Co. of Ga., 240 Ga. App. 222, 223-24, 522 S.E.2d 670, 672 (1999). Plaintiffs have not identified any such consideration. Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 52 of 60 - 42 - 2. Plaintiffs fail to state a claim for breach of contract based on the Term Sheet. There likewise is no merit to Plaintiffs’ contention that Defendants breached the Term Sheet. To start, the Term Sheet unequivocally states that it is: a “propos[al] to Georgia Renewable Power, LLC”; “not a binding commitment or agreement”; “outlined for discussion purposes only”; and “subject to approval of both parties.” [Compl. Ex. F. pp. 1, 4.] Accordingly, Plaintiffs cannot show that the Term Sheet constitutes a binding agreement. Harmon v. Innomed Techs., Inc., 309 Ga. App. 265, 266, 709 S.E.2d 888, 890 (2011) (“agreement was unenforceable” because “the terms that were specified within the agreement were tempered by alternatives and otherwise subject to unspecified future changes”). Furthermore, even if the Term Sheet was a binding agreement, GRP is the only Defendant that either signed or is referenced in the Term Sheet. 12 [Compl. Ex. F, p. 1.] Plaintiffs cannot claim that the other nine Defendants breached the Term Sheet. O’Connell, 254 Ga. App. at 313, 563 S.E.2d at 170 (finding an entity not a party to a contract could not be liable for its breach). A “person who is not a party to a contract (i.e., is not named in the contract and has not executed it) is not bound by its terms.” Martin v. Pierce, 140 Ga. App. 897, 899, 32 S.E.2d 170, 172 12 Although Defendant Shaffer signed the Term Sheet, he did so in his capacity as President and Chief Operating Officer of GRP, not in his individual capacity. Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 53 of 60 - 43 - (1977). Finally, Plaintiffs must point to an express provision of the Term Sheet that Defendants allegedly breached to state a claim for breach of contract. Adkins, 411 F.3d at 1327; Barnes, 932 F. Supp. at 1435. They have not done so. D. Plaintiffs Fail to State a Claim for Breach of the Implied Covenant of Good Faith and Fair Dealing. The implied covenant of good faith and fair dealing does not impose “an undertaking that can be breached apart from” the explicit terms of a contract. Alan’s of Atlanta, Inc. v. Minolta Corp., 903 F.2d 1414, 1429 (11th Cir. 1990). “[G]eneral allegations concerning the breach of an implied duty of good faith and fair dealing not tied to a specific contract provision are not actionable.” Tart v. IMV Energy Sys. of Am., Inc., 374 F. Supp. 2d 1172, 1181 (N.D. Ga. 2005) (Judge Duffey). Accordingly, this claim fails as a matter of law because Plaintiffs have not alleged facts establishing breach of a binding contract between the parties. E. Plaintiffs Fail to State a Claim for Quantum Meruit or Unjust Enrichment. In Count X of the Complaint, Plaintiffs attempt to assert claims for quantum meruit and unjust enrichment. These claims fail for a multitude of reasons. First, Plaintiffs fail to allege sufficient facts to support these claims. Instead, Plaintiffs allege in conclusory fashion that they “provided services to and for Defendants that were valuable and that were valuable to Defendants, including but not limited to Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 54 of 60 - 44 - assistance with EB-5 and other financing for the Projects,” that “Defendants requested that Plaintiffs provide these valuable services,” that “Defendants knowingly accepted these valuable services from Plaintiffs and knowingly allowed Plaintiffs to perform these valuable services for and on behalf of Defendants,” and that “Defendants’ receipt of these valuable services from Plaintiffs, without compensating Plaintiffs for such services, would be, and is, unjust.” [FAC ¶¶ 170- 173.] Such bare, conclusory allegations are insufficient to satisfy the applicable pleading standard under Ashcroft v. Iqbal, 556 U.S. 662, 667 (2009). Second, unjust enrichment is available only when there is no legal contract. Camp Creek Hospitality Inns, Inc. v. Sheraton Franchise Corp., 139 F.3d 1396, 1413 (11th Cir. 1998) (citing Reg’l Pacesetters, Inc. v. Halpern Enters. Inc., 165 Ga. App. 777, 782, 300 S.E.2d 180 (1983)). To the extent Plaintiffs conferred any benefit on Defendants by performing their duties under the Engagement Agreements, a separate claim for unjust enrichment is improper. Tidikis v. Network for Med. Commc’ns & Research LLC, 274 Ga. App. 807, 811, 619 S.E.2d 481, 485 (2005) (unjust enrichment claim was properly dismissed when benefits were conferred in accordance with unchallenged contract). Third, to recover in quantum meruit, Plaintiffs must show (1) performance of services valuable to Defendants, (2) either at the request of Defendants or Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 55 of 60 - 45 - knowingly accepted by Defendants, (3) Defendants’ receipt of which without compensating Plaintiffs would be unjust, and (4) Plaintiffs’ expectation of compensation at the time of the rendition of the services. Perry Golf Course Dev., LLC v. Hous. Auth. of City of Atlanta, 294 Ga. App. 387, 394, 670 S.E.2d 171, 178 (2008). Unjust enrichment likewise applies “when there is no legal contract and when there has been a benefit conferred which would result in an unjust enrichment unless compensated.” Smith Serv. Oil Co. v. Parker, 250 Ga. App. 270, 271, 549 S.E.2d 485, 487 (2001). Here, Plaintiffs admit that GRP “has paid invoices from Gate for Gate’s work on the Projects.” [Compl. Ex. T at p. 2.] CONCLUSION This lawsuit is nothing more than a shake down. Plaintiffs’ complete disregard for applicable procedural rules and this Court’s Order warrants dismissal of the FAC with prejudice. 13 This 26th day of June, 2017. 13 Because Plaintiffs’ underlying claims fail as a matter of law, their claim for treble damages, punitive damages and attorney’s fees likewise fail since those claims are dependent on an award on the underlying claims. United Cos. Lending Corp. v. Peacock, 475 S.E.2d 601, 602, 475 S.E.2d 601, 602 (1996) (“A prerequisite to any award of attorney fees under O.C.G.A. § 13-6-11 is the award of damages or other relief on the underlying claim.”). Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 56 of 60 - 46 - Respectfully submitted, GREENBERG TRAURIG /s/ Janna S. Nugent Ernest L. Greer Georgia Bar No. 309180 greere@gtlaw.com Mark G. Trigg Georgia Bar No. 716295 triggm@gtlaw.com Janna S. Nugent Georgia Bar No. 940465 nugentj@gtlaw.com Counsel for Defendants Terminus 200 3333 Piedmont Road, NE, Suite 2500 Atlanta, Georgia 30305 Telephone: (678) 553-2100 Facsimile: (678) 553-2212 Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 57 of 60 - 47 - CERTIFICATE PURSUANT TO LOCAL RULE 7.1 I hereby certify that the within and foregoing document was prepared in Times New Roman, 14-point font in accordance with L.R. 5.1C. This 26th day of June, 2017. /s/ Janna S. Nugent Janna S. Nugent Georgia Bar No. 940465 Counsel for Defendants Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 58 of 60 - 48 - UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION FIVE ON FIFTY, LLC; GATE INDUSTRIES, LLC and SOUTHERN FILM REGIONAL CENTER-ATLANTA, LLC Plaintiff, -vs.- F. RAYMON BEAN; DAVID SHAFFER; JEFFREY KUEHR; GREENFUELS ENERGY, LLC; GEORGIA RENEWABLE POWER, LLC; GRP FRANKLIN, LLC; GRP MADISON, LLC; GRP NORTH CAROLINA, LLC; NORTH CAROLINA RENEWABLE POWER-LUMBERTON, LLC; and NORTH CAROLINA RENEWABLE POWER- ELIZABETHTOWN, LLC Defendants. Civil Action No. 1:16-cv-3690 - TCB (JURY TRIAL DEMANDED) CERTIFICATE OF SERVICE I hereby certify that on June 26, 2017 the foregoing document titled MEMORANDUM OF LAW IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS THE FIRST AMENDED COMPLAINT was filed with the Court through its CM/ECF service which shall send electronic notice of said filing to the following attorneys of record: Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 59 of 60 - 49 - Thomas C. Grant, Esq. LEWIS BRISBOIS BISGAARD & SMITH, LLP 1180 Peachtree Street, N.E. Suite 2900 Atlanta, Georgia 30309 /s/ Janna S. Nugent Janna S. Nugent Georgia Bar No. 940465 Counsel for Defendants ATL 22156717v10 Case 1:16-cv-03690-TCB Document 36-1 Filed 06/26/17 Page 60 of 60 EXHIBIT B Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 1 of 74 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION FIVE ON FIFTY, LLC; GATE INDUSTRIES, LLC; and SOUTHERN FILM REGIONAL CENTER-ATLANTA, LLC, Plaintiffs, CIVIL ACTION NO. 1:16-CV-3690 v. F. RAYMON BEAN; DAVID SHAFFER; JEFFREY KUEHR; GREENFUELS ENERGY, LLC; GEORGIA RENEWABLE POWER, LLC; GRP FRANKLIN, LLC; GRP MADISON, LLC; GRP NORTH CAROLINA, LLC; NORTH CAROLINA RENEWABLE POWER- LUMBERTON, LLC; and NORTH CAROLINA RENEWABLE POWER-ELIZABETHTOWN, LLC, Defendants. CIVIL ACTION NO. 1:16-CV-3690 JURY DEMAND FIRST AMENDED COMPLAINT Plaintiffs Five on Fifty, LLC; Gate Industries, LLC; and Southern Film Regional Center-Atlanta, LLC (collectively, “Plaintiffs”) hereby file this First Amended Complaint against Defendants F. Raymon Bean; David Shaffer; Jeffrey Kuehr; GreenFuels Energy, LLC; Georgia Renewable Power, LLC; GRP Franklin, LLC; GRP Madison, LLC; GRP North Carolina, LLC; North Carolina Renewable Power-Lumberton, LLC; and North Carolina Renewable Power-Elizabethtown, LLC (collectively, “Defendants”) and state as follows: I. INTRODUCTION. 1. Defendants are individuals and entities that hold themselves out as having significant experience and expertise in the electrical power generation industry.1 Before being introduced to Plaintiffs, 1 Defendants F. Raymon Bean; David Shaffer; Jeffrey Kuehr are referred to collectively as the “Individual Defendants.” The remaining seven Defendants are entities and are referred to collectively as the “Entity Defendants.” Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 2 of 74 Defendants had been pursuing a complex, multi-million dollar business venture that involved acquiring and building four electrical power plants -two located in northern. Georgia and two in southern North Carolina-that would generate revenue by selling electrical power to utilities pursuant to power purchase agreements with those utilities. The plants were to be modernized to employ technologies that would produce renewable energy from bio fuels, such as wood and chicken waste (also referred to as chicken litter). 2. Because the Entity Defendants could not fund the entire venture themselves, they needed significant investment of more than $200,000,000.00 and were therefore seeking funding from other sources, when they met Plaintiffs, who have experience and expertise with obtaining funding for EB-5 Projects. (EB-5 Projects are part of the “EB-5” foreign investment program that is overseen by the United States Citizenship and Immigration Services (“USCIS”).) EB-5 Projects involve a complex, lengthy, and expensive application process that can take a year or more, whereby an applicant must demonstrate to the USCIS that the underlying business venture for a project will create at least a specified number of jobs in order to attract foreign investment which is demonstrated, inter alia, through submission of a detailed business plan supported by an economist’s report. 3. The Entity Defendants (individually or through affiliated entities) retained Plaintiffs to apply for, and fund, an EB-5 project for each of the four power plants (collectively, the “Projects”). The Individual Defendants communicated with Plaintiffs about the Projects on behalf of the Entity Defendants. Dominic (“Nic”) Applegate and Lowell Elliott communicated with Defendants on behalf of the entities that are named as Plaintiffs in this action. Because of the large scope of the Projects and the substantial work that would be required for the Projects, Defendants Shaffer and Bean asked Plaintiffs to focus on Defendants’ four Projects and to work on them exclusively for an entire year, which Defendants agreed to do, and did, turning down other Projects throughout that period of time. Plaintiffs were to receive payment for expenses and services necessary to prepare valid applications for each project and then stood to earn significant compensation, in excess of $25 million over a period of years, for their work in raising EB-5 funding the Projects through foreign investment. 4. Because EB-5 project applications involve serious and complex representations to the USCIS, made under penalty of perjury, Plaintiffs stressed from the outset of their relationship with the Entity Defendants that the EB-5 applications must be completely accurate in describing the details of the Projects, to demonstrate to the USCIS that each project would in fact produce enough power and jobs to meet requirements and would be able to support at least $166,000,000.00 in foreign investment in the domestic Projects, as required for USCIS approval. 5. 2 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 3 of 74 In hindsight, Plaintiffs now know that the Individual Defendants, individually and on behalf of the Entity Defendants, fraudulently induced themPlaintiffs into working with the Entity Defendants to apply for and seek funding for the Projects by representing that the Entity Defendants had the knowledge, assets, permits, and equipment necessary to meet the EB-5 requirements for job-creation and investment. Relying upon Defendants’ representations about the cost, operation, output, and revenues associated with each of the Projects, Plaintiffs agreed to set aside all new business and to work exclusively on Defendants’ four EB-5 Projects for a year, beginning in November 2014. 6. As work on the Projects continued over a period of months, however, Plaintiffs began to discover that Defendants had fraudulently misrepresented (and in some cases omitted) key facts about the Projects that were to be used in the EB-5 applications for the Projects, to prove that each project was financially viable and would produce revenues necessary to fund the underlying business. These misrepresentation and omissions occurred through interstate emails, telephone calls, and in face-to-face meetings. 7. For instance, Defendants misrepresented the type and size of a boiler that was a key part of the Lumberton plant’s ability to generate the requisite amount of electrical power to meet the requirements of a Power Purchase Agreement with Duke Energy, at a certain cost, and in doing so greatly exaggerated the amount of power that would in fact be generated. This and other key factors regarding the performance and profitability of the Projects were the basis for very detailed representations about each of the Projects that were contained in large, complex “pro forma” spreadsheets that the Individual Defendants (acting on behalf of the Entity Defendants) periodically sent to, and discussed with, Plaintiff Gate Industries. The Defendants represented to Plaintiff Gate Industries that the pro formas they produced were current and accurate. 8. As another example, the Individual Defendants withheld from Plaintiffs that two key personnel who were overseeing the Projects had quit because of their dissatisfaction with Defendants’ handling of the Projects. 9. Even after being warned by Nic Applegate and other representatives of Plaintiffs about these misrepresentations, the Entity Defendants proceeded in bad faith and chose not to pay for updated economic studies and reports that would be necessary to revise the EB-5 applications to reflect the true facts and figures about the Projects. 