Graham Enginerring Corp. v. Schilke

REPLY BRIEF re MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM

M.D. Pa.May 11, 2017

IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA GRAHAM ENGINEERING CORP., : Plaintiff : Civil Action No. 1:16-cv-02521-CCC v. : (Honorable Christopher C. Conner) : ERIC ADAIR, : : Defendant : : GRAHAM ENGINEERING CORP., : Plaintiff : Civil Action No. 1:16-cv-02522-CCC v. : (Honorable Christopher C. Conner) : : DOUG JOHNSON, : : Defendant : : GRAHAM ENGINEERING CORP., : Plaintiff : Civil Action No. 1:16-cv-02523-CCC v. : (Honorable Christopher C. Conner) : : WILLIAM KRAMER, : : Defendant : : Case 1:16-cv-02526-CCC Document 33 Filed 05/11/17 Page 1 of 29 GRAHAM ENGINEERING CORP., : Plaintiff : Civil Action No. 1:16-cv-02524-CCC v. : (Honorable Christopher C. Conner) : : JEFF LAWTON, : : Defendant : : GRAHAM ENGINEERING CORP., : Plaintiff : Civil Action No. 1:16-cv-02525-CCC v. : (Honorable Christopher C. Conner) : MICHAEL PERRI, : : Defendant : : GRAHAM ENGINEERING CORP., : Plaintiff : Civil Action No. 1:16-cv-02526-CCC v. : (Honorable Christopher C. Conner) : DANIEL SCHILKE, : : Defendant : : Case 1:16-cv-02526-CCC Document 33 Filed 05/11/17 Page 2 of 29 GRAHAM ENGINEERING CORP., : Plaintiff : Civil Action No. 1:16-cv-02527-CCC v. : (Honorable Christopher C. Conner) : KEVIN SLUSARZ, : : Defendant : : DEFENDANTS’ OMNIBUS REPLY BRIEF IN SUPPORT OF THEIR MOTION TO DISMISS PLAINTIFF’S FIRST AMENDED COMPLAINT May 11, 2017 John V. Gorman (PA 80631) Andrew C. Whitney (PA 201534) MORGAN, LEWIS & BOCKIUS LLP 1701 Market Street Philadelphia, PA 19103 T: 215.963.5000 F: 215.963.5001 john.gorman@morganlewis.com andrew.whitney@morganlewis.com Counsel for Defendants Case 1:16-cv-02526-CCC Document 33 Filed 05/11/17 Page 3 of 29 TABLE OF CONTENTS Page i I. INTRODUCTION .......................................................................................... 1 II. ARGUMENT .................................................................................................. 2 A. GEC’s Recitation of Conclusory Allegations Fails to Demonstrate that Counts I-VII State Plausible Breach of Contract Claims .................................................................................... 2 B. GEC Has Failed to Demonstrate That Counts VIII, X, XI, and XII Are Not Barred Under the Gist of the Action Doctrine................. 7 C. GEC’s Recitation of Conclusory Allegations Fails to Demonstrate that Counts X and XI State Plausible Tortious Interference Claims .............................................................................. 9 D. GEC’s Derivative Unfair Competition Claim in Count VIII Fails for the Same Reasons as Other Deficient Counts ..................... 11 E. GEC Has Failed to Demonstrate Count IX States a Plausible Trade Secret Misappropriation Claim ................................................ 12 F. GEC’s Recitation of Legal Conclusions and Cherry-Picking of Allegations from the FAC Fails to Salvage Its Civil Conspiracy Claim in Count XII ............................................................................. 15 G. GEC Has Failed to Demonstrate Its Unjust Enrichment Claim in Count XIII Can Withstand Dismissal ............................................ 17 H. GEC’s Asserted Liability Theories Divorced from the Facts Pled in the FAC Fail to Salvage Count XIV ...................................... 19 I. The FAC Should Be Dismissed With Prejudice ................................ 21 III. CONCLUSION ............................................................................................. 22 Case 1:16-cv-02526-CCC Document 33 Filed 05/11/17 Page 4 of 29 TABLE OF AUTHORITIES Page(s) CASES Accenture Global Servs. GmBH v. Guideware Software, Inc., 581 F. Supp. 2d 654 (D. Del. 2008).................................................................... 12 Adderly v. Stofko, 646 F. App’x 138 (3d Cir. 2016) ........................................................................ 17 Adv. Fluid Sys., Inc. v. Huber, 28 F. Supp. 3d 306 (M.D. Pa. 2014) ................................................................... 20 Am. Collision & Auto. Ctr., Inc. v. Windsor-Mt. Joy Mut. Ins. Co., No. 11-cv-06947, 2012 WL 4490982 (E.D. Pa. Sept. 12, 2012) ......................... 8 Ashcroft v. Iqbal, 556 U.S. 662 (2009) ............................................................................................ 10 Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) ........................................................................................ 3, 21 Bristol Twp. v. Indep. Blue Cross, No. 01-4323, 2001 WL 1231708 (E.D. Pa. Oct. 11, 2001) ................................ 16 Chemtech Int’l, Inc. v. Chem. Injection Techs, Inc., 170 F. App’x 805 (3d Cir. 2006) ...................................................................... 2, 8 Cunningham Lindsey U.S., Inc. v. Bonnani, No. 1:13-cv-2528, 2014 WL 1612632 (M.D. Pa. Apr. 22, 2014) ........................ 7 Emtech, Inc. v. Condor Techs. Sol., Inc., No. 97-6652, 1998 WL 834097 (E.D. Pa. Nov. 30, 1998) ................................. 13 Fleet Nat’l Bank v. Boyle, No. 04CV1277, 2005 WL 2455673 (E.D. Pa. Sept. 12, 2005) .......................... 16 Fowler v. UPMC Shadyside, 578 F.3d 203 (3d Cir. 2009) ............................................................................... 10 Case 1:16-cv-02526-CCC Document 33 Filed 05/11/17 Page 5 of 29 TABLE OF AUTHORITIES (continued) Page(s) CASES ii M.J. McPherson Servs., L.L.P. v. Sports Images, Inc., No. 5:06 CV 465, 2006 WL 2505925 (N.D. Ohio Aug. 28, 2006) .................... 13 Partners Coffee v. Oceana Srvs. & Prods., 2009 U.S. Dist. LEXIS 113209 (W.D. Pa. Dec. 4, 2009) .................................... 7 Sedona Corp. v. Ladenburg Thalman & Co., No. 03 Civ. 3120, 2009 WL 1492196 (S.D.N.Y. May 27, 2009) ........................ 7 Sheinman Provisions, Inc. v. Nat’l Deli, LLC, No. 08-cv-453, 2008 WL 2758029 (E.D. Pa. July 15, 2008) ............................. 17 Spitzer v. Abdelhak, No. 98-6475, 1999 WL 1204352 (E.D. Pa. Dec. 15, 1999) ............................... 15 Sunlight Elec. Contracting Co. v. Turchi, No. 08-5834, 2011 WL 4086077 (E.D. Pa. Sept. 13, 2011) ............................... 18 Synesious v. DesignToMarket, Inc., No. 01-5358, 2002 WL 501494 (E.D. Pa. Apr. 3, 2002) ................................... 17 U.S. Bank Nat’l Ass’n v. Parker, No. 4:09-cv-1755, 2010 WL 2735661 (E.D. Mo. July 9, 2010) .................... 6, 14 Case 1:16-cv-02526-CCC Document 33 Filed 05/11/17 Page 6 of 29 I. INTRODUCTION In its Opposition to the Motion to Dismiss of defendants Eric Adair, Doug Johnson, William Kramer, Jeff Lawton, Michael Perri, Daniel Schilke, and Kevin Slusarz (collectively, “Defendants”), plaintiff Graham Engineering Corporation (“GEC”) conflates legal conclusions and factual allegations in the First Amended Complaint (“FAC”) in contravention of well-established pleading standards. See Dkt. 32; C.A. No. 1:16-cv-02527-CCC, Dkt. 31 (“Opposition” or “Opp.”).1 While GEC casts the answers to basic questions underlying its claims as reserved for discovery, GEC conveniently ignores the cases that Defendants have cited, which hold that questions pertaining to critical factual elements of a claim must be answered by the complaint in order to state a plausible claim for relief. GEC also abandons theories of liability and fails to even mention - let alone refute - numerous bases Defendants have identified for dismissal. Instead of addressing the deficiencies identified in Defendants’ Opening Brief (Dkt. 28; C.A. No. 1:16-cv-02527-CCC, Dkt. 27) (“Br.”), GEC stakes out the legally untenable positions that the Court must take GEC’s word for it that Defendants are liable for contract, tort, and statutory claims and that the Court is required to accept naked assertions of legal elements, such as intent and harm, as 1 Unless otherwise stated all ¶ __ citations refer to paragraphs in the FAC, and all Dkt. __ citations refer to dockets in the individual actions excluding C.A. No. 1:16- cv-02527-CCC. Case 1:16-cv-02526-CCC Document 33 Filed 05/11/17 Page 7 of 29 2 true. GEC even goes so far as to imply there is something nefarious about Defendants’ failure to deny the allegations of the FAC at this stage. That is both irrelevant to Defendants’ Motion to Dismiss and flat wrong because Defendants have expressly denied any wrongdoing in sworn affidavits under oath. At bottom, like the FAC, GEC’s Opposition is long on rhetoric and short on substance. Once GEC’s rhetoric and conclusory allegations are stripped away, the few factual allegations that remain fail to establish that GEC is plausibly entitled to relief under any of its theories. As such, the FAC should be dismissed. Because GEC neither disputes that dismissal with prejudice is appropriate nor posits how it could cure the numerous deficiencies discussed herein and in Defendants’ Opening Brief, dismissal should be with prejudice. Indeed, the longer this lawsuit goes on, the longer it hangs as an albatross around the necks of the Defendants, who are no longer under any restrictive covenants and who are free to engage in lawful competition with GEC individually or together, if they so choose. II. ARGUMENT A. GEC’s Recitation of Conclusory Allegations Fails to Demonstrate that Counts I-VII State Plausible Breach of Contract Claims. In order to adequately plead a claim for breach of contract, the FAC must set forth factual allegations to underpin the legal conclusion of breach. See Chemtech Int’l, Inc. v. Chem. Injection Techs, Inc., 170 F. App’x 805, 808 (3d Cir. 2006) (affirming dismissal of breach of contract claim that lacked requisite facts Case 1:16-cv-02526-CCC Document 33 Filed 05/11/17 Page 8 of 29 3 supporting breach). In its Opposition, GEC does everything but point to factual allegations in the FAC necessary to state plausible claims for breach of contract. The reason for this is simple: no such allegations exist. Thus, Counts I-VII should be dismissed. First, GEC claims it “need only plead the elements of a cause of action for breach of contract,” and that it need not answer questions (the answers to which would supply the facts necessary to demonstrate a plausible entitlement to relief) because the bases for its claims can be unearthed at depositions. See Opp. at 15. GEC is incorrect. Under operative pleading standards, merely parroting the legal elements of a cause of action is insufficient to state a claim. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (“[A] formulaic recitation of the elements of a cause of action will not do.”). Despite GEC’s assertion to the contrary, answers to the questions posed in Defendants’ Opening Brief are essential to pleading breach. For instance, if ProSystems or another unidentified entity that GEC contends Defendants Adair, Johnson, and Lawton sought to contract with was not an entity that these Defendants had “substantial business dealings with” in the last 12 months of their employment then there could be no breach stemming from this conduct. See FAC, Exs. A, B, & D ¶ 2 (limiting prohibited conduct). Second, GEC repeats stray factual allegations and contends - without any explanation - that these few facts add up to a plausible claim of breach. See, e.g., Case 1:16-cv-02526-CCC Document 33 Filed 05/11/17 Page 9 of 29 4 Opp. at 16 ¶ 2. However, that Defendants allegedly “exchanged emails” and discussed “product and sales techniques and design specifications,” does not equate to a plausible inference that Defendants breached their respective Confidentiality Agreements. The Confidentiality Agreements do not impose a code of silence on Defendants; Defendants were free to exchange emails and talk to each other. And, the FAC does not even allege - let alone plead facts supporting a plausible inference - that these unidentified product and sales techniques and design specifications constitute confidential information that Defendants were prohibited from disclosing to each other (all former GEC and/or American Kuhne employees) or to a GEC supplier. Likewise, that GEC has identified the “dates, time and contents” of alleged meetings between Defendants and a GEC supplier does not demonstrate a breach of any specific provision of the Confidentiality Agreements. Opp. at 26. Indeed, GEC has not pointed to a single factual allegation plausibly demonstrating that anything improper occurred during these purported meetings. See Br. at 31-32. It is the critical missing factual allegations regarding disclosure of specific GEC confidential information or actual statements made during these meetings encouraging a GEC supplier to take action disadvantageous to GEC which are missing and necessary to state a claim. Case 1:16-cv-02526-CCC Document 33 Filed 05/11/17 Page 10 of 29 5 Third, GEC purports to read facts into the FAC which are not pled. For instance, GEC claims that the FAC pleads “explicit attempts to have [a] supplier join [Defendants]’ company, US Extruders, to compete with GEC.” Opp. at 19 ¶ 3. However, there are no facts pled supporting GEC’s naked assertions that US Extruders exists as a company, that Defendants’ owned US Extruders, or that there was any effort to have a supplier join US Extruders. See Br. at 42-43. Likewise, although GEC claims it has alleged certain Defendants breached their Confidentiality Agreements by working for competitors, see, e.g., Opp. at 17 ¶ 2, the FAC is devoid of any facts demonstrating that US Extruders is even a “competitor” of GEC - a fact GEC conveniently ignores in its Opposition. See Br. at 27, 35, 42. And, far from “clearly sett[ing] forth specifics” as to the confidential information each Defendant allegedly disclosed, Opp. at 26, the FAC merely lists broad categories of information of GEC and/or American Kuhne and claims that Defendants disclosed some or all of that information. See ¶¶ 120, 171. Further, GEC confuses an allegation in the FAC regarding Defendants’ “discussion regarding design specifications, products, and sales techniques” generally (¶ 168) with an assertion of disclosure of GEC and/or American Kuhne’s “design specifications, products, and sales techniques.” See, e.g., Opp. at 21-22 ¶ 2. That logical leap is unsupported by the FAC. Despite GEC’s assertion in its Opposition, Case 1:16-cv-02526-CCC Document 33 Filed 05/11/17 Page 11 of 29 6 the FAC fails to allege disclosure of any specific GEC and/or American Kuhne confidential information by any specific Defendant. Fourth, GEC attempts to distract the Court from the factual deficiencies in its breach of contract claims by citing irrelevant allegations of a supposed cover-up and passing these allegations off as evidence of breach of Defendants’ Confidentiality Agreements. See, e.g., Opp. at 16 ¶ 2 (claiming that Adair “deleted his company password from” computer constitutes breach); id. at 19 ¶ 2 (claiming Kramer’s “factory reboot” of his computer constitutes breach); id. at 21, 23, 24 ¶ 2 (claiming that certain Defendants’ copying of information onto USB drives during their employment constitutes breaches). However, Defendants’ actions with respect to their GEC computers are irrelevant to GEC’s breach of contract claims because the Confidentiality Agreements do not prohibit the conduct alleged. Copying or deleting information from one’s computer does not involve disclosure of confidential information to anyone. And, it is the latter act - disclosure - which is prohibited by Defendants’ Confidentiality Agreements. At bottom, because GEC has failed to point to any factual allegations in the FAC that give rise to a plausible inference of breach by any Defendants of any of their respective Confidentiality Agreements, Counts I-VII should be dismissed. See, e.g., U.S. Bank Nat’l Ass’n v. Parker, No. 4:09-cv-1755, 2010 WL 2735661, at *3 (E.D. Mo. July 9, 2010) (dismissing breach of contract claim for failure to Case 1:16-cv-02526-CCC Document 33 Filed 05/11/17 Page 12 of 29 7 plead sufficient factual allegations); Sedona Corp. v. Ladenburg Thalman & Co., No. 03 Civ. 3120, 2009 WL 1492196, at *10 (S.D.N.Y. May 27, 2009) (same).2 B. GEC Has Failed to Demonstrate That Counts VIII, X, XI, and XII Are Not Barred Under the Gist of the Action Doctrine. As Defendants explained in their Opening Brief, GEC’s unfair competition claim (Count VIII), tortious interference claims (Counts X and XI), and civil conspiracy claim (Count XII) contain substantive allegations which are premised on exclusively the same conduct underlying the breach of contract claims (Counts I-VII). See Br. at 65-70. To avoid dismissal, GEC claims that courts are “hesitant to dismiss tort claims under the ‘gist of the action’ doctrine at the motion to dismiss stage.” Opp. at 28. Not so. This Court and others have routinely dismissed tort claims that were duplicative of breach of contract claims under the gist of the action doctrine. See Cunningham Lindsey U.S., Inc. v. Bonnani, No. 1:13-cv-2528, 2014 WL 1612632, at *7 (M.D. Pa. Apr. 22, 2014) (Conner, J.) (dismissing unfair competition and tortious interference claims as barred by gist of action doctrine); Partners Coffee v. Oceana Srvs. & Prods., 2009 U.S. Dist. LEXIS 113209, at *10 (W.D. Pa. Dec. 4, 2009) (a case cited by GEC to support supposed “hesitation” by courts to dismiss claims under gist of action doctrine wherein court dismissed 2 In its Opposition, GEC does not dispute that its allegations of claimed “inevitable disclosure” are insufficient to support its breach of contract claims. As such, these allegations cannot salvage the breach of contract claims. See Br. at 43-45. Case 1:16-cv-02526-CCC Document 33 Filed 05/11/17 Page 13 of 29 8 tortious interference claim as barred by the gist of action doctrine). And, courts have rejected the very rationale GEC provides for this claimed hesitation - that pleading in the alternative precludes application of the gist of the action doctrine. See, e.g., Am. Collision & Auto. Ctr., Inc. v. Windsor-Mt. Joy Mut. Ins. Co., No. 11-cv-06947, 2012 WL 4490982, at *9 n.48 (E.D. Pa. Sept. 12, 2012) (“While plaintiffs may plead in the alternative and seek mutually exclusive forms of relief, each cause of action must state a claim upon which relief can be granted. Here, plaintiffs’ [tort] claims fail to state a claim upon which relief can be granted because the claims are based on the [contract] and therefore barred by the gist of the action doctrine.”).3 GEC also claims it is “[i]ronic[ ]” that Defendants seek dismissal pursuant to the gist of the action doctrine while also arguing that the breach of contract claims are deficient. Opp. at 26. However, there is nothing ironic about the Third Circuit’s holding that “failure to state a claim for breach of contract does not mean that a tort claim based on the same conduct cannot be barred by the ‘gist of the action’ doctrine.” See Chemtech, 170 F. App’x at 809. Finally, GEC claims that Pennsylvania’s supposed imposition of social duties on former employees independent of contractual covenants precludes application of the gist of action doctrine. Opp. at 29. Not so. Although 3 All unpublished cases not previously cited by either party are included in the Appendix filed