Law Firm Seeks Dismissal of Conservation Easement Suit

ANDREW LECHTER; SYLVIA THOMPSON; LAWSON F. THOMPSON; RUSSELL DALBA; and KATHRYN DALBA, on behalf of themselves and all other similarly situated,
Plaintiffs,
v.
APRIO, LLP f/k/a HABIF, AROGETI & WYNNE, LLP; ROBERT GREENBERGER; SIROTE & PERMUTT, P.C.; BURR & FORMAN, LLP; BAKER, DONELSON, BEARMAN, CALDWELL& BERKOWITZ, P.C.; SMITH, LEWIS & HALEY, LLP; DAVID C. SMITH; FOREVER FORESTS LLC; NANCY ZAK; JAMES JOWERS; LARGE & GILBERT, INC.; CLOWER KIRSCH & ASSOCIATES, LLC; JIM R. CLOWER, SR.; TENNILLE & ASSOCIATES,) INC.; ATLANTIC COAST CONSERVANCY,) INC.; ROBERT D. KELLER; and GEORGIA ALABAMA LAND TRUST, INC. f/k/a GEORGIA LAND TRUST, INC.,
Defendants.

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION

MOTION TO DISMISS COMPLAINT AS TO
DEFENDANT SIROTE & PERMUTT, P.C.

Defendant Sirote & Permutt, P.C. (“Sirote”) moves to dismiss Plaintiffs Andrew Lechter, Sylvia Thompson, Lawson F. Thompson, Russell Dalba, and Kathryn Dalba's (collectively, “Plaintiffs”) Complaint in its entirety under Federal Rules of Civil Procedure 12(b)(6) and 12(b)(2). Plaintiffs have asserted a litany of claims against seventeen defendants on behalf a putative nationwide class of individuals who invested in various syndicated conservation easement transactions dating back to 2008. In particular, Plaintiffs claim that Sirote violated the federal and Georgia RICO statutes (Counts I-IV), made negligent misrepresentations (Count VI), defrauded Plaintiffs (Count IX), aided and abetted misconduct by other Defendants (Count X), conspired with other Defendants (Count XII), and committed negligence/professional malpractice (Count XI). See Compl. ¶¶ 262-355. Despite the length of Plaintiffs' Complaint, they have not plausibly alleged that Sirote participated in the design, development, or marketing of any of these largely unidentified transactions. Indeed, as explained in the accompanying brief, the Complaint is irreparably flawed for several independent reasons.

First, the vast majority of Plaintiffs' claims are time-barred. Second, Plaintiffs Russell and Kathryn Dalba's malpractice claim fails because they never employed Sirote. Third, given the disclaimers in Sirote's legal opinion and related documents, as a matter of law, Plaintiffs could not have reasonably relied on any alleged misstatement by Sirote. Further, Sirote's alleged statements are legal opinions and forward looking, not statements of current fact, and hence do not support fraud or negligent misrepresentation claims. Fourth, Plaintiffs lack standing to assert federal and Georgia RICO claims. They also fail to allege (i) predicate acts of mail or wire fraud; or (ii) a pattern of racketeering activity to support RICO claims. And because Plaintiffs' allegations could be construed as securities fraud, they cannot support RICO claims as a matter of law. Fifth, Georgia law does not recognize a claim for aiding and abetting fraud, and Plaintiffs' conclusory allegations do not support any other such claim. Sixth, because Plaintiffs' fraud and breach of fiduciary duty claims fail, their conspiracy claims also fail. Moreover, Plaintiffs have not alleged that Sirote reached a “mutual understanding” to conspire with any other Defendant. Seventh, the Court lacks personal jurisdiction over Sirote, including jurisdiction to resolve claims alleged by nonresident putative class members. Accordingly, all claims against Sirote should be dismissed.

Respectfully submitted this 7th day of August, 2020.

KING & SPALDING LLP

M. Robert Thornton
Georgia Bar No. 710475
David L. Balser
Georgia Bar No. 035835
J. Andrew Pratt
Georgia Bar No. 465311
Billie Pritchard
Georgia Bar No. 460789
1180 Peachtree Street
Atlanta, Georgia 30309
Telephone: (404) 572-4600
bthornton@kslaw.com
dbalser@kslaw.com
apratt@kslaw.com
bpritchard@kslaw.com

Counsel for Defendant Sirote & Permutt, P.C.

---

BRIEF IN SUPPORT OF MOTION TO DISMISS COMPLAINT
AS TO DEFENDANT SIROTE & PERMUTT, P.C.

---

TABLE OF CONTENTS

STATEMENT OF RELEVANT FACTS

LEGAL STANDARD

ARGUMENT

CONCLUSION

TABLE OF AUTHORITIES

Cases

Ackerman v. Nat'l Prop. Analysts, Inc., 887 F. Supp. 494 (S.D.N.Y. 1992)

AFFCO Invs., LLC v. KPMG, LLP, No. H-07-3379, 2008 WL 5070053 (S.D. Tex. Nov. 20, 2008)

Agency Holding Corp. v. Malley–Duff & Assocs., Inc., 483 U.S. 143 (1987)

Allmond v. Young, 314 Ga. App. 230 (2012)

Am. Casual Dining, L.P. v. Moe's Sw. Grill, L.L.C., 426 F. Supp. 2d 1356 (N.D. Ga. 2006)

Am. Dental Ass'n v. Cigna Corp., 605 F.3d 1283 (11th Cir. 2010)

Anza v. Ideal Steel Supply Corp., 547 U.S. 451 (2006)

Ashcroft v. Iqbal, 556 U.S. 662 (2009)

Bald Eagle Area Sch. Dist. v. Keystone Fin., Inc., 189 F.3d 321 (3d Cir. 1999)

Banco Latino Int'l v. Gomez Lopez, 95 F. Supp. 2d 1327 (S.D. Fla. 2000)

Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007)

Bernstein v. Peters, 26 S.E.2d 192 (Ga. Ct. App. 1943)

Bogle v. Bragg, 248 Ga. App. 632 (2001)

Bristol-Myers Squibb Co. v. Superior Court of Cal., 137 S. Ct. 1773 (2017)

Brown v. Ford Motor Co., 347 F. Supp. 3d 1347 (N.D. Ga. 2018)

Brown v. Kinser, 218 Ga. App. 385 (1995)

Bullard v. MRA Holding, LLC, 292 Ga. 748 (2013)

Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985)

Butala v. Agashiwala, 916 F. Supp. 314 (S.D.N.Y. 1996)

Cape v. von Maur, 932 F. Supp. 124 (D. Md. 1996)

Carvelli v. Ocwen Fin. Corp., 934 F.3d 1307 (11th Cir. 2019)

Catalyst Pharm., Inc. v. Fullerton, 748 F. App'x 944 (11th Cir. 2018)

Chesapeake Emp'rs' Ins. Co. v. Eades, 77 F. Supp. 3d 1241 (N.D. Ga. 2015)

Chi v. MasterCard Int'l, Inc., No. 1:14-CV-614-TWT, 2014 WL 5019917 (N.D. Ga. Oct. 7, 2014)

Copeland v. Miller, 347 Ga. App. 123 (2018)

Courboin v. Scott, 596 F. App'x 729 (11th Cir. 2014)

Craig Outdoor Advert., Inc. v. Viacom Outdoor, Inc., 528 F.3d 1001 (8th Cir. 2008)

Crawford v. Williams, 258 Ga. 806 (1989)

Crawford's Auto Ctr., Inc. v. State Farm Mut. Auto. Ins. Co., 945 F.3d 1150 (11th Cir. 2019)

Curtis Inv. Co. v. Bayerische Hypo-Und Vereinsbank, No. 1:06-cv-2752-WSD, 2007 WL 4564133, at *12 (N.D. Ga. Dec. 20, 2007)

Daimler AG v. Bauman, 134 S. Ct. 746 (2014)

Duke Galish, LLC v. Arnal Golden Gregory, LLP, 288 Ga. App. 75 (2007)

Duncan v. O'Shea, 376 F. Supp. 3d 115 (D. Me. 2019)

Feldman v. Am. Dawn, Inc., 849 F.3d 1333 (11th Cir. 2017)

First Fed. Sav. Bank v. Hart, 185 Ga. App. 304 (1987)

Flagg v. First Premier Bank, 257 F. Supp. 3d 1351 (N.D. Ga. 2017)

Garland v. Advanced Med. Fund, L.P. II, 86 F. Supp. 2d 1195 (N.D. Ga. 2000)

Gignilliat v. Borg, 131 Ga. App. 182 (1974)

Gill as Next Friend of K.C.R. v. Judd, 941 F.3d 504 (11th Cir. 2019)

Hanson v. Denckla, 357 U.S. 235 (1958)

Hemi Grp., LLC v. City of New York, 559 U.S. 1 (2010)

Hi-Tech Pharm., Inc. v. HBS Int'l Corp., 910 F.3d 1186 (11th Cir. 2018)

Hunter, Maclean, Exley & Dunn, P.C. v. Frame, 269 Ga. 844 (1998)

Hyman v. Jordan, 201 Ga. App. 852 (1991)

Int'l Shoe Co. v. Washington, 326 U.S. 310 (1945)