10. Another example of Defendants’ misrepresentations about the viability of the power Projects is the fact that Defendants have had to stop the operation of the Lumberton plant had to cease for 3 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 4 of 74 extended periods of timemonths, because Defendants have beenwere unable to outfit and operate it within the applicable legal limits for pollution. Furthermore, even when that plant has been operational, it has consistently failed to generate the amount of electricity that Defendants represented that it would, making it unlikelyclear that the Lumberton plant could perform as represented by Defendants in their EB-5 application. 11. Upon information and belief, Plaintiffs now understand that Defendants have stopped work on the two Projects in Georgia (the Madison and Franklin power plants), because of serious problems making those two plants function at the necessary capacity. 12. Rather than continuing to work in good faith with Plaintiffs on the Projects, the Entity Defendants instead purported to continue working with Plaintiffs to fund the Projects, when the Entity Defendants were instead actively soliciting yet another source of funding for the Projects, which the Entity Defendants ultimately pursued after Defendant Shaffer suddenly and unilaterally terminatingterminated their commercial relationship with Plaintiffs. The Entity Defendants ultimately breached their contracts with Plaintiffs and ended Plaintiffs’ involvement in the Projects, deprivingwhich deprived Plaintiffs of the money that theyPlaintiffs would have earned from the Projects. Having sought investment in their power Projects from other sources, both before and after they used Plaintiffs for EB-5 financing, it is clear that Defendants’ fraudulent activities constitute an interstate enterprise that (i) has committed wire and mail fraud and thus violates Federal and state RICO laws, (ii) has committed fraud, (iii) has breached contracts, and (iv) failed to act in good faith,. Therefore, Plaintiffs have filed this action seeking relief for the damage done to them, including lost fees, profits, and other amounts that Plaintiffs will not receive, as a proximate cause of Defendants’ fraud, bad faith, and other improper acts. Defendants’ actions have also harmed Plaintiffs by causing Plaintiffs to spend additional time and effort working on the Projects, which caused Plaintiffs both to spend additional resources on the Projects and also reduced Plaintiffs’ ability to work on (and be paid for) other matters. II. PARTIES, VENUE, AND JURISDICTION. 13. 12. Plaintiff Five on Fifty, LLC (“Five on Fifty”) is a limited liability company registered in Delaware that is a citizen of Georgia. Its role in the Projects included service as the “NCE manager” for each fund involved in each Project. Five on Fifty would receive compensation for services that it provided in relation to each of the Projects. 14. 13. 4 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 5 of 74 Plaintiff Gate Industries, LLC (“Gate Industries”) is a limited liability company registered in Delaware that is a citizen of Georgia. Gate Industries played a key role in nearly all aspects of the Projects, from their beginning-developing EB-5 plans for submission to the USCIS, working to ensure government approval of those plans, and seeking investment in the related Projects. 15. 14. Plaintiff Southern Film Regional Center-Atlanta, LLC (“SFRC”) is a limited liability company registered in Georgia. SFRC was the EB-5 regional center that was associated with the Projects. (EB-5 projects must be associated with a regional center approved by the USCIS.) 16. 15. Defendant F. Raymon Bean (“Bean”) is a natural person who, upon information and belief, is a citizen of Alabama. Bean has acted as a representative and agent of the Entity Defendants with respect to the Projects and other matters described in this Complaint. Defendant Bean directly or indirectly owns all of the Entity Defendants. 17. 16. Defendant David Shaffer (“Shaffer”) is a natural person who, upon information and belief, is a citizen of Pennsylvania. Shaffer has acted as a representative and agent of the Entity Defendants with respect to the Projects and other matters described in this Complaint. 18. 17. Defendant Jeff Kuehr (“Kuehr”) is a natural person who, upon information and belief, is a citizen of Indiana. Kuehr has acted as a representative and agent of the Entity Defendants with respect to the Projects and other matters described in this Complaint. 19. 18. Defendant GreenFuels Energy, LLC (“GreenFuels”) is a limited liability company registered in Delaware that is a citizen of Alabama. Defendant Bean owns all of Defendant GreenFuels. The Individual Defendants have acted and communicated on behalf of GreenFuels, including the actions and communications that have a nexus with Georgia, as explained below. Defendant GreenFuels is also a party to the four Engagement Agreements, each of which 5 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 6 of 74 expressly subjects GreenFuels to the jurisdiction of this Court and to the application of Georgia law. Defendant GreenFuels also owns and/or operates two power plants located in Georgia. 20. 19. Defendant Georgia Renewable Power, LLC (“Georgia Renewable Power”) is a limited liability company registered in Delaware that is a citizen of Alabama. Defendant GreenFuels owns all of Defendant Georgia Renewable Power. The Individual Defendants have acted and communicated on behalf of Georgia Renewable Power, including the actions and communications that have a nexus with Georgia, as explained below. Defendant Georgia Renewable Power is also a party to the four Engagement Agreements (as an affiliate of GreenFuels), each of which expressly subjects Georgia Renewable Power to the jurisdiction of this Court and to the application of Georgia law. Defendant Georgia Renewable Power also owns and/or operates two power plants located in Georgia. 21. 20. This courtCourt has personal jurisdiction over the parties to this action for reasons that include, inter alia, their work performed in the Northern District of Georgia on a large power plant projects, which work involved the Individual Defendants’ presence in Georgia (on behalf of the Entity Defendants) to visit the Georgia power plants, to meet with Plaintiffs’ representatives, and to meet with professionals in Atlanta regarding the complex transactions and documents associated with the Projects. Among other things, the Individual Defendants (acting in part as representatives of the Entity Defendants), frequently attended meetings in Atlanta as they worked with counsel at the Atlanta office of the Seyfarth Shaw law firm, which served as the Entity Defendants’ counsel for the Projects. Although the two North Carolina power plants are not located in Georgia, the North Carolina entities associated with those projects had representatives (including the Individual Defendants) who frequently communicated and met with professionals in Atlanta, in relation to the financing of the Projects. 21. Defendant Bean is the managing member of Defendant Georgia Renewable Power, which operates and/or owns power plants located in Georgia. Defendant Bean’s contacts with Georgia (individually and as a representative of the Entity Defendants, all of which he directly or indirectly owns) include the following: a. Defendant Bean met Nic Applegate (as a representative of Plaintiffs) at the offices of SFRC in Atlanta, to discuss the terms and other aspects of the Projects; 6 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 7 of 74 b. On numerous occasions during the nearly two years that the parties worked on the Projects, Defendant Bean frequently attended meetings with lawyers and other professionals at the Atlanta office of Seyfarth Shaw regarding the Projects; c. Defendant Bean visited the plant in Franklin, Georgia, to meet with Mr. Applegate and others concerning the Projects; d. Defendant Bean made numerous visits to the power plants in Franklin and Madison, Georgia; e. Upon information and belief, Defendant Bean made numerous, multi-day trips to and throughout Georgia in an effort to negotiate contracts for the supply of wood and other biofuels to be used at the Franklin and Madison plants; f. Defendant Bean negotiated and executed a Power Purchase Agreement between Georgia Power and Defendant GRP Franklin, LLC (dated June 15, 2015) for the Franklin plant, which agreement is governed by Georgia law and contains an arbitration provision that requires any disputes regarding the agreement to be arbitrated in Atlanta; g. Defendant Bean negotiated and executed a Power Purchase Agreement between Georgia Power and Defendant GRP Madison, LLC (dated November 23, 2015) for the Madison plant, which agreement is governed by Georgia law and contains an arbitration provision that requires any disputes regarding the agreement to be arbitrated in Atlanta; h. Defendant Bean communicated frequently by telephone and email with people in Atlanta regarding the Projects (primarily with professionals and others at the Atlanta office of Seyfarth Shaw); and i. Defendant Bean owns (directly and indirectly) entities that operate two power plants in Georgia and has caused promotional and other literature to be distributed to potential investors that specifically identifies him as a key part of the team that will operate those plants. 22. Defendant Bean is the managing member of Defendant Georgia Renewable Power.Shaffer is the president and Chief Operating Officer of Defendant Georgia Renewable Power, which operates and/or owns power plants located in Georgia. Defendant Shaffer’s contacts with Georgia (individually and as a representative of the Entity Defendants) include the following: a. Defendant Shaffer met Nic Applegate (as a representative of Plaintiffs) at the offices of SFRC in Atlanta, to discuss the terms and other aspects of the Projects; b. On numerous occasions during the nearly two years that the parties worked on the Projects, Defendant Shaffer frequently attended meetings with lawyers and other professionals at the Atlanta office of Seyfarth Shaw regarding the Projects; 7 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 8 of 74 c. While the Projects were ongoing, Defendant Shaffer asked Mr. Applegate (as a representative of Plaintiffs) to meet Mr. Shaffer at the Atlanta airport to discuss the Projects, which meeting occurred as requested; d. Defendant Shaffer visited the plant in Franklin, Georgia, to meet with Mr. Applegate and others concerning the Projects; e. Defendant Shaffer made numerous visits to the power plants in Franklin and Madison, Georgia; including many meetings there with Terry Williams, who previously worked as vice president of construction on the Projects; f. Defendant Shaffer visited Georgia to personally attend meetings with local government officials and residents, to promote the Projects, including a trip to Jefferson County, Georgia, which was originally to be the location for what ultimately became the Franklin plant; g. Defendant Shaffer was intimately involved in the construction and operation of the Franklin and Madison plants; consequently, the “Notice” provisions in both Power Purchase Agreements for those plants list him as the sole contact to receive notices concerning those two agreements; h. Defendant Shaffer communicated frequently by telephone and email with people in Atlanta regarding the Projects (primarily with professionals and others at the Atlanta office of Seyfarth Shaw); and i. Defendant Shaffer supervises and/or controls the operation of two power plants in Georgia and has caused promotional and other literature to be distributed to potential investors that specifically identifies him as a key part of the team that will operate those plants. 23. Defendant Shaffer is the president and Chief Operating Officer of Defendant Georgia Renewable Power.Kuehr is the Finance Director of Defendant Georgia Renewable Power, which operates and/or owns power plants located in Georgia. Defendant Kuehr’s contacts with Georgia (individually and as a representative of the Entity Defendants) include the following: a. Defendant Kuehr met with Mr. Applegate (as a representative of Plaintiffs) in Atlanta on several occasions to discuss the Projects; b. On numerous occasions during the nearly two years that the parties worked on the Projects, Defendant Kuehr frequently attended meetings with lawyers and other professionals at the Atlanta office of Seyfarth Shaw regarding the Projects; c. Upon information and belief, Defendant Kuehr has also traveled to Georgia to see the Madison and Franklin plants; 8 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 9 of 74 d. Defendant Kuehr communicated frequently by telephone and email with people in Atlanta regarding the Projects (primarily with professionals and others at the Atlanta office of Seyfarth Shaw); and e. Defendant Kuehr supervises and/or controls the operation of two power plants in Georgia and has caused promotional and other literature to be distributed to potential investors that specifically identifies him as a key part of the team that will operate those plants. 24. Defendant Kuehr is the Finance Director of Defendant Georgia Renewable Power.GRP Franklin, LLC and Defendant GRP Madison, LLC each own and/or operate a power plant located in Georgia. These Defendants have also been registered to do business in Georgia since at least February 17, 2015. In addition, Defendant GRP Franklin, LLC and Defendant Madison, LLC are part of a larger venture involving the Entity Defendants that worked to fund the Projects. (See, e.g. Exhibit “E” to the Complaint,2 in which Defendant Shaffer acknowledged that “GreenFuels…and Affiliates” were parties to Defendants’ relationship with Plaintiff Gate Industries regarding the “financing, construction and operation of GreenFuels’ biomass facilities and projects, which include each of the Projects”). Also, Defendant GRP Franklin, LLC and Defendant GRP Madison, LLC are each parties to a Power Purchase Agreement with Georgia Power Company regarding the generation of power in Georgia to supply power to Georgia utilities. 25. Defendant GRP North Carolina, LLC; North Carolina Renewable Power-Lumberton, LLC; and North Carolina Renewable Power-Elizabethtown, LLC (collectively, the “North Carolina Defendants”) are each subsidiaries of Defendant GreenFuels and are each affiliates of GreenFuels. (See, e.g. Exhibit “E” to the Complaint, in which Defendant Shaffer recognizes that the venture to finance the Projects included GreenFuels and its “Affiliates.”) Furthermore, as parties to the venture to fund and operate the Projects, the Individual Defendants (acting on behalf of the North Carolina Defendants) performed many actions and communications, in and around Atlanta, to prepare and submit EB-5 applications, including communications with, and presence at, the offices of Seyfarth Shaw in Atlanta and meetings in and around Atlanta with representatives of Plaintiffs. 26. This Court has subject matter jurisdiction over this action pursuant to 18 U.S.C. § 1964, 28 U.S.C. § 1331, 28 U.S.C. § 1332, and 28 U.S.C. § 1367. The current in controversy in this action exceeds $75,000.00, exclusive of interest and costs. 26. 27. 2 Unless otherwise indicated the exhibits referenced in this Amended Complaint are the exhibits that Plaintiff filed in support of their initial Complaint in this action. 