contemporaneously herewith. Case 1:16-cv-02526-CCC Document 33 Filed 05/11/17 Page 14 of 29 9 Pennsylvania courts have held that there is an independent statutory duty to not misappropriate trade secrets, this is irrelevant to the application of the gist of the action doctrine in this case where Defendants do not seek dismissal of the misappropriation of trade secret claim under the gist of the action doctrine. Accordingly, GEC’s reliance on cases refusing to apply the gist of the action doctrine to misappropriation of trade secret claims, id. at 28-29, is misplaced. At bottom, GEC has failed to demonstrate that Counts VIII, X, XI, and XII do not arise out of the Confidentiality Agreements, involve duties created by those Agreements, and depend wholly on the Confidentiality Agreements. Accordingly, the Court should dismiss these counts pursuant to the gist of the action doctrine. C. GEC’s Recitation of Conclusory Allegations Fails to Demonstrate that Counts X and XI State Plausible Tortious Interference Claims. Counts X (asserting a claim for tortious interference with business relations) and XI (asserting a claim for tortious interference with prospective business relations) lack factual allegations giving rise to a plausible inferences that Defendants (1) acted primarily with intent to harm GEC or (2) took any tortious actions to interfere with GEC’s existing or prospective contractual relationships. See Br. at 50-52 (discussing these flaws in detail). GEC does not meaningfully dispute this. Instead, GEC contends - without citation to any legal support - that the Court “must accept as true” various legal assertions GEC has made in its Case 1:16-cv-02526-CCC Document 33 Filed 05/11/17 Page 15 of 29 10 Opposition and the FAC including, inter alia, that (1) certain Defendants induced other Defendants to breach their Confidentiality Agreements, (2) “GEC was harmed because of the disclosure of confidential information;” (3) “Defendants’ intent in securing ProSystems as a partner was to prevent or curtail the ongoing relationship between GEC and ProSystems,” and (4) “Defendants had no privilege or justification for interfering with GEC’s relationship with ProSystems.” Opp. at 30-31. However, GEC is incorrect. Under well-established pleading standards, the Court need not accept conclusory allegations and parroting of legal conclusions as true. See Ashcroft v. Iqbal, 556 U.S. 662, 678, 681 (2009) (“conclusory allegations” and “naked assertions” are not entitled to “presumption of truth” for motion to dismiss); see also Fowler v. UPMC Shadyside, 578 F.3d 203, 210-11 (3d Cir. 2009) (court should “disregard any legal conclusions”). Thus, GEC’s listing of conclusory assertions pled in the FAC has no bearing on the Court’s motion to dismiss analysis and cannot salvage GEC’s defective tortious interference claims. GEC’s repetition of the FAC’s few factual allegations - meetings with ProSystems, provision of a US Extruders email address to ProSystems’ John Burnell, and discussions regarding how to eventually integrate ProSystems with US Extruders - likewise fails to demonstrate a plausible basis for tortious inference as there is nothing improper alleged regarding these activities. See Br. at 51-52 (discussing deficiencies in these allegations). Case 1:16-cv-02526-CCC Document 33 Filed 05/11/17 Page 16 of 29 11 Additionally, GEC fails to even address Defendants’ argument that GEC has failed to plead facts that Defendants acted primarily to harm GEC. See Br. at 50- 51 (discussing this dispositive deficiency). Instead, GEC falls back on its naked assertion of intent in the FAC. See Opp. at 31. However, as set forth above, the Court need not accept this naked assertion as true. Indeed, other allegations in the FAC directly undermine any inference that Defendants’ intent was primarily to harm GEC. See, e.g., ¶ 177 (alleging Defendants acted for financial benefit). Finally, Count XI should be dismissed for the independent reason that it fails to adequately allege the existence of any prospective business relationship that Defendants supposedly interfered with - an essential element to a tortious interference with prospective business relations claim and one which GEC does not address in its Opposition. See Br. at 53-54 (collecting cases dismissing tortious interference claims on this basis). D. GEC’s Derivative Unfair Competition Claim in Count VIII Fails for the Same Reasons as Other Deficient Counts. As GEC concedes in its Opposition, its unfair competition claim is premised on other causes of action. See Opp. at 32. For the reasons set forth in Defendants’ Opening Brief and further discussed herein, GEC has failed to plead any facts giving rise to a plausible inference that Defendants breached their Confidentiality Agreements, misappropriated trade secrets, or engaged in tortious interference. As such, for the same reasons that these claims fail so too does the derivative unfair Case 1:16-cv-02526-CCC Document 33 Filed 05/11/17 Page 17 of 29 12 competition claim asserted in Count VIII. See generally Accenture Global Servs. GmBH v. Guideware Software, Inc., 581 F. Supp. 2d 654, 668 (D. Del. 2008) (dismissing unfair competition claim predicated on other deficient claim). E. GEC Has Failed to Demonstrate Count IX States a Plausible Trade Secret Misappropriation Claim. As GEC acknowledges, information can only constitute a legally protectable trade secret if it (1) derives independent economic value from not being known or readily ascertainable by proper means and (2) is subject to reasonable efforts to maintain its secrecy. Opp. at 33. According to GEC, it has satisfied its pleading obligation because it parroted these statutory requirements. See id. at 36; see also ¶¶ 21, 267, 269. However, repeating boilerplate statutory requirements falls far short of pleading the requisite facts necessary to state a trade secret misappropriation claim. See Br. at 47-48 (collecting cases dismissing similar improvidently pled claims). GEC purports to overcome this deficiency by claiming it need not identify the trade secrets at issue with particularly to survive dismissal. But, Defendants are not asserting that there is a heightened pleading standard for trade secret claims. Instead, Defendants have demonstrated that even if something in GEC’s laundry list of confidential information could possibly rise to the level of a trade secret under certain circumstances, GEC has failed to plead any allegations Case 1:16-cv-02526-CCC Document 33 Filed 05/11/17 Page 18 of 29 13 regarding these circumstances that make it plausible any of GEC’s supposedly confidential information actually constitutes a legally protectable trade secret. GEC’s claim that because it has used the magic words “customer list” it has automatically stated sufficient facts to identify a legally protectable trade secret is incorrect. See Opp. at 35. Although it is possible that a “customer list” could rise to the level of a trade secret, it is equally possible that a customer list will not. See Emtech, Inc. v. Condor Techs. Sol., Inc., No. 97-6652, 1998 WL 834097, at *7 (E.D. Pa. Nov. 30, 1998) (customer lists are not trade secrets where “they are easily or readily obtained, without great difficulty, through some independent source other than the trade secret holder”). What separates complaints claiming misappropriation of customers lists that survive dismissal from those that do not are the factual allegations missing here - facts (as opposed to legal conclusions) giving rise to a plausible inference that the customer list derives economic value from not being known and was subject to reasonable efforts to maintain secrecy. See M.J. McPherson Servs., L.L.P. v. Sports Images, Inc., No. 5:06 CV 465, 2006 WL 2505925, at *3 (N.D. Ohio Aug. 28, 2006) (dismissing trade secret claim for failure to plead facts demonstrating reasonable efforts to maintain secrecy and emphasizing that “allegation that the customer list is a trade secret is merely a legal conclusion, unsupported by the facts in the Complaint”). Case 1:16-cv-02526-CCC Document 33 Filed 05/11/17 Page 19 of 29 14 GEC also acknowledges that in order to plead a misappropriation claim it must plausibly allege actual use or disclosure of trade secret information. See Opp. at 37. However, in its Opposition, GEC offers nothing more than speculative assertions - divorced from what is actually pled in the FAC - to demonstrate this “use” or “disclosure.” For instance, GEC claims that Perri’s distribution of a parts list and Defendants’ lawful download of confidential information equates to disclosure of trade secrets. Id. at 37-38. But, there are no facts rendering such a conclusion plausible - as opposed to merely possible. The FAC is devoid of facts demonstrating this parts list or any other unidentified confidential information constitutes a trade secret. Likewise, GEC’s speculative assertion that the “confidential information” Defendants discussed at a meeting regarding potential formation of US Extruders was not “the product of Defendants’ own [knowledge] but rather specific [unidentified] trade secrets” finds no support in the FAC. Opp. at 38. Further, GEC’s claim - without citation - that it “pled Defendants took GEC’s customer lists and disclosed the lists to each other and others,” Opp. at 35, is wholly unsupported by what is actually pled in the FAC. Ultimately, GEC’s speculation regarding “use” or “disclosure” fails to state a claim. See generally Nat’l Ass’n v. Parker, No. 4:09-cv-1755, 2010 WL 2735661, at *4 (E.D. Mo. July 9, 2010) (“While Plaintiff may have a confidential and proprietary interest in its customer’s information, merely ‘believing’ Case 1:16-cv-02526-CCC Document 33 Filed 05/11/17 Page 20 of 29 15 Defendant kept the information and believing [ ]he used that information [to compete] is insufficient to state a claim beyond the speculative level.”).4 F. GEC’s Recitation of Legal Conclusions and Cherry-Picking of Allegations from the FAC Fails to Salvage Its Civil Conspiracy Claim in Count XII. In its Opposition, GEC ignores pleading requirements and legal standards and instead doubles-down on its insufficient conclusory allegations while ignoring other allegations in the FAC. This fails to demonstrate Count XII pleads a plausible claim for civil conspiracy. First, GEC claims it has adequately pled an underlying tort for “the reasons outlined” in its Opposition. Opp. at 39. However, as discussed supra and in Defendants’ Opening Brief, GEC has failed to plead any underlying tort, and, thus, the civil conspiracy claim cannot survive dismissal. See Br. at 54. Second, GEC claims that its naked assertions of malice and intent to harm are sufficient to plead malice. See Opp. at 39-40 (citing ¶¶ 275, 295). However, GEC is incorrect. “Merely describing something as malicious is not sufficient to give the proper inference of malice.” Spitzer v. Abdelhak, No. 98-6475, 1999 WL 1204352, at *9 (E.D. Pa. Dec. 15, 1999) (dismissing conspiracy claim that alleged malice in conclusory terms). 4 In its Opposition, GEC abandons its “inevitable disclosure” theory and fails to refute Defendants’ argument as to why naked assertions of inevitable disclosure fail to state a claim for misappropriation of trade secrets. See Br. at 49. Case 1:16-cv-02526-CCC Document 33 Filed 05/11/17 Page 21 of 29 16 Third, GEC claims that “there exists no other reasonable explanation for Defendants’” behavior “other than intent” to harm GEC. Opp. at 40. However, such an assertion is directly contradicted by GEC’s own allegations. See, e.g., ¶ 293 (Defendants acted for “financial benefit”); ¶ 162 (Defendants had discussions with ProSystems not to harm GEC, but instead to gain a new business partner or supplier). Thus, GEC’s own allegations in the FAC preclude a finding that the FAC plausibly pleads malice. See, e.g., Bristol Twp. v. Indep. Blue Cross, No. 01- 4323, 2001 WL 1231708, at *6 (E.D. Pa. Oct. 11, 2001) (“Banet argues that because Bristol’s Complaint alleges that one purpose of the conspiracy was to further defendants’ business dealings and obtain money for Vacca and/or Banet, Bristol failed to allege that Banet has acted with malice. The Court agrees.”); Fleet Nat’l Bank v. Boyle, No. 04CV1277, 2005 WL 2455673, at *12 (E.D. Pa. Sept. 12, 2005) (dismissing conspiracy claim for failure to adequately plead malice where complaint alleged Defendants had business and financial reasons for harming Plaintiff).5 Finally, GEC ignores Defendants’ argument that the FAC consists exclusively of a recitation of legal requirements for civil conspiracy, which are 5 In contravention to its claim in the Introduction that Defendants have not admitted or denied the allegations in the FAC, GEC relies on Defendants’ affidavits (which the Court cannot consider on a motion to dismiss) claiming that the fact Defendants never started a company demonstrates a lack of motivation for financial benefit. Opp. at 40. This argument is nonsensical. Case 1:16-cv-02526-CCC Document 33 Filed 05/11/17 Page 22 of 29 17 insufficient to state a claim. This too provides a basis for dismissal of Count XII. See Adderly v. Stofko, 646 F. App’x 138, 143 (3d Cir. 2016) (“We must dismiss claims, like Adderly’s conspiracy claim, that are “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements.”). G. GEC Has Failed to Demonstrate Its Unjust Enrichment Claim in Count XIII Can Withstand Dismissal. In their Opening Brief, Defendants explained that, where, as here, the parties do not dispute the existence of valid binding contracts, a plaintiff cannot maintain an unjust enrichment claim. See Br. at 57 (collecting cases dismissing unjust enrichment claims under such circumstances). GEC responds claiming that it is permissible to plead an unjust enrichment claim as an alternative to a breach of contract claim. See Opp. at 40. However, courts have expressly rejected this argument where an express contract governs the parties’ relationship. See, e.g., Sheinman Provisions, Inc. v. Nat’l Deli, LLC, No. 08-cv-453, 2008 WL 2758029, at *4 (E.D. Pa. July 15, 2008) (dismissing unjust enrichment claim where contract governed parties’ relationship and emphasizing that “bar to this type of claim is not altered when unjust enrichment is pled in the alternative to an unsuccessful breach of contract claim as the relationship of the parties is still governed by a valid contract”); Synesious v. DesignToMarket, Inc., No. 01-5358, 2002 WL 501494, at *5 (E.D. Pa. Apr. 3, 2002) (“[T]he fact that the federal rules permit alternative pleading does not mean that alternatively pled claims may not be dismissed if they Case 1:16-cv-02526-CCC Document 33 Filed 05/11/17 Page 23 of 29 18 fail to state a claim . . . the finding of an enforceable contract defeats the validity of promissory estoppel and unjust enrichment claims.”). In their Opening Brief, Defendants also explained that GEC’s conclusory unjust enrichment allegations were insufficient to state a claim under established pleading standards. See Br. at 57-58. In response, GEC merely summarizes its conclusory allegations without pointing to a single fact in the FAC sufficient to plausibly support these allegations. For instance, GEC claims that it set forth “extensively” in the FAC that “Defendants have wrongfully misappropriated Plaintiff’s confidential information for use in establishing a new entity to compete with GEC.” Opp. at 41-42. Yet, as explained herein and in Defendants’ Opening Brief, there are no facts giving rise to a plausible inference that any Defendant used any specific confidential information to start a new company to compete with GEC. GEC’s self-serving summary of its conclusory allegations in the FAC fails to salvage its unjust enrichment claim. See Sunlight Elec. Contracting Co. v. Turchi, No. 08-5834, 2011 WL 4086077, at *15-16 (E.D. Pa. Sept. 13, 2011) (“concrete factual allegations” are necessary to plead unjust enrichment claim; conclusory allegations will not suffice). Case 1:16-cv-02526-CCC Document 33 Filed 05/11/17 Page 24 of 29 19 H. GEC’s Asserted Liability Theories Divorced from the Facts Pled in the FAC Fail to Salvage Count XIV. In its Opposition, GEC claims that all Defendants are liable for direct Computer Fraud and Abuse Act (“CFAA”) violations pursuant to 1030(a)(2)(C) and 1030(a)(5)(B)-(C) because the Defendants each accessed a protected computer without authorization or in excess of authorization. GEC does not dispute that access is not “unauthorized” within the meaning of the CFAA where an employee accesses a computer that it is permitted to access during employment even if the information accessed is ultimately used for an improper purpose - disposing of the majority of the “access” related allegations in the FAC.6 Instead, GEC asserts a new theory of liability - one which has no plausible basis in the facts pled in the FAC: that Defendants “accessed” computers vicariously through one another when, after termination of their employment, certain Defendants induced and encouraged other Defendants (who were still employed at GEC) to access computers.7 See Opp. at 44-46. GEC’s newfound theory of access fares no better than its flawed claim of direct access. 6 GEC also does not dispute that it has failed to state a claim for conspiracy under Section 1030(b). 