Intelligent Inv. Int'l LLC v. Fu, No. 1:17-CV-05296-RWS, 2019 WL 1281204 (N.D. Ga. Mar. 20, 2019)

J & M Assocs. v. Callahan, 753 F. Supp. 2d 1183 (S.D. Ala. 2010)

Jackson Inv. Grp., LLC v. Thomas, 325 F. Supp. 3d 1334 (N.D. Ga. 2017)

Jackson v. BellSouth Telecomms., 372 F.3d 1250 (11th Cir. 2004)

Jankowski v. Taylor, Bishop & Lee, 154 Ga. App. 752 (1980)

Jaraysi v. City of Marietta, Ga., No. 1:12-CV-2104-AT, 2012 WL 13065617 (N.D. Ga. Dec. 21, 2012)

Jones, Day, Reavis & Pogue v. Am. Envirecycle, 217 Ga. App. 80 (1995)

Kahn v. Britt, 330 Ga. App. 377 (2014)

Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487 (1941)

Klopfenstein v. Deutsche Bank Sec., Inc., 592 F. App'x 812 (11th Cir. 2014)

Ledford v. Smith, 274 Ga. App. 714 (2005)

Lehman v. Lucom, 727 F.3d 1326 (11th Cir. 2013)

Leibel v. Johnson, 291 Ga. 180 (2012)

Licht v. Watson, 567 F. App'x 689 (11th Cir. 2014)

Mallayev v. Cohen, No. 1:07-CV-0094-JEC, 2009 WL 10697493 (N.D. Ga. Mar. 27, 2009)

Martin v. State, 189 Ga. App. 483 (1988)

Mbigi v. Wells Fargo Home Mortg., 336 Ga. App. 316 (2016)

McKesson Corp. v. Green, 343299 Ga. App. 91 (2009)

Menzies v. Seyfarth Shaw LLP, 943 F.3d 328 (7th Cir. 2019)

Middleton v. Int'l Bus. Machines Corp., 787 F. App'x 619 (11th Cir. 2019)

Mitchell v. Ga. Dep't of Cmty. Health, 281 Ga. App. 174 (2006)

MJK Family LLC v. Corp. Eagle Mgmt. Servs., Inc., 676 F. Supp. 2d 584 (E.D. Mich. 2009)

Palm Beach Golf Ctr.-Boca, Inc. v. John G. Sarris, D.D.S., P.A., 781 F.3d 1245 (11th Cir. 2015)

Parm v. Nat'l Bank of Cal., N.A., 242 F. Supp. 3d 1321 (N.D. Ga. 2017)

Plumlee v. Davis, 221 Ga. App. 848 (1996)

Prince Heaton Enters., Inc. v. Buffalo's Franchise Concepts, Inc., 117 F. Supp. 2d 1357 (N.D. Ga. 2000)

Ray v. Spirit Airlines, Inc., 836 F.3d 1340 (11th Cir. 2016)

Reynolds v. Henderson & Lyman, 903 F.3d 693 (7th Cir. 2018)

Rowe v. Gary, Williams, Parenti, Watson & Gary, P.L.L.C., 181 F. Supp. 3d 1161 (N.D. Ga. 2016), rev'd and remanded on other grounds sub nom. Rowe v. Gary, 703 F. App'x 777 (11th Cir. 2017)

SEC v. W.J. Howey Co., 328 U.S. 293 (1946)

Siavage v. Gandy, 350 Ga. App. 562 (2019)

Simpson v. Sanderson Farms, Inc., 744 F.3d 702 (11th Cir. 2014)

Skilling v. United States, 561 U.S. 358 (2010)

Sprint Nextel Corp. v. Ace Wholesale, Inc., No. 1:12-cv-02902-JEC, 2014 WL 688134 (N.D. Ga. Feb. 21, 2014)

Stubbs v. Hall, 840 S.E.2d 407 (Ga. 2020)

Suzhou Allpro Certified Pub. Accountants Co. v. Sure Heat Mfg., Inc., No. 1:15-CV-03436-RWS, 2016 WL 11528968 (N.D. Ga. June 9, 2016)

United States v. Persico, 832 F.2d 705 (2d Cir. 1987)

United States v. Zak, 426 F. Supp. 3d 1365 (N.D. Ga. 2019)

Velten v. Regis B. Lippert, Intercat, Inc., 985 F.2d 1515 (11th Cir. 1993)

Vernon v. Assurance Forensic Accounting, LLC, 333 Ga. App. 377 (2015)

W. Coast Roofing & Waterproofing, Inc. v. Johns Manville, Inc., 287 F. App'x. 81 (11th Cir. 2008)

Walden v. Fiore, 134 S. Ct. 1115 (2014)

Walton v. Sec'y of Veterans Affairs, No 1:13-CV-00918-RWS, 2014 WL 5307577 (N.D. Ga. Oct. 15, 2014)

Williams v. Crispaire Corp., 225 Ga. App. 172 (1997)

Youngblood-W. v. Aflac Inc., No. 4:18-CV-83 (CDL), 2018 WL 10562576 (M.D. Ga. Nov. 9, 2018)

Statutes

15 U.S.C. § 77b(1)

18 U.S.C. § 1346

18 U.S.C. § 1964(c)

Ala. Code § 6-5-574(a)

O.C.G.A. § 9-3-31

O.C.G.A. § 9-3-96

Private Securities Litigation Reform Act

Other Authorities

Ga. R. Prof. Conduct 1.13(f)

Fed. R. Civ. P. 9(b)

---

Stripped of hyperbole, impermissible group pleading, and conspiracy theory, Plaintiffs' 175-page, 356-paragraph Complaint boils down to a single concrete factual allegation against Defendant Sirote & Permutt, P.C. (“Sirote”): that Sirote prepared a legal opinion ten years ago for Maple Landing, LLC (“Maple Landing”). Plaintiffs do not and cannot allege that Sirote prepared legal opinions for Mossy Rock, LLC and Oakhill Woods, LLC, the other two LLCs that appear to form the basis of their claims. Rather, Plaintiffs allege that Sirote represented the latter two LLCs in connection with IRS proceedings that commenced years after the closing of those transactions, and Plaintiffs do not allege that Sirote's representation of these LLCs in the audits and IRS disputes was deficient or caused them harm. As a result, Plaintiffs' claims against Sirote must rise or fall with their allegations concerning Maple Landing. Those allegations are woefully insufficient.

To start, none of the named Plaintiffs alleges that Sirote represented them in any transaction or legal proceeding. Nor could they. The Complaint is clear that Sirote represented the LLCs, not their investors. Moreover, the very Maple Landing offering materials that Plaintiffs Russell and Kathryn Dalba (the “Dalba Plaintiffs”) rely upon as the basis of their claims clearly disclosed that Sirote was not representing any investors — and that they should consult their own lawyers and other professional advisors concerning their investment. Ex. 1 at 129 (“SEEK ADVICE BASED ON THE INVESTOR'S CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.”). This alone dooms the Dalba Plaintiffs' legal malpractice claim against Sirote.

Perhaps recognizing the fatal flaws in their legal malpractice claim — the most logical claims to assert against a law firm — Plaintiffs resort to a lengthy barrage of vague and conclusory allegations about Sirote, concocting an elaborate theory that Sirote and the other defendants conspired to defraud Plaintiffs into investing in the LLCs. But this theory is devoid of any factual support. Setting aside vague, impermissible “group pleading” allegations, Plaintiffs' primary complaint is that Sirote prepared a legal opinion for Maple Landing and other, unspecified opinions. By its very nature, a legal opinion cannot support the broad claims Plaintiffs assert against Sirote. Opinions concerning future events, such as the way the IRS will evaluate a tax deduction, cannot support claims for fraud, negligent misrepresentation, or RICO claims premised on fraudulent conduct — especially when the reader has been instructed not to rely on that opinion.

Against this backdrop, Plaintiffs assert claims against Sirote on behalf a putative nationwide class of individuals who invested in syndicated conservation easement transactions dating back to 2008. Without any factual support for the allegation that Sirote participated in the design, development, or marketing of any of these largely unidentified LLCs, Plaintiffs contend that Sirote violated the federal and Georgia RICO statutes (Counts I-IV), made negligent misrepresentations (Count VI), defrauded Plaintiffs (Count IX), aided and abetted misconduct by other Defendants (Count X), conspired with other Defendants (Count XII), and committed negligence/professional malpractice (Count XI). See Compl. ¶¶ 262-355. Despite Plaintiffs' efforts, these lengthy and largely conclusory allegations cannot disguise the fundamental flaws in their claims.