9 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 10 of 74 Venue is proper in the Northern District of Georgia pursuant to 28 U.S.C. § 1391(b)(2) because, inter alia, a substantial part of the events or omissions giving rise to this dispute occurred in Georgia, and because a substantial part of the property that is the subject of this action is situated in the Northern District of Georgia. 27. 28. Venue is also proper as to Defendants, pursuant to 18 U.S.C. § 1965, based on their work on power plant projects in the Northern District of Georgia, including work to approve and fund those projects that required them to engage in frequent communications with, and meetings at, the offices of Seyfarth Shaw in Atlanta. 28. 29. Additionally, numerous of the DefendantsDefendant GreenFuels (individually and through theirits “affiliates) are parties”) is a party to four separate “Engagement Agreements” (one for each EB-5 power plant project), each of which contains a venue and choice of law provision which states that applies Georgia law applies, and that the parties have agreedrequires that “[a] suit, action or proceeding arising out of or relating to [the] Agreement may be maintained in any court of competent jurisdiction in Fulton County, Georgia, and each party waives all objections to such jurisdiction and venue.” (True and correct copies of these four Engagement Agreements are attached hereto as Exhibits “A”-”D” (collectively, the “Engagement Agreements”).)1 (See also Exhibit “C,” in which Defendant Shaffer recognizes that the contractual relationship regarding the Projects included both Defendant GreenFuels and its “affiliates.”) III. BACKGROUND FACTS. A. Defendants Are Affiliated Persons and Entities Who Were Collectively Seeking to Fund a Business Venture That Involved the Production of Electrical Power Using Biomass Materials at Four Power Plants Located in Georgia and North Carolina. 29. 30. Before the Individual Defendants were introduced to Plaintiffs, they had caused the Entity Defendants had formedto form a venture involving the production of electrical power at four power plants, located in (i) the City of Madison, Georgia, (ii) the Village of Franklin, Heard County, Georgia, (iii) the City of Lumberton, North Carolina, and (iv) the Town of Elizabethtown, Bladen County, North Carolina. (Defendants had initially explored 1 Out of an abundance of caution, Plaintiffs are seeking to file the exhibits under seal, because some contain confidential information. 10 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 11 of 74 acquiringoperating a power plant in the City of Jefferson, Georgia, but opted instead to acquireoperate a power plant in the City of Madison.) 30. 31. As part of the venture, each of the power plants was to be modernized so that each could produce renewable energy to be generated from bio fuels, including wood pulp and chicken waste. 31. 32. Achieving profitable and sustainable levels of electricity from biofuels requires substantial expertise in a niche area of power production and the use of new and expensive technologies. Among other things, biofuels create substantially more moisture than traditional coal plants and thus do not produce energy as efficiently as do traditional, coal-burning power plants. Also, the availability and price of biofuels is a key factor in a power plant’s profitability, especially when two or more biofuel-burning plants are located near one another (which was the case in both Georgia and in North Carolina with respect to the Projects.) This is because having two plants located near each other (as was the case in both Georgia and North Carolina) will increase demand on local supplies of fuel, thus increasing the price of fuel. Therefore, being able to attract investors and funding for biofuel power projects requires a strong and supportableverifiable business plan to demonstrate that a plant can and will produce the required amount of electrical power, at an overall cost that will allow the plant to operate at a specified projectprofit level. 32. 33. Before the Entity Defendants were introduced to Plaintiffs, Defendants (acting through the Individual Defendants) had been seeking investment financing for their venture from other 11 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 12 of 74 sources. In materials associated with that financing, the relationship of the entities involved in Defendants’ venture was listed as follows:23 [IMAGE PLACEHOLDER] 33. 34. In an attempt to acquire financing for the four Projects that comprise Defendants’ overall venture, Defendants (primarily through the Individual Defendants) engaged in interstate communications with Plaintiffs (primarily Gate Industries), beginning in approximately July or August 2014. These discussions involved obtaining financing for the Projects through foreign investment via the EB-5 Immigrant Investor Program overseen by the USCIS. (The Immigrant Investor program was created under the Immigration Act of 1990. The Regional Center Pilot Program was added as part of changes adopted in 1993.) 34. 35. Many of the parties’ communications occurred via interstate email, mail, and telephone calls, given (i) that Defendants predominantly work out of Alabama, (ii) that Plaintiffs operated out of Georgia and South Carolina, and (iii) that the subject power plants are located in Georgia and in North Carolina,. In addition, the Individual Defendants (on behalf of the Entity Defendants) traveled to North Carolina and to Georgia to see the various power plants and to seek contracts for the large supply of biofuels that were needed to operate the Projects. Furthermore, the Individual Defendants (on behalf of the Entity Defendants) often traveled to Georgia, often to Atlanta, to meet with lawyers at the Atlanta office of Seyfarth Shaw, which law firm performed the substantial amount of legal work required for the Projects, including work on the EB-5 plan documents. 35. 36. 2 3 Plaintiff did not work directly with Power Fiber, LLC, with GRP Finance Corp. or GreenFuels International, LLC. Plaintiffs are aware, however, that GreenFuels Energy, LLC and GreenFuels International, LLC are currently being sued for allegedly taking another party’s business opportunity in violation of a non-circumvention agreement regarding a biofuel-powered project in Ireland. See MUN Associates, Inc., et al. v. GreenFuels Energy, LLC, United States District Court for the District of New Jersey, Newark Division, Case No. 2:16-cv-04859-ES-JAD. In addition, Defendants Georgia Renewable Power and GreenFuels are currently beinghave been sued unin this Court regarding their alleged nonpayment of $3,000,000.00 allegedly owed by them on a Purchase and Sale Agreement concerning the power plant in Franklin, Georgia, that iswas part of the Franklin Project. See SEA Green Energy Partners, LLC v. Georgia Renewable Power, LLC and GreenFuels Energy, LLC, United States District Court for the Northern District of Georgia, Atlanta Division, Case No. I 1:16-cv-03617-CAP. In other related, pending litigation, Defendants Georgia Renewable Power, LLC and North Carolina Renewable Power-Lumberton have been sued by “NRG,” a provider of employees for operation of the Lumberton plant, for more that $637,000.00 owed for NRG’s provision of employees at that plant. See NRG Energy Services, LLC et al. v. Georgia Renewable Power, LLC, et al., United States District Court for the Eastern District of North Carolina, Western Division, Case No. 7:16-CV-00390-BO. 12 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 13 of 74 Defendants’ continuing use of the entities and persons who pursued the Projects, as well as improper practices related to the funding of the Projects, is evidenced by facts including Defendant Shaffer’s own letter, dated March 29, 2016, to Plaintiff Gate Industries that unilaterally ended Defendants’ relationship with Plaintiffs. Specifically, Defendant Shaffer sent that letter under the subject line, “GreenFuels Energy, LLC and Affiliates (`‘GreenFuels’),” after which he stated, “[t]hank you for your interest in working with GreenFuels and its affiliates in connection with the sourcing of debt and/or equity sources to facilitate the financing, construction and operation of GreenFuels’ biomass facilities and projects.” (These projects include the Projects.” at issue in this action.) Defendant Shaffer thenalso advised Gate Industries that “GreenFuels has recently entered into an exclusive arrangement” with another entity regarding “financing and financial structuring.” Defendant Shaffer copied Defendant Bean and Defendant Kuehr on his letter. (A copy of that letter is attached hereto as Exhibit “E.”) B. Plaintiffs Provide Services Related to EB-5 Projects. 36. 37. Plaintiffs are related businesses that work together on EB-5 Projects-to assist in the preparation of the complex applications, and, upon approval by the USCIS, to assist clients in seeking foreign investment in these EB-5 Projects through foreign brokers and agents abroad. 37. 38. EB-5 Projects are part of the government sponsored EB-5 Program, which promotes job creation in the United States through foreign investment and allows certain qualified foreign investors to obtain green cards that allow them to live and work in the United States. 38. 39. The EB-5 process includes three major steps: (i) application to the USCIS for approval of a project; (ii) solicitation of foreign investment to fund a project (which continues after USCIS approval); and (iii) approval of the application by the USCIS. 39. 40. In order for an EB-5 project to be approved by the USCIS, an applicant must file a lengthy and complex application which shows, inter alia, that the related project is a viable business opportunity that will create at least a specific number of jobs in a particular geographic area and thereby generate at least a certain level of foreign investment. 13 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 14 of 74 40. 41. Preparing an application for a single EB-5 project can take up to, or more than, a year and can cost well over $200,000.00. Among other things, this is because EB-5 applications require the retention and use of a number of third-party professionals such as immigration and securities lawyers, economists, accountants, consultants, migration brokers and others. 41. 42. EB-5 applications must include an economist’s report and a detailed business plan to demonstrate to the USCIS that the underlying business venture is viable and will create the required number of jobs and investment. 42. 43. Applicants seeking approval of an EB-5 project must certify that all information contained in an application is correct, under penalty of perjury. 43. 44. For example, the USCIS “Form 1I-924” that must be submitted with an EB-5 application includes the following “instructions”: By signing this form, you have stated under penalty of perjury (28 U.S.C. 1746) that all information and documentation submitted with this form is true and correct. You also have authorized the release of any information from your records that USCIS may need to determine eligibility for the benefit you are seeking and consented to USCIS verification of such information. Agency verification methods may include but are not limited to: review of public records and information; contact via written correspondence, the Internet, facsimile, or other electronic transmission or telephone; unannounced physical site inspections of residences and places of employment; and interviews. Information obtained through verification will be used to assess your compliance with the laws and to determine your eligibility for the benefit sought. 44. 45. Similarly, the USCIS “Form I-924a” that must be submitted by a Regional Center to verify the progress of an EB-5 Project includes the following language: 14 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 15 of 74 I certify, under penalty of perjury under the laws of the United States of America, that this form and the evidence submitted with it are all true and correct. I authorize the release of any information from my records that U.S. Citizenship and Immigration Services needs to determine eligibility for the benefit being sought. I also certify that I have authority to act on behalf of the Regional Center. 45. 46. The accuracy of information submitted in an application to the USCIS is especially important, because recent high profile episodes of fraud related to EB-5 Projects have resulted in large sanctions and have heightened USCIS attention to the representations made in EB-5 applications. 46. 47. Once an EB-5 application is submitted, a project can proceed, including solicitation of foreign investment to fund the approved project. Only submission of a Project Application is needed to market the Project and take investor funds into escrow. USCIS approval is not necessary to begin marketing a Project. C. The Entity Defendants Engaged Plaintiffs to Apply for and Fund an EB-5 Project for Each of the Four Power Plants in Georgia and North Carolina. 47. 48. On or about July 1, 2014, certain of Defendants engaged PlaintiffsDefendant GreenFuels and its affiliates engaged Plaintiff Gate Industries and Plaintiff SFRC to apply for and, upon submission of application, to fund an EB-5 project for each of the four power plants in Georgia and North Carolina that were part of the Entity Defendants’ overall venture to make money through the generation and sale of electric powerelectricity to utility companies, using biomass materials. 48. 49. Due to the great size and complexity of each of the Projects, which involved details and logistics concerning the modernization and operation of each power plant, and the amount of investment being sought, Plaintiffs Gate Industries and SFRC explained to Defendants the substantial amount of time, effort, and expense that would be involved in preparing the EB-5 applications and, thereafter, seeking funding of the Projects. 49. 15 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 16 of 74 50. In response, Defendant Shaffer (acting on behalf of the Entity Defendants) repeatedly asked Plaintiffs (in the presence of others) to work exclusively and only on Defendants’the applications for the four power plant Projects for one year. Defendant Bean was aware of this request for exclusivity with respect to the Entity Defendants, which he owns, either directly or indirectly. Plaintiffs agreed and honored that request by working exclusively on the Projects for a year, foregoing other business opportunities as a result. 50. 51. On July 1, 2014, GreenFuels and its affiliates4 entered into four essentiallynearly identical “Engagement Agreements” with Gate Industries and SFRC--ATL for each of the four Projects. Defendant Shaffer signed three of the four Engagement Agreements, copies of which are attached hereto as Exhibits “A”-”D.” The Engagement Agreement for the Lumberton Plant was signed by Chris Colucci, who was then working for certain of the Defendants on the Projects. (Mr. Colucci subsequently quit and ceased work on the Projects.) 51. 52. Each of the Engagement Agreements included as attachments both (i) a “Critical Path and Timeline” that outlined the phases required to prepare a final application to the USCIS, and (ii) a chart summarizing the significant “Estimated Expenses” that would be required for the application process. 52. 53. The “Critical Path and Timeline” described the five “Phases” of the EB-5 application process, ending with “Phase V” which concluded with submission of an application for each of the Projects to the USCIS for consideration and approval. 