7 Under Plaintiffs’ new “access” theory, Defendant Schilke cannot be held liable because at all times of the claimed illicit access Schilke was employed by GEC and thus had the right to access his GEC computer. It would defy logic to conclude that Schilke induced or encouraged any other Defendant to access information he could lawfully access on his own. Case 1:16-cv-02526-CCC Document 33 Filed 05/11/17 Page 25 of 29 20 The FAC is devoid of any factual allegations plausibly demonstrating that each Defendant instigated or induced anything. The sole allegation even relating to purported interactions between Defendants regarding access to GEC computers is GEC’s conclusory claim that “[w]ith the knowledge and at the instigation of [Defendants], [Specific Defendant] knowingly and willfully accessed numerous protected documents from Plaintiff servers and computers for the improper purpose of transmitting that protected information to [D]efendants.” ¶¶ 306-309. This bald allegation of “instigation” falls far short of meeting applicable pleading standards for CFAA claims. Cf. Adv. Fluid Sys., Inc. v. Huber, 28 F. Supp. 3d 306, 327, 329 (M.D. Pa. 2014) (finding access adequately alleged only where there were “detailed allegations” regarding conspiracy to gain access to protected computer). The FAC is also devoid of any allegations plausibly demonstrating a violation of § 1030(a)(5)(A). GEC’s claim that “Defendants selectively cite certain allegations and conveniently ignore others,” is simply false. Opp. at 46. Both Defendants and GEC discuss the sole allegations supporting intent to cause damage: Kramer’s “factory reboot” of his computer and Defendant Adair’s deletion of his company password and profile. See Br. at 62; Opp. at 47. As Defendants have explained, GEC’s repetition of threadbare statutory requirements Case 1:16-cv-02526-CCC Document 33 Filed 05/11/17 Page 26 of 29 21 fails to support a plausible inference that Defendants acted with the express goal of causing damage to a computer. See Br. at 62. Further, far from “conceding that Plaintiff has raised factual issues,” Opp. at 47, Defendants posited other possibilities flowing from GEC’s conclusory allegations to demonstrate that GEC’s inadequate pleading leaves open many possibilities. See Br. at 62-63. GEC’s conjecture regarding these possibilities does not raise a factual dispute. Instead, it only highlights the fact that GEC has failed to nudge the CFAA claim from the “possible” to the “plausible” - as is required to survive a motion to dismiss. See Twombly, 550 U.S. at 570. I. The FAC Should Be Dismissed With Prejudice. Tellingly, in its Opposition, GEC fails to address Defendants’ arguments regarding why the FAC should be dismissed with prejudice - that (1) GEC has already had an opportunity to amend the majority of its claims and has failed to cure deficiencies previously identified and (2) the deficiencies in the newly added unjust enrichment and CFAA claims cannot be cured through amendment because these deficiencies go to the legal sufficiency of the claims. See Br. at 70-71. Thus, because it is clear that GEC cannot conjure up any legally sufficient, non- conclusory allegations to support its infirm claims, the FAC should be dismissed with prejudice. Case 1:16-cv-02526-CCC Document 33 Filed 05/11/17 Page 27 of 29 22 III. CONCLUSION For the foregoing reasons and those in Defendants’ Opening Brief, the Court should dismiss the FAC with prejudice. Dated: May 11, 2017 Respectfully submitted, s/ Andrew C. Whitney John V. Gorman (PA 80631) Andrew C. Whitney (PA 201534) MORGAN, LEWIS & BOCKIUS LLP 1701 Market Street Philadelphia, PA 19103 T: 215.963.5000 F: 215.963.5001 john.gorman@morganlewis.com andrew.whitney@morganlewis.com Counsel for Defendants Case 1:16-cv-02526-CCC Document 33 Filed 05/11/17 Page 28 of 29 CERTIFICATE OF SERVICE I, Andrew C. Whitney, certify that the foregoing was filed on this 11th day of May 2017, using the electronic case filing (CM/ECF) for the U.S. District Court for the Middle District of Pennsylvania, which will send notification of such filing to the following: Richard L. Hackman Harlan W. Glasser Saxton & Stump LLC 280 Granite Run Drive, Suite 300 Lancaster, PA 17601 rlh@saxtonstump.com hwg@saxtonstump.com s/Andrew C. Whitney Andrew C. Whitney Case 1:16-cv-02526-CCC Document 33 Filed 05/11/17 Page 29 of 29 IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA GRAHAM ENGINEERING CORP., : Plaintiff : Civil Action No. 1:16-cv-02521-CCC v. : (Honorable Christopher C. Conner) : ERIC ADAIR, : : Defendant : : GRAHAM ENGINEERING CORP., : Plaintiff : Civil Action No. 1:16-cv-02522-CCC v. : (Honorable Christopher C. Conner) : : DOUG JOHNSON, : : Defendant : : GRAHAM ENGINEERING CORP., : Plaintiff : Civil Action No. 1:16-cv-02523-CCC v. : (Honorable Christopher C. Conner) : : WILLIAM KRAMER, : : Defendant : : Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 1 of 64 GRAHAM ENGINEERING CORP., : Plaintiff : Civil Action No. 1:16-cv-02524-CCC v. : (Honorable Christopher C. Conner) : : JEFF LAWTON, : : Defendant : : GRAHAM ENGINEERING CORP., : Plaintiff : Civil Action No. 1:16-cv-02525-CCC v. : (Honorable Christopher C. Conner) : MICHAEL PERRI, : : Defendant : : GRAHAM ENGINEERING CORP., : Plaintiff : Civil Action No. 1:16-cv-02526-CCC v. : (Honorable Christopher C. Conner) : DANIEL SCHILKE, : : Defendant : : Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 2 of 64 GRAHAM ENGINEERING CORP., : Plaintiff : Civil Action No. 1:16-cv-02527-CCC v. : (Honorable Christopher C. Conner) : KEVIN SLUSARZ, : : Defendant : : APPENDIX OF UNPUBLISHED CASES (NOT PREVIOUSLY PROVIDED TO THE COURT) CITED IN DEFENDANTS’ REPLY BRIEF IN SUPPORT OF THEIR MOTION TO DISMISS PLAINTIFF’S FIRST AMENDED COMPLAINT Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 3 of 64 CASE TAB Am. Collision & Auto. Ctr., Inc. v. Windsor-Mt. Joy Mut. Ins. Co., No. 11-cv-06947, 2012 WL 4490982 (E.D. Pa. Sept. 12, 2012) ........................ A Bristol Twp. v. Indep. Blue Cross, No. 01-4323, 2001 WL 1231708 (E.D. Pa. Oct. 11, 2001) ................................. B Emtech, Inc. v. Condor Techs. Sol., Inc., No. 97-6652, 1998 WL 834097 (E.D. Pa. Nov. 30, 1998) .................................. C Fleet Nat’l Bank v. Boyle, No. 04CV1277, 2005 WL 2455673 (E.D. Pa. Sept. 12, 2005) ........................... D M.J. McPherson Servs., L.L.P. v. Sports Images, Inc., No. 5:06 CV 465, 2006 WL 2505925 (N.D. Ohio Aug. 28, 2006) ..................... E Spitzer v. Abdelhak, No. 98-6475, 1999 WL 1204352 (E.D. Pa. Dec. 15, 1999) ................................ F Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 4 of 64 Tab A Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 5 of 64 American Collision & Automotive Center, Inc. v...., Not Reported in... 2012 WL 4490982 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 2012 WL 4490982 Only the Westlaw citation is currently available. United States District Court, E.D. Pennsylvania. AMERICAN COLLISION & AUTOMOTIVE CENTER, INC., Ronald B. Galati and Tiffany N. Galati, Plaintiffs v. WINDSOR-MT. JOY MUTUAL INSURANCE COMPANY, Defendant. Civil Action No. 11-cv-06947. | Sept. 27, 2012. Attorneys and Law Firms Howard G. Silverman, Esq., for Plaintiffs. Eric R. Brown, Esq., Martin A. Durkin, Esq., for Defendant. OPINION JAMES KNOLL GARDNER, District Judge. *1 This matter is before the court on the Motion to Dismiss of Defendant, Windsor-Mt.Joy Mutual Insurance Company filed on November 14, 2011. For the reasons expressed below, I grant the motion to dismiss and dismiss plaintiffs' Complaint. JURISDICTION This court has jurisdiction pursuant to 28 U.S.C. § 1333, which provides that district courts shall have original and exclusive jurisdiction over any civil case of admiralty or maritime jurisdiction. VENUE Venue is proper pursuant to 28 U.S.C. § 1441 because this action was removed from the Court of Common Pleas of Lancaster County, Pennsylvania, which is within this judicial district. PROCEDURAL HISTORY Plaintiffs Fleetway Capital Corporation 1 , American Collision & Automotive Center, Inc., Ronald B. Galati, and Tiffany N. Galati initiated this civil action on December 3, 2010 by filing a Praecipe to Issue Writ of Summons in the Court of Common Pleas of Lancaster County, Pennsylvania against defendant Windsor-Mount Joy Mutual Insurance Company. Thereafter, following a Rule to File Complaint filed by defendant, plaintiffs filed a five-count Complaint 2 in the Lancaster County state action on October 17, 2011. Defendant timely removed the matter to this court by Notice of Removal filed November 7, 2011. On November 14, 2011 the defendant filed the within motion to dismiss. 3 On November 28, 2011 Plaintiffs' Brief in Opposition to Defendant's Motion to Dismiss was filed. 4 On December 7, 2011 the Reply of Defendant Windsor-Mt.Joy Mutual Insurance Company to Plaintiffs' Response to Defendant's Motion to Dismiss was filed (“Defendant's Reply Brief”). STANDARD OF REVIEW A claim may be dismissed under Federal Rule of Civil Procedure 12(b)(6) for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). A 12(b)(6) motion requires the court to examine the sufficiency of the complaint. Conley v. Gibson, 355 U.S. 41, 45, 78 S.Ct. 99, 102, 2 L.Ed.2d 80, 84 (1957) (abrogated in other respects by Bell Atlantic Corporation v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). Generally, in ruling on a motion to dismiss, the court relies on the complaint, attached exhibits, and matters of public record, including other judicial proceedings. Sands v. McCormick, 502 F.3d 263, 268 (3d. Cir.2008). Except as provided in Federal Rule of Civil Procedure 9, a complaint is sufficient if it complies with Rule 8(a)(2), which requires “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). Rule 8(a) (2) does not require heightened fact pleading of specifics, but “only enough facts to state a Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 6 of 64 American Collision & Automotive Center, Inc. v...., Not Reported in... 2012 WL 4490982 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570, 127 S.Ct. at 1974, 167 L.Ed.2d at 949. 5 In determining whether a plaintiff's complaint is sufficient, the court must “accept all factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading, the plaintiff may be entitled to relief.” Fowler, 578 F.3d at 210 (citing Phillips v. County of Allegheny, 515 F.3d 224, 233 (3d Cir.2008)). *2 Although “conclusory or bare-bones allegations” will not survive a motion to dismiss, Fowler, 578 F.3d at 210, a complaint may not be dismissed “merely because it appears unlikely that the plaintiff can prove those facts or will ultimately prevail on the merits.” Phillips, 515 F.3d at 231. Nonetheless, to survive a 12(b)(6) motion, the complaint must provide “enough facts to raise a reasonable expectation that discovery will reveal evidence of the necessary element[s].” Id. (quoting Twombly, 550 U.S. at 556, 127 S.Ct. at 1965, 167 L.Ed.2d at 940) (internal quotations omitted). The court is required to conduct a two-part analysis when considering a Rule 12(b)(6) motion. First, the factual matters averred in the complaint, and any attached exhibits, should be separated from legal conclusions asserted therein. Fowler, 578 F.3d at 210. Any facts pled must be taken as true, and any legal conclusions asserted may be disregarded. Id. at 210-211. Second, the court must determine whether those factual matters averred are sufficient to show that the plaintiff has a “plausible claim for relief.” Id. at 211 (quoting Iqbal, 556 U.S. at 679, 129 S.Ct. at 1950, 178 L.Ed.2d at 884). Ultimately, this two-part analysis is “context-specific” and requires the court to draw on its “judicial experience and common sense” to determine if the facts pled in the complaint have “nudged [plaintiff's] claims” over the line from “[merely] conceivable [or possible] to plausible.” Iqbal, 556 U.S. at 680, 129 S.Ct. at 1949-1950, 178 L.Ed.2d at 884-885. A well-pleaded complaint may not be dismissed simply because “it strikes a savvy judge that actual proof of those facts is improbable, and that a recovery is very remote and unlikely.” Twombly, 550 U.S. at 556, 127 S.Ct. at 1965, 167 L.Ed.2d at 940-941. FACTS Based upon the averments in plaintiffs' Complaint, which I must accept as true under the foregoing standard of review when considering a motion to dismiss, the pertinent facts are as follows. Plaintiff American Collision and Automotive Center, Inc. (“American Collision”) is a Pennsylvania corporation. Plaintiffs Ronald B. Galati and Tiffany N. Galati are individuals who reside in Philadelphia, Pennsylvania. Ronald B. Galati is an officer and shareholder of American Collision. 6 Defendant Windsor-Mount Joy Mutual Insurance Company (“Windsor”) is a Pennsylvania corporation. 7 On May 23, 2006 plaintiff American Collision entered into a Lease Agreement, Guaranty, and Security Agreement with former plaintiff Fleetway Capital under which various assets of American Collision were pledged as security for the financing of a thirty-three foot Chaparral boat (“boat”). 8 On May 31, 2006 plaintiff Ronald B. Galati's father, Ronald L. Galati 9 , executed a purchase agreement for the boat. Ronald B. Galati, Tiffany N. Galati, and American Collision all provided funds for the down payment on the boat. *3 Also on May 31, 2006 defendant issued its Watercraft Policy (“Policy”) to “Ronald Galati” 10 , which insured the boat against loss caused by fire. Former plaintiff Fleetway Capital Corporation is listed as a loss payee on the Policy. 11 On December 22, 2006 a fire at the Waterfront Marina in Summers Point, New Jersey damaged boats, including the Chapparral boat insured under the Policy issued by defendant. The next day, Ronald L. Galati learned that the boat was damaged and met with investigators from the Summers Point prosecutors office. Ronald L. Galati cooperated with the New Jersey authorities investigating the cause and origin of the fire. 12 Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 7 of 64 American Collision & Automotive Center, Inc. v...., Not Reported in... 2012 WL 4490982 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 On January 24, 2007 defendant's investigator, Robert Gibble, sent defendant a letter, which indicated that the New Jersey prosecutor, Chuck DeFebbo, believed that the fire was caused by a vagrant. 13 On March 21, 2007 Ronald L. Galati filed a proof of loss with defendant. 14 On March 27, 2007 defendant denied Ronald L. Galati's claim for insurance coverage on the boat. On March 28, 2007 Mr. Galati requested all evidence and facts which supported defendant's decision not to honor the claim submitted by him. 15 On March 29, 2007 another of defendant's investigators, Michael Walters, sent defendant a letter, indicating that Mr. DeFebbo believed the fire had been set by an unidentified homeless person. 16 On April 4, 2007 defendant refused to provide the requested evidence and documents upon which it relied in denying Ronald L. Galati's claim. Defendant contended that Mr. Galati's claim file, which included police reports relied upon by defendant, was proprietary. 17 On April 6, 2007 Mr. Galati sent a letter to defendant seeking confirmation that defendant denied his claim because defendant determined that Mr. Galati intentionally set the fire. Mr. Galati also forwarded information to defendant regarding another marina fire and a string of deliberately set fires at other businesses. 18 On May 9, 2007 defendant reiterated its decision not to accept Ronald L. Galati's claim. On July 5, 2007 Mr. Galati forwarded additional information to defendant regarding an additional suspected arson in the immediate vicinity of the Waterfront Marina. However, on July 18, 2007 defendant again reiterated its decision not to honor Mr. Galati's claim. 19 On October 12, 2007 defendant paid a cleanup and disposal fee of $1,281.16 to the Waterfront Marina. Defendant further released the remains of the boat to the Waterfront Marina for salvage value to offset the Waterfront Marina storage fees. 20 On October 22, 2007 Ronald L. Galati filed a Complaint in the Court of Common Pleas of Philadelphia County, Pennsylvania (“Philadelphia County Action”), alleging that he owned the boat and that defendant had improperly denied his claim for insurance benefits. 21 Defendant initially responded to Mr. Galati's Complaint in the Philadelphia County Action by admitting that Ronald L. Galati was the owner of the boat. However, at trial defendant changed its position and contended that Ronald L. Galati did not own the boat. 22 *4 Defendant took this position despite testimony indicating that there was no fraud in the application process for the Policy and that the only issue regarding the payment of the claim was the issue of arson. Additionally, a few months before the fire at the Waterfront Marina, defendant had paid Mr. Galati for a small claim for damage to the boat's outdrive caused by a submerged object. 23 Prior to trial in the Philadelphia Action defendant represented to Ronald L. Galati that it had provided him with all information to its investigation, including all information related to ownership of the boat. However, at trial defendant produced evidence from its lead investigator, Michael Walters which it had not provided during discovery. Defense counsel, Martin A. Durkin, Esquire, stated that he was unaware that Ronald L. Galati had not been provided with this evidence. However, contrary to Attorney Durkin's assertions, he knew that Mr. Walters had not provided the information to Mr. Galati. Specifically, a letter dated March 9, 2009 from Mr. Walters to Attorney Durkin indicates that various letters were being withheld from Mr. Galati. 24 Despite this knowledge, defendant represented to the Philadelphia Court of Common Pleas that it had discovered “new information”, which supported its position that defendant Ronald L. Galati was not the owner of the boat. Accordingly, after conclusion of the trial, defendant sought to amend its answer to the Philadelphia County Complaint in order to contest the assertion that Mr. Galati was the owner of the boat. 25 However, the information on which defendant relied upon to amend its answer was not in fact new. Rather, the information consisted of facts known to defendant from the inception of the Philadelphia County Action, but Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 8 of 64 American Collision & Automotive Center, Inc. v...., Not Reported in... 2012 WL 4490982 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 which defendant had concealed from Mr. Galati until the time of trial. In fact, during trial defendant's claim manager and corporate designee admitted that a valid insurance policy existed and that defendant had no reason to dispute Ronald L. Galati's ownership of the boat. 26 Specifically, defendant's corporate designee and president both conceded that Mr. Galati's policy had not been cancelled after his claim was denied, nor was it canceled as of the time of trial. Additionally, defendant's corporate designee testified that the only question concerning whether Mr. Galati was entitled to a claim, was whether the boat damage was caused by Mr. Galati. Despite these admissions, defendant allowed its counsel to make misrepresentations to the Philadelphia Court of Common Pleas which were directly at odds with defendant's own testimony. 27 On June 18, 2009 the jury in the Philadelphia County Action returned a verdict in favor of defendant. Specifically, the jury found that plaintiff (Ronald L. Galati) did not meet his burden of proof in establishing that he had a “pecuniary (insurable) interest in the boat”. However, the jury also found that defendant improperly denied Mr. Galati's claim. 28 *5 On July 28, 2009 former plaintiff Fleetway Capital Corporation submitted a demand for payment of insurance benefits as the loss payee of the policy. On July 29, 2009 defendant acknowledged the claims by Fleetway Capital Corporation and Ronald L. Galati. 29 On July 15, August 11 and August 28, 2009 plaintiffs requested defendant to answer the following questions: (1) Who owns the boat?; (2) Who is the named insured?; (3) Who has an insurable interest in the boat?; (4) Who has submitted a claim and, to the extent that a claim was submitted by someone other than Ronald L. Galati, what is the status of the claim?; and (5) Was the prior claim for hitting the submerged object paid to Ronald L. Galati, and, if so, why did Windsor pay the claim to him if he did not own the boat? 30 However, defendant refused to pay the claims of either Fleetway Capital Corporation or Ronald L. Galati. In addition, defendant has refused to answer plaintiffs' five questions. 