First, the vast majority of Plaintiffs' claims are time-barred. Second, the Dalba Plaintiffs cannot assert a legal malpractice claim because they never employed Sirote.¹ Third, Plaintiffs could not have reasonably relied on any alleged misstatement by Sirote. Further, Sirote's alleged statements are legal opinions and forward looking, not statements of current fact, and hence do not support fraud or negligent misrepresentation claims. Fourth, Plaintiffs lack standing to assert federal and Georgia RICO claims. They also fail to allege (i) predicate acts of mail or wire fraud; or (ii) a pattern of racketeering activity to support RICO claims. And because Plaintiffs' allegations could be construed as securities fraud, they cannot support RICO claims as a matter of law. Fifth, aiding and abetting fraud is not a claim under Georgia law, and Plaintiffs' conclusory allegations do not support any other such claim. Sixth, because Plaintiffs' fraud and breach of fiduciary duty claims fail, their conspiracy claims also fail. Moreover, Plaintiffs have not alleged that Sirote reached a “mutual understanding” to conspire with any other Defendant. Seventh, the Court lacks personal jurisdiction over Sirote, including jurisdiction to resolve claims alleged by nonresident putative class members. Accordingly, all claims against Sirote should be dismissed.

STATEMENT OF RELEVANT FACTS

Plaintiffs Andrew Lechter (“Lechter”), Sylvia and Lawson Thompson (the “Thompson Plaintiffs”), and Russell and Kathryn Dalba (the “Dalba Plaintiffs”) (collectively, “Plaintiffs”) allege that they invested in three separate conservation easement transactions in 2010 and 2011.² Compl. ¶¶ 1-9, 79, 106, 132. “Conservation easements are encumbrances placed on real estate to preserve property for conservation purposes.” Id. ¶ 2. The easements in question were placed on three distinct parcels of property acquired by separate partnership entities (each a “LLC”): the Maple Landing, LLC; the Mossy Rock, LLC; and the Oakhill, LLC.³ See id. ¶¶ 70, 81, 100, 108, 125, 134. The LLCs conveyed the conservation easements to land trusts, which affirmed that these charitable contributions were “fully tax deductible.” Id. ¶¶ 84, 86, 112-113, 137-138 (quotation marks omitted). As participants in the LLCs, Plaintiffs claimed their respective portions of the deductions on their individual tax returns. Id. ¶¶ 93, 119, 145.

The IRS audited the tax returns of each LLC for the relevant tax years and ultimately disagreed that the conservation easement contributions were tax deductible. See id. ¶¶ 94, 96, 120, 122, 148. The IRS issued Revenue Agent Reports (“RARs”)⁴ disallowing the deductions for Maple Landing on November 17, 2014; for Mossy Rock on December 11, 2014; and for Oakhill sometime before July 12, 2016. See id. ¶¶ 96, 122, 148.

Several years later, on March 26, 2020, Plaintiffs filed this putative class action lawsuit against seventeen different Defendants⁵ on behalf of “hundreds, if not thousands, of clients” who invested in these LLCs and other conservation easement transactions, including those “involving land located in other states.” Id. ¶¶ 6, 193, n.3. Plaintiffs claim that Defendants conspired to promote “a flawed and defective tax savings strategy” (the “Syndicated Conservation Easement Strategy” or “SCE Strategy”) “for the purpose of generating and sharing fees and commissions generated from the SCE Strategy and alleged tax liability reduction it purported to provide.” See id. ¶¶ 7, 211. Plaintiffs further allege that Defendants' conduct “caus[ed] them to pay substantial fees and transaction costs, be exposed to interest and penalties from the IRS, and incur additional accounting and legal fees and expenses to deal with the IRS fallout.” Id. ¶ 8.

Despite its length, the Complaint includes very few specific details about Sirote, an Alabama-based law firm, and its alleged involvement in the transactions in question. Id. ¶ 21. Altogether, Plaintiffs allege that Sirote (i) prepared a legal opinion in support of Maple Landing and other unspecified transactions (“Legal Opinions”), see id. ¶¶ 72, 127; (ii) sent three e-mails to members of the Maple Landing LLC, id. ¶ 234(s), (v), (x); (iii) represented Maple Landing, Mossy Rock, and Oakhill audits and tax court proceedings with “clear conflicts of interest,” id. ¶¶ 95, 121, 146, 257; (iv) reviewed and approved some aspects of the Maple Landing and Oakhill LLC promotional materials,⁶ id. ¶¶ 73, 127; (v) “draft[ed] operating agreements and other legal documents and review[ed]” similar “documents provided and/or prepared by other team members,” id. ¶¶ 58(e); and (vi) “reviewed and assisted with the preparation of the Conservation Easement Deeds, the Baseline Documentation Reports, and the Appraisals” used in the transactions, id. ¶¶ 58(e), 87, 135.

Plaintiffs fail to elaborate on most of these allegations — or otherwise explain how Sirote's actions departed from accepted legal practice. Rather, their allegations against Sirote focus almost exclusively on the Maple Landing Legal Opinion. Specifically, the Dalba Plaintiffs claim that they decided to invest in the Maple Landing LLC based, in part, on Sirote's “flawed and inaccurate” Legal Opinion. See id. ¶¶ 58(e), 345. The Complaint does not specifically allege that Sirote prepared Legal Opinions for the Mossy Rock or Oakhill LLCs.⁷ Nonetheless, Plaintiffs generally claim that “Sirote prepared Legal Opinions purporting to support the bona fides of the charitable contribution deductions generated from the SCE Strategy and concluding that the deductions would more likely than not be accepted by the IRS, if challenged.” Id. ¶ 58(e). Plaintiffs allege that these unidentified Legal Opinions contained a number of “incorrect and insupportable conclusions” and “failed to discuss or disclose any . . . issues and deficiencies” regarding the tax deductions relating to the specific conservation easements. Id. ¶¶ 173-79.

Even as to Dalba Plaintiffs and the Maple Landing LLC specifically, Plaintiffs' allegations are contradictory and thin. Though both Dalba Plaintiffs claim to have invested in the Maple Landing LLC, see id. ¶ 79, documents that Plaintiffs reference throughout the Complaint demonstrate that only Russell Dalba — and not Kathryn Dalba — invested in the Maple Landing LLC, see Ex. 2, Ex. 3.⁸ In other words, Kathryn Dalba cannot plausibly allege any harm flowing from Sirote's conduct. As a result, Plaintiffs' allegations that Sirote participated in a grand conspiracy to defraud hundreds of people rise and fall with one named Plaintiff's review of three e-mails that are now nearly ten years old and a Legal Opinion that was addressed to the LLC — not to him — that specifically said he was not entitled to rely on it and should consult his own lawyer.

Based on these meager facts, other conclusory statements, and collective allegations against “Defendants” and “Law Firm Defendants,”⁹ Plaintiffs assert nine claims against Sirote: violations of the federal and Georgia RICO statutes (Counts I-IV), negligent misrepresentation (Count VI), fraud (Count IX), aiding and abetting (Count X), negligence/professional malpractice (Count XI), and civil conspiracy (Count XII). See id. ¶¶ 262-355. As discussed below, all of these claims have fatal defects and hence should be dismissed.

LEGAL STANDARD

To survive a motion to dismiss, Plaintiffs must allege “sufficient factual matter” that is “plausible on its face,” showing that they are entitled to the relief they seek. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quotation omitted). The allegations must provide “more than labels and conclusions.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 555 n.3 (2007) (a “formulaic recitation of the elements of a cause of action will not do,” and a “blanket assertion[ ] of entitlement to relief” is insufficient).

ARGUMENT

I. PLAINTIFFS FAIL TO STATE A CLAIM AGAINST SIROTE

A. Georgia Law Applies To Plaintiffs' Common Law Claims

A federal court sitting in diversity or exercising supplemental jurisdiction is bound to apply the substantive law of the state in which it sits. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941); Palm Beach Golf Ctr.-Boca, Inc. v. John G. Sarris, D.D.S., P.A., 781 F.3d 1245, 1259 (11th Cir. 2015). Georgia uses the rule of lex loci delicti to determine which state's law applies to a tort claim. Bullard v. MRA Holding, LLC, 292 Ga. 748, 750 (2013). Under this rule, the law of the place where the tort is committed governs. Id. at 750-51. A tort is committed in the place “where the injury sustained was suffered.” Id. An economic loss is generally sustained in the plaintiff's home state, where he suffers such a loss. See Velten v. Regis B. Lippert, Intercat, Inc., 985 F.2d 1515, 1521 (11th Cir. 1993) (applying Georgia law to a Georgia plaintiff's fraud claim); Garland v. Advanced Med. Fund, L.P. II, 86 F. Supp. 2d 1195, 1205 (N.D. Ga. 2000) (applying Florida law to Florida plaintiffs' fraud, misrepresentation, fiduciary breach, and civil theft claims).¹⁰

Here, Plaintiffs invoke the Court's diversity and supplemental jurisdiction to assert their common law claims (Compl. ¶ 10), so Georgia's choice of law rules apply. And because all five named Plaintiffs are Georgia residents (id. ¶¶14-18) and allegedly suffered economic injury in Georgia (see id. ¶ 8), Georgia law applies to all of their substantive common law claims.

B. The Vast Majority Of Plaintiffs' Claims Are Time-Barred

Plaintiffs' federal RICO, fraud, negligent misrepresentation, negligence/professional malpractice, and civil conspiracy claims are all subject to four-year statutes of limitations.¹¹ See Agency Holding Corp. v. Malley–Duff & Assocs., Inc., 483 U.S. 143, 156 (1987) (RICO); O.C.G.A. § 9-3-31 (negligent misrepresentation, fraud, and civil conspiracy); Mbigi v. Wells Fargo Home Mortg., 336 Ga. App. 316, 325 (2016) (negligent misrepresentation); Copeland v. Miller, 347 Ga. App. 123, 125 (2018) (fraud); Jankowski v. Taylor, Bishop & Lee, 154 Ga. App. 752, 754 (1980) (malpractice); Suzhou Allpro Certified Pub. Accountants Co. v. Sure Heat Mfg., Inc., No. 1:15-CV-03436-RWS, 2016 WL 11528968, at *4 (N.D. Ga. June 9, 2016) (civil conspiracy).