53. 54. Sections 9 and 10 of the Engagement Agreements specified the types of information that the Entity Defendants would need to provide for the Projects and the information that would be 4 As previously described above, the involvement and participation of “affiliates” of GreenFuels is evident, inter alia, from Defendant Shaffer’s termination letter (see Exhibit “E”), which recognizes the involvement of such “affiliates” “in connection with the sourcing of debt and/or equity sources to facilitate the financing, construction and operation of GreenFuels’ biomass facilities and projects,” which in turn was the object of the Engagement Agreements. 16 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 17 of 74 provided to the USCIS in regard to them. In addition, Plaintiffs made clear to all Defendants through numerous written and oral communications that other information about the Projects must be accurately reported to the USCIS. 54. 55. Because of the importance of providing accurate and complete information to the USCIS in regard to the Projects (under penalty of perjury), the Entity Defendants agreed as follows in the Engagement Agreements: REPRESENTATIONS BY THE CLIENT. The acts, statements and representations made by or on behalf of the Client to prospective foreign investors or other transaction counterparties about the Client or the Project, including but not limited to representations in the Business Plan, Private Placement Memorandum or other offering documents, are the sole responsibility of the Client and the Client agrees to indemnify the Regional Center and its officers, directors, members, managers, employees, attorney, and agents for any liability, claims, losses and expensed, including legal expenses, incurred by the Regional Center that result from any of the Client’s acts, statements and representations about the Client or the Project. (Engagement Agreements (Exhibits “A”-”D”), § 15 (emphasis added).) 55. 56. As the parties continued to work together to apply for and fund the Projects, Plaintiffs and certain ofthe Entity Defendants memorialized the steps and terms for funding the Projects, by executing a detailed “Term Sheet,” dated April 6, 2015, a copy of which is attached hereto as Exhibit “F.” The Term Sheet incorporated as part of its terms an attached “Project Checklist for Team of Professionals” (the “Term Sheet Checklist”). 56. 57. The parties to the Term Sheet included as a party, DefendantPlaintiff Gate Industries “or an affiliate or subsidiary thereof,” all of which are collectively defined as the “New Commercial Enterprise or NCE” inparty to the Term Sheet. Section II, on page 5 of the Term Sheet, identified DefendantPlaintiff Five on Fifty, LLC in relation to Gate Industries’ work as the “NCE.” 57. 58. 17 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 18 of 74 As stated on the first page of the Term Sheet, the Term Sheet concerned the funding of the Projects, and collectively identified four limited liability companies as the “Lender” the following Defendants,” each of which was named after the city in which the Project was located. Although the four entities listed on that page in the Term Sheet include the name “fund” in them (none of which were created, according to the Georgia Secretary of State), the parties’ intent was to use the following entities (created in Georgia, in early 2015): GRP Franklin, LLC; GRP Madison, LLC; North Carolina Renewable Power- Lumberton, LLC; and North Carolina Renewable Power-Elizabethtown, LLC. (all of which are included as defendants in this action.) (Although the Term Sheet lists these four entities having the word “Trust” in their names, the parties used the entities referenced in the preceding sentence.) 58. 59. The continuity of the Term Sheet in regard to the parties’ ongoing work being performed to apply for and then fund the Projects is evident from the detailed Term Sheet Checklist, which like the Engagement Agreements, contained a detailed explanation of the numerous “Phases” involved in the EB-5 process for each of the Projects. 59. 60. Before the parties’ relationship would end due to the Entity Defendants’ abrupt termination of itstheir relationship with Plaintiffs, the parties had completed the first three of the four Phases listed in the detailed Term Sheet Checklist, and Plaintiffs had already taken significant steps toward, and invested considerable time and effort in, completing the final, fourth Phase which concerned the funding of the Projects. 60. 61. Plaintiffs were especially interested in funding the Projects because it was the funding phase of each Project through which Plaintiffs would receive substantial payments, including a percentage of all investment and related fees for work regarding the financing. This future stream of payments was one of the main reasons that Plaintiffs agreed to work exclusively on Defendants’the Projects for a year. D. After Working Diligently and Exclusively for Months to Apply for And Fund the Projects, Plaintiffs Began to Encounter Problems Receiving Accurate and Prompt Information About Key Aspects of The Projects That Was Vital to Approval and Funding of the Projects. 61. 62. 18 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 19 of 74 Because each of the four power plants involved in the four Projects was the sole source of profits and job-creation necessary for obtaining EB-5 approval and, subsequently, the necessary level of foreign investment, the details about the operation and performance of each power plant were critical. 62. 63. Each of the four power plants would produce revenue by supplying electrical power to the applicable local power utility (here, Georgia Power for the Georgia power plants, and Duke Energy for the North Carolina power plants). The terms of each plant’s supply of power to each utility was governed by a separate power purchase agreement (commonly referred to as a “PPA”). Accordingly, the PPA for each plant dictated, among other things: (i) the amount of electrical power that a plant had to supply to the utility; (ii) the deadline by which the power plant had to be able to produce that amount of power; and (iii) the price to be paid by the contracting utility for that amount of power. 63. 64. The PPA for each plant also contained a significant liquidated damages provision that required the entity operating a power plant to pay liquidated damages, if a plant was not fully operational by the contracted deadline. 64. 65. Therefore, the viability and success of each of the Projects depended entirely on the Entity Defendants’ ability to bring each plant online and to produce the required level of electrical power by the required deadline, and at a profitable cost. 65. 66. Among other things, assumptions about these facts were a key part of the EB-5 application for each of the Projects, as well as to attracting the required level of investment that would be necessary to fund the Projects. 66. 67. Because of the size and complexity of the four power plants at issue, Plaintiffs were largely dependent upon the expertise and communications of the Entity Defendants, and their 19 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 20 of 74 contractors and consultants, for knowing that the representations in the EB-5 applications for each of the Projects were accurate and realistic. One of the key documents through which the Entity Defendants communicated the detailed assumptions about each of the Projects was a “pro forma”-a very detailed group of spreadsheets that the Entity Defendants periodically prepared and communicated to Plaintiffs, via interstate emails. Through the pro formas, the Entity Defendants made detailed representations to Plaintiffs and to the professionals working on the Projects about the performance, equipment, cost, and profit of each plant and Project. 67. 68. For example, one key element of, and assumption for, each of the Projects was the type of equipment to be used at each power plant. This was especially important for the Projects, because they all involved reconfiguring older, coal-burning plants to produce power from biofuels using modern, high tech equipment. The equipment, permits and other important aspects of the Projects were communicated, inter alia, through factors such as output, parasitic load, availability, and heat rate-all of which could be determined from the pro formas prepared by the Entity Defendants. 68. 69. For example, a key part of the plan for the Lumberton Plant was to replace an antiquated boiler there with a modern, $70,000,000.00 Andritz Group boiler that was capable of generating the necessary amount of heat and hence power output using biofuels. Consequently, using the new boiler was a key part of the plan for operating that project at a level that would be consistent with representations being made and the related EB-5 application, such that the Lumberton project would meet the job-creation and investment requirements for that project. Based entirely upon information provided and confirmed by the Defendants, the numbers and other representations in the EB-5 application for the Lumberton plant assumed and represented that the plant would generate an output of 40mw (which turned out to be nearly double the amount of actual output). 69. 70. Although Defendants were aware that the EB-5 application documents for the Lumberton project continued to assume the use of such a new boiler, the Entity Defendants ultimately decided (on their own and without promptly informing Plaintiffs) against replacing the boiler, as initially planned. 70. The Entity Defendants did not promptly communicate thismade that decision towell before September 2015 but chose not to notify Plaintiffs. until well into 2016. 20 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 21 of 74 71. Consequently, as the September 2015 deadline approached to finalize the EB-5 application for the Lumberton (and other) Projects, Plaintiffs became concerned and requested (through interstate communications) that Defendants pay to have certain reports revised about the assumptions and expectations about the Lumberton Project, because it was clear that the change in the boiler (along with other changes) would reduce the performance and output ofinconsistencies and irregularities in the information provided in pro formas and other communications suggested that the Lumberton power plant and would affect key EB-5 terms including job-creation numbers for that plantwould not generate the output, profit, and job creation represented in the Lumberton plan. 71. 72. Plaintiffs therefore requested that Defendants pay to have the necessary reports revised, but Defendants, speaking through Defendant Schaffer, refused -- even though certain members of Defendants’ own team (including Defendant Kuehr) questioned how Defendants could proceed with the EB-5 application process, based on old and inaccurate data. Among other things, Defendant Schaffer stated that he did not want to pay an added expense for revisions to the reports used in the EB-5 application. 72. 73. As time passed while Plaintiffs continued to work exclusively on the Projects for Defendants, Plaintiffs came to learn -belatedly (and after the submission of the EB-5 applications)-about other, serious problems with the Projects, including but not limited to the Lumberton Project. 73. 74. For example, even though Plaintiffs subsequently came to learn about a diligence report, dated August 10, 2015, that outlined numerous discrepancies and concerns about the representations about the Projects being made in the EB-5 applications, Plaintiffs did not become aware about that report, or many of the problems discussed in it, until late February 2016, when Plaintiffs eventually received a copy of it. Significantly, although Defendants had, and were aware of, that report at least one month before the EB-5 applications had to be finalized, Defendants did not attempt to inform Plaintiffs about the report or its contents, until many months later. Similarly, it was not until late February 2016 that the Entity Defendants provided Plaintiffs with a “bank book” (dated 2015) which further demonstrated the inaccuracies that the Entity Defendants had allowed to remain in the EB-5 applications that they approved for submission. 21 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 22 of 74 74. 75. The significant effects of Defendants’ misrepresentations and material omissions about the configuration and, operation, and profitability of the Projects are evident from Defendants’ inability to proceed with them. 75. 76. Upon information and belief, although the PPA for the Lumberton Power Plant called for the generation of at least 35 megawatts of power, that plant has been unable to generate more than approximately 20 megawatts, which level could only be maintainedsustained for a short period of time, due to problems with ash, buildup caused by the burning of biofuels. 76. 77. Furthermore, and upon information and belief, Defendants haveit has not been ablepossible to operate the Lumberton Plant, at all, for significant periods of time, because Defendants havethe plant has continually exceeded the permissible level of emissions, which has required shutdowns so that the plant could stay within the applicable pollution limits. (Although the Entity Defendants were aware of these permitting problems before submission of the EB-5 application for the Lumberton project, they did not inform Plaintiffs of this fact until months later. Among other things, this caused Plaintiffs to seek investment in that Project based upon inaccurate representations about the plant’s output.) 77. 78. In addition and upon information and belief, Defendants’ inability to operate the two Georgia plants at necessary levels of power production, have caused Defendants to stop operations at those plants, as wellhas caused these plants to cease operating for periods of time. 78. 79. Although Defendants knew and/or should have known (for a considerable amount of time) about the problems that have significantly and adversely affected the operation of the power plants, Defendants chose to keep Plaintiffs in the dark, as Plaintiffsthey instead chose to misrepresent information about the plants to the Plaintiffs and to hide material facts from the Plaintiffs. Consequently, Plaintiffs were kept in the dark, as they continued to work, exclusively and for months, on the Projects. 22 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 23 of 74 79. 80. Another key misrepresentation and omission of Defendants with regard to Plaintiffs’ work on the Projects concerns the continued involvement and employment of persons identified by Defendants as “key personnel” for the success of the Projects. 80. 81. The Entity Defendants’ solicitations, disclosures, and other materials used to seek involvement and investment in the Projects have routinely stressed that the Projects were being overseen by key personnel with significant experience in the power production industry, in general, and with power generated from biofuels, in particular. These personnel have included Chris Colucci and Terry Williams (collectively the “Key Personnel”). 81. 82. In or around the last quarter of 2015, as Plaintiffs grew concerned about the accuracy and completeness of information about the Projects, Nic Applegate, acting on behalf of Plaintiffs, began to inquire withask the Individual Defendants about the continuing involvement of the Key Personnel on Projects. Mr. Applegate was curious because the Key Personnel had not been appearing in ongoing communications about the Projects at that time, as they had been doing before. 