31 DISCUSSION Breach of Contract In Count One plaintiff asserts a cause of action for breach of contract. Defendant contends that plaintiffs' breach of contract claim is barred by a suit limitation clause in the insurance policy, which provides that any action against defendant must be brought within one year after whatever caused the loss or damage. Plaintiffs contend that the suit limitations clause does not bar their breach-of-contract claim because the limitations period was tolled by defendant's fraudulent concealment of its intention to dispute the ownership of the boat. Moreover, plaintiffs contend that the suit limitation clause in the Policy does not apply to them because defendant provided the policy only to Ronald L. Galati and not to them. Finally, plaintiffs contend that the suit limitation clause is not enforceable because defendant has not shown that it was prejudiced by the late notice of plaintiffs' claim. Article XI of the Policy provides that “Should you wish to bring legal action against us you must do so within (1) one year after whatever caused the loss or damage”. 32 Here, plaintiffs allege that the loss-specifically the burning of the boat-occurred on December 22, 2006. Plaintiffs' Praecipe to Issue Writ of Summons was filed on December 3, 2010, well outside the suit limitation period. However, plaintiffs contend that defendant intentionally concealed its intention to dispute that Ronald L. Galati was the owner of boat during the course of the Philadelphia County litigation. Accordingly, plaintiffs contend they did not receive notice that defendant had breached the Policy until June 11, 2009. However, even assuming the doctrine of fraudulent concealment serves to toll the suit limitations clause in the Policy, plaintiffs still are barred by the suit limitation clause because they filed the Praecipe to Issue Writ of Summons on December 3, 2010,-nearly sixteen months after June 11, 2009. Plaintiffs attempt to avoid this result by contending that the one-year-suit-limitation clause in the policy is Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 9 of 64 American Collision & Automotive Center, Inc. v...., Not Reported in... 2012 WL 4490982 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 5 not enforceable against them because defendant has not established that it was prejudiced by plaintiffs' delay in making their claim. Further, plaintiffs contend that the one-year suit limitation does not apply to them because “defendant did not provide the policy to [p]laintiffs, but provided it only to Ronald L. Galati.” 33 *6 However, an insurance provider is not required to demonstrate prejudice to enforce a suit limitation clause. Hospital Support Services, Ltd. v. Lumbermens Mutual Casualty Company, 889 F.2d 1311, 1316 (3d Cir.1989) 34 Moreover, plaintiffs do not provide any authority for their contention that defendant's failure to provide plaintiffs with a copy of the Policy renders certain provisions of it unenforceable. Therefore, even if the doctrine of fraudulent concealment tolls the suit limitation provision of the Policy until June 11, 2009, plaintiffs' breach of contract claim is still untimely under the terms of the Policy. Therefore, I grant defendant's motion to dismiss to the extent it seeks dismissal of plaintiffs' breach of contract claim 35 . Bad Faith In Count Two, plaintiff asserts a claim for bad faith pursuant to 42 Pa.C.S. § 8371. 36 Defendant contends that plaintiffs' bad faith claim is barred by a two-year statute of limitations. Moreover, defendant contends that plaintiffs do not have standing to pursue a bad faith claim because Ronald L. Galati already litigated a bad faith claim against defendant in the Philadelphia County Action. Defendant contends that plaintiffs cannot re-litigate those issues pursued by Ronald L. Galati and that to the extent that plaintiffs had a separate ownership interest, they waived those rights by allowing Mr. Gallati to pursue his lawsuit on his own. Plaintiffs contend that the doctrine of fraudulent concealment tolls the statute of limitations on their bad faith claim. Additionally, plaintiffs contend that they have standing to assert a bad faith claim because defendant has refused to pay any insurance benefits to them. The Commonwealth of Pennsylvania has established a statutory remedy for bad faith on the part of insurance companies. 42 Pa.C.S. § 8371. In order to recover on a bad faith claim, a plaintiff must show (1) that the defendant did not have a reasonable basis for denying benefits under the policy; and (2) that defendant knew or recklessly disregarded its lack of reasonable basis in denying the claim. Klinger v. State Farm Mutual Insurance Company, 115 F.3d 230, 233 (3d Cir.1997). The Supreme Court of Pennsylvania has established a two-year statute of limitations for statutory insurance bad faith claims brought pursuant to 42 Pa.C.S. § 8371. Ash v. Continental Insurance Company, 593 Pa. 523, 932 A.2d 877, 885 (Pa.2007). The statute of limitations begins to run when coverage is initially denied. Adamski v. Allstate Insurance Company, 738 A.2d 1033, 1038 (Pa.Super.1999). “[C]ontinuing denials of coverage do not give rise to separate acts of bad faith.” CRS Auto Parts, Inc. v. National Grange Mutual Insurance Company, 645 F.Supp.2d 354, 365 (2009) citing Adamski, 738 A.2d 1040. However, “separate acts of bad faith, distinct from the initial denial of coverage” constitute an independent basis for a bad faith claim and therefore trigger a new limitations period. See CRS Auto Parts, Inc., 645 F.Supp.2d at 372. *7 Conduct by an insurer that is “calculated not toward prolonging an investigation into an insured's claim, but rather toward winning a lawsuit” does not constitute distinct bad faith conduct. Id. at 373. Accordingly, “discovery violations” by an insurer do not give rise to an independent bad faith claim. Id. Instead, when considering whether conduct of an insurer constitutes an independent act of bad faith, a court should consider whether the alleged bad faith conduct “stem[s] solely and precisely from the original denial of coverage”. Id. Therefore in order to determine when the statute of limitations period began to run on plaintiffs' bad faith claim, it is necessary to consider the conduct that plaintiffs allege to be in bad faith. Here, plaintiffs contend that defendant acted in bad faith in fourteen instances. 37 Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 10 of 64 American Collision & Automotive Center, Inc. v...., Not Reported in... 2012 WL 4490982 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 6 Plaintiffs' allegations of bad faith can be grouped into three categories: (1) defendant's failure to investigate and refusal to pay the policy benefits on Mr. Galati's claim 38 ; (2) defendant's conduct during the course of litigation in the Philadelphia County Action 39 ; and (3) defendant's failure to respond to plaintiffs' request for information after the Philadelphia County Action. 40 With respect to the first category of conduct, the statute of limitations on plaintiffs' bad faith claim began on March 27, 2007 when defendant denied Ronald L. Galati's claim for insurance proceeds for fire damage to the boat. Adamski, 738 A.2d at 1038. Because plaintiffs did not file the within action until December 3, 2010, plaintiffs' bad faith claims concerning the failure to investigate and the refusal to pay policy benefits on Mr. Galati's claim are barred by the statute of limitations. Moreover, defendant's conduct during the litigation in the Philadelphia County Action is subject to the same statute- oflimitations period. Plaintiffs allege that defendant acted in bad faith by “withholding evidence during the litigation and trial ... in order to prevent Ronald L. Galati and Plaintiffs from discovery, prior to trial, Defendant's intention to raise a defense of ‘ownership’ and[/]or ‘lack of insurable interest’ “. 41 However, “discovery violations” by an insurer do not give rise to an independent bad faith claim. CRS Auto Parts, Inc., 645 F.Supp.2d at 373. Additionally, conduct by an insurer that is “calculated not toward prolonging an investigation into an insured's claim, but rather toward winning a lawsuit” does not constitute distinct bad faith conduct. Id. at 373. Therefore, I conclude that defendant's conduct during the Philadelphia County Action is subject to the same statute of limitations period that began to run upon defendant's initial refusal to pay policy benefits on Ronald L. Galati's claim. Accordingly, plaintiffs' claim that defendant acted in bad faith during the course of litigation is also barred by the statute of limitations. 42 *8 Likewise, plaintiffs' allegations concerning defendant's conduct after the Philadelphia County Action do not state a timely bad faith claim. Specifically, plaintiffs allege that defendant has refused to respond to plaintiffs' requests for information about the identity of the insureds, the owner of the boat and the prior payment made to Ronald L. Galati. 43 Plaintiffs allege that on July 15, 2009, and on August 11 and 28, 2009, they sent requests to defendant seeking such information. However, these requests clearly “stem solely and precisely from the original denial of coverage”. CRS Auto Parts, Inc. 645 F.Supp.2d at 372. Therefore, this conduct is subject to the same limitations period which commenced following defendant's initial refusal to pay policy benefits on Ronald L. Galati's claim. 44 Because plaintiffs' bad faith time is not timely, I grant defendant's motion to dismiss Count Two of plaintiff's Complaint with prejudice. 45 Fraud and Negligent Misrepresentation In Counts Three and Four, plaintiffs assert claims for fraud and negligent misrepresentation. Defendant contends that these claims fail because plaintiffs do not allege that defendant made any representations to them. Rather, plaintiffs allege that the representations were made to Ronald L. Galati. Additionally, defendant contends that plaintiffs' fraud and negligent misrepresentation claims are barred by the gist-of-the-action doctrine. Plaintiffs contend that they have alleged viable fraud and negligent misrepresentation claims because defendant's misrepresentations to Ronald L. Galati were intended to be relied upon by plaintiffs. Plaintiffs also contend that their fraud and negligent misrepresentation claims are not barred by the gist-of-the-action doctrine because plaintiffs may plead in the alternative, and if plaintiffs are not insured under the policy, they still have viable fraud claims. In Pennsylvania to state a claim for fraud, a plaintiff must allege (1) a misrepresentation; (2) a fraudulent utterance thereof; (3) an intention by the maker that the recipient will thereby be induced to act; (4) justifiable reliance by the recipient upon the misrepresentation; and (5) damage to the recipient as the proximate result. Kurtz v. American Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 11 of 64 American Collision & Automotive Center, Inc. v...., Not Reported in... 2012 WL 4490982 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 7 Motorists Insurance Co., 1995 U.S.Dist. LEXIS 17417 at *3, 1995 WL 695111 (E.D.Pa. Nov. 21, 1995) (Hutton, J.) citing Scaife Co. v. Rockwell-Standard Corporation, 446 Pa. 280, 285 A.2d 451, 454 (1971). To establish a claim for negligent misrepresentation, a plaintiff must show (1) a misrepresentation of material fact; (2) made under circumstances in which the misrepresenter ought to have known of the falsity; (3) with an intent to induce another to act on it; and (4) which results in injury to a party acting in justifiable reliance on misrepresentation. Tran v. Metropolitan Life Insurance Company, 408 F.3d 130, 133 (3d Cir.2005) citing Bortz v. Noon, 556 Pa. 489, 729 A.2d 555, 561 (1999). *9 For both claims of fraud and negligent misrepresentation, a misrepresentation “may be communicated directly to the recipient or indirectly to the recipient through a third party.” Kurtz, 1995 U.S.Dist. LEXIS 17417 at *5, 1995 WL 695111. Therefore, plaintiffs may assert viable fraud and negligent misrepresentation claims based on allegations that defendant made misrepresentations to Ronald L. Galati, rather than to plaintiffs, provided defendant intended such misrepresentations to be relied upon by plaintiffs. 46 However, defendant also contends that plaintiffs' fraud and negligent misrepresentation claims are barred by the gist-of-the-action doctrine. Under Pennsylvania law, the “gist of the action” doctrine “is designed to maintain the conceptual distinction between breach of contract and tort claims by precluding plaintiffs from recasting ordinary breach of contract claims into tort claims.” CRS Auto Parts, Inc., 645 F.Supp.2d at 376 (internal quotations omitted). Accordingly, when a plaintiff alleges that a defendant committed a tort in the course of carrying out a contractual agreement, a court must examine the claim and determine whether the “gist or gravamen” of it sounds in contract or tort. Id. at 377. Therefore, the doctrine bars tort claims (1) that arise solely from a contract between the parties; (2) where the duties allegedly breached were created and grounded in the contract itself; (3) where the liability stems from a contract; or (4) where the tort claim essentially duplicates a breach of contract claim or where the success of the tort claim is dependent on the success of the breach of contract claim. Id. Accordingly, where the alleged misrepresentation or fraud concerns the performance of contractual duties, “then the alleged fraud is generally held to be merely collateral to a contract claim for breach of those duties.” eToll, Inc. v. Elias/Savion Advertising, Inc., 811 A.2d 10, 19 (Pa.Super.2002). However, where pre-contractual statements are the basis for a fraud-in-the-inducement claim or where the fraud concerns an act “collateral to and not interwoven with the terms of the parties contract”, courts have been “less willing to bar the claims.” CRS Auto Parts, Inc., 645 F.Supp.2d at 377-378. But even pre-contractual statements cannot serve as a basis for an independent fraud claim if such statements “concern specific duties that the parties later outlined in the contract”. Id. at 378. Here, plaintiffs' fraud and negligent misrepresentation claims arise solely from the Policy that defendant allegedly refused to honor. Accordingly, the duties allegedly breached by defendant were created and grounded in the contract itself. 47 Moreover, plaintiffs do not contend that they were fraudulently induced into entering, nor do they seek to void, the Policy. Rather, plaintiffs contend that they are entitled to the insurance benefits as provided by the Policy. Therefore, all of plaintiffs' allegations of fraudulent conduct concern defendant's performance of the contract and are barred by the gist-of-theaction doctrine. 48 *10 Because plaintiffs' fraud and negligent misrepresentation claims are barred by the gist-of-the- actions doctrine, I grant defendant's motion to dismiss and dismiss Counts Three and Four with prejudice. 49 Conversion In Count Five, plaintiffs assert a claim for conversion. Plaintiffs allege that on October 12, 2007, after the boat had burned, defendant paid a cleanup and disposal fee, and released the remains of the boat, to Waterfront Marina to offset the Waterfront Marina storage fees. 50 Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 12 of 64 American Collision & Automotive Center, Inc. v...., Not Reported in... 2012 WL 4490982 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 8 Plaintiffs contend that by doing so, defendant treated the boat as its own property and therefore is liable for conversion. Defendant contends that plaintiffs' conversion claim is barred by the statute of limitations. Additionally, defendant contends that even if plaintiffs' conversion claim can proceed, plaintiffs are entitled only to the value of the remains, and not to the full value of the boat. Plaintiffs contend that the doctrine of fraudulent concealment tolls the statute of limitations and therefore their claim for conversion is timely. In Pennsylvania the statute of limitations for conversion is two years. 42 Pa.C.S. § 5524(3). 51 Here, the alleged conversion occurred on October 12, 2007. Therefore, plaintiffs had until October 12, 2009 to file a claim for conversion. Because the within action was not filed until December 3, 2010, plaintiffs' conversion claim is barred by the statute of limitations. Plaintiffs contend that the limitations period is tolled by defendant's fraudulent concealment. However, plaintiffs do not allege that defendant concealed, or that they were unaware, that the remains of the boat were released to Waterfront Marina. The doctrine of fraudulent concealment only tolls the statute of limitations until a person of “reasonable diligence” would uncover the facts upon which his recovery may be based. Fine v. Checcio, 582 Pa. 253, 271, 870 A.2d 850, 860 (Pa.2005). Therefore, the doctrine of fraudulent concealment is not applicable and plaintiffs' conversion claim is barred by the statute of limitations. CONCLUSION For all the foregoing reasons, defendant's motion to dismiss is granted. Accordingly, I dismiss Counts One through Five of plaintiffs' Complaint with prejudice. All Citations Not Reported in F.Supp.2d, 2012 WL 4490982 Footnotes 1 By Order dated and filed January 3, 2012, I approved the voluntary dismissal of plaintiff Fleetway Capital Corporation. 2 The Complaint is attached to the Notice of Removal as Exhibit “A”. The Complaint arises from a dispute concerning whether defendant, as an insurer of a boat damaged in a fire, is required to pay plaintiffs for the fire loss. In their Complaint, plaintiffs assert Pennsylvania state-law causes of action for Breach of Contract (Count I), Bad Faith (Count II), Fraud (Count III), Negligent Misrepresentation (Count IV), and Conversion (Count V). 3 Defendant's motion to dismiss was accompanied by Exhibits “A” through “D” and by a Brief in Support of the Motion to Dismiss of Defendant, Windsor-Mt.Joy Mutual Insurance Company (“Defendant's Brief”). 4 Plaintiffs' brief in opposition (“Plaintiffs' Brief”) was accompanied by three attached documents: (1) a Marine Purchase Agreement; (2) Defendant's Answer with New Matter to Plaintiff's Complaint, which answer responded to a Complaint filed by non-party Ronald L. Galati against defendant on October 22, 2007 in case number 002774, October Term 2007 in the Court of Common Pleas of Philadelphia County, Pennsylvania (“Philadelphia County Action”); and (3) the Complaint filed by Ronald L. Galati in the Philadelphia County Action. 5 The opinion of the United States Supreme Court in Ashcroft v. Iqbal, 556 U.S. 662, 684, 129 S.Ct. 1937, 1953, 173 L.Ed.2d 868, 887 (2009), states clearly that the “facial plausibility” pleading standard set forth in Twombly applies to all civil suits in the federal courts. Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir.2009). This showing of facial plausibility then “allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged,” and that the plaintiff is entitled to relief. Fowler, 578 F.3d at 210 (quoting Iqbal, 556 U.S. at 678, 129 S.Ct. at 1949, 173 L.Ed.2d at 884). As the Supreme Court explained in Iqbal, “[t]he plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that the defendant acted unlawfully.” Iqbal, 556 U.S. at 678, 129 S.Ct. at 1949, 173 L.Ed.2d at 884. 6 Complaint, ¶¶ 2-4 and 7. 