Although these limitations periods are identical, the claims accrue at different points in time. Legal malpractice claims accrue “immediately upon the wrongful act having been committed.” Jones, Day, Reavis & Pogue v. Am. Envirecycle, 217 Ga. App. 80, 82 (1995); see also Duke Galish, LLC v. Arnal Golden Gregory, LLP, 288 Ga. App. 75, 76 (2007). Fraud, negligent misrepresentation, and civil conspiracy claims accrue “when the plaintiff suffers pecuniary loss with certainty, and not as a matter of pure speculation.” Mbigi, 336 Ga. App. at 325 (negligent misrepresentation); Jaraysi v. City of Marietta, Ga., No. 1:12-CV-2104-AT, 2012 WL 13065617, at *2 n.3 (N.D. Ga. Dec. 21, 2012) (“Courts have applied different tests to determine when a civil conspiracy claim begins to accrue, the latest of which measures accrual by the date of the injury.”). By contrast, federal RICO claims accrue “when the injury was or should have been discovered, regardless of whether or when the injury is discovered to be part of a pattern of racketeering.” Lehman v. Lucom, 727 F.3d 1326, 1330 (11th Cir. 2013) (internal quotation marks omitted); see also Youngblood-W. v. Aflac Inc., No. 4:18-CV-83 (CDL), 2018 WL 10562576, at *13 (M.D. Ga. Nov. 9, 2018) (dismissing RICO conspiracy claims as time-barred where the substantive RICO claims were dismissed as time-barred). In sum, the Dalba Plaintiffs' malpractice claim became ripe at the time of Sirote's allegedly wrongful acts; Plaintiffs' fraud, negligent misrepresentation, and civil conspiracy claims accrued when Plaintiffs sustained any alleged injury; and their federal RICO claims accrued when that injury was or should have been discovered.

Regardless of the specific accrual period, most of Plaintiffs' claims are time-barred on the face of the Complaint, which was not filed until March 2020. Plaintiffs' allegations regarding Sirote center on statements in the firm's Maple Landing Legal Opinion and other unspecified Legal Opinions that, according to Plaintiffs, caused them to “pa[y] substantial sums to participate in the SCE Strategy” and later generated other costs. See, e.g., Compl. ¶¶ 316, 333, 347, 354. Accordingly, under Georgia law, the Dalba Plaintiffs' malpractice claim accrued in 2010 when they received Sirote's Maple Landing Legal Opinion (i.e., “the allegedly wrongful act”). See id. ¶¶ 79, 340-45; Am. Envirecycle, 217 Ga. App. at 82. All of Plaintiffs' remaining claims accrued no later than when they received notice of the IRS's intent to disallow charitable deductions. According to the Complaint, that occurred when Plaintiffs received IRS RARs in 2014 and 2015, which stated that the LLC's claimed deductions would be disallowed.¹² Compl. ¶¶ 96, 122. Because the RARs challenged the deductions Plaintiffs expected to receive, the RARs put Plaintiffs on notice that Sirote may have incorrectly predicted how the IRS would evaluate the tax treatment of the conservation easements in question, which gave rise to their alleged injuries. See Klopfenstein v. Deutsche Bank Sec., Inc., 592 F. App'x 812, 815 (11th Cir. 2014) (taxpayer was “on notice” that defendant's representations about tax shelters were false when the taxpayer “received direct information that conflicted with [the defendant's] representation that the tax shelter transactions at issue had economic substance” (internal quotation marks omitted)). Because Plaintiffs' Complaint was filed more than four years after these claims accrued, they should be dismissed. See Butala v. Agashiwala, 916 F. Supp. 314, 318 (S.D.N.Y. 1996) (“[O]n a motion to dismiss, a RICO claim will be time-barred if the facts alleged in the complaint indicate that the plaintiff, with reasonable diligence, should have uncovered the alleged fraud prior to the limitations period.”).¹³

When, as here, claims are time-barred on the face of the Complaint, the plaintiff then bears the burden of establishing a basis for tolling. See Allmond v. Young, 314 Ga. App. 230, 230-31 (2012). Here, Plaintiffs allege that the limitations periods were tolled under “the discovery rule and/or equitable tolling” (1) because Defendants stood by their advice and suggested that Sirote and the Aprio Defendants should represent Plaintiffs in the IRS proceedings; and (2) based on the “Continuous Representation/Continuing Tort Doctrines.” See Compl. ¶¶ 248-61. These allegations are insufficient as a matter of law.¹⁴

First, Plaintiffs cannot rely on any “continuous representation” rule as a matter of law. See Hunter, Maclean, Exley & Dunn, P.C. v. Frame, 269 Ga. 844, 848–49 (1998) (“[T]he 'continuing representation rule,' . . . has been consistently rejected by Georgia courts in the malpractice context, and which we expressly decline to adopt in this case.”). Likewise, Georgia does not recognize “equitable tolling.” Stubbs v. Hall, 840 S.E.2d 407, 419 (Ga. 2020) (noting that there is not “any Georgia precedent in which [the state supreme court] has endorsed or applied a doctrine of equitable tolling, and [the Georgia Supreme Court] . . . found only one case in which [that court] even discuss[ed] equitable tolling”) (emphasis original)).

Second, Plaintiffs have not alleged that Sirote or the other Defendants made any fraudulent misrepresentation of fact that “conceal[ed] the existence of the cause of action from [Plaintiffs].” See Curtis Inv. Co. v. Bayerische Hypo-Und Vereinsbank, No. 1:06-cv-2752-WSD, LLC, 2007 WL 4564133, at *12 (N.D. Ga. Dec. 20, 2007) (explaining that a plaintiff must allege “(1) actual fraud on the part of the defendant involving moral turpitude, (2) which conceals the existence of the cause of action from the plaintiff, and (3) plaintiff's reasonable diligence in discovering his cause of action, despite his failure to do so within the time of the applicable statute of limitations.”); see also claim Hyman v. Jordan, 201 Ga. App. 852, 853 (1991) (because plaintiff did not show that defendants “prevented or deterred” plaintiff from his claims, the statutes of limitations were not tolled). Defendants' “expressions of opinion” about the continued viability of Plaintiffs' charitable deductions “are not sufficient to establish the fraud required to toll the statute of limitation pursuant to OCGA § 9-3-96.” Brown v. Kinser, 218 Ga. App. 385, 389 (1995) (alterations accepted; quotation omitted). As in Brown, this Court should reject any attempt to preserve Plaintiffs' untimely claims.¹⁵

C. The Dalba Plaintiffs' Negligence/Professional Malpractice Claim Fails Because They Did Not Employ Sirote

To state a legal malpractice claim under Georgia law, a plaintiff must allege “(1) employment of the defendant attorney, (2) failure of the attorney to exercise ordinary care, skill and diligence, and (3) that such negligence was the proximate cause of damage to the plaintiff.” Leibel v. Johnson, 291 Ga. 180, 181 (2012). Here, only the Dalba Plaintiffs assert a legal malpractice claim against Sirote, and it fails at the threshold. In addition to being time-barred, see II.B. supra, the Dalba Plaintiffs have not alleged that they (or any other putative class member) engaged Sirote to prepare the Maple Landing Legal Opinion that forms the basis of their malpractice claim. See Compl. ¶¶ 339-348. Nor could they. The Maple Landing Offering Materials explicitly stated that Sirote was “not acting as counsel for any of the prospective Investors,” including the Dalba Plaintiffs. Ex. 1, p. 19 (emphasis added), see also id. p. 20 (“It is also important to note that the Tax Opinion has been issued to the Company only and has not been issued to any Investor, and no Investor may rely upon such Tax Opinion for any purpose whatsoever without prior written consent of the opinion giver[.]”). Accordingly, the Dalba Plaintiffs had no choice but to allege that Sirote was “acting as counsel to the [LLC].” Id. ¶ 173 (emphasis added).

Plaintiff Russell Dalba's subsequent investment in the Maple Landing LLC did not retroactively make Sirote the Dalba Plaintiffs' attorney. See Ga. R. Prof. Conduct 1.13(f) (explaining that, by default, an organization's constituents are not the lawyer's clients); see also Reynolds v. Henderson & Lyman, 903 F.3d 693, 696 (7th Cir. 2018) (holding that there was no attorney-client relationship between LLC member and law firm that represented LLC); MJK Family LLC v. Corp. Eagle Mgmt. Servs., Inc., 676 F. Supp. 2d 584, 594-95 (E.D. Mich. 2009) (holding that counsel for LLC and LLC's manager did not represent members of LLC individually). Accordingly, this claim (Count XI) should also be dismissed.