82. 83. When Mr. Applegate specifically asked Defendant Kuehr about the status of the Key Personnel with respect to the Projects, Defendant Kuehr falsely advised that they were still involved and knowingly failed to disclose to Plaintiffs that the Key Personnel had actually quit working for the Projects -- more than a month before, as Plaintiffs would subsequently learn from another, unrelated source. Similarly, Defendants Shaffer and Bean also failed to respond accurately about the status of the Key Personnel, when asked by Nic Applegate in interstate phone calls that occurred after the departure of the Key Personnel. 83. 84. Defendants’ hidingThis concealment of material facts regarding the continued involvement of the Key Personnel is yet another fraudulent representation about the Projects, made through 23 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 24 of 74 interstate commerce, on which Plaintiffs relied in deciding to continue their work, exclusively, on the Projects for Defendants. 84. 85. Upon information and belief, the Key Personnel both voluntarily chose to quit and leave the Projects because of their concerns about Defendants’ ability to properly configure and operate the Projects, as well asand related concerns about maintaining their reputations in the electrical-power-generation industry, because ofdue to missteps by Defendants. 85. 86. As the parties reached the September 2015 deadline to finalize the EB-5 applications for the Projects, Plaintiffs became concerned about the accuracy and completeness of the information being provided by Defendants about the Projects,. These concerns were heightened by the Entity Defendants’ continued refusal to pay the relatively insignificant costs required to have economists and others update their reports so that the EB-5 applications were accurate and current for each of the Projects. 86. 87. Interstate emails between the parties demonstrate that even certain financial persons working on the Projects for Defendants had questioned how Defendants could proceed with the EB-5 applications, without revisions to reflect numerous changes, as had been directed by Defendant Schaffer. However, the Entity Defendants ultimately chose not to pay for, or make, the related changes. Among other things, Defendants communicated their decision not to revise the EB-5 application documents through interstate phone calls between Defendant Schaffer and Mr. Applegate, acting on behalf of Plaintiffs. 87. 88. Plaintiffs’ concerns aboutregarding the accuracy and completeness of Defendants’ disclosures about the Projects increased further, in approximately January 2016, when Plaintiffs received an anonymous phone call expressing concerns about the accuracy of the information that Defendants had supplied. 88. 89. 24 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 25 of 74 On January 31, 2016, Mr. Applegate, acting on behalf of Plaintiffs, sent a letter to Defendants, care of Defendant Bean, notingstating Plaintiffs’ concerns about the accuracy of the information that Defendants had supplied and approved for inclusion in the EB-5 applications for the Projects. (A copy of this letter is attached hereto asSee Exhibit “G.”) Several weeks later, on February 18, 201, Jeff Kuehr attempted to address these concerns by sending Mr. Applegate (by interstate email) a “bank book” with additional financial and other information about the Projects. In that email, Defendant Kuehr confirmed with Mr. Applegate that Defendant Kuehr and one of Defendants’ attorneys would fly to Greenville, South Carolina, on February 23, 2016 to meet for “a 3 hour working session” to discuss the Projects. That meeting occurred as scheduled. 89. 90. In February and March 2016, Mr. Applegate had numerous interstate telephone conversations with Defendant Bean about the Plaintiffs’ concerns about the Projects. Defendant Bean, in calls made to Mr. Applegate, assured Plaintiffs that Defendants would continue working withhad provided accurate information to Plaintiffs onregarding the Projects and that Defendants would cureaddress any problems with that information on the applications. Defendant Bean’s representations proved to be false and were part of Defendants’a continuing pattern of fraud and misrepresentations about the Projects, aimed at having Plaintiffs continue workingtheir work on the Projects--at least until the Entity Defendants could find another source of funding for the Projects. 90. 91. Then, on March 29, 2016, Defendant Schaffer sent a letter to Plaintiffs, throughPlaintiff Gate Industries, via an interstate commerceemail, on behalf of “GreenFuels Energy, LLC and Affiliates” unilaterally terminating Defendants’their relationship with Plaintiffs. Mr. Schaffer provided no explanation for this sudden move, other than to advise that Defendant GreenFuels, LLC and its affiliates had “recently entered into an exclusive arrangement with a strategic partner” to provide services “relating to financing and financial structuring.” (A copy of Mr. Schaffer’s letter is attached hereto as Exhibit “E.”)See Exhibit “E.”) This occurred just one month after Defendant Kuehr and Defendants’ counsel had flown to Greenville to continue working with Plaintiffs on the Projects. E. The Entity Defendants Have Also Encountered Problems Obtaining Financing from Other Sources Due to Their Continuing Failure to Provide Accurate, Verifiable Data About the Projects. 92. Since the breakdown of Plaintiffs’ relationship with the Entity Defendants regarding the financing of the Projects, Plaintiffs have learned that the Entity Defendants have 25 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 26 of 74 encountered similar problems seeking financing from other sources, due to Defendants’ continuing inability to provide accurate information about the Projects. 93. For instance, Defendants Bean, Shaffer, and Kuehr-acting on behalf of the Entity Defendants-were subsequently unable to obtain financing from an entity known as Constellation and (twice) from Capital Peak Asset Management (“Capital Peak”). 94. Upon information and belief, the Entity Defendants were unable to obtain financing for the Projects from Capital Peak, then unsuccessfully sought financing from Constellation, only to again fail in a second attempt with Capital Peak. 95. Upon information and belief, Capital Peak grew frustrated about the Entity Defendants’ inability to provide accurate, verifiable information about the performance and profitability of the power plants, including the Lumberton plant. For instance, whereas the Entity Defendants initially represented to Capital Peak that the Lumberton plant was capable of generating well over 30 megawatts of power and was then generating 25 megawatts, the Entity Defendants were unable to actually produce that amount of power. Instead, Defendants could only produce 20 megawatts at the Lumberton plant, and were only even able to reach that level for brief periods of less than a month at a time. (And yet, the Entity Defendants had repeatedly represented to Plaintiffs that the Lumberton plant could generate well over 30 megawatts on an ongoing basis.) 96. Furthermore, and upon information and belief, third-party financing companies have expressed concerns about the ability of Defendant Kuehr (the Finance Director for Defendant Georgia Renewable Power) to solicit potential investors for the Projects, due to concerns about his past involvement in an alleged “fraudulent scheme” as described by the Securities and Exchange Commission (the “SEC”) for which he was sanctioned in the amount of $70,000.00.5 97. Neither Defendant Kuehr nor the other Defendants shared this information with Plaintiffs. F. The Pro Formas and Other Documents That Defendants Provided to Plaintiffs Repeatedly Misrepresented and Omitted Material Facts About the Projects That Were Crucial to the Approval and Successful Financing of the Projects. 5 See SEC Administrative Preceding, File No. 3-15946, In the Matter of Jeffrey C. Kuehr and Michael J. Willoughby, “Order Instituting Cease-and-Desist Proceedings” issued on or about June 25, 2014 (available online via the internet). 26 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 27 of 74 98. As noted in this Complaint, Plaintiffs spent more than a year and a half working with Defendants to prepare accurate and successful EB-5 applications to obtain USCIS approval of, and foreign investment in, the Projects. Plaintiffs repeatedly stressed to the Individual Defendants the need for accuracy and consistency throughout the many, detailed documents to be submitted in support of the applications, including detailed economist reports and financials, which were vital to prove to the USCIS that the Projects would in fact create the jobs, profits, and investment as represented in the applications (all of which the Defendant Entities approved before submission to the USCIS). 99. One of the primary vehicles for the Defendant Entities’ provision of this vital and detailed information about each plant and project were the pro formas that Defendants repeatedly created and provided to Plaintiffs, as well as to their legal counsel and other professionals who assisted on the Projects. The pro formas were very complex groups of spreadsheets that contained both macro-level, summary data about each plant’s performance, job creation, electrical output, and profitability. They also contained highly detailed, technical representations and assumptions about all aspects of the plants, from their fuel supply and cost, ability to operate, equipment, construction, permitting, and operation. The Defendant Entities used the pro formas to communicate these details to Plaintiffs and other professionals with the knowledge that the pro formas would be relied upon by them to prepare applications and other documents for the Projects. 100. Despite this knowledge, the Defendant Entities repeatedly prepared and affirmed the accuracy of data in the pro formas and other documents that they knew to be false and/or they omitted material facts. Unfortunately, Plaintiffs would not discover the extent of misrepresentation and omission until months after submission of the applications to the USCIS, requiring attempts to revise the applications-which Defendants, and especially Defendant Shaffer, did not want to do. 101. One of the most important representations in the pro formas was the output of each plant, which was a representation about the amount of power (expressed in megawatts) that a plant would be able to produce for sale pursuant to a PPA to generate money for a Project. This is because output would create revenues and create jobs and thus allow the Projects to meet the performance represented in the EB-5 applications. It was also crucial to profitability and thus the ability to attract the amount of investment represented in the applications. 102. With respect to the Lumberton plant, the pro formas all assumed that the plant would be fitted with a new Andritz boiler that was crucial to achieve the necessary output and 27 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 28 of 74 performance of that plant, within the timeframe required by the PPA and within emissions limits. The presence of the new boiler was evident in the detailed performance figures that the Defendant Entities provided in the pro formas. Although the pro formas (and the ultimate business plan and application which were also approved by the Defendant Entities) assumed the use of the new, more efficient boiler, Plaintiffs later came to learn that the Defendant Entities had instead decided to use a less efficient, older boiler that was to be reconfigured. The pro formas misrepresented that a new boiler would be used because the Defendant Entities knew that the older boiler would be used and nonetheless made contrary representations in both the pro formas and the application for the Lumberton Project. This was a key misrepresentation that would materially affect the output, cost, emissions, profits, and job creation for the Lumberton Project and interfere with USCIS approval, as well as investment, based upon the application. 103. Additionally, the Entity Defendants produced and provided pro formas for the Franklin, Georgia plant that were inaccurate and misrepresented the amount of output that could reasonably be expected from that plant. This also would compromise the likelihood that the USCIS would approve the Project and that investors would invest in it. The evidence suggests that the Defendant Entities (which possessed substantial experience and expertise in biofuel power generation) knowingly misrepresented aspects of that plant in the pro formas and other documents. This is because, inter alia, an independent consulting report prepared by E3 Consulting demonstrated that the Entity Defendants knew (or at least should have known) that they had over-estimated the expected output and thus profitability of the Franklin Project. 104. Specifically, Plaintiffs would come to learn (after submission of EB-5 applications) that the pro formas and other representations by the Defendant Entities were wrong. Subsequent analysis and review of the E3 Consulting report indicated that misrepresentations of the parasitic load of the plant would reduce projected revenues by approximately $2.5 million; that misrepresentations about the “availability” of the plant would likely reduce projected revenues by approximately $3.2 million; and that misrepresentations about the “heat rate” of the plant would likely reduce projected revenues by approximately $1.75 million). These material differences, alone, would significantly impact the profitability and job creation of the Project, both of which were necessary for USCIS approval and for attraction of the required amount of investment. 105. Plaintiffs would also come to learn-after submission of the applications-that the Defendant Entities had failed to disclose known problems with the Lumberton plant that would delay its ability to comply with the requirements in the PPA for use of fuel, which the Defendant Entities knew could cause liquidated damages under the PPA and thus impact the profitability and performance of the plant. It was not until Plaintiffs saw the 28 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 29 of 74 Milbank diligence report in 2016 that they learned that the Defendant Entities had known of this problem and yet failed to disclose it. As noted in that diligence report: Poultry Waste Fuel Requirement under PPA and REC Agreements of Lumberton Facility. Lumberton PPA requires that at least 75% of the output of the Lumberton Facility must be generated using poultry waste as fuel source (“Fuel Requirement”). If the Lumberton Facility fails to comply with such Fuel Requirement, GRP is required to pay liquidated damages, and if such failure continues for 2 consecutive calendar years, Progress [power company] is entitled to terminate the PPA. We understand that compliance with Fuel Requirement will not be feasible until the boiler installation at the Lumberton Facility is completed and that such installation is expected to take up to 2 years. However, GRP has communicated to us that commercial operations have commenced at the Lumberton Facility. Accordingly, GIP should confirm whether GRP has obtained all necessary waiver from Progress in respect of Fuel Requirement to avoid being charged liquidated damages. Please note that Fuel Requirement is also applicable to each of the Lumberton REC Agreements. Accordingly, GRP must also confirm whether all necessary waiver in respect of Fuel Requirement have been obtained from each REC buyer. 