7 Id., ¶ 5. Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 13 of 64 American Collision & Automotive Center, Inc. v...., Not Reported in... 2012 WL 4490982 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 9 8 Id., ¶ 8. 9 To avoid confusion between these similar names, in this Opinion I refer to plaintiff's father Ronald L. Galati by his full name or as Mr. Galati. I refer to plaintiff Ronald B. Galati by his full name. 10 The insurance policy did not specify whether the policy was issued to plaintiff Ronald B. Galati or his father, Ronald L. Galati. 11 Complaint, ¶ 12. 12 Id., ¶¶ 14-17. 13 Id., ¶ 21. 14 Plaintiffs did not file a proof of loss on behalf of themselves. 15 Id., ¶¶ 22 and 23. 16 Id., ¶ 24. 17 Id., ¶¶ 25-27. 18 Id., ¶ 28. 19 Id., ¶ 29-31. 20 Id., ¶ 32. 21 Id., ¶ 33. 22 Id., ¶ 34. 23 Id., ¶¶ 34 and 35. 24 Id., ¶ 36. 25 Id., ¶ 37. 26 Id., ¶¶ 38 and 39. 27 Id., ¶¶ 40 and 41. 28 Id., ¶ 42. 29 Id., ¶ 46; Exhibit 18. 30 Id., ¶¶ 47. 31 Id., ¶ 48. 32 Defense Exhibit “A”, Watercraft Policy, page 4 of 11. Plaintiffs' breach of contract claim is based on the Policy. Therefore, the Policy may be considered in the adjudication of defendant's motion to dismiss. See Pension Benefit Guaranty Corporation v. White Consolidated Industries, Inc., 998 F.2d 1192, 1196 (3d Cir.1993). 33 Plaintiffs' Brief in Opposition to Defendant's Motion to Dismiss, page 11. 34 Accordingly, plaintiffs reliance on Brakeman v. Potomac Insurance Company, 472 Pa. 66, 371 A.2d 193 (1977), is misplaced. In Brakeman, the Pennsylvania Supreme Court held that a time limitation on filing a notice of claim was unenforceable absent a showing of prejudice by the insurer. 472 Pa. at 72, 371 A.2d at 196. However, “the Brakeman rule does not apply to limitation of suit clauses.” Hospital Support Services, Ltd., 889 F.2d at 1316. 35 Because the one-year suit limitation clause in the Policy clearly bars plaintiffs' breach of contract claim, I dismiss Count One with prejudice. I conclude that leave to amend would be futile. See Shane v. Fauver, 213 F.3d 113, 115 (3d Cir.2000). 36 Title 42 of the Pennsylvania Consolidated Statutes Section 8371 provides that: In an action arising under an insurance policy, if the court finds that the insurer has acted in bad faith toward the insured, the court may take all of the following actions: (1) Award interest on the amount of the claim from the date the claim was made by the insured in the amount equal to the prime rate of interest plus 3%. (2) Award punitive damages against the insurer. (3) Assess court costs and attorney fees against the insurer. 37 See Complaint, ¶ 59. 38 See Complaint, ¶ 59(a), (b), (c), (l), (m) and (n). 39 See Complaint, ¶ 59(d), (e), (f), (g) and (h). 40 See Complaint, ¶ 59(i). Subsections (j) and (k) of paragraph 59 do not contain factual allegations and therefore are not considered. See Iqbal, 556 U.S. at 678-679, 129 S.Ct. at 1949-1950, 178 L.Ed.2d at 884-885. 41 Complaint, ¶ 59(e). 42 Plaintiffs' contention that the doctrine of fraudulent concealment serves to toll the statute of limitations is not persuasive. Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 14 of 64 American Collision & Automotive Center, Inc. v...., Not Reported in... 2012 WL 4490982 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 10 The doctrine of fraudulent concealment provides that a defendant may not invoke the statute of limitations if, through fraud or concealment, he causes the plaintiff to “relax his vigilance or deviate from his right of inquiry into the facts.” Fine v. Checcio, 582 Pa. 253, 271, 870 A.2d 850, 860 (Pa.2005). However, the doctrine of fraudulent concealment only tolls the statute of limitations until a person of “reasonable diligence” would uncover the facts upon which his recovery may be based. Id. at 271, 870 A.2d 850. Here, the doctrine of fraudulent concealment is not applicable. Plaintiffs' bad faith claim pertains to defendant's denial of coverage for loss of the boat-which was not concealed from plaintiffs. Indeed, plaintiffs were well aware that on March 27, 2007 defendant denied Ronald L. Galati's claim for coverage. Moreover, even if defendant concealed its intention to raise the issue of “ownership” and “insurable interest” of the boat until trial in the Philadelphia County Action, such conduct would not toll the statute of limitations for plaintiffs' bad faith claim. If plaintiffs, rather than Ronald L. Galati, had an insurable interest in the boat, “reasonable diligence” on the part of plaintiffs would have uncovered those facts. In fact, the Complaint alleges that plaintiffs' “each provided funds for a down payment on the boat and had an insurable interest in the boat”. (Complaint, ¶ 10). Therefore, even if defendant concealed its intention to raise the issue of whether Ronald L. Galati had an insurable interest in the boat, plaintiffs were aware of the facts upon which their recovery would be based. That is, plaintiffs knew when the boat burned; knew when Mr. Galati's claim was denied; and knew that they had an insurable interest in the boat. 43 Complaint, ¶ 59(i). 44 In addition, even though plaintiffs' requests for information were filed within two years of December 3, 2010, when plaintiffs Praecipe to Issue Writ of Summons was filed, defendant's failure to respond to these requests does not establish a viable bad faith claim. In order to recover on a bad faith claim, a plaintiff must show that the defendant did not have a reasonable basis for denying benefits under the policy. Klinger v. State Farm Mutual Insurance Company, 115 F.3d 230, 233 (3d Cir.1997). Here, plaintiffs' requests for information on July 15, 2009, and on August 11 and 28, 2009 (and former plaintiff Fleetway Capital Corporation's claim for benefits submitted on July 28, 2009) were all outside the one-year suit limitation clause, discussed above. Therefore, defendant had a reasonable basis not to respond to plaintiffs' requests for information. Accordingly, even if this conduct is within the statute of limitations, the allegations do not support a bad faith claim. 45 Because I have concluded that plaintiffs' bad faith claim is barred by the statute of limitations, I dismiss Count Two with prejudice. I conclude that leave to amend would be futile. See Shane v. Fauver, 213 F.3d 113, 115 (3d Cir.2000). Because I have granted defendant's motion to dismiss Count Two on the basis of the statute of limitations, I do not address defendant's contention that plaintiffs lack “standing” to assert a bad faith claim. 46 In its reply brief, defendant concedes that a misrepresentation may be actionable based upon statements made to third parties (Defendant's Reply Brief, page 4). Nevertheless, defendant contends that plaintiffs' allegation that defendant intended plaintiffs to rely on the misrepresentation is not plausible. However, this contention does not provide a basis for dismissal. Plaintiffs Ronald B. Galati and Tiffany N. Galati are the son and daughter of Ronald L. Galati. Therefore, drawing the required inferences in favor of plaintiffs, it is plausible that defendant made misrepresentations to Ronald L. Galati with the intent to induce plaintiffs to act to their detriment. 47 For example, plaintiffs allege that defendant misrepresented that it had issued a valid policy to Ronald L. Galati but that defendant never intended to honor the Policy (See Complaint, ¶¶ 62-65). The duty to honor the Policy is grounded in the contract itself. Therefore, it cannot provide a basis for a separate fraud claim. 48 Plaintiffs contend that they may plead fraud and breach of contract claims in the alternative and that, in the event plaintiffs were not insured under the Policy, the gist action doctrine would not bar their fraud and negligent misrepresentation claims. While plaintiffs may plead in the alternative and seek mutually exclusive forms of relief, each cause of action must state a claim upon which relief can be granted. Here, plaintiffs' fraud and negligent misrepresentation claims fail to state a claim upon which relief can be granted because the claims are based on the Policy and therefore barred by the gist of the action doctrine. 49 Because the alleged breach of duty is clearly derived from the Policy, I conclude that leave to amend would be futile. 50 Complaint, ¶ 32. 51 Title 42 of the Pennsylvania Consolidated Statutes Section 5524(3) provides that “An action for taking, detaining or injuring personal property, including actions for specific recovery thereof” must be commenced within two years. Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 15 of 64 American Collision & Automotive Center, Inc. v...., Not Reported in... 2012 WL 4490982 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 11 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 16 of 64 Tab B Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 17 of 64 Bristol Tp. v. Independence Blue Cross, Not Reported in F.Supp.2d (2001) 2001 WL 1231708, RICO Bus.Disp.Guide 10,152 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 2001 WL 1231708 United States District Court, E.D. Pennsylvania. BRISTOL TOWNSHIP Plaintiff, v. INDEPENDENCE BLUE CROSS et al., Defendants. No. CIV. A. 01-4323. | Oct. 11, 2001. MEMORANDUM CLARENCE C. NEWCOMER, S.J. *1 Defendants Independence Blue Cross and David N. Banet & Associates have each filed motions to dismiss plaintiff's Amended Complaint. Those motions, and plaintiff's responses thereto are presently before the Court. I. BACKGROUND Plaintiff Bristol Township (“Bristol”) his filed a sixteen count Amended Complaint against Independence Blue Cross (“IBC”), David N. Banet & Associates (“Banet”), and Eric Vacca (“Vacca”). IBC now asks the Court to dismiss three causes of action Bristol asserts against it: 1) a claim for an accounting (Count I); 2) fraud (Count VII); and 3) a claim under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961-68 (“RICO”) (Count XVI). Banet also asks the Court to dismiss the causes of action Bristol has asserted against it: 1) a claim for accounting (Count I); 2) breach of contract (Count X); 3) fraud (Count XI); 4) breach of fiduciary duty (Count XII); 5) conversion (Count XIII); 6) civil conspiracy (Count XIV); 7) negligence (Count XV); and 7) RICO (Count XVI). Bristol is a Pennsylvania township with its offices located at 2501 Bath Road, Bristol, Pennsylvania, 19007. IBC is a Pennsylvania corporation that provides health and medical insurance coverage under individual and group insurance policies with its offices at 1901 Market Street, Philadelphia, Pennsylvania. Banet is a corporation engaged in the insurance brokerage business with offices located at 5 Frame Avenue, Malvern, Pennsylvania. Defendant Vacca is an individual whose address is 224 West Mt. Airy Avenue, Philadelphia, Pennsylvania. Bristol alleges that it provided health insurance to its employees through IBC over a six year period ending in 2000. Vacca was appointed as Bristol's insurance broker in January 1994, but Bristol alleges that Vacca did not negotiate, service, place, renew, manage, originate, solicit, purchase or sell the health insurance Bristol provided its employees through IBC. However, Bristol claims that from 1994 to 2000 IBC paid Vacca commissions from money added to Bristol's insurance premiums without Bristol's authorization. Although it concedes it has no means of calculating the alleged commissions, Bristol believes IBC paid Vacca over $400,000 in commissions. Bristol also alleges that IBC continued to pay Vacca these commissions after Vacca became an employee of Banet sometime before February 1999. Bristol further alleges that IBC paid Vacca these commissions after February 19, 1999, the day Vacca's insurance broker's license was suspended after Vacca pled guilty or no contest to charges of conflict of interest, bribery and tampering with public records or information. Because Vacca's license was suspended, Bristol contends Vacca was not legally entitled to collect the commissions. In light of these facts, the Court turns to the IBC and Banet's Motions to Dismiss. II. DISCUSSION Both IBC and Banet move the Court to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). When evaluating a Motion to Dismiss pursuant to Rule 12(b)(6), the Court must accept each allegation in a well pleaded complaint as true. Albright v. Oliver, 510 U.S. 266, 268, 114 S.Ct. 807, 127 L.Ed.2d 114 (1994). Additionally, a Motion to Dismiss should only be granted if the Court finds that no proven set of facts would entitle the plaintiff to recovery under the filed pleadings. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). It is also firmly established that in reviewing a Federal Rule of Civil Procedure 12(b)(6) motion, the Court must draw all reasonable inferences in the plaintiff's favor. Schrob v. Catterson, 948 F.2d 1402, 1405 (3rd Cir.1991). A. IBC and Bristol's Motions to Dismiss Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 18 of 64 Bristol Tp. v. Independence Blue Cross, Not Reported in F.Supp.2d (2001) 2001 WL 1231708, RICO Bus.Disp.Guide 10,152 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 1. Bristol's Claim for Breach of Contract Against Banet (Count X) *2 Banet moves to dismiss Bristol's breach of contract claim against Banet. To plead a breach of contract, a plaintiff must allege: 1) the existence of a contract, including its essential terms; (2) a breach of a duty imposed by the contract and (3) resultant damages. Williams v. Nationwide Mut. Ins. Co., 750 A.2d 881, 884 (Pa.Super.Ct.2000). After reviewing Bristol's Amended Complaint, the Court finds that Bristol fails to allege the existence of a contract with Banet, its essential terms, and fails to explain how Banet breached the contract if it did exist. The Court will therefore dismiss Bristol's breach of contract claim against Banet. 2. Bristol's Claim for Breach of Fiduciary Duty Against Banet (Count XII) Banet also contends that Bristol fails to state a valid claim for breach of fiduciary duty against it because Banet was not Bristol's fiduciary. In response, Bristol argues that because Banet employed Vacca, Bristol Township's insurance broker, and collected commissions from IBC through Vacca, Banet acted as Bristol's agent, and therefore fiduciary. It is true that an agent's duty to his principal is the same as that of a fiduciary. Garbish v. Malvern Federal Sav. and Loan Assn., 358 Pa.Super. 282, 517 A.2d 547, 554 (Pa.Super.Ct.1986). A fiduciary has the duty to act for the benefit of another as to matters within the scope of the relation. Id. In support of its contention that Banet was Bristol's agent and fiduciary through Banet's employment of Vacca, Bristol cites the Restatement (Second) of Agency, § 15 cmt. e: One acting for the benefit of another without a manifestation of consent by the other may subject himself to the liabilities of an agent at the election of the principal. Thus, one who purports to act on behalf of another but without the authority to do so is subject to liability to the other as if he were a disobedient agent if he affects the principal's interests either by binding the principal to a third person where he has apparent authority, or by disposing of or meddling with the principal's assets. Assuming this Court were to adopt the Restatement's view of the law, Bristol fails to claim that Banet employed Vacca while Vacca still served as Bristol's broker. To the contrary, Bristol's Amended Complaint explains that “[p]laintiff does not have knowledge of the ... specific nature of the relationship between Vacca and Banet.” Amended Complaint ¶ 19. Further, Bristol's Amended Complaint states that “Banet was never appointed or retained by Bristol as its insurance broker.” Amended Complaint ¶ 21. Because Bristol has failed to allege that Vacca served as its broker while Banet employed him, it has not stated a claim for breach of fiduciary duty against Bristol. 3. Bristol's Claim for an Accounting (Count I) *3 IBC moves to dismiss Count I of plaintiff's Complaint where Bristol demands that IBC provide Bristol with a full and complete accounting of the commissions IBC allegedly paid Vacca at Bristol's expense. Some courts have explained that accounting is an equitable remedy which is available only when there is no adequate remedy at law. Benefit Control Methods v. Health Care Services, Inc., 1998 WL 22080, at *2 (E.D.Pa. Jan 16, 1998); Taylor v. Wachtler, 825 F.Supp. 95, 104 (E.D.Pa.1993). Other courts recognize that an action for an accounting also exists at law and is proper where: (1) there was a valid contract, express or implied, between the parties whereby the defendant (a) received monies as agent, trustee or in any other capacity whereby the relationship created by the contract imposed a legal obligation upon the defendant to account to the plaintiff for the monies received by the defendant, or (b) if the relationship created by the contract between the plaintiff and defendant created a legal duty upon the defendant to account and the defendant failed to account and the plaintiff is unable, by reason of the defendant's failure to account, to state the exact amount due him, and (2) that the defendant breached or was in dereliction of his duty under the contract. Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 19 of 64 Bristol Tp. v. Independence Blue Cross, Not Reported in F.Supp.2d (2001) 2001 WL 1231708, RICO Bus.Disp.Guide 10,152 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 Haft v. U.S. Steel Corp., 346 Pa.Super. 404, 499 A.2d 676, 677-78 (Pa.Super. Ct. Oct 18, 1985; see also Berger & Montague, P.C. v. Scott & Scott, LLC, 153 F.Supp.2d 750, 754 (E.D.Pa.2001)(recognizing that a claim of accounting may exist both in equity and at law. Here, IBC only argues that Bristol cannot state an equitable claim for accounting, but fails to address whether Bristol can state a cause of action for an accounting at law. Moreover, IBC does not move to dismiss Bristol's breach of contract claim against it, nor has IBC argued that it was not under a legal obligation to account to Bristol. Consequently, the Court will not dismiss plaintiff's claim for an accounting against IBC. Banet also moves to dismiss Bristol's claim for an accounting. However, unlike IBC, Banet argues that Bristol has failed to state a claim for legal or equitable accounting. The Court agrees. To the extent Bristol seeks an accounting against Banet on equitable grounds, Bristol has an adequate remedy at law: discovery. Benefit Control Methods v. Health Care Svcs., Inc., No. 97-4418, 1998 WL 22080, at *2 (E.D.Pa. Jan.16, 1998). To the extent Bristol seeks an accounting at law against Banet, as explained above, Bristol has failed to allege the existence of a contract between it and Banet, and has failed to allege that Banet was Bristol's agent. Thus, Bristol has failed to state a claim for accounting against Banet. 