D. Plaintiffs Fail To State A Claim For Fraud Or Negligent Misrepresentation

To state a claim for fraud under Georgia law, a plaintiff must allege all of the following elements: a false representation of material fact by a defendant, “scienter, intention to induce the plaintiff to act or refrain from acting, justifiable reliance by plaintiff, and damage to plaintiff.” Crawford v. Williams, 258 Ga. 806, 806 (1989). “Negligent misrepresentation is similar to fraud and requires the same elements of proof.”¹⁶ Am. Casual Dining, L.P. v. Moe's Sw. Grill, L.L.C., 426 F. Supp. 2d 1356, 1365 (N.D. Ga. 2006). “[C]laims alleging fraudulent conduct,” including claims for common law fraud and negligent misrepresentation, must be “plead with particularity . . . as required by Rule 9(b).” Jackson Inv. Grp., LLC v. Thomas, 325 F. Supp. 3d 1334, 1354 (N.D. Ga. 2017). To satisfy Rule 9(b), a plaintiff must plead (1) which specific “statements or omissions were made in which documents or oral representations; (2) when, where, and by whom the statements were made (or, in the case of omissions, not made); (3) the content of the statements or omissions and how they were misleading; and (4) what the defendant received as a result of the fraud.” Carvelli v. Ocwen Fin. Corp., 934 F.3d 1307, 1318 (11th Cir. 2019) (emphasis added). Further, “a plaintiff claiming fraud must apprise each defendant of the scope of his or her participation in the alleged fraud.” Ackerman v. Nat'l Prop. Analysts, Inc., 887 F. Supp. 494, 505 (S.D.N.Y. 1992) (emphasis added).

Here, Plaintiffs allege that Sirote committed fraud by preparing unidentified Legal Opinions which “[c]ontained [n]umerous [m]isrepresentations [a]nd [o]missions,” Compl. § III.F, and by “fail[ing] to disclose to . . . Plaintiffs . . . that it was not an independent law firm, but was rather part of the conspiracy to develop, promote, sell, and implement the SCE Strategy” in the same document, id. ¶ 179. Plaintiffs' claims fail because: (i) neither opinions nor statements concerning future events can support a claim for fraud or negligent misrepresentation; (ii) Plaintiffs did not justifiably rely on any representation by Sirote; (iii) Sirote owed no duty of disclosure to Plaintiffs; and (iv) Plaintiffs otherwise fail to allege with particularity any misrepresentation or omission specifically attributable to Sirote.

i. Sirote's Legal Opinions Cannot Support A Claim For Fraud Or Negligent Misrepresentation

Not every statement is an actionable “false representation.” For instance, it is well-settled that “[a] misrepresentation as to the status of the law, or as a matter of law, or as to its effect upon the subject matter of a contract is a statement of opinion only” that cannot support a claim for fraud or negligent misrepresentation. Gignilliat v. Borg, 131 Ga. App. 182, 183 (1974) (collecting cases). Likewise, as a general rule, “a claim for fraud cannot be based upon a representation as to a future event.” Williams v. Crispaire Corp., 225 Ga. App. 172, 172 (1997). Instead, “one alleging that a speaker spoke falsely as to a future event must . . . prove that the speaker intended to speak falsely and that he knew the projected event would not occur.” Mallayev v. Cohen, No. 1:07-CV-0094-JEC, 2009 WL 10697493, at *7 (N.D. Ga. Mar. 27, 2009) (emphasis added). These well-established principles doom Plaintiffs' fraud and negligent misrepresentation claims against Sirote.

Plaintiffs' only specific allegation against Sirote is that it made false and misleading statements in its Maple Landing Legal Opinion and opinions prepared for other, unspecified transactions. See Compl. ¶¶ 173-179.¹⁷ As an initial matter, Sirote's alleged misstatements are by (Plaintiffs') definition Legal Opinions, which were designed to convey Sirote's legal assessment of the potential tax treatment of SCE Strategy transactions. See id. ¶ 173 (alleging that the Legal Opinions were prepared in accordance with IRS Circular 230, which required Sirote to apply the federal tax code to the relevant facts). Moreover, Plaintiffs have not identified any actionable statement(s) of fact contained in the Legal Opinions.¹⁸ Instead, Plaintiffs identify nine allegedly “incorrect and insupportable [legal] conclusions.” See id. ¶ 177 (emphasis added). For example, Plaintiffs cite Sirote's statement that “[t]he Appraisal constitutes a Qualified Appraisal under Treas. Reg. § 1.170A-13(c)” and that “[i]t [wa]s more likely than not that an accuracy-related penalty” would “not apply.” Id. ¶¶ 177(c), (h). Those legal conclusions cannot support a fraud or negligent misrepresentation claim as a matter of law. See, e.g., Bernstein v. Peters, 26 S.E.2d 192, 193 (Ga. Ct. App. 1943) (erroneous statement that plaintiff would not have to pay tax was “clearly an expression of opinion as to the law,” which could not support plaintiff's claim); Curtis Inv. Co., LLC, 2007 WL 4564133, at *15 (“opinion letter stating [that it was] 'more likely than not' that . . . [a] transaction would provide the tax benefits represented” not actionable mail or wire fraud).

Further, these purported misstatements cannot support claims for fraud or negligent misrepresentation because they ultimately pertain to future (potential) events — namely, the likely success of claimed tax deductions if later challenged by the IRS. See Williams, 225 Ga. App at 172-73. Plaintiffs do not (and cannot) allege that Sirote actually knew how the IRS would ultimately view these deductions. In fact, the Offering Materials expressly cautioned the Dalba Plaintiffs that “there can be no assurance that these forward-looking statements will prove accurate.”¹⁹ Ex. 1, 6; see also id. at 16 (“There is no assurance that the Company will be able to achieve its business and tax objectives in connection with any Conservation Easement[.]”), 36 (“[T]his tax opinion is not a guaranty of any particular tax treatment.”). Accordingly, Plaintiffs' claims fail for this independent reason. See Mallayev, 2009 WL 10697493, at *7.

ii. The Dalba Plaintiffs As A Matter Of Law Did Not Justifiably Rely On Any Representation By Sirote

Even if the Dalba Plaintiffs had alleged some misrepresentation in the Maple Landing Legal Opinion (and they have not), they could not have reasonably relied on that representation. The Maple Landing Offering Materials expressly (and repeatedly) informed the Dalba Plaintiffs that they could not rely on Sirote's Legal Opinions. See, e.g., Ex. 1, pp. 5 (“RECIPIENTS ARE NOT TO CONSTRUE THE CONTENTS OF THIS OFFERING SUMMARY OR ANY PRIOR OR SUBSEQUENT COMMUNICATIONS, WHETHER WRITTEN OR ORAL, FROM THE COMPANY OR ANY PERSON ASSOCIATED WITH THIS OFFERING AS LEGAL, TAX OR INVESTMENT ADVICE.”), 19 (Sirote is “not acting as counsel for any of the prospective Investors. . . . Thus, prospective Investors should not rely on such legal counsel to represent and protect their respective interests.”), 155 (“This Opinion may not be relied upon by any other party or for any other purpose whatsoever without prior written consent.”). Instead, the Dalba Plaintiffs were told to “SEEK ADVICE BASED ON THE INVESTOR'S CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.” Id. at 129; see also, e.g., id. at 3 (“You should consult your attorney or business advisor as to the legal, business, tax, and related matters concerning your investment.”).

Accordingly, the Dalba Plaintiffs' claims fail for this independent reason. See Middleton v. Int'l Bus. Machines Corp., 787 F. App'x 619, 622 (11th Cir. 2019) (finding reliance on a presentation was “unreasonable as a matter of law” because “[u]nder Georgia law, the mere presence of a disclaimer, regardless of whether or not the plaintiff saw it, can render reliance unreasonable” (alteration accepted) (internal quotation marks omitted)); J & M Assocs. v. Callahan, 753 F. Supp. 2d 1183, 1211 (S.D. Ala. 2010) (finding “plaintiffs [could not] show reasonable reliance” on legal opinions, which stated “that it was 'more likely than not' that” certain tax shelters would “pass IRS muster”); Mitchell v. Ga. Dep't of Cmty. Health, 281 Ga. App. 174, 178–79 (2006) (because a “website contain[ed] numerous disclaimers directing users to verify their benefits with their health plan benefit administrators” reliance on other statements on that website was “unreasonable”).

iii. Sirote's Alleged Omissions Are Not Actionable

Having failed to allege that Sirote made any actionable misrepresentations of fact, Plaintiffs resort to accusing Sirote of concealing a litany of purportedly material facts. See Compl. ¶¶ 178-79, 252, 257. “[T]he suppression of a material fact is fraud only if there is a duty to disclose arising from a fiduciary relationship or the particular circumstances of the case.” Ledford v. Smith, 274 Ga. App. 714, 721 (2005). “[I]n the absence of a fiduciary relationship,” a duty to disclose generally exists only “when the allegedly defrauding party actively conceals a latent defect or intrinsic quality that the other party cannot easily discover, or when one knowingly takes advantage of another who is 'laboring under a delusion' regarding the true facts.” Pinkerton & Laws Co. v. Roadway Express, Inc., 650 F. Supp. 1138, 1147 (N.D. Ga. 1986).