106. Although this issue created great uncertainty about the Lumberton plant’s ability to operate profitably and generate anticipated revenues under the PPA, the Defendant Entities failed to disclose it, and Plaintiffs did not learn of this fact until after submission of the Project application. 107. Another significant misrepresentation and omission by the Entity Defendants regarding the Lumberton Project concerned the availability of needed environmental permits. Specifically, the Defendant Entities had failed to obtain necessary permits required for phase II of the Lumberton Project. The presence of these permits was crucial in order for the Lumberton plant to operate enough to produce the output required by the PPA and by the representations in the Project’s EB-5 application. 108. Because the Entity Defendants failed to obtain the environmental permits, they were repeatedly forced to shut down the Lumberton plant because it repeatedly exceeded emissions allowed by the permits. This reduced its output and thus further compromised its ability to generate the output required for profitability and approval by the USCIS based upon the representation by the Entity Defendants in the pro formas and Project application. Plaintiffs would later learn that the Entity Defendants were aware, for months, about this shut down and its effect on the Project, yet the pro formas and other representations by the Entity Defendants did not reflect it; nor did the Entity Defendants disclose this material fact to Plaintiffs. 29 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 30 of 74 109. In fact, the pending lawsuit against the Defendant Entities in a United States District Court in North Court by NRG indicates that NRG (which supplied personnel to operate the plant pursuant to a contract) had to cease work to prevent violation of the applicable environmental permits, over the Defendant Entities’ objection. 110. These and other misrepresentations and omissions occurred throughout the Defendants’ communications with Plaintiffs about the Projects, as recited by the communications referenced below in Count I and incorporated into other Counts of this Complaint. IV. CAUSES OF ACTION. COUNT I (RICO 18 U.S.C. § 1962(c)) 91. 111. Plaintiffs hereby incorporate by reference Paragraphs 1-90110 of this Complaint. 92. 112. The Entity Defendants are all culpable parties and, together, constitute (and constituted)collectively an enterprise engaged in, and whose activities affect,have affected interstate commerce. 93. The Individual Defendants’ are employed by and/or associated with the enterprise. 113. The Individual Defendants agreed to and did conduct and participate in the conduct of the enterprise’s affairs through a pattern of racketeering activity and for the unlawful purpose of intentionally defrauding Plaintiffs. 114. The enterprise involved making fraudulent statements and other material misrepresentations and omissions that were intended to induce other persons and entities, including Plaintiffs, into investing in and/or seeking investment in the Projects, through EB-5 financing and other means of financing. 94. 30 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 31 of 74 115. Defendants’The enterprise included their efforts to obtain financing for the Projects done before Defendants’ engaged Plaintiffs, and itthe enterprise has continued after Defendants unilaterallythe enterprise terminated theirits relationship with Plaintiffs, as evidenced by Defendant Shaffer’s March 29, 2016,2016 letter, mailed and emailed to Plaintiffs, in which he advised that Defendants were moving on to yet another, third-party provider of investment financing for the Projects. (See Exhibit “E” to Complaint.) 95. 116. The Individual Defendants agreed to and did conduct and participate in the conduct of the enterprise’s affairs through a pattern of racketeering activity and for the unlawful purpose of intentionally defrauding Plaintiffs. 96. 117. The Individual Defendants’ conducted and participated in the enterprise via fraudulent interstate mail, email, and telephone calls, which is consistent with the fact that the enterprise related to large power plants located in Georgia and in North Carolina, and entities and persons located in Alabama, Georgia, North Carolina, South Carolina, and the Southeastern United States. 97. 118. The Individual Defendants’ participation in interstate communications made in furtherance of theirthe enterprise is evidenced in the communications attached as Exhibits “A - G” hereto(to the Complaint) as well as by the following communications (all of which are hereby incorporated by reference): a. On February 23, 2015, at 2:05 p.m., Defendant Shaffer sent an email to Nikki Weiner and Nic Applegate, an agentagents of Plaintiffs, copying Defendant Bean, regarding information needed for preparation of the EB-5 applications for the Projects, in which he referenced the use of prior disclosures that had been used in connection with the enterprise. (A copy of this email is attached hereto asacknowledged that Defendants had recently provided Plaintiffs with “copies of the pro formas for all 4 plants” and suggested that Plaintiffs should use them as a basis for information regarding the applications for the Projects. (See Exhibit “H.”) b. On February 23, 2015, at 5:20 p.m., Nic Applegate, on behalf of Plaintiffs, sent an email to Defendant Bean regarding the status of the EB-5 applications for the Projects in which he noted delays and difficulty in obtaining accurate information from GRP and others for those applications. (A copy of this email is attached hereto asSee Exhibit “I.”) 31 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 32 of 74 c. On February 23, 2015, at 11:45 a.m., Nikki Weiner, on behalf of Plaintiffs, sent an email to persons including Defendant Bean and Defendant Shaffer that included an attached checklist regarding the status of the applications for the Projects and that identified certain discrepancies regarding data for the Projects needed for the related applications. (A copy of this email is attached hereto asSee Exhibit “J.”) d. On February 24, 2015, at 10:15 a.m., Nikki Weiner, on behalf of Plaintiffs, sent an email to persons including Defendant Bean and Defendant Shaffer that circulated a checklist of issues to be addressed regarding the applications for the Projects. (A copy of this email is attached hereto asSee Exhibit “J.”) e. During February 2015, Nic Applegate had numerous interstate phone calls on behalf of Plaintiffs with Defendant Bean regarding the accuracy of data on pro formas that Defendants had provided for the Lumberton plant. During those calls, Defendant Bean acknowledged those pro formas and assured Mr. Applegate that the pro formas were accurate and up to date. f. In May 2015, Defendants caused a detailed pro forma to be sent to Plaintiff Gate Industries for the purpose of completing the economic report for the Lumberton Project. This pro forma contained inaccurate data about the Lumberton Project, including but not limited to misrepresentations about the output, permitting, boiler and other equipment, and fuel regarding the Lumberton plant. g. On July 21, 2015, Defendant Kuehr sent an email to Plaintiff Gate Industries that included another detailed pro forma (dated June 30, 2015) to be sent to Plaintiff Gate Industries to use as a basis for creating the EB-5 applications for the Projects. This pro forma also contained inaccurate data about the Lumberton Project, including but not limited to misrepresentations about the output, permitting, boiler and other equipment, and fuel regarding the Lumberton plant. h. On July 21, 2015, representatives of Plaintiffs and the Entity Defendants exchanged interstate emails in which even Defendant Kuehr questioned the need to revise the applications for the Projects to reflect revised financial data, after Defendant Shaffer suggested that the applications did not need to be revised. That evening, Defendant Shaffer sent an email to recipients including Defendant Kuehr, Nic Applegate, and Nikki Weiner (an employee of Plaintiff Gate Industries); Shaffer responded to a prior chain of emails discussing how to address the revised financial data and stated, “We don’t need to change the EB5 representative financial model at all.” Shortly thereafter, Defendant Kuehr replied to the same group and asked, “So how do you reconcile two different models with varied assumptions which drive to different numbers for the same underlying projects?” Ms. Weiner then replied to the same group, stating, “I want to get us all on the same page. Jeff [Kuehr] sent me new financials to incorporate and indicated several changes to financial[s] throughout the economic impact report and business plan. Are you saying we are OK to stick to the financials you provided us several months ago, which I also attached in my reply to Jeff [Kuehr]?” Mr. Applegate then had a telephone conversation with Defendant Shaffer in which Shaffer directed Plaintiff Gate Industries not to revise the application documents, despite the newer, different data. 32 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 33 of 74 i. On July 24, 2015, Defendants caused their legal counsel and agent, Sherman Golden, to send an email to Plaintiff Gate Industries that included yet another detailed pro forma (dated July 23, 2015) to be used as a basis for creating the EB-5 applications for the Projects. This pro forma also contained inaccurate data about the Lumberton Project, including but not limited to misrepresentations about the output, permitting, boiler and other equipment, and fuel regarding the Lumberton plant. j. On August 3, 2015, at 9:26 a.m., Defendant Kuehr sent an email to persons including Defendant Shaffer, as well as Lowell Elliott, on behalf of Plaintiffs, that included a detailed list of information needed for, and outstanding tasks to be done for, the applications for the Projects. (A copy of this email is attached hereto asSee Exhibit “K.”) fk. On August 3, 2015, at 12:52 p.m., Defendant Kuehr sent an email to Nic Applegate and Nikki Weiner, responding to issues listed in the email referenced in the preceding paragraph of this Complaint. (A copy of this email is included in the chain of emails attached hereto asin Exhibit “K.”) gl. On August 5, 2015, at 5:17 p.m., Nikki Weiner, on behalf of Plaintiffs, sent an email to persons including Dennis Carroll of Defendant GreenFuels Energy, LLC and Defendant Georgia Renewable Power, LLC; Defendant Shaffer; and Defendant Kuehr, in which Ms. Weiner thatshe addressed concern about Defendants’ continuing failure to provide promised information that was then urgently needed in order to prepare accurate applications for the Projects. (A copy of this email is included in the chain of emails attached hereto asin Exhibit “L.”) hm. On August 6, 2015, at 7:40 a.m., Defendant Shaffer sent an email to others including Dennis Carroll, Nikki Weiner, and Nic Applegate, in which Defendant Shaffer acknowledged the issues raised in the email identified in the preceding paragraph of this Complaint. (A copy of this email is included in the chain of emails attached hereto asin Exhibit “L.”) in. On August 10, 2015, at 4:31 p.m., Nikki Weiner, on behalf of Plaintiffs, sent an email to Defendant Kuehr, in which she expressed concern about accurately describing the jobs to be created by the projects, given that revised data suggested a decrease in the number of jobs that were supposed to have been created by the Projects. (A copy of this email is included in the chain of entails attached hereto asemails in Exhibit “M.”) jo. On August 11, 2015, at 5:29 p.m., Defendant Kuehr sent an email to persons including Nikki Weiner, Nic Applegate, Lowell Elliott, Dennis Carroll, and Defendant Shaffer. In this email, he forwardsforwarded an earlier email identifying issues about the accuracy of being provided for the applications for the Projects and recommended to Defendant Shaffer that they should therefore revise certain reports for the Projects, as well as recognizing other outstanding issues regarding the provision of complete and accurate information to Plaintiffs about the Projects. On August 12, 2015, Defendant Kuehr forwarded that email to Defendant Shaffer, with a comment recommending revising project reports. Defendant Shaffer responded by email on August 12, 2015, at 10:37 a.m., which response was forwarded by Defendant Kuehr to Nic Applegate, Nikki Weiner, and Defendant Shaffer. (Copies of these emails are included in the chain of emails attached hereto asin Exhibit “M.”) 33 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 34 of 74 p. In early August 2015, Nic Applegate, on behalf of Plaintiffs, had an interstate telephone conversation with Defendant Bean and Defendant Kuehr to discuss Plaintiff Gate Industries’ continuing concerns about the accuracy of data being provided for inclusion in EB-5 application materials for the Projects-especially proof that Projects would in fact be able to accurately support the representations of power output, job-creation, and profit that were being made in the EB-5 applications for the Projects. During that call, Defendant Bean assured Mr. Applegate that the data was “on track” and “looking great.” Because of his concerns, Mr. Applegate requested an in-person meeting with Defendant Kuehr to review the EB-5 documents for accuracy. q. During August 2015 and September 2015, weekly interstate telephone calls occurred between representatives of Plaintiffs and representatives of the Entity Defendants (principally Defendant Kuehr) during which he repeatedly confirmed the accuracy of the pro formas that the Defendants had provided to Plaintiffs regarding the Projects. kr. On August 17, 2015, at 3:35 p.m., Defendant Kuehr sent an email to persons including Defendant Shaffer, Dennis Carroll, Nic Applegate, and Lowell Elliott, in which he requested copies of certain agreements regarding the Projects, which was one of many opportunities that Defendants had to seerecognize that certain of the facts and information contained in those agreements (previously provided by Defendants) were not consistent with facts presently known to Defendants. (A copy of this email is included in the chain of emails attached hereto asin Exhibit “N.”) s. On August 31, 2015, Defendant Shaffer and Defendant Kuehr approved the draft business plan for the Lumberton Project, even though that plan was later found to have inaccuracies that Defendants knew or should have known, with respect to matters including the output of the plant (stated to be at 40 megawatts), its costs, job creation and profitability. lt. On September 2, 2015, at 9:45 a.m., Defendant Kuehr sent an email to Nic Applegate and others acting on behalf of Plaintiffs, regarding the scheduling of a telephone conference call with Defendant Shaffer, at which the parties would address continuing, open issues regarding information needed for the EB-5 applications for the Projects. (A copy of this email is included in the chain of emails attached hereto asin Exhibit “0.O.”) Within a week of this email, the parties engaged in one of many interstate telephone