4. Bristol's Claims for Fraud (Count VII and XI) IBC also moves to dismiss Bristol's fraud claim. IBC first argues that the economic loss doctrine bars Bristol's fraud claim. The economic loss doctrine “prohibits plaintiffs from recovering in tort economic losses to which their entitlement flows only from a contract.” Duquesne Light Co. v. Westinghouse Elec. Corp., 66 F.3d 604, 618 (3d Cir.1995). “The rationale of the economic loss rule is that tort law is not intended to compensate parties for losses suffered as a result of a breach of duties assumed only by agreement.” Sun Co., Inc. (R & M) v. Badger Design & Constructors, Inc., 939 F.Supp. 365, 372 (E.D.Pa.1996)(quoting Palco Linings, Inc. v. Pavex, Inc., 755 F.Supp. 1269, 1271 (M.D.Pa.1990)). Thus, to determine whether the economic loss doctrine precludes recovery, the court must consider whether the damages plaintiff seeks to recover “were in the contemplation of the parties at the origination of the agreement.” Cortez v. Keystone Bank, Inc., 2000 WL 536666, at *8 (E.D.Pa. May 03, 2000)(quoting Duquesne Light Co., 66 F.3d at 618). However, there is a split of authority among Pennsylvania district courts as to whether the economic loss doctrine applies to intentional fraud claims. Compare KNK Medical-Dental Specialities, Ltd. v. Tamex Corp., 2000 WL 1470665 (E.D.Pa. Sep 28, 2000)(Van Antwerpin, J.)(unwilling to dismiss plaintiff's fraud claim on the economic loss rule because of the lack of clarity from either Pennsylvania state courts or the Third Circuit); Sunquest Info. Systems v. Dean Witter Reynolds, 40 F.Supp.2d 644, 658 (W.D.Pa.2000)(finding economic loss rule inapplicable to tort claim based on intentionally false representation); Palco Linings, Inc. v. Pavex, Inc., 755 F.Supp. 1269, 127 (M.D.Pa.1990)(noting the exception to the economic loss rule but not relying on it); Peerless Wall & Window Coverings, Inc. v. Synchronics, Inc., 85 F.Supp.2d 519, 535 (W.D.Pa.2000)(same); with Montgomery County v. Microvote Corp., No. Civ.A. 97- 6331, 2000 WL 134708, at *7 (E.D.Pa. Feb.3, 2000)(Kelly, J.)(concluding economic loss rule bars recovery for both negligent and intentional misrepresentation); Werwinski v. Ford Motor Co., No. Civ.A. 00-943, 2000 WL 1291576, at *5 (E.D.Pa. Aug. 15, 2000) (Buckwalter, J.)(“This Court finds more persuasive the reasoning of courts that do bar fraud claims that are intertwined with contract claims and the only resulting loss has been economic.”). *4 Nevertheless, this Court does not need to reconcile the differing opinions of courts in this Circuit. At this early stage of the litigation, the Court is unconvinced that plaintiff has not stated a claim for fraud separate and distinct from its breach of contract claim. Plaintiff's fraud claim involves parties who were not parties to the contract between IBC and Bristol, and IBC's alleged payment of the commissions were not contemplated in the contract between IBC and Bristol. Moreover, it would be of no consequence if plaintiff's case did rely on the same set of facts because those facts can give rise to both causes of action. KNK Medical-Dental Specialities, Ltd., 2000 WL 1470665, at 6. Additionally, if plaintiff's allegations are true, this case involves more than negligent misrepresentation. Indeed, plaintiff alleges that IBC actively concealed the commissions it paid Vacca both in its invoices and throughout their six year relationship. Thus, the Court will not dismiss plaintiff's fraud claim based upon the economic loss doctrine. Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 20 of 64 Bristol Tp. v. Independence Blue Cross, Not Reported in F.Supp.2d (2001) 2001 WL 1231708, RICO Bus.Disp.Guide 10,152 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 Alternatively, IBC argues the Bristol's fraud claim should be dismissed because there is no confidential relationship between Bristol and IBC, and therefore, IBC had no duty to tell Bristol that its invoices included inflated premiums to conceal the commissions IBC allegedly paid Vacca. It is true that there is no liability for fraudulent concealment absent some duty to speak. Duquesne Light Co. v. Westinghouse Electric Corp., 66 F.3d 604, 611- 12 (3d Cir.1995); City of Rome v. Glanton, 958 F.Supp. 1026, 1038 (E.D.Pa.1997). While a duty to speak does arise in fiduciary and confidential relationships, a “duty to speak may also arise as a consequence of an agreement between parties, or as a result of one party's reliance on the other's representations, if one party is the only source of information to the other party, or the problems are not discoverable by other reasonable means.” City of Rome, 958 F.Supp. at 1038. Additionally, a duty to speak may also occur when disclosure is necessary to prevent an ambiguous or partial statement from being misleading. Id.; see also Duquesne, 66 F.3d at 612-13. Assuming, as this Court must, that plaintiff's allegations are true, IBC and Bristol not only had an agreement, but IBC and not Bristol knew that IBC was paying Vacca commissions. Further, Bristol relied on IBC invoices when paying IBC for the premiums Bristol owed IBC. According to Bristol though, those premiums were inflated to hide the commissions IBC paid Vacca. Thus, IBC has not persuaded the Court that Bristol has failed to state a claim for fraud. *5 Banet has also moved to dismiss Bristol's claim of fraud against it. Banet first argues that Bristol's Amended Complaint fails to state a claim for fraud. Upon a review of plaintiff's Amended Complaint and the relevant law, the Court disagrees at this juncture. Banet further contends that Bristol's Complaint fails to allege fraudulent misrepresentation with sufficient particularity. Claims for fraud must be pleaded with adequate particularity to satisfy Rule 9(b) of the Federal Rules of Civil Procedure. Seville Indus. Mach. Corp. v. Southmost Mach. Corp., 742 F.2d 786, 791 (3d Cir.1984). However, “in applying Rule 9(b), ‘focusing exclusively on its “particularity language” is too narrow an approach and fails to take account of the general simplicity and flexibility contemplated by the rules.’ ” Id. (citations omitted). The rule's purpose is to give notice to the defendant of the precise misconduct with which she is charged, and to protect her from any spurious charges of fraudulent or immoral behavior. In Re Meridian Securities Litigation, 772 F.Supp. 223, 229 (E.D.Pa.1991). As long as there is some precision and some measure of substantiation in the pleadings, the rule will be satisfied. Id. Here, Bristol has adequately plead its claims of fraud. Bristol alleges that Banet approved and furthered IBC's alleged scheme to charge Bristol for commissions Bristol did not approve. The Complaint alleges the time frame of the alleged fraud, the means used to perpetrate the fraud, and each defendant's conduct. Consequently, the Court will not dismiss plaintiff's fraud claims against Banet. 5. Bristol's Claims for Conversion, Civil Conspiracy and Negligence (Counts XIII, XIV and XV) Banet argues that Bristol's claim for conversion against it should be dismissed. Under Pennsylvania law conversion is the “deprivation of another's right of property in, or use or possession of a chattel, or other interference therewith, without the owner's consent and without lawful justification.” Cenna v. United States, 402 F.2d 168, 170 (3d Cir.1968). Banet argues that Bristol fails to allege that Banet interfered with Bristol's property, and at worst, it only accepted commissions from IBC. Bristol argues that it has alleged that Banet and IBC agreed to charge Bristol for commissions for which Banet was not entitled, and disguised the overcharges as premiums. Thus, Bristol contends it has properly alleged conversion. If Bristol's allegations are true, then Banet has interfered with Bristol's property, and may be liable for conversion. The Court will not dismiss Bristol's conversion claim at this time. Banet further argues that the Court should dismiss Bristol's claim of civil conspiracy. To prove a civil conspiracy under Pennsylvania law, a plaintiff must show the following elements: (1) a combination of two or more persons acting with a common purpose to do an unlawful act or to do a lawful act by unlawful means or for an unlawful purpose; (2) an overt act done in pursuance of the common purpose; and (3) actual legal damage. SNA, Inc. v. Array, 51 F.Supp.2d 554, 561 (E.D.Pa.1999). Proof of malice or an intent to injure is essential to the proof of a conspiracy. Strickland v. University of Scranton, 700 A.2d 979, 987-88 (Pa.Super.Ct.1997). An action will lie Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 21 of 64 Bristol Tp. v. Independence Blue Cross, Not Reported in F.Supp.2d (2001) 2001 WL 1231708, RICO Bus.Disp.Guide 10,152 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 5 only where the sole purpose of the conspiracy is to cause harm to the party who claims to be injured. Thompson Coal Co. v. Pike Coal Co., 488 Pa. 198, 412 A.2d 466, 472 (Pa.1979). Thus, where the facts show that a person acted to advance his own business interests, those facts constitute justification and negate any alleged intent to injure. Id. *6 Banet argues that because Bristol's Complaint alleges that one purpose of the conspiracy was to further defendants' business dealings and obtain money for Vacca and/or Banet, Bristol failed to allege that Banet has acted with malice. The Court agrees. That it may have been necessary to deceive plaintiff to carry out their scheme does not indicate that the defendants acted with malice solely to injure plaintiff. Spitzer v. Abdelhak, 1999 WL 1204352, at *9 (E.D.Pa. Dec 15, 1999). The Court will dismiss plaintiff's claim of civil conspiracy. In addition, Banet asks this Court to dismiss Bristol's negligence claim. However, after reviewing plaintiff's Complaint, and the parties briefs, Banet has not persuaded the Court that it should dismiss Bristol's negligence claim at this juncture. 6. Bristol's RICO Claim (Count XVI) IBC and Banet argue that Bristol's RICO claim should be dismissed. First Banet claims that Bristol's RICO claim fails to allege that defendants engaged in interstate commerce. More specifically, Banet argues that Bristol's Complaint concedes that all defendants here are located and conduct business in Pennsylvania, and fails to allege that defendants conduct business outside of Pennsylvania. 18 U.S.C.1962(a) makes it unlawful: for any person who has received any income derived, directly or indirectly, from a pattern of racketeering activity or through collection of any unlawful debt in which such person has participated as a principal within the meaning of section 2, title 18, United States Code, to use or invest, directly or indirectly, any part of such income, in acquisition of any interest in, or the establishment or operation of, any enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce. The requirement that RICO affect interstate commerce is satisfied by “minimal” effects. Rose v. Bartle, 871 F.2d 331, 357 (3d Cir.1989). Here, even if Bristol has failed to expressly plead the interstate aspect of defendants activities, the interstate requirement may be reasonably inferred from the nature of defendants' activities in the field of employee benefits. See Shearin v. E.F. Hutton Group, Inc., 885 F.2d 1162, 1166 (3d Cir.1989)(explaining that the interstate requirement may be reasonably inferred from the nature of a defendant's activities). Indeed, Congress has expressly found that: *7 employee benefit plans ... have become an important factor in commerce because of the interstate character of their activities, and of the activities of their participants, and the employers, employee organizations, and other entities by which they are established or maintained; that a large volume of the activities of such plans are carried on by means of the mails and instrumentalities of interstate commerce ... 29 U.S.C. § 1001. Moreover, plaintiff has alleged that the defendants carried out their unlawful scheme through the United States mails. Thus, given the low threshold of activity that satisfies the interstate requirement, and defendants interstate activities, the Court will not dismiss plaintiff's RICO claim on this ground. IBC and Banet then argue that Bristol has failed to allege that defendants exist as an enterprise within the meaning of RICO. To support that contention, they urge the Court to apply the Supreme Court's decision in United States v. Turkette, 452 U.S. 576, 101 S.Ct. 2524, 69 L.Ed.2d 246 (1981), and the Third Circuit's decision in United States v. Riccobene, 709 F.2d 214, 221 (3d Cir.1983). IBC and Banet therefore invite this Court to commit reversible error. In Seville Indus. Machinery Corp. v. Southmost Machinery Corp., 742 F.2d 786, 789-90 (3d Cir.1984), the Third Circuit explained: Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 22 of 64 Bristol Tp. v. Independence Blue Cross, Not Reported in F.Supp.2d (2001) 2001 WL 1231708, RICO Bus.Disp.Guide 10,152 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 6 In so ruling, the district court confused what must be pleaded with what must be proved. Riccobene and Turkette certainly stand for the proposition that a plaintiff, to recover, must prove that an alleged enterprise possesses the three described attributes. But neither case speaks to what must be pleaded in order to state a cause of action. The district court erred in applying the Riccobene-Turkette proof analysis to the allegations in Seville's complaint. We need cite no authority for the proposition that the Federal Rules of Civil Procedure were designed to eliminate the vagaries of technical pleading that once plagued complainants, and to replace them with the considerably more liberal requirements of so-called “notice” pleading. Under the modern federal rules, it is enough that a complaint put the defendant on notice of the claims against him. It is the function of discovery to fill in the details, and of trial to establish fully each element of the cause of action. In the present case, Seville identified the four entities it believed were the enterprises that had been marshalled against it. The rules of pleading require nothing more at this early juncture than that bare allegation. *8 742 F.2d 789-90 (citations omitted). Like the plaintiff in Seville, Bristol has alleged that the defendants were an enterprise, and the Court will not dismiss plaintiff's RICO claim. An appropriate Order follows. All Citations Not Reported in F.Supp.2d, 2001 WL 1231708, RICO Bus.Disp.Guide 10,152 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 23 of 64 Tab C Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 24 of 64 Emtec, Inc. v. Condor Technology Solutions, Inc., Not Reported in F.Supp.2d (1998) 1998 WL 834097 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 1998 WL 834097 Only the Westlaw citation is currently available. United States District Court, E.D. Pennsylvania. EMTEC, INC. v. CONDOR TECHNOLOGY SOLUTIONS, INC, SCM LLC d/b/a The Commonwealth Group, J. Marshall Coleman and Kennard F. Hill. No. CIV. A. 97-6652. | Nov. 30, 1998. MEMORANDUM AND ORDER HUTTON. *1 Presently before the Court are Plaintiff's Motion for Leave to File an Amended Complaint (Docket No. 29), Defendants' response (Docket No. 31), and Plaintiff's Reply Brief (Docket No. 31). Also before the Court are the Defendants' Motion for Partial Summary Judgment (Docket No. 22), Plaintiff's response (Docket No. 25), and Defendants' Reply Brief (Docket No. 28). For the reasons that follow, the Plaintiff's Motion for Leave to File an Amended Complaint is GRANTED IN PART AND DENIED IN PART and the Defendants' Motion for Partial Summary Judgment is GRANTED IN PART AND DENIED IN PART. I. BACKGROUND Taken in the light most favorable to the nonmoving party, the facts are as follows. In late 1996, Plaintiff Emtec, Inc. and Legg Mason Wood Walker, Inc. (“Legg Mason”), Emtec's investment banker, began considering the feasibility of a corporate “roll-up” of certain computer companies. A roll-up is a process whereby one corporate structure acquires other companies, generally within a similar field of business, while at the same time stock in the acquiring corporation is offered to the public through an initial public offering (“IPO”). Emtec considered nine companies that were possible participants in the roll-up. Eventually, Emtec shortened this list to three: Computer Hardware Maintenance Corporation (“CHMC”), Corporate Access, Inc. (“Corporate Access”), and PCNet. Prior to being introduced to Emtec, CHMC and Corporate Access were already interested in being acquired. Corporate Access acted through a corporate broker, Ross Crossland Weston & Co. (“RCW”), in an attempt to find an acquisition partner. RCW sent summary descriptions of Corporate Access a larger descriptive memorandum to numerous potential acquisition companies. Along the same lines, CHMC was also interested in acquisition prior to its discussions with Emtec. CHMC had acquisition discussions with a number of other firms before meeting with Emtec. In early 1997, Emtec, Corporate Access, and CHMC signed letters of intent. These letters of intent stated that Emtec would acquire Corporate Access and CHMC. Due to market conditions, Emtec was unable to proceed with the roll-up of these three companies in March of 1997. Marshall Coleman, a principal of Defendant Commonwealth Group, Inc. (“Commonwealth”), discovered Emtec's failed roll-up. Coleman and a representative of Legg Mason, Seth Lehr, met and signed a confidentiality agreement on April 28, 1997. Coleman and Lehr then exchanged financial information about the prospects that each were considering concerning the roll-up. In late May of 1997, Commonwealth sent letters of intent to Emtec, CHMC, and Corporate Access. These letters of intent set forth the terms pursuant to which Defendant Condor Technology Solutions, Inc. (“Condor”) proposed to purchase each of the three companies in their roll-up. On May 13, 1997, Commonwealth and Condor signed a supplemental agreement with Legg Mason and Emtec. Emtec agreed to disclose the identities of CHMC and Corporate Access. The parties also agreed that in no event would Commonwealth enter into any transactions with either CHMC or Corporate Access without Emtec's approval before May 13, 1999. 