Here, Sirote represented the LLCs, Compl. ¶ 173, not Plaintiffs, in the audits and subsequent proceedings — and Sirote only prepared a Legal Opinion for Maple Landing, see id. ¶¶ 173-179. As such, Sirote had no fiduciary obligation to Plaintiffs and no duty to disclose any purported “conflict” to them.²⁰ See Bogle v. Bragg, 248 Ga. App. 632, 637-38 (2001) (no fiduciary relationship between attorney for a company and an investor where the attorney recommended investment but did no legal work for investor). No other aspects of this case suggest that Sirote had a duty to disclose any purported conflicts. In fact, the Maple Landing Offering Materials expressly stated that “[y]ou should consult your attorney or business advisor as to the legal, business, tax, and related matters concerning your investment.” Ex. 1 at 3. Accordingly, Sirote's alleged omissions are not actionable.

iv. Plaintiffs Otherwise Fail To Identify Any Specific Misrepresentations Or Omissions Made By Sirote

Setting aside the statements in Sirote's Legal Opinion addressed supra, Plaintiffs have not identified any actionable misrepresentations or omissions by Sirote.²¹ Plaintiffs only attribute three other specific communications to Sirote,²² which all generally pertain to the status of the Maple Landing LLC IRS audit and a “RERI issue,” respectively. See Compl. ¶ 234(s), (v), (x). As an initial matter, these communications occurred well after Plaintiffs invested in Maple Landing, so they cannot plausibly have induced Plaintiffs to make their investments. Moreover, Plaintiffs' allegations about these e-mails come nowhere close to supplying the specificity required by Rule 9(b). That is hardly surprising. The actual e-mails contradict Plaintiffs' inaccurate characterizations and conclusory allegations. See Exs. 4-6. Each cover e-mail attaches a communication from Derek Hutcheson, the Tax Matters Partner for Maple Landing — not Sirote. Id. The January 17, 2017 letter merely informs Maple Landing members of their right to participate in an upcoming IRS appeals conference. Ex. 4. The February 16, 2017 letter then describes the conference and explains that “the IRS remains skeptical about the claimed value for the conservation easement[.]” Ex. 5. Finally, the August 14, 2017 letter explains the IRS's decision to terminate discussions with Maple Landing based on a decision in a tax court case, RERI Holdings I, LLC v. Commissioner, and explains next steps. Ex. 6. All of these letters are completely innocuous and cannot support a fraud or malpractice claim as a matter of law.²³

E. Plaintiffs' Federal and Georgia RICO Claims Are Deficient

The federal RICO statute does not “federalize every tort or breach of contract in business transactions involving the use of the mails,” Prince Heaton Enters., Inc. v. Buffalo's Franchise Concepts, Inc., 117 F. Supp. 2d 1357, 1363 (N.D. Ga. 2000), or “create a new means of recovery in garden variety commercial disputes,” Banco Latino Int'l v. Gomez Lopez, 95 F. Supp. 2d 1327, 1333 (S.D. Fla. 2000). Rather, to a state a federal RICO claim under § 1962(c), a plaintiff must “allege four elements: (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.” Crawford's Auto Ctr., Inc. v. State Farm Mut. Auto. Ins. Co., 945 F.3d 1150, 1158 (11th Cir. 2019) (internal quotation marks omitted). Because “[t]he focus of section 1962(c) is on the individual patterns of racketeering engaged in by a defendant, rather than the collective activities of the members of the enterprise,” United States v. Persico, 832 F.2d 705, 714 (2d Cir. 1987), “[t]he requirements of § 1962(c) must be established as to each individual defendant,” Craig Outdoor Advert., Inc. v. Viacom Outdoor, Inc., 528 F.3d 1001, 1027 (8th Cir. 2008). “[T]o state a claim for civil RICO conspiracy” under § 1962(d), “a plaintiff must allege an illegal agreement to violate a substantive provision of the RICO statute.” Parm v. Nat'l Bank of Cal., N.A., 242 F. Supp. 3d 1321, 1349 (N.D. Ga. 2017) (internal quotation marks omitted). To have standing to sue under either provision, a plaintiff must allege “(1) [an] injury to 'business or property,' and (2) that such injury was 'by reason of' the substantive RICO violation.” Ray v. Spirit Airlines, Inc., 836 F.3d 1340, 1348 (11th Cir. 2016).

Here, Plaintiffs' RICO claims should be dismissed because they fail to allege any racketeering activity by Sirote, much less a pattern. Even assuming Plaintiffs had adequately alleged such a pattern, their RICO claims still would fail because (1) any alleged securities fraud cannot support a RICO claim; and (2) Plaintiffs have not plausibly alleged that such racketeering activity was the direct cause of their alleged injuries. As a result, Plaintiffs' substantive RICO claims and RICO conspiracy claims against Sirote both fail.

i. Plaintiffs Fail To Allege That Sirote Engaged In A Single Predicate Act Of Mail Or Wire Fraud

“A pattern of racketeering activity under RICO requires at least two qualifying predicate acts” defined by the RICO statute. Crawford's Auto Ctr., 945 F.3d at 1158. Here, Plaintiffs bring their federal RICO claim based on the alleged predicate acts of mail and wire fraud. Compl. ¶ 268.²⁴ To establish the predicate acts of “[m]ail or wire fraud,” a plaintiff must show that the defendant “(1) intentionally participates in a scheme to defraud another of money or property and (2) uses the mails or wires in furtherance of that scheme.” Am. Dental Ass'n v. Cigna Corp., 605 F.3d 1283, 1290 (11th Cir. 2010). The Eleventh Circuit has explained that an “expression of opinion” is not actionable under the federal mail and wire fraud statutes because it is not “a misrepresentation as to some existing fact.” Feldman v. Am. Dawn, Inc., 849 F.3d 1333, 1343 (11th Cir. 2017) (internal quotation marks omitted).

Accordingly, Plaintiffs' RICO claims fail for the same reasons as their common law fraud claims: Sirote's Legal Opinions (including the one for Maple Landing and the other Legal Opinions that Plaintiffs vaguely reference but fail to identify) cannot support a claim for mail or wire fraud because they are both (a) expressions of opinion and (b) statements about future events, see Am. Dawn, 849 F.3d at 1343, and Plaintiffs fail to allege any other actionable misrepresentations or omissions by Sirote. See Prince Heaton Enters., 117 F. Supp. 2d 1357, 1362-63 (N.D. Ga. 2000) (“Quite simply, where there is no fraud there is no mail fraud. . . . The mail fraud statute does not forbid all business practices that fail to fulfill expectations.”).

ii. Plaintiffs Fail To Satisfy RICO's Pattern Requirement

Even if a plaintiff shows that a defendant committed two predicate acts, that alone is not sufficient to satisfy RICO's pattern requirement. Rowe v. Gary, Williams, Parenti, Watson & Gary, P.L.L.C., 181 F. Supp. 3d 1161, 1179 (N.D. Ga. 2016) (Totenberg, J.), rev'd and remanded on other grounds sub nom. Rowe v. Gary, 703 F. App'x 777 (11th Cir. 2017). A plaintiff must also show that these acts are related and continuous in nature. Jackson v. BellSouth Telecomms., 372 F.3d 1250, 1265 (11th Cir. 2004). A plaintiff must make this showing by (1) “proving a series of related predicates extending over a substantial period of time,” (2) by “establishing . . . that the racketeering acts themselves include a specific threat of repetition extending indefinitely into the future,” or (3) by demonstrating “that the predicate acts or offenses are part of an ongoing entity's regular way of doing business.” Id. (internal quotation marks omitted). “The continuity element of a pattern of racketeering activity is crucial to a valid RICO claim in order to ensure that the crime alleged is the sort of offense that RICO is designed to address — one that is part of a pattern of ongoing, continuing criminality or that involves criminality that promises to continue into the future.” Id. at 1265.

Here, even accepting that Sirote's purported misrepresentations are actionable (and they are not), they do not constitute a pattern of racketeering activity because Plaintiffs have failed to allege continuity. Plaintiffs attempt to establish a pattern of racketeering activity by providing a laundry list of communications that are purportedly acts of mail and wire fraud. Compl. ¶ 234. They further attempt to inflate the scope of the alleged fraud by claiming that “they believe . . . over 1,500” people “geographically dispersed throughout the United States” were victims of the alleged fraud, which involved land in multiple states. Id. n.3, ¶¶ 193-94. But Plaintiffs only identify three transactions at issue — Maple Landing, Mossy Rock, and Oakhill. See id. ¶¶ 70-152. And they only identify Sirote's communications related to one of these transactions — the preparation of the Maple Landing Legal Opinion and three innocuous e-mails related to the audit of the Maple Landing transaction. See ¶¶ 72-73, 234(s), (v), (x), (ff). These bare bones allegations of mail and wire fraud related to a single, discrete transaction do not demonstrate “a series of related predicates extending over a substantial period of time,” nor do they suggest that mail and wire fraud are part of Sirote's “regular way of doing business.” See Jackson, 372 F.3d at 1265; see also Menzies v. Seyfarth Shaw LLP, 943 F.3d 328, 341 (7th Cir. 2019) (affirming the dismissal of a RICO claim where plaintiffs specifically alleged misrepresentations related to only one of the transactions they alleged was part of the pattern of racketeering activity).