calls made between agents of Plaintiffs and agents of Defendants during which Defendants continued to discuss and supply data for the applications for the Projects, much of which was inaccurate and thus misstated the profitability and job-creation of the Projects. mu. On September 7, 2015, Nic Applegate, acting for Plaintiffs, sent emails to a person at Capital Peak Asset Management, in which he provided information about, and sought interest in providing investment financing for, the Projects for Defendants. On September 21 2015, at 2:41 p.m., Mr. Applegate forwarded this information to Defendant Kuehr as part of Plaintiffs’ continuing efforts to assist Defendants with obtaining needed financing and investment in the Projects. (Copies of these emails are included in the chain of emails attached hereto as Exhibit “P.”) 34 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 35 of 74 nv. On November 8, 2015, at 2:54 p.m., Defendant Kuehr sent an email to persons including Defendant Shaffer and Nic Applegate, discussing a need for updated information for information reported in a report contained in an EB-5 application for one of the Projects, in which Defendant Kuehr also acknowledges work by Mr. Applegate, on behalf of Plaintiffs, to obtain investment financing for the Projects from a specific funding source. (A copy of this email is attached hereto asSee Exhibit “Q.”) (Despite these and other continuing communications regarding Plaintiffs’ difficulty obtaining accurate data regarding the Projects, Defendant Shaffer ultimately chose not to incur the relatively minor costs associated with having professionals assisting with the Projects revise their reports so that the applications would be accurate.) ox. On December 21, 2015, at 12:20 p.m., Defendant Kuehr sent an email to persons including Nic Applegate and Lowell Elliott, which email forwarded other, recent emails regarding Plaintiffs’ continuing efforts to obtain investment financing for the Projects from another source. (A copy of this email is attached hereto asSee Exhibit “R.”) y. On January 22, 2016, Defendant Kuehr sent an interstate email regarding the Lumberton Project to various professionals working on the Projects stating: I have been saying for some time that the EB-5 business plan for phase II is out of sync with our strategy. Specifically the plan describes a scenario where we are installing a new Andritz boiler at a cost of something like $80MM. This spend is driving jobs per the economic report. When you assume we are no longer intending to install the new boiler but rather have Foster Wheeler modify the existing boilers, there is a significant reduction in the spend and likely the related jobs. Don’t see how we can source EB-5 investors unless we depict the proper program. I agree with you that this will need to be trued up at some point. Seems odd to go to market describing once scenario when reality we intend to execute on another. Am I missing something? This email clearly recognizes that the Entity Defendants had in fact decided not to purchase a new boiler for the Lumberton plant, despite the many pro formas that they had previously provided to Plaintiffs that assumed a new boiler would be used. (Plaintiffs did not know this until after submission of the Lumberton EB-5 application to the USCIS, based upon the Entity Defendants’ approval of the Lumberton application which contained figures and information based largely on prior representations that a new boiler would be used.) pz. On January 31, 2016, Nic Applegate sent a letter by mail and email to Defendants, addressed specifically to Defendant Bean, in which Mr. Applegate (again) stressed the importance of having complete and accurate information reported in the applications for the Projects and concerns about Plaintiffs’ continuing inability to obtain such information from Defendants. (A copy of this email is attached hereto asSee Exhibit “G.”) aa. On February 18, 2016, Defendant Kuehr, on behalf of the Entity Defendants, sent copy of a “bank book” (dated January 4, 2015) to Nic Applegate and Lowell Elliott (who were previously unaware of that book or its contents) as an attachment to an interstate email (which references a recent and related interstate telephone conversation) and stated as follows: 35 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 36 of 74 Nic - just to confirm, Dan Sherman [counsel for the Entity Defendants] and I are planning to travel to Greenville on Tuesday, 2/23. We are departing Birmingham at 8:30 ET for a 50 minute flight to the downtown airport. I would predict we will be to your office by no later than 10:00 ET. We are expecting a 3 hour working session. Per our phone conversation, the attached Lumberton bank book should help you and Lowell get up to date on this project. I will work to pull together information relative to Madison and Franklin that will help us in our discussion. Thanks. The referenced “bank book” further demonstrated the misrepresentations that Defendants had made regarding the Lumberton Project because it indicated that the Defendant Entities had been aware, when making these misrepresentations, that (i) the Lumberton plant was rated as having an output of only 25 megawatts (more than 10 megawatts less than Defendants had repeatedly represented, including in the Lumberton EB-5 application documents that they had approved), and (ii) that Defendants had previously decided not to purchase and use a new boiler as had been represented to Plaintiffs during and even after the submission of the Lumberton application that represented the performance of the plant based on the use of a new boiler that would increase the plant’s output, profitability, and job creation as needed for USCIS approval. qbb. On February 22, 2016, at 2:14 p.m., Defendant Kuehr sent an email to persons including Defendant Shaffer, Defendant Bean, Lowell Elliott, and Nic Applegate (which included another earlier email sent to Defendant Kuehr) regarding continuing efforts to obtain complete and accurate information for applications for the Projects. (A copy of this email is attached hereto asSee Exhibit “S.”) rcc. On March 29, 2016, at 10:02 a.m., Defendant Shaffer directed that a letter signed by him, on letterhead identifying him as President and Chief Operating Officer of Defendant Georgia Renewable Power, LLC, which Defendant Shaffer sent expressly on behalf of Defendant “GreenFuels Energy, LLC and Affiliates,” by email, to persons including Nic Applegate, Defendant Bean, and Defendant Kuehr. In that letter, as described earlier in this Complaint, Defendant Shaffer attempted unilaterally to terminate Defendants’ relationship with Plaintiffs, due to an “exclusive arrangement” that Defendants had entered into with an undisclosed third-party. (A copy of this letter is attached hereto asSee Exhibit “E.”) sdd. On April 15, 2016, Plaintiffs’ counsel sent a letter to Defendant Bean reciting in detail the problems and damages that Plaintiffs had sustained because of Defendants’ continuing failure to provide necessary and accurate information, which letter is incorporated by reference and which recites additional emails in which Defendants conducted their fraudulent enterprise. (A copy of this letter is attached hereto asSee Exhibit “T.”) 98. 119. The acts of mail and wire fraud set forth above and throughout this Complaint constitute a pattern of racketeering activity, pursuant to 18 U.S.C. § 1961(5). 36 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 37 of 74 99. 120. The Individual Defendants have directly and indirectly conducted, and participated in, the conduct of the enterprise’s affairs through the pattern of racketeering activity described above, in violation of 18 U.S.C. § l 962( 1962(c). 100. 121. As a direct and proximate result of the Individual Defendants’ racketeering activities and violations of 18 U.S.C. § 1962(c), Plaintiffs have suffered damages totaling at least $9,000,000.00. In addition, Plaintiffs are entitled to treble damages and the costs and expenses associated with bringing this action, including their attorney’s fees. COUNT II (RICO 18 U.S.C. § 1962(b)) 122. 101. Plaintiffs hereby incorporate by reference Paragraphs 1-100121 of this Complaint. 102. 123. The Individual Defendants’ participated in an enterprise that involved making fraudulent statements and other misrepresentations that were intended to induce other persons and entities, including Plaintiffs, into investing in and/or seeking investment in the Projects, through EB-5 financing and other means of financing. This enterprise included, but was not limited to, using the following entitiesEntity Defendants to seek and attract investment in the Projects: GRP Franklin, LLC; GRP Madison, LLC; GRP North Carolina, LLC; North Carolina Renewable Power-Lumberton, LLC; and North Carolina Renewable Power-Elizabethtown, LLC. 103. 124. Defendants’The enterprise was engaged in, and its activities affected, interstate commerce. 104. 125. The Individual Defendants acquired and maintained interests in and control of the enterprise through a pattern of racketeering activity, including but not limited to the fraud and 37 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 38 of 74 misrepresentations made to Plaintiffs and otherothers through interstate wire and mail fraud, as described above in this Complaint. 105. 126. The racketeering activity described above constitutes a pattern of racketeering activity pursuant to 18 U.S.C. § 1961(5). 106. 127. The Individual Defendants have directly and indirectly acquired and maintained interests in and control of the enterprise through the pattern of racketeering activity described above, in violation of 18 U.S.C. § 1962(b). 107. 128. As a direct and proximate result of the Individual Defendants’ racketeering activities and violations of 18 U.S.C. § 1962(b), Plaintiffs have been injured in their business and property by reasonably relying on representations of Defendants’ about the viability, profitability, and other key aspects of the Projects, which reliance caused Plaintiffs to work exclusively for the Entity Defendants for a year (during which time Plaintiffs turned away other work and therefore lost profits), to devote money and other valuable resources to applying for, and seeking investment in, the Projects, and to lose substantial fees and payments that Plaintiffs would have received in relation to the Projects, had the Projects been able to proceed. 108. 129. As a direct and proximate result of the Individual Defendants’ racketeering activities and violations of 18 U.S.C. § 1962(b), Plaintiffs have suffered damages totaling at least $9,000.000.00. In addition, Plaintiffs are entitled to treble damages and the costs and expenses associated with bringing this action, including their attorney’s fees. COUNT III (RICO 18 U.S.C. § 1962(d)) 109. 130. Plaintiffs hereby incorporate by reference Paragraphs 1-108121 of this Complaint. 38 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 39 of 74 110. 131. As stated above, the Individual Defendants agreed and conspired to violate 18 U.S.C. § 1962(c). 111. 132. The Individual Defendants have intentionally conspired and agreed to conduct and participate in the conduct of the affairs of the enterprise through a pattern of racketeering activity. The Individual Defendants knew that their predicate acts were part of a pattern of racketeering activity and agreed to the commission of those acts to further the schemes described above. Defendants’That conduct constitutes a conspiracy to violate 18 U.S.C. § 1962(c), in violation of 18 U.S.C. § 1962(d). 112. 133. As a direct and proximate result of the Individual Defendants’ racketeering activities and violations of 18 U.S.C. § 1962(d), Plaintiffs have suffered damages totaling at least $9,000,000.00. In addition, Plaintiffs are entitled to treble damages and the costs and expenses associated with bringing this action, including their attorney’s fees. COUNT IV (GEORGIA RICO, O.C.G.A. § 16-14-4(a)) 113. 134. Plaintiffs hereby incorporate by reference Paragraphs 1-112121 of this Complaint. 114. 135. As alleged more fully above, the Individual Defendants engaged in a pattern of racketeering activity pursuant to which they engaged in multiple predicate acts, including but not limited to O.C.G.A. § 16-8-3 (theft by deception) and violations of 18 U.S.C. § 1961(1)(B) (mail and wire fraud), that have harmed Plaintiffs. 115. 136. 39 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 40 of 74 As a direct and proximate result of the Individual Defendants’ racketeering activities and violations of O.C.G.A. § 16-14-4(a), Plaintiffs have suffered damages totaling at least $9,000,000.00. Plaintiffs are also entitled to treble damages and the costs and expenses associated with bringing this action, including their attorney’s fees. COUNT V (GEORGIA RICO, O.C.G.A. § 16-14-4(b)) 116. 137. Plaintiffs hereby incorporate by reference Paragraphs 1-115121 of this Complaint. 117. 138. As alleged more fully above, the Individual Defendants constituted and engaged in an enterprise consisting of the Entity Defendants that operated in, and whose activities affected, interstate commerce. The Individual Defendants were employed by and/or associated with the enterprise. 118. 139. The Individual Defendants agreed to, and did, conduct and participate in the conduct of the enterprise’s affairs through a pattern of racketeering activity, pursuant to which they engaged in multiple predicate acts, including but not limited to O.C.G.A. § 16-8-3 (theft by deception) and violations of 18 U.S.C. § 1961(1)(B) (mail and wire fraud) in violation of O.C.G.A. § 16-14-4(b). 119. 140. As a direct and proximate result of the Individual Defendants’ racketeering activities and violations of O.C.G.A. § 16-14-4(a), Plaintiffs have suffered damages totaling at least $9,000,000.00. In addition, Plaintiffs are entitled to treble damages and the costs and expenses associated with bringing this action, including attorney’s fees. COUNT VI (Fraud) 120. 141. 40 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 41 of 74 Plaintiffs hereby incorporate by reference Paragraphs 1-112110 and 118 of this Complaint. 121. 142. Defendants knowingly made false representations (and material omissions) to Plaintiffs in an attempt to induce Plaintiffs to work (exclusively for one year) for Defendants on the Projects, including preparation of EB-5 applications for the Projects and seeking investment funding for the Projects. (See especially Paragraphs 98-110 and 118.) 122. 143. Defendants’ false representations include misrepresentations (and material omissions) about specific aspects of the complex power plants that were part of the Projects, such as the type of equipment to be used at the power plants, the amount of electrical power and profits that each of the Projects would produce, and the status of key personnel who were working (or continuing to work) on the Projects-including material omissions about the fact that certain key personnel had quit working for Defendants and thus on the Projects. 123. 144. Defendants knew or should have known that their representations to Defendants were false (and that certain omissions were omissions of material fact), when Defendants made those representations and omissions. Among other things, this is clear from solicitations and other promotional materials from Defendants about the Projects, which repeatedly touted the vast knowledge, experience, and expertise of Defendants in the renewable power industry. 