1 *2 With the May 13, 1997 agreement signed, Legg Mason and Emtec introduced representatives of Condor and Commonwealth to the presidents of CHMC and Corporate Access. During these introductions, Emtec's CEO, Thomas Dresser, told CHMC and Corporate Access that Emtec planned to roll-up with Condor. On Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 25 of 64 Emtec, Inc. v. Condor Technology Solutions, Inc., Not Reported in F.Supp.2d (1998) 1998 WL 834097 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 July 3, 1997, Emtec and Condor signed a letter of intent providing for the acquisition of Emtec by Condor. On July 17, 1997, however, Dresser told CHMC and Corporate Access that Emtec might not be included in the Condor roll up. Defendants contend that Dresser also stated that Emtec had no objection if CHMC and Corporate Access went ahead with the Condor roll-up. Plaintiff responds, and this Court must accept at the summary judgment stage, that Dresser only stated that Emtec could not legally prevent CHMC and Corporate Access from joining the Condor roll-up without them. On July 24, 1997, Condor withdrew the letter of intent providing for its acquisition of Emtec. As the roll-up transaction approached its target date, the Defendants excluded Emtec and completed the transaction with the other acquirees-including CHMC and Corporate Access -on February 5, 1998. The Defendants argue that they excluded Emtec, among other reasons, because it failed to provide them with audited 1997 financial statements establishing a “clean bill of financial health.” Subsequently, Emtec brought suit against the Defendants. Emtec claims that the roll-up was an outright breach of the May 13, 1997 agreement and sues for breach of contract (Count I), tortious interference with business relations (Count II), and misappropriation of a trade secret (Count III). Defendants filed a motion for partial summary judgment and seek dismissal of Counts II and III. After Defendants filed their summary judgment motion, Plaintiff filed a motion to amend the complaint. The Court considers these motions together. II. DISCUSSION A. Motion to Amend the Complaint 1. Standard Pursuant to Rule 15(a) of the Federal Rules of Civil Procedure: “A party may amend the party's pleading once as a matter of course at any time before a responsive pleading is served.” Fed.R.Civ.P. 15(a). Because the Plaintiff seeks to amend the complaint after the Defendants served their responsive pleading, the Plaintiff “may amend [his complaint] only by leave of court.” Id. Rule 15(a) clearly states that, “leave shall be freely given when justice so requires.” Id. “Among the grounds that could justify a denial of leave to amend are undue delay, bad faith, dilatory motive, prejudice, and futility.” In re Burlington Coat Factory Secs. Litig., 114 F.3d 1410, 1434 (3d Cir.1997) (citations omitted); see also Lorenz v. CSX Corp., 1 F.3d 1406, 1413 (3d Cir.1993). 2. Unjust Enrichment Plaintiff asks this Court for leave to amend the complaint in order to add an unjust enrichment claim. Defendants argue that Plaintiff cannot assert a right to recover damages under a theory of unjust enrichment because the relationship between the parties is based on a express, written contractual relationship. *3 “The Supreme Court of Pennsylvania has concluded that the quasi-contractual doctrine of unjust enrichment [is] inapplicable when the relationship between the parties is founded on a written agreement or express contract.” Schott v. Westinghouse Elec. Corp., 436 Pa. 279, 259 A.2d 443, 448 (Pa.1969). The Pennsylvania Superior Court followed this holding in Gee v. Eberle, 119, 279 Pa.Super. 101, 420 A.2d 1050, 1060 (Pa.Super.Ct.1980). In Gee, the Court found that “the essence of the doctrine of unjust enrichment is that there is no direct relationship between the parties.” Id. If there is a relationship in the form of a promise to the plaintiff, he or she “has a right to recover on the promise.... The existence of that right, however, precludes a claim of unjust enrichment.” Benefit Trust Life Ins. Co. v. Union Nat'l Bank of Pittsburgh, 776 F.2d 1174, 1177 (3d Cir.1985). Here, the damages that Plaintiff alleges in the proposed unjust enrichment claim are the same that Plaintiff alleges in the breach of contract claim against the Defendants. Because a contractual relationship exists between Plaintiff and Defendants, Plaintiff cannot recover damages against Defendants under a theory of unjust enrichment. The Court finds that a claim for unjust enrichment under these facts fails as a matter of law. Therefore, the Court denies Plaintiff's motion for leave because the addition of an unjust enrichment claim would be “futile.” See Lorenz v. CSX Corp., 1 F.3d 1406, 1413 (3d Cir.1993) (upholding the district court's denial of motion to amend the complaint because the proposed amendment included claims that were “futile”). 3. Additional and Inaccurate Facts Plaintiff also asks for leave to amend the complaint in order to correct a factual inaccuracy and allege additional Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 26 of 64 Emtec, Inc. v. Condor Technology Solutions, Inc., Not Reported in F.Supp.2d (1998) 1998 WL 834097 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 facts concerning the IPO. Defendants do not oppose the Plaintiff's motion to amend these factual obligations. Therefore, the Court grants Plaintiff leave to correct or allege these facts. B. Motion for Partial Summary Judgment 1. Standard Summary judgment is appropriate “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(c). The party moving for summary judgment has the initial burden of showing the basis for its motion. See Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the movant adequately supports its motion pursuant to Rule 56(c), the burden shifts to the nonmoving party to go beyond the mere pleadings and present evidence through affidavits, depositions, or admissions on file to show that there is a genuine issue for trial. See id. at 324. A genuine issue is one in which the evidence is such that a reasonable jury could return a verdict for the nonmoving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). *4 When deciding a motion for summary judgment, a court must draw all reasonable inferences in the light most favorable to the nonmovant. See Big Apple BMW, Inc. v. BMW of N. Am., Inc., 974 F.2d 1358, 1363 (3d Cir.1992). Moreover, a court may not consider the credibility or weight of the evidence in deciding a motion for summary judgment, even if the quantity of the moving party's evidence far outweighs that of its opponent. See id. Nonetheless, a party opposing summary judgment must do more than rest upon mere allegations, general denials, or vague statements. See Trap Rock Indus., Inc. v. Local 825, 982 F.2d 884, 890 (3d Cir.1992). 2. Tortious Interference with Business Relationships Under Pennsylvania law, 2 a plaintiff must establish four elements to sustain a claim for tortious interference: (1) the existence of a prospective contractual relation between plaintiff and a third party; (2) defendant's purpose or intent to harm the plaintiff by preventing completion of a contractual relationship; (3) improper conduct, which is neither privileged nor justified, on the part of the defendant; and (4) actual legal harm resulting from the defendant's actions. See Nathason v. Medical College of Pa., 926 F.2d 1368, 1392 (3d Cir.1991). Defendants move for summary judgment based on three of these four factors. Plaintiff argues that there is sufficient evidence on each of these three factors to defeat summary judgment. a. Prospective Contractual Relation Defendants first argues that there was no prospective contractual relation between Emtec, Corporate Access, and CHMC. The Pennsylvania Supreme Court has defined “prospective contractual relation” as “something less than a contractual right, something more than a mere hope.” Thompson Coal Co. v. Pike Coal Co., 488 Pa. 198, 412 A.2d 466, 471 n. 7 (Pa.1980). “This must be something more than a mere hope or the innate optimism of a salesman.... ‘This is an objective standard which of course must be supplied by adequate proof.’ ” Id. at 471 (quoting Glenn v. Point Park College, 441 Pa. 474, 272 A.2d 895, 898-99 (Pa.1971) (footnote and citation omitted)). It exists if there is a reasonable probability that a contract will arise from the parties' current dealings. See Glenn, 272 A.2d at 898-899. Merely pointing to an existing business relationship or past dealings, however, does not reach this level of probability. See General Sound Tel. Co., Inc., v. AT & T Communications, Inc., 654 F.Supp. 1562, 1565 (E.D.Pa.1987) (finding that opportunity to bid on a contract is insufficient to establish the existence of a prospective contract under Pennsylvania law); Thompson, 412 A.2d at 471 (finding that existing year-to-year lease on certain property did not amount to a reasonable probability of renewal, despite the existing business relationship). Moreover, in the context of a breach of contract claim, if the breach only incidentally affects the plaintiff's business relations with third parties, then the plaintiff's only cause of action lies in contract. See Glazer v. Chandler, 414 Pa. 304, 200 A.2d 416, 418 (Pa.1964). *5 Defendants argue that the undisputed facts reveal that Emtec had no objectively reasonable probability that Corporate Access and CHMC would join Emtec's roll-up. Defendants point to the evidence indicating Emtec's own roll-up plans with Corporate Access and CHMC ended by March of 1997. For instance, Defendants note that the letters of intent between Emtec, Corporate Access, and CHMC expired. Defendants also state that Emtec Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 27 of 64 Emtec, Inc. v. Condor Technology Solutions, Inc., Not Reported in F.Supp.2d (1998) 1998 WL 834097 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 encouraged Corporate Access and CHMC to roll-up with Condor. This Court finds that there is enough evidence to suggest that Plaintiff did have a prospective contractual relation. Thomas Dresser, Emtec's CEO, stated in his deposition testimony that, even though the letters of intent expired and the roll up may have been “dead,” Emtec, Corporate Access, and CHMC still “wanted to do something with their businesses joined together and be something part of a bigger entity.” Dresser Dep. at 35. Viewed objectively, this testimony indicates the existence of “something beyond a mere hope” and “a reasonable probability” that a contract would arise from the parties' dealings. Moreover, Plaintiff offered the deposition testimony of Dresser which directly contradicts Defendants' statement that Dresser encouraged Corporate Access and CHMC to go ahead with Condor's roll-up without Emtec. See id. at 51. Defendants submitted the affidavits of the Presidents of Corporate Access and CHMC, both of whom state that Dresser encouraged them to roll-up with Condor. Nevertheless, Dresser stated that he never made this statement to anyone from either Corporate Access or CHMC. See id. Rather, Dresser stated that he told them that he could not legally stop them from joining the roll up with Condor. See id. Therefore, because this Court must draw all reasonable inferences in the light most favorable to the Plaintiff as the nonmovant, it also finds that there remains a genuine issue of fact concerning whether Emtec had a objective reasonable probability that Corporate Access and CHMC would roll up with Emtec. b. Purpose or Intent to Harm by Preventing the Relation Defendants also argue that “Emtec cannot demonstrate that the Defendants acted with any actionable ill-will, malice or intent as required.” However, an intention to interfere with Plaintiff's prospective contractual relations does not require spite or ill will. See Pioneer Leimel Fabrics, Inc. v. Paul Rothman Indus., Ltd., No. CIV.A.87- 2581, 1992 WL 73012, at *7 (E.D.Pa. Mar.31, 1992), aff'd, 993 F.2d 225 (3d Cir.1993) (unpublished table decision); Yaindl v. Ingersoll-Rand Co., 281 Pa.Super. 560, 422 A.2d 611, 622 (Pa.Super.Ct.1980). Plaintiff need not show express evidence of intent, but may establish that interference is certain or substantially certain to occur as a result of the action. See Pioneer, 1992 WL 73012, at *7. *6 Defendants again point to the statements by Dresser to Corporate Access and CHMC encouraging them to proceed with the Condor roll up without Emtec. As noted, this Court must view the facts in the light most favorable to the Plaintiff. Dresser denied making these statements in his deposition. Therefore, the Court finds that summary judgment is not proper on this ground as well. c. Actual Damage Finally, Defendants argue that Plaintiff did not suffer sufficient injury to warrant a tortious interference with prospective contractual relations claim. Under tortious interference with prospective contractual relations, a plaintiff may recover damages for the pecuniary loss of the benefits of the contract or the prospective relation, consequential losses legally caused by the interference, and emotional distress or actual harm to reputation reasonably expected to result from the interference. See Pioneer, 1992 WL 73012, at *9. This Court finds that Plaintiff offered sufficient evidence to preclude summary judgment. Plaintiff suffered lost profits as a result of Defendants' interference with their potential roll-up with Corporate Access and CHMC. This is pecuniary loss of benefits of the prospective relation. Therefore, the Court denies summary judgment on Plaintiff's interference with contractual relations claim. 3. Misappropriation of Trade Secrets In order to prove a claim of misappropriation of trade secrets, a plaintiff must prove: (1) the existence of a trade secret; (2) the trade secret was communicated in confidence to defendant; (3) defendant used the trade secret in breach of that confidence; and (4) defendant used the trade secret to the detriment of the plaintiff. See Prudential Ins. Co. of Am. v. Stella, No. CIV.A.97-4163, 1998 WL 57514, at *4 (E.D.Pa. Feb.12, 1998). Defendants argue that the Court should grant summary judgment on Plaintiff's claim for misappropriation of trade secrets because the information alleged to be a trade secret by Plaintiff does not fall within the definition of a trade secret under Pennsylvania law. Plaintiff argues that the identities of CHMC and Corporate Access as potential acquisition candidates are similar to customer lists and falls within the definition of a trade secret under Pennsylvania law. Pennsylvania courts have adopted the definition of trade secret found in a comment to the Restatement of Torts. Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 28 of 64 Emtec, Inc. v. Condor Technology Solutions, Inc., Not Reported in F.Supp.2d (1998) 1998 WL 834097 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 5 See Smith v. BIC Corp., 869 F.2d 194, 199 (3d Cir.1989); see also Restatement of Torts § 757 cmt. b (1939). This comment provides: A trade secret may consist of any formula, pattern, device or compilation of information which is used in one's business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it. It may be a formula for a chemical compound, a process of manufacturing, treating or preserving materials, a pattern for a machine or other device, or a list of customers. [A trade secret] ... differs from other secret information in a business ... in that it is not simply information as to single or ephemeral events in the conduct of a business, as, for example, the amount or other terms of a secret bid for a contract or the salary of certain employees, or the security investments made or contemplated, or the date fixed for the announcement of a new policy or for bringing out a new model or the like. A trade secret is a process or device for continuous use in the operation of the business. *7 Id. In addition, the Third Circuit cited several factors which should be considered in concluding whether certain information is a trade secret: (1) the extent to which the information is known outside of the owner's business; (2) the extent to which it is known by employees and others involved in the owner's business; (3) the extent of measures taken by the owner to guard the secrecy of the information; (4) the value of the information to the owner and to his competitors; (5) the amount of effort or money expended by the owner in developing the information; and (6) the ease or difficulty with which the information could be properly acquired or duplicated by others. SI Handling Sys., Inc. v. Heisley, 753 F.2d 1244, 1256 (3d Cir.1985) (citing Restatement of Torts § 757 cmt. b (1939)). A trade secret can be a plan or process, tool or mechanism, compound or element which is known only to its owner and those employees to whom it is necessary to inform of it. See Van Prods. Co. v. General Welding & Fabricating Co., 419 Pa. 248, 213 A.2d 769, 775 (Pa.1965). “Novelty is only required of a trade secret to the extent necessary to show that the alleged secret is not a matter of public knowledge.” Id. Consequently, information that is in the public domain cannot be protected as trade secrets. See id. Protection has been extended to certain business and marketing information. See, e.g., SI Handling, 753 F.2d at 1260 (extending trade secret protection to cost and pricing information); Union Carbide Corp. v. UGI Corp., 731 F.2d 1186, 1191 (5th Cir.1984) (extending trade secret protection to marketing information and strategies); Alexander & Alexander, Inc. v. Drayton, 378 F.Supp. 824, 833 (E.D.Pa.) (extending trade secret protection to the terms of specific customer accounts), aff'd, 505 F.2d 729 (3d Cir.1974) (unpublished table decision); Air Prods. & Chems., Inc. v. Johnson, 296 Pa.Super. 