Relatedly, Plaintiffs have not alleged “a specific threat” that the mail and wire fraud Sirote allegedly committed will repeat “indefinitely into the future.” To the contrary, Plaintiffs allege that it is unlikely these transactions will be consummated in the future; according to Plaintiffs, it is now abundantly “clear” from IRS warnings that syndicated conservation easement transactions are “fatally flawed.” See Compl. ¶¶ 3, 6. Accordingly, Plaintiffs' own allegations defeat their claim that Sirote will continue to engage in any racketeering activity.

iii. Plaintiffs' RICO Claims Are Prohibited By The PSLRA Bar

Moreover, because “the conduct the Plaintiffs pled as the predicate acts for their RICO claim could amount to securities fraud,” their RICO claims are barred by the Private Securities Litigation Reform Act (“PSLRA”). See Intelligent Inv. Int'l LLC v. Fu, No. 1:17-CV-05296-RWS, 2019 WL 1281204, at *4 (N.D. Ga. Mar. 20, 2019) (emphasis in original). “'[N]o person may rely upon any conduct . . . actionable as fraud in the purchase or sale of securities to establish a violation' of RICO.” Licht v. Watson, 567 F. App'x 689, 693 (11th Cir. 2014) (quoting 18 U.S.C. § 1964(c)). A plaintiff cannot avoid this rule, which is known as the PSLRA bar, “by omitting allegations of securities fraud.” Intelligent Inv. Int'l LLC, 2019 WL 1281204, at *4; see also Bald Eagle Area Sch. Dist. v. Keystone Fin., Inc., 189 F.3d 321, 330 (3d Cir. 1999) (“[A] plaintiff cannot avoid the RICO Amendment's bar by pleading mail fraud, wire fraud and bank fraud as predicate offenses in a civil RICO action if the conduct giving rise to those predicate offenses amounts to securities fraud.”).

Securities fraud is “any fraud 'in connection with the purchase or sale of any security.'” Id. (quoting 15 U.S.C. § 78j(b)). Investment contracts, that is “contract[s], transaction[s] or scheme[s] whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party,” expressly fall within this definition. SEC v. W.J. Howey Co., 328 U.S. 293, 298–99 (1946); see also 15 U.S.C. § 77b(1); Intelligent Inv. Int'l LLC, 2019 WL 1281204, at *7 (investments in LLCs used to effectuate real estate transactions were securities); AFFCO Invs., LLC v. KPMG, LLP, No. H-07-3379, 2008 WL 5070053, at *1, *3-*5 (S.D. Tex. Nov. 20, 2008) (“ownership shares in” LLCs “necessary” to effectuate option contracts executed to provide investors tax benefits were securities).

Here, although Plaintiffs are careful to avoid characterizing their purchase of membership interests in the LLCs as an “investment” or describing the products which they purchased as a “securities,” the Offering Materials referenced throughout their Complaint make clear that Plaintiffs purchased securities when they invested in an LLC. For example, the Maple Landing Legal Opinion describes that transaction as “a private securities offering.” See Ex. 1, p. 129 (emphasis added). Indeed, the Maple Landing Offering Materials are replete with references to “securities.” See, e.g., Ex. 1, pp. 1, 3-5, 55, 101-02, 116-18. Accordingly, any alleged mail or wire fraud by Sirote in connection with the sale of those interests “could amount to securities fraud,” and any RICO claim based on that fraud is prohibited by the PSLRA bar. Intelligent Inv. Int'l LLC, 2019 WL 1281204, at *4.

iv. Plaintiffs Lack Standing To Sue Under RICO Because Their Injuries Were Not Directly Caused By Sirote's Alleged Fraud

To have RICO standing, a plaintiff must have suffered an injury proximately caused by the defendant's pattern of racketeering activity. See 18 U.S.C. § 1964(c); Ray, 836 F.3d at 1348. An injury meets RICO's test for proximate causation only when “the alleged [RICO] violation led directly to” that injury. Anza v. Ideal Steel Supply Corp., 547 U.S. 451, 461 (2006) (emphasis added). The Supreme Court has emphasized that “in the RICO context, the focus is on the directness of the relationship between the conduct and the harm,” and it has expressly rejected a test for proximate cause based on foreseeability. Hemi Grp., LLC v. City of New York, 559 U.S. 1, 12 (2010) (plurality opinion); see also Ray, 836 F.3d at 1349. Where a plaintiff's theory of causation “requires the Court to move . . . beyond the first step” in the causal chain, “that theory cannot satisfy RICO's direct relationship requirement.” Hemi Grp., LLC, 559 U.S. at 2.

Here, the only racketeering activity that Sirote allegedly engaged in is mail and wire fraud. Compl. ¶¶ 268-69. Plaintiffs allege that this racketeering activity injured them by “causing them to pay substantial fees and transaction costs, be exposed to interest and penalties from the IRS, and incur additional accounting and legal fees and expenses to deal with the IRS fallout.” Id. ¶ 8. This theory of causation “requires the Court to move well beyond the first step” in the causal chain. Indeed, there are a number of intervening steps between Sirote's alleged conduct and the adverse treatment of Plaintiffs' claimed tax deductions. First, Plaintiffs had to choose to invest in an LLC after allegedly being convinced to do so by Sirote's Legal Opinions. Id. ¶ 76. Second, after choosing to invest, Plaintiffs then had to ratify the decision by the manager of the LLC in which they invested by majority vote to use the property for a conservation easement as opposed to any other purpose the property could have served. See id. ¶ 81; Ex. 1, p. 10 (“Neither the Company nor the Members are under any obligation to adopt the proposed [conservation easement] or any [conservation easement] at all. No [conservation easement] can be adopted by the Company unless recommended by the Manager and approved by the Majority.”). Third, Plaintiffs had to decide to claim a charitable deduction on their federal or state tax returns. Fourth, the IRS then had to make the independent decisions to (1) select the LLCs' returns for audits; (2) determine that the LLCs' claimed deductions should be disallowed; and (3) decide to assess penalties and fees as a result.

In short, an array of intervening actions by Plaintiffs and the IRS — and not Sirote's alleged conduct — “led directly to” Plaintiffs' injuries. See Anza, 547 U.S. at 461. Because Plaintiffs fail to allege that their injuries were the direct result of Sirote's alleged racketeering activity, they lack standing to sue under RICO.

v. Plaintiffs' RICO Conspiracy Claims Necessarily Fail Because Their Substantive RICO Claims Fail

“To be guilty of conspiracy, . . . parties must have agreed to commit an act that is itself illegal — parties cannot be found guilty of conspiring to commit an act that is not itself against the law.” Jackson, 372 F.3d at 1269. Thus, “[i]f the underlying allegations of RICO violations are not viable, a conspiracy claim based on those violations must also fail.” Flagg v. First Premier Bank, 257 F. Supp. 3d 1351, 1365 (N.D. Ga. 2017). Here, as detailed above, Plaintiffs “underlying allegations of RICO violations are not viable,” so their “conspiracy claim based on those violations must also fail.” See id.

vi. Plaintiffs' Georgia RICO Claims Fail For Many of The Same Reasons As Their Federal RICO Claims

“The federal and Georgia racketeering acts are 'essentially identical.'” ²⁵ Am. Dawn, 849 F.3d at 1342; accord Simpson v. Sanderson Farms, Inc., 744 F.3d 702, 705 n.1 (11th Cir. 2014); see also Martin v. State, 189 Ga. App. 483, 485 (1988) (“The Georgia RICO Act . . . is modeled upon and closely analogous to the Federal RICO statute.”). Like its federal counterpart, a successful Georgia RICO claim requires a plaintiff to show “that the defendant engaged in at least two predicate acts of racketeering activity” and “that a predicate act was the proximate cause of his injury,” among other things. Vernon v. Assurance Forensic Accounting, LLC, 333 Ga. App. 377, 391-92 (2015). The similarity between the federal and Georgia RICO statutes means that “failure to state a claim under the federal act” necessarily “warrants dismissal under the Georgia act.” Am. Dawn, 849 F.3d at 1342. Here, Plaintiffs' substantive Georgia RICO claims fail for the same reasons their federal RICO claims fail: Plaintiffs failed to allege even one predicate act by Sirote that can support a RICO claim, and Plaintiffs failed to show that their injuries were directly caused by Sirote's purported fraud.

F. Plaintiffs Fail To State A Claim For Aiding And Abetting

Plaintiffs also assert that “each of the Defendants aided and abetted the wrongful conduct (including fraud and breaches of fiduciary duty) of each of the other Defendants. Each Defendant was aware of and agreed to its respective role and responsibility in the overall tortious activity and intentionally provided aid and substantial assistance in the other Defendants' tortious activity.” Compl. ¶ 336. These conclusory allegations do not state a claim.