124. 145. Plaintiffs reasonably and justifiably relied upon Defendants’ misrepresentations and omissions by, inter alia, working exclusively to spend time, effort, and money in pursuit of the approval and financing of the Projects, based on what Defendants’ had repeatedly represented were viable and profitable projects that would allow Plaintiffs to profit from their work on the Projects. 125. 146. Plaintiffs have been damaged in an amount exceeding $9,000,000.00 by their reasonable and justifiable reliance on Defendants’ misrepresentations, in ways that include, but are not limited 41 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 42 of 74 to, legal and professional expenses, as well as lost profits and opportunities, and other expenses and losses associated with Plaintiffs work on the Projects. COUNT VII (Negligent Misrepresentation) 126. 147. Plaintiffs hereby incorporate by reference Paragraphs 1-112110 and 118 of this Complaint. 127. 148. Defendants have negligently supplied information to Plaintiffs regarding and in furtherance of the Projects, including but not limited to details about the equipment at the power plants, the capacity of the power plants to produce electrical power, the profitability of the power plants, and the status of key personnel who worked on the Projects. Many of these misrepresentations, which Defendants knew (or should have known) were false, are recited above in this Complaint, and particularly in support of the RICO claims stated herein. 128. 149. Defendants have negligently supplied such information to Plaintiffs in an attempt to induce Plaintiffs to work, exclusively, for and with Defendants to apply for and fund the Projects. 129. 150. Because Defendants made negligent misrepresentations to Plaintiffs for the purpose of inducing Plaintiffs to work, exclusively, on and for the Projects, it was foreseeable to Defendants that Plaintiffs would reasonably rely upon those misrepresentations. Plaintiffs’ reliance was also reasonable because Defendants repeatedly represented that they were experienced experts in the complex renewable power industry. 130. 151. Plaintiffs reasonably and justifiably relied upon the negligent misrepresentations made by Defendants. 131. 42 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 43 of 74 152. Plaintiffs have suffered economic injury proximately caused from their reliance upon Defendants’ negligent misrepresentations. 132. 153. Plaintiffs’ damages caused by the Defendants’ negligent misrepresentations include but are not limited to lost fees, profits, and other amounts, in excess of $9,000,000.00. COUNT VIII (Breach of Contract) 133. 154. Plaintiffs hereby incorporate by reference Paragraphs 1-100110 of this Complaint. 134. 155. The Entity Defendants contracted with Plaintiffs to receive the benefit of Plaintiffs’ experience, knowledge, and services in regard to the application, approval, and funding of the Projects. 135. 156. As the parties continued work on the Projects-advancing from the preparation of EB-5 applications for the Projects, to submitting those applications for USCIS approval, and seeking funding for the Projects-the parties memorialized the terms of their relationship by executing numerous individual contracts that, together, memorialized their agreement regarding Plaintiffs’ work on the Projects. 136. 157. The parties’ contracts include, but are not limited to, the following: (i) the four Engagement Agreements, attached hereto as Exhibits “A”-”D”, and (ii) the Term Sheet,” attached hereto as Exhibit “F” (collectively the “Breached Contacts”). 137. 158. 43 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 44 of 74 Pursuant to the Breached Contracts and other agreements entered into by the Parties, Plaintiffs agreed to work, exclusively, for Defendants to prepare and submit EB-5 applications for the Projects and to seek investment financing for the Projects. In return, Defendants agreed to pay Plaintiffs and to present timely and accurate information regarding the Projects which information was to be used in support of the EB-5 applications (to be made under penalty of perjury) and in support of efforts to obtain investment financing for the Projects. 138. 159. The Entity Defendants breached the Breached Contracts by, inter alia, failing to provide timely and accurate information needed for Plaintiffs to proceed with EB-5 applications for them and to seek funding for them. Instead, the Entity Defendants caused Plaintiffs unnecessary harm and expense by providing false and misleading information about the Projects. 139. 160. The Entity Defendants’ breaches continued despite repeated warnings by Plaintiffs that timely and accurate information was crucial for the success of the Projects. 140. 161. The Entity Defendants’ breach of the Breached Contracts has proximately caused harm to Plaintiffs, including but not limited to Plaintiffs’ loss of fees, profits, and other payments that Plaintiffs should, and would, have received over the life of the contemplated Projects. Plaintiffs are therefore entitled to recover damages in excess of $75,000.00. COUNT IX (Breach of Implied Covenant of Good Faith and Fair Dealing) 141. 162. Plaintiffs hereby incorporate by reference Paragraphs 1-100110 of this Complaint. 142. 163. As alleged above in the prior Count VIII of this Complaint, Plaintiffs and the Entity Defendants entered into contracts including the Breached Contracts. 143. 44 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 45 of 74 164. The parties’ contracts each included an implied covenant of good faith and fair dealing with regard to the negotiation and performance of those contracts. As such, the Entity Defendants had an implied duty to act in good faith and to engage in fair dealing under the contracts with Plaintiffs. 144. 165. The parties’ implied covenants of good faith and fair dealing included a duty to negotiate in good faith with each other and prohibited acts in bad faith, such as any effort by the Entity Defendants make representations aimed at lulling Plaintiffs into moving forward with Plaintiffs’ exclusive work on the Projects, when the Entity Defendants were in fact intending soon to unilaterally terminate the Entity Defendants’ contractual relationship with Plaintiffs. Such bad faith is actionable. 145. 166. Out of an abundance of caution, and in the event that Defendants argue that the Term Sheet (See Exhibit “F” hereto) is not a binding contract, Plaintiffs allege in the alternative that the Entity Defendants acted in bad faith by continuing to negotiate with and work with Plaintiffs, when the Entity Defendants knew that they would soon be suddenly and unilaterally ending the parties’ relationship. 146. 167. The Entity Defendants’ breaches of their duty to comply with the implied covenant of good faith and fair dealing have proximately harmed Plaintiffs in an amount to be determined at trial. Plaintiffs are therefore entitled to recover damages in excess of $75,000.00. COUNT X (Unjust Enrichment/Quantum Meruit) 147. 168. Plaintiffs hereby incorporate by reference Paragraphs 1-100110 of this Complaint. 148. 169. 45 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 46 of 74 Plaintiffs assert this Count X in the alternative to their claim for breach of contract made above in Count VIII. 149. 170. Plaintiffs provided services to and for the Entity Defendants that were valuable and that were valuable to Defendants, including but not limited to assistance with EB-5 and other financing for the Projects. 150. 171. The Entity Defendants requested that Plaintiffs provide these valuable services. 151. 172. The Entity Defendants knowingly accepted these valuable services from Plaintiffs and knowingly allowed Plaintiffs to perform these valuable services for and on behalf of the Entity Defendants. 152. 173. The Entity Defendants’ receipt of these valuable services from Plaintiffs, without compensating Plaintiffs for such services, would be, and is, unjust. 153. 174. Plaintiffs expected compensation for these valuable services, at the time that Plaintiffs performed them. 154. 175. Plaintiffs are therefore entitled to recover from the Entity Defendants the value of these valuable services in an amount to be determined at trial. Plaintiffs are therefore entitled to recover damages in excess of $75,000.00. COUNT XI (Exemplary Damages) 46 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 47 of 74 176. 155. Plaintiffs hereby incorporate by reference Paragraphs 1-112146 of this Complaint. 156. 177. Based on Defendants’ actions and intent with respect to Plaintiffs and the allegations stated above, Plaintiffs are entitled to recover exemplary damages from Defendants in the form of both punitive damages, pursuant to O.C.G.A. § 51-12-5.1, and treble damages pursuant to Plaintiff’s federal and Georgia RICO claims stated above. 157. 178. Defendants’ actions with respect to Plaintiffs have shown willful misconduct, malice, fraud, wantonness, oppression, and an entire want of care which would raise the presumption of conscious indifference to consequences. COUNT XII (Attorney’s Fees) 158. 179. Plaintiffs hereby incorporate by reference Paragraphs 1-157110 and 118 of this Complaint. 159. 180. Defendants have acted in bad faith, been stubbornly litigious, and have caused Plaintiffs unnecessary trouble and expense. 160. 181. Plaintiffs are entitled to recover from Defendants all reasonable attorney’s fees incurred by Plaintiffs in regard to this dispute, pursuant to 0.O.C.G.A. § 13-6-11. WHEREFORE, Plaintiffs pray: a. That the Court enter judgment in Plaintiff’s favor and against Defendants in an amount to be proven at trial for compensatory and exemplary damages, including but not limited to, punitive damages and treble damages; 47 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 48 of 74 b. That Plaintiffs recover their expenses, including attorney’s fees, from Defendants; c. That all cost of this action be taxed against Defendants; and d. That the Court award such other and further legal and equitable relief as is just and proper; and e. That all issues be tried before a jury. Respectfully submitted this 30th1st day of September, 2016.June, 2017. LEWIS BRISBOIS BISGAARD & SMITH, LLP 1180 Peachtree Street, N.E. Suite 2900 Atlanta, GA 30309 Telephone: 404.348.8585 Facsimile: 404.467.8845 thomas.grant@lewisbrisbois.comthomas.grant@lewisbrisbois.com adi.allushi@lewisbrisbois.com /s/ Thomas C. Grant THOMAS C. GRANT Georgia Bar No. 297455 ADMIR ALLUSHI Georgia Bar No. 852810 Counsel for Plaintiffs 48 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 49 of 74 EXHIBIT “A” Filed Under Seal 49 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 50 of 74 EXHIBIT “B” Filed Under Seal 50 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 51 of 74 EXHIBIT “C” Filed Under Seal 51 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 52 of 74 EXHIBIT “D” Filed Under Seal 52 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 53 of 74 EXHIBIT “E” Filed Under Seal 53 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 54 of 74 EXHIBIT “F” Filed Under Seal 54 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 55 of 74 EXHIBIT “G” Filed Under Seal 55 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 56 of 74 EXHIBIT “H” Filed Under Seal 56 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 57 of 74 EXHIBIT “I” Filed Under Seal 57 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 58 of 74 EXHIBIT “J” Filed Under Seal 58 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 59 of 74 EXHIBIT “K” Filed Under Seal 59 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 60 of 74 EXHIBIT “L” Filed Under Seal 60 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 61 of 74 EXHIBIT “M” Filed Under Seal 61 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 62 of 74 EXHIBIT “N” Filed Under Seal 62 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 63 of 74 EXHIBIT “O” Filed Under Seal 63 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 64 of 74 EXHIBIT “P” Filed Under Seal 64 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 65 of 74 EXHIBIT “Q” Filed Under Seal 65 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 66 of 74 EXHIBIT “R” Filed Under Seal 66 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 67 of 74 EXHIBIT “S” Filed Under Seal 67 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 68 of 74 EXHIBIT “T” Filed Under Seal 68 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 69 of 74 EXHIBIT “U” Filed Under Seal 69 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 70 of 74 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION FIVE ON FIFTY, LLC; GATE INDUSTRIES, LLC; and SOUTHERN FILM REGIONAL. CENTER-ATLANTA, LLC, ) Plaintiffs, F. RAYMON BEAN; DAVID SHAFFER; JEFFREY KUEFIR.; GREENFUELS ENERGY, LLC; GEORGIA RENEWABLE- POWER, LLC; GRP FRANKLIN, LLC; GRP MADISON, LLC; GRP NORTH CAROLINA, LLC; NORTH CAROLINA RENEWABLE POWER-LUMBERTON, LLC; and NORTH CAROLINA RENEWABLE POWER-ELIZABETHTOWN, LLC, Defendants. CIVIL ACTION NO. 1:16-CV-3690 ORDER GRANTING PLAINTIFFS’ MOTION FOR LEAVE TO FILE DOCUMENTS UNDER SEAL This matter having come before this Court on Plaintiffs’ Motion for Leave to File Documents under Seal in the above-referenced action, and good cause being, shown: IT IS HEREBY ORDERED that Plaintiffs’ Motion for Leave is GRANTED. Plaintiffs may therefore file the Exhibits to their Complaint under seal. Accordingly, the Clerk is hereby directed to accept those exhibits for filing under seal. SO ORDEREDORDERED THIS 30th day of Sept. 2016. Honorable United States District Court Northern District of Georgia Order Proposed by: CERTIFICATE OF SERVICE I hereby certify that on this date, I served the foregoing First Amended Complaint with the Clerk of Court using the CM/ECF System which will automatically send electronic notification of such filing to the following counsel of record: Mark G. Trigg Richard Valladares Janna Nugent 70 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 71 of 74 Greenberg Traurig Terminus 200 3333 Piedmont Road, NE Suite 2500 Atlanta, GA 30305 This 1st day of June, 2017. THOMAS C. GRANT Georgia Bar No.: 297455 LEWIS BRISBOIS BISGAARD & SMITH, LLP 1180 Peachtree Street NE, N.E. Suite 2900 Atlanta, GA 30309-3521 Tel: 404-348-8585 Fax: 404-467-8845 thomas.grant@lewisbrisbois.comTelephone: 404.348.8585 Facsimile: 404.467.8845 thomas.grant@lewisbrisbois.com adi.allushi@lewisbrisbois.com /s/ Thomas C. Grant THOMAS C. GRANT Georgia Bar No. 297455 ADMIR ALLUSHI Georgia Bar No. 852810 Counsel for Plaintiffs 71 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 72 of 74 Document comparison by Workshare Compare on Friday, June 02, 2017 11:43:05 AM Input: Document 1 ID file://J:\Working_Space\Portnoy, Josh\1706-000073\Segment 1\5. Final\Five on Fifty - Complaint.docx Description Five on Fifty - Complaint Document 2 ID file://J:\Working_Space\Portnoy, Josh\1706-000073\Segment 2\5. Final\Five on Fifty First Amended Complaint.docx Description Five on Fifty First Amended Complaint Rendering set GT-1 Legend: Insertion Deletion Moved from Moved to Style change Format change Moved deletion Inserted cell Deleted cell Moved cell Split/Merged cell Padding cell Statistics: Count Insertions 568 Deletions 454 Moved from 0 Moved to 0 Style change 0 Format changed 0 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 73 of 74 Total changes 1022 Case 1:16-cv-03690-TCB Document 36-2 Filed 06/26/17 Page 74 of 74