405, 442 A.2d 1114, 1121 (Pa.Super.Ct.1982) (extending trade secret protection to business plans and financial projections). “Customer lists and confidential business information cannot be trade secrets if they are easily or readily obtained, without great difficulty, through some independent source other than the trade secret holder.” See Smith, 869 F.2d at 200; see also General Bus. Servs., Inc. v. Rouse, 495 F.Supp. 526, 530 (E.D.Pa.1980). “Accordingly, courts have denied protection to customer lists which are easily generated from trade journals, ordinary telephone listings, or an employee's general knowledge of who, in an established industry, is a potential customer for a given product.” Smith, 869 F.2d at 200; see also S.I. Handling, 753 F.2d at 1258. *8 Under the following principles, the Court grants summary judgment for the Defendants on the Plaintiff's claim of misappropriation of trade secret because it finds that the Plaintiff's confidential information simply does not fall within even a broad reading of the definition of a trade secret. The identities of two companies as possible acquisition targets is not the type of information Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 29 of 64 Emtec, Inc. v. Condor Technology Solutions, Inc., Not Reported in F.Supp.2d (1998) 1998 WL 834097 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 6 meant to be protected as a trade secret. Plaintiff argues the identity of these two corporations is similar to a customer list. However, this is not information that will be routinely used in Plaintiff's business as a computer company, nor does it give the Plaintiff an everyday advantage over Plaintiff's competitors. See Restatement of Torts § 757 cmt. b (1939) (noting that proposed security investments are not trade secrets to a company because it is a single event and not used every day as an advantage over competitors). Therefore, this Court finds that the identities of two companies for possible acquisition is not a trade secret. Moreover, this Court is persuaded by the similar reasoning employed by the Second Circuit in Lehman v. Dow Jones & Co., 783 F.2d 285, 297-98 (2d Cir.1986). In Lehman, the plaintiff provided the defendant with information regarding the availability of a certain company for merger. See id. This information included the attractiveness of such a merger for the defendant. See id. The Second Circuit, using the same Restatement definition of a trade secret, held that this merger information was not used in the operation of plaintiff's business. See id. Rather, the court found that this information was a single event and did not constitute a trade secret under the Restatement definition. See id. This Court agrees with the Lehman court's analysis and finds that the information provided by Emtec to Condor and Commonwealth was not a trade secret. Even if this Court were to find that this information fit the Restatement's definition of a trade secret, this information cannot be protected as a trade secret because it was in the public domain. See Smith, 869 F.2d at 200 (“Customer lists and confidential business information cannot be trade secrets if they are easily or readily obtained, without great difficulty, through some independent source other than the trade secret holder.”). In this case, Defendants submitted the affidavits of Richard T. Marino, the President and CEO of Corporate Access, and Michael G. Paglaicetti, the President of CHMC. These affidavits outline the numerous and substantial efforts that Corporate Access and CHMC undertook in order to merge with other computer companies. These efforts included, inter alia, the hiring of an investment banker to locate acquisition partners, the distribution of memorandum describing Corporate Access to hundreds of possible acquisition companies, and CHMC's acquisition discussions with companies prior to meeting with Emtec. Clearly, the identity of Corporate Access and CHMC as possible acquisitions was very well known in the computer industry. Therefore, summary judgment for the Defendants on Plaintiff's misappropriation of trade secrets claim is proper on this ground as well. *9 Finally, this Court agrees with the Plaintiff that whether information is a trade secret is ordinarily a question of fact to be decided by a jury. See Protocomm Corp. v. Fluent, Inc., No. CIV.A.93-0518, 1995 WL 3671, at *4 (E.D.Pa. Jan.4, 1995). Nevertheless, the Court finds that summary judgment is appropriate in this case because, like all questions of fact, whether a plaintiff has a protective trade secret may be determined by a court where no reasonable person could determine the issue in any way but one based upon the evidence. See Frank W. Winne & Son, Inc. v. Palmer, No. CIV.A.91-2239, 1991 WL 155819, at *3 n. 3 (E.D.Pa. Aug.7, 1991); Continental Data Sys., Inc. v. Exxon Corp., 638 F.Supp. 432, 442 (E.D.Pa.1986). An appropriate Order follows. ORDER AND NOW, this 24th day of November, 1998, upon consideration of the Plaintiff's Motion for Leave to File an Amended Complaint and Defendants' Motion for Partial Summary Judgment, IT IS HEREBY ORDERED that the Plaintiff's Motion for Leave to File an Amended Complaint is GRANTED IN PART AND DENIED IN PART and Defendants' Motion for Partial Summary Judgment is GRANTED IN PART AND DENIED IN PART. IT IS FURTHER ORDERED that: (1) Plaintiff may file an amended complaint within twenty (20) days of the date of this Order to the extent that Plaintiff seeks to plead additional facts relating to consummation of the IPO roll-up transaction and correct a factual inaccuracy relating to a letter of intent between Emtec and CHMC; and (2) Count III of Plaintiff's complaint is DISMISSED. Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 30 of 64 Emtec, Inc. v. Condor Technology Solutions, Inc., Not Reported in F.Supp.2d (1998) 1998 WL 834097 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 7 All Citations Not Reported in F.Supp.2d, 1998 WL 834097 Footnotes 1 The May 13, 1997 letter agreement, attached as Exhibit B to the complaint, states in part: Commonwealth and Legg Mason have determined to continue to explore a possible business transaction relating to Legg Mason's client EMTEC, Inc. (“EMTEC”) and Commonwealth's client The Condor Group (“Condor”). Each of EMTEC and Condor have been having discussions with potential acquisition candidates (“Founding Companies”) which are engaged in their respective lines of business. Commonwealth and Legg Mason and representatives of EMTEC and Condor propose to meet to discuss a potential business transaction which would require disclosure of information relating to EMTEC's and Condor's Founding Companies. * * * Commonwealth and Legg Mason each hereby agrees that neither it nor Condor or EMTEC, as the case may be, will seek, directly or indirectly, to enter into a business transaction with any of the other's Founding Companies for a period of two years from the date hereof, without the prior written consent of the other party. Pl.'s Compl. at Ex. B. 2 Plaintiff's breach of contract claim, Count I, appears to be governed by Virginia law pursuant to the confidentiality agreement between the parties. Counts II and III, however, are tort actions. Neither party disputes the application of Pennsylvania's law to the torts found in Counts II and III. End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 31 of 64 Tab D Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 32 of 64 Fleet Nat. Bank v. Boyle, Not Reported in F.Supp.2d (2005) 2005 WL 2455673 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 2005 WL 2455673 Only the Westlaw citation is currently available. United States District Court, E.D. Pennsylvania. FLEET NATIONAL BANK, as agent for a syndicate of lenders Plaintiff, v. John P. BOYLE, et al., Defendants. No. Civ.A. 04CV1277LDD. | Sept. 12, 2005. Attorneys and Law Firms H. Marc Tepper, Robert B. Eyre, Buchanan Ingersoll, P.C., Philadelphia, PA, for Plaintiff. Kelly D. Eckel, Matthew A. Taylor, Patrick Loftus, Robert E. Kelly, Duane Morris LLP, Thomas A. Leonard, William J. Leonard, Obermayer Rebmann Maxwell & Hippel LLP, Michael J. Dolan, Kittredge, Donley, Elson, Fullem & Embick, LLP, Karen Pieslak Pohlmann, Marc J. Sonnenfeld, John H. McHugh, Morgan, Lewis & Bockius LLP, Andrew Hanan, Patricia M. Hamill, Conrad, O'Brien, Gellman & Rohn, P.C., Richard L. Scheff, Jeffrey S. Feldman, Montgomery McCracken Walker & Rhoads LLP, Daniel J. McGravey, David M. Laigaie, Gregory P. Miller, Michael A. Morse, Stephen G. Stroup, Miller Alfano & Raspanti PC, William J. Taylor, Kevin F. Berry, Cozen O'Connor, Bruce S. Haines, Daniel Segal, Matthew Hamermesh, Paul W. Kaufman, Hangley, Aronchick, Segal and Pudlin, Marc Durant, Shari Amster, Law Offices Durant & Durant, Richard A. Levan, Richard A. Levan and Associates, PC, Robert L. Hickok, Pepper Hamilton LLP, William J. Murray, Jr., Vaira and Riley, P.C., William J. O'Brien, Delaney & O'Brien, Philadelphia, PA, Julian Friedman, Maureen Nakly, Stillman & Friedman, New York, NY, Bruce M. Cohen, Robert G. Martin, Sapna Kanoor, Scott Richard Lord, Cohen & Lord, P.C., Marina Del Rey, CA, for Defendants. MEMORANDUM & ORDER DAVIS, J. I. INTRODUCTION *1 This case is one of three related civil actions pending before this Court arising out of the bankruptcy of DVI, Inc. in which the Court held oral arguments on the pending Motions to Dismiss on March 4, 2005. See WM High Yield v. O'Hanlon, No. 04-3423 (E.D. Pa. filed July 19, 2004); In re DVI Securities Litigation, No. 03-5336 (E.D. Pa. filed Sept. 23, 2003); see also Federal Ins. Co. v. O'Hanlon, No. 04-5068 (E.D. Pa. filed Oct. 28, 2004). Presently before the Court are Defendants' Motions to Dismiss (Doc. Nos. 72, 74, 75, 79, 80, 81, 82, 83, 85, 86, 87, 89, 91, 111, and 112) (“Mots. to Dismiss”) and Plaintiff's Amended Omnibus Response in Opposition (Doc. No. 125) (“Pl.'s Opp.”). For the reasons set forth herein, Defendants' Motions to Dismiss will be granted in part and denied in part. II. FACTUAL BACKGROUND AND PROCEDURAL HISTORY This action is brought by Fleet National Bank, as agent to a syndicate of lenders comprised of Fleet; U.S. Bank National Association; Bank One, N.A.; Bank of America, N.A.; Sovereign Bank; and CDC Mortgage Capital Inc., who provided lines of credit and other credit facilities to DVI for the operation of its financing business and who alleges that it was injured by a fraudulent scheme perpetrated by DVI, its subsidiaries, officers, directors, shareholders, employees, and third parties to obfuscate DVI's true financial performance. Defendants in this action and the positions they are alleged to have held at DVI are: (1) DVI Executives Michael O'Hanlon, President, Chief Executive Officer (“CEO”), and Chairman of the Board of DVI, CEO and a Director of subsidiary DVIFS, Member of DVI's Executive and Audit Committees, and CEO, President, and a Director of subsidiary DVIBC; Stephen Garfinkel, Executive Vice President and Chief Financial Officer (“CFO”) of DVI, CFO of DVIFS and DVIBC, Executive Vice President of DVIFS and DVIBC, a Director of DVIFS, and Member of the DVIFS Executive Committee; Richard Miller, Executive Vice President of DVI, President of subsidiary DVIFS, and a Member of the DVI Executive Committee; Anthony Turek, Executive Vice President, Chief Credit Officer, and a Member of the Executive Committee of DVI, Executive Vice President of DVIFS, and a Director of DVIBC; John Boyle, Vice President, Secretary, and Chief Accounting Officer of DVI, DVIFS, and DVIBC; Terry Cady, Senior Vice President of DVI and DVIFS and President and Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 33 of 64 Fleet Nat. Bank v. Boyle, Not Reported in F.Supp.2d (2005) 2005 WL 2455673 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 a Director of subsidiary DVIBC; Matthew Goldenberg, Vice President of Securitization of DVI, and a Director of Structured Finance at DVIFS; Philip Jackson, Vice President of Banking and Finance of DVI, and a Senior Vice President and Treasurer for DVIBC; Lisa Cruikshank, until May 2001, Vice President of the Treasury Department of DVIFS; Matthew Colisanti, an internal consultant for DVI and the head of DVI's internal workout group; and Raymond Fear, Vice President of Credit for DVI; (2) Members of DVI's Board of Directors Gerald Cohn, a Member of the Compensation, Credit, Executive, and Audit Committees and a Director of DVIFS; Harry Roberts, a Member of the Compensation, Audit, and Executive Committees, and an employee of DVI; William Goldberg, a Member of the Audit and Compensation Committees; John McHugh, a Member of the Audit and Compensation Committees; Nathan Shapiro, a Member of the Audit Committee; and (3) outside entities PresGar Imaging LLC, an owner and operator of imaging facilities; Radnet Management, Inc., a manager of medical imaging centers; and Dolphin Medical Inc., an owner of cancer treatment centers. 1 *2 Nonparty DVI is a now-bankrupt public Delaware corporation that operated primarily as a finance company for healthcare providers, through its subsidiaries, DVI Financial Service, Inc. (“DVIFS”) and DVI Business Credit (“DVIBC”). (Compl.¶¶ 2, 5.) More specifically, DVIFS financed the acquisition or lease of medical equipment, while DVIBC extended lines of credit for operating costs to healthcare providers, secured by a provider's accounts receivable. (Id. ¶¶ 6, 7.) The funds used by DVIFS to extend financing to its customers were provided through lines of credit and other credit facilities from banks and other institutional lenders, including the Fleet-agented syndicate of lenders, to whom the DVIFS Financed Contracts were pledged as collateral to secure the repayment of the loans by DVIFS. (Id. ¶ 8.) According to Plaintiff, beginning in 1995, DVI perpetrated fraudulent schemes and devices that, included repeated and continuous misrepresentations and omissions of material facts to Fleet and the lenders it represented (the “Fleet Lenders”) regarding: (i) the quality and amount of DVIFS Financed Contracts pledged to secure the loans advanced under the Fleet Line of Credit Facility; and (ii) the finances, credit and accounting policies and practices of the DVI companies generally and DVIFS in particular. (Compl.¶ 9, 10.) Plaintiff alleges that as a result of these fraudulent operations, Fleet and the Fleet Lenders suffered damages in excess of $50 million. (Id. ¶ 11.) DVI, DVIFS, and DVIBC filed joint petitions for bankruptcy on August 25, 2003. (Compl.¶ 12.) On October 14, 2003, the Bankruptcy Court appointed an Examiner, R. Todd Neilson (the “Examiner”), to investigate the circumstances surrounding DVI's demise. (Compl.¶ 13.) The Examiner conducted a five plus month investigation, culminating in the issuance of a detailed report (the “Examiner's Report” or “ER”) on April 7, 2004, attached to Plaintiff's Complaint, which described “the fraudulent activities, precarious financial condition, faulty, inaccurate and fraudulent credit and accounting practices, and other fraud and mismanagement in the operation of the DVI Enterprise over the course of at least four years.” (Comp.¶ 13.) Plaintiff filed the instant action on March 24, 2004 and subsequently amended its Complaint on September 20, 2004, alleging violations of RICO, Fraud, Conspiracy to Commit Fraud, Aiding and Abetting Fraud, Breach of Fiduciary Duty, Negligent Tortious Interference with Contract, Conspiracy to Commit Tortious Interference with Contract, Violation of Mass. Gen. Laws Ch. 93A, Sec. 11, Conversion, Conspiracy to Commit Conversion, and Unjust Enrichment. III. LEGAL STANDARD When determining a Motion to Dismiss pursuant to Rule 12(b)(6), the court may look only to the facts alleged in the complaint and its attachments. Jordan v. Fox Rothschild, O'Brien & Frankel, 20 F.3d 1250, 1261 (3d Cir.1994). Dismissal for failure to state a claim is appropriate when it clearly appears that plaintiff can prove no set of facts in support of the claim which would entitle him to relief. See Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); Robb v. City of Philadelphia, 733 F.2d 286, 290 (3d Cir.1984). Such a motion tests the legal sufficiency of a claim while accepting the veracity of the claimant's allegations. See Markowitz v. Northeast Land Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 34 of 64 Fleet Nat. Bank v. Boyle, Not Reported in F.Supp.2d (2005) 2005 WL 2455673 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 Co., 906 F.2d 100, 103 (3d Cir.1990); Sturm v. Clark, 835 F.2d 1009, 1011 (3d Cir.1987); Winterberg v. CNA Ins. Co., 868 F.Supp. 713, 718 (E.D.Pa.1994), aff'd, 72 F.3d 318 (3d Cir.1995). A court, however, need not credit conclusory allegations or legal conclusions in deciding a motion to dismiss. See General Motors Corp. v. New A.C. Chevrolet, Inc., 263 F.3d 296, 333 (3d Cir.2001); Morse v. Lower Merion School Dist., 132 F.3d 902, 906 (3d Cir.1997); L.S.T., Inc. v. Crow, 49 F.3d 679, 683-84 (11th Cir.1995). A claim may be dismissed when the facts alleged and the reasonable inferences therefrom are legally insufficient to support the relief sought. See Pennsylvania ex rel. Zimmerman v. PepsiCo., Inc., 836 F.2d 173, 179 (3d Cir.1988). IV. DISCUSSION A. Count I: Violations of RICO, 18 U.S.C. §§ 1961, et seq. *3 Plaintiff's Count I asserts that Defendants, O'Hanlon, Garfinkel, Boyle, Cady, Miller, Turek, Cohn, Shapiro, Goldberg, Roberts and McHugh (“the Individual RICO Defendants”) and the Special Relationship Entity Defendants violated the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961, et seq. by “engaging in a pattern of racketeering activity consisting of ... multiple instances of mail fraud (18 U.S.C. § 1341), wire fraud (18 U.S.C. § 1343), and financial institution fraud (18 U.S.C. § 1344).” (Comp.¶ 394.) Defendants assert that Plaintiff's RICO claim fails for lack of specificity. 2 Plaintiff asserts that it has sufficiently pled a RICO claim. 1. Statutory Framework Plaintiff asserts violations of subsections (a)-(d) of 18 U.S.C. § 1962. (Compl.¶ 402.) Plaintiffs asserting claim under subsection (a) must establish: (1) the existence of an enterprise, (2) the acquisition of income by a defendant from a pattern of racketeering activity, (3) use of any part or all of that income in acquiring an interest in or operating the enterprise, and (4) a nexus between the investment and plaintiff's injury. 18 U.S.C.A. § 1962(a); In re Enron Corp. Sec., Derivative & “ERISA” Litig., 284 F.Supp.2d 511, 541 n. 41 (S.D.Tex.2003) (citation omitted). In order to recover under subsection (b), a plaintiff must show (1) injury from the defendant's acquisition or control of an interest in a RICO enterprise, (2) injury from the predicate acts, and (3) a firmly established nexus between the interest in the RICO enterprise and the alleged racketeering activities. Lightning Lube, Inc. v. Witco Corp., 4 F.3d 1153, 1190 (3d Cir.1993). “It is not enough for the plaintiff merely to show that a person engaged in racketeering has an otherwise legitimate interest in an enterprise.” Id. To set forth a prima facie case of a RICO violation under section 1962(c), a plaintiff must allege (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity. 3 Lum v. Bank of America, 361 F.3d 217, 223 (3d Cir.2004) (citations omitted). “A pattern of racketeering activity requires at least two predicate acts of racketeering.” Id. (citing 18 U.S.C. § 1961(5)). These predicate acts may include, inter alia, mail fraud under 18 U.S.C. § 1341, 4 wire fraud under 18 U.S.C. § 1343, 5 and financial institution fraud under 18 U.S.C. § 1344. 6 18 U.S.C. § 1961(1). 7 Finally, to set out a cause of action under subsection (d), a plaintiff must demonstrate that the defendant agreed to conduct the affairs of the RICO enterprise through a pattern of racketeering activity to be accomplished through the acts of coconspirators. United States v. Pungitore, 910 F.2d 1084, 1135 (3d Cir.1990). “The federal mail and wire fraud statutes prohibit the use of the mail or interstate wires for purposes of carrying out any scheme or artifice to defraud.” Id. (citations omitted). While “[a] scheme or artifice to defraud need not be fraudulent on its face,” it must “involve some sort of fraudulent misrepresentation or omission reasonably calculated to deceive persons of ordinary prudence and comprehension.” Brokerage Concepts, Inc. v. U.S. Healthcare, Inc., 140 F.3d 494, 528 (3d Cir.1998) (citation omitted). Moreover, because Plaintiff alleges that the predicate acts in this case are comprised of instances of wire fraud, mail fraud, and financial institution fraud, Plaintiff's averments must satisfy the heightened pleading requirements of Federal Rule of Civil Procedure 9(b), which applies to averments of fraud. Federal Rule of Civil Procedure 9(b) requires that plaintiffs allege with particularity “the ‘circumstances' of the alleged fraud in order to place the defendants on notice of the precise misconduct with which they are charged, and to safeguard defendants against spurious charges of immoral and Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 35 of 64 Fleet Nat. Bank v. Boyle, Not Reported in F.Supp.2d (2005) 2005 WL 2455673 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 fraudulent behavior.” 8 Seville Indus. Mach. Corp. v. Southmost Mach. Corp., 742 F.2d 786, 791 (3d Cir.1984). According to the Third Circuit, “[p]laintiffs may satisfy this requirement by pleading the ‘date, place or time’ of the fraud, or through ‘alternative means of injecting precision and some measure of substantiation into their allegations of fraud.’ ” Lum v. Bank of America, 361 F.3d at 224 (citing Seville Indus. Mach. Corp. v. Southmost