As an initial matter, Georgia law does not recognize claims for aiding and abetting fraud. Siavage v. Gandy, 350 Ga. App. 562, 566 (2019) (“[T]he tort of 'aiding and abetting fraud' does not exist as a basis for liability under Georgia law.”). Further, Plaintiffs' conclusory allegations that all Defendants (including Sirote) aided and abetted breaches of fiduciary duty (or any other tortious conduct) are insufficient.²⁶ To state a claim for aiding and abetting breaches of fiduciary duty, a plaintiff must allege all of the following elements: “(1) through improper action or wrongful conduct and without privilege, the defendant acted to procure a breach of the primary wrongdoer's fiduciary duty to the plaintiff; (2) with knowledge that the primary wrongdoer owed the plaintiff a fiduciary duty, the defendant acted purposely and with malice and the intent to injure; (3) the defendant's wrongful conduct procured a breach of the primary wrongdoer's fiduciary duty; and (4) the defendant's tortious conduct proximately caused damage to the plaintiff.” Kahn v. Britt, 330 Ga. App. 377, 389 (2014). Simply stating that Defendants “aided and abetted,” as Plaintiffs have alleged, is not sufficient. E.g., Chi v. MasterCard Int'l, Inc., No. 1:14-CV-614-TWT, 2014 WL 5019917, at *3 (N.D. Ga. Oct. 7, 2014). Accordingly, this claim (Count X) should also be dismissed.

G. The Court Should Dismiss Plaintiffs' Claim For Civil Conspiracy

Finally, Plaintiffs allege that Defendants “conspired to perpetrate fraud on the Plaintiffs and members of the Class and to breach fiduciary duties owed to Plaintiffs and members of the Class.” Compl. ¶ 350. Civil conspiracy is not an independent tort; it must be accompanied by another underlying theory of liability. McKesson Corp. v. Green, 343299 Ga. App. 91, 99 (2009) (“The cause of action for civil conspiracy lies not in the conspiracy itself, but in the underlying tort committed against the plaintiff and the resulting damage.”) (citation omitted). Accordingly, if the underlying claim fails, a civil conspiracy claim also fails. See, e.g., Walton v. Sec'y of Veterans Affairs, No 1:13-CV-00918-RWS, 2014 WL 5307577, at *5 (N.D. Ga. Oct. 15, 2014) (“[W]hile Plaintiff bases her conspiracy allegations on a general 'conspiracy to defraud,' she does not plead an underlying claim of fraud, and Georgia law provides no independent cause of action for conspiracy.”). Here, because Plaintiffs' fraud and breach of fiduciary duty claims fail, their civil conspiracy claims also fail and must be dismissed.

In addition, to plead an action for conspiracy, a plaintiff must allege (among other elements) that a defendant arrived at a “mutual understanding” with another party “to accomplish an unlawful end or to accomplish a lawful end by an unlawful means.” First Fed. Sav. Bank v. Hart, 185 Ga. App. 304, 305 (1987) (holding that the trial court erred in refusing to dismiss plaintiff's claim for civil conspiracy because apart from a “suspicion” of a mutual understanding, there was no evidence of mutual understanding between defendants). Here, Plaintiffs have not alleged any fact that shows Sirote reached such a “mutual understanding” with any other Defendant. And Plaintiffs' general assertion that all “Defendants” conspired is insufficient. See Compl. ¶¶ 349-355. Accordingly, Plaintiffs' civil conspiracy claim (Count XII) should be dismissed for this alternative reason. See, e.g., Walton, 2014 WL 5307577, at *4-5 (dismissing plaintiff's conclusory civil conspiracy claim).

II. THE COURT LACKS PERSONAL JURISDICTION OVER SIROTE

The Court should also dismiss Plaintiffs' claims against Sirote for lack of personal jurisdiction. The fundamental inquiry for personal jurisdiction is whether the defendant has “minimum contacts” with the forum state. Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). “[M]inimum contacts for the purposes of exercising personal jurisdiction over a nonresident Defendant may be satisfied if the Court has either general or specific jurisdiction.” Brown v. Ford Motor Co., 347 F. Supp. 3d 1347, 1350 (N.D. Ga. 2018). Here, exercising personal jurisdiction over Sirote, a nonresident law firm with only incidental connections to Georgia, would violate due process.²⁷

A. The Court Lacks General Jurisdiction Over Sirote

The standard for general jurisdiction is rigorous: even “continuous and systematic” contacts between a nonresident defendant and the forum are insufficient unless those contacts are so significant they render the defendant “at home” in the jurisdiction. Daimler AG v. Bauman, 134 S. Ct. 746, 754 (2014). Accordingly, only in a truly “exceptional case” will a court have general jurisdiction over a defendant that is incorporated and has its principal place of business in another state. Id. at 761 n.19. This is not an “exceptional case.” Sirote “does not maintain a regular place of business or current designated agent upon whom service may be made” in Georgia. Compl. ¶ 21. Moreover, Plaintiffs' vague and conclusory allegations that Sirote conducted other, unspecified business in Georgia — unrelated to the claims at issue here — do not give rise to personal jurisdiction.²⁸ See id; Brown, 347 at 1350 (“Normal in-state business does not suffice to convey general jurisdiction.”).

B. The Court Lacks Specific Jurisdiction Over Sirote

For a court to exercise specific jurisdiction over a nonresident defendant, the suit must arise out of or relate to the defendant's contacts with the forum state. See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472–73 (1985). In short, there must be a nexus between the nonresident defendant, the forum state, and the litigation to warrant exercising personal jurisdiction over that defendant. Walden v. Fiore, 134 S. Ct. 1115, 1122-23 (2014). Moreover, “it is essential in each case that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.” Hanson v. Denckla, 357 U.S. 235, 253 (1958) (emphasis added). Plaintiffs have not made that showing here.²⁹

First, the mere preparation of documents for Sirote's clients (who are not Plaintiffs) does not establish personal jurisdiction. Plaintiffs do not allege that any documents were prepared in Georgia or that Sirote even intended for them to be presented to these Plaintiffs. The mere fact that these documents addressed certain transactions involving real property in Georgia does not give rise to personal jurisdiction. See, e.g., Duncan v. O'Shea, 376 F. Supp. 3d 115, 123 (D. Me. 2019). Nor does the fact that Georgia residents ultimately received these materials through a third party. See Compl. ¶ 76. Jurisdiction is only proper “where the contacts proximately result from actions by the defendant himself that create a 'substantial connection' with the forum State,” Burger King Corp., 471 U.S. at 475 (quotation omitted), and here the contact in question was not initiated by Sirote.

Second, Plaintiffs cannot rely on Sirote's representation of the LLCs in audits and tax proceedings to confer personal jurisdiction. See Compl. ¶¶ 95, 121, 146, 234(s), (v), (x). Plaintiffs' claims against Sirote do not “arise out of” Sirote's representation of the LLCs or any inconsequential communications related to those proceedings. Rather, Plaintiffs complain that they were fraudulently induced to invest in the LLCs based, in part, on Sirote's Legal Opinions — long before any audits or tax proceedings took place. See, e.g., id. ¶¶ 339-348. But even if Plaintiffs did assert such claims (and they do not), Plaintiffs have not alleged that any tortious conduct was directed at Georgia — or that any representation even took place in Georgia. Accordingly, this “contact” cannot support personal jurisdiction. See, e.g., Cape v. von Maur, 932 F. Supp. 124, 128 (D. Md. 1996) (plaintiff-client's in-state contacts did not create personal jurisdiction over defendant-law firm).

Third, Plaintiffs cannot overcome these deficiencies by pointing to the alleged acts of other Defendants or their federal RICO claims. It is well-settled that any actions imputed to Sirote do not satisfy the due process analysis. See, e.g., Sprint Nextel Corp. v. Ace Wholesale, Inc., No. 1:12-cv-02902-JEC, 2014 WL 688134, at *7 (N.D. Ga. Feb. 21, 2014) (explaining that conspiracy alone cannot satisfy minimum contacts required for due process). Likewise, as discussed supra in part I.E., Plaintiffs cannot rely on the federal RICO statute because their claims against Sirote fail as a matter of law.³⁰ See, e.g., Courboin v. Scott, 596 F. App'x 729, 733-34 (11th Cir. 2014) (plaintiff could not “take advantage of the nationwide service-of-process provision in RICO” where plaintiff's “allegations under RICO do not rise to the level of a colorable federal controversy”). Accordingly, all of Plaintiffs' claims against Sirote should be dismissed for lack of personal jurisdiction.³¹

CONCLUSION

For the reasons set forth above, Sirote respectfully requests that the Court grant this motion and dismiss all claims against it.

Respectfully submitted this 7th day of August, 2020.

KING & SPALDING LLP

M. Robert Thornton
Georgia Bar No. 710475
David L. Balser
Georgia Bar No. 035835
J. Andrew Pratt
Georgia Bar No. 465311
Billie Pritchard
Georgia Bar No. 460789
1180 Peachtree Street
Atlanta, Georgia 30309
Telephone: (404) 572-4600
bthornton@kslaw.com
dbalser@kslaw.com
apratt@kslaw.com
bpritchard@kslaw.com

Counsel for Defendant Sirote & Permutt, P.C.

---

DECLARATION OF PETER J. HARDIN

I, Peter J. Hardin, depose and state as follows:

Pursuant to 28 U.S.C. § 1746, I declare under penalty of perjury that the foregoing is true and correct.

This 7th day of August, 2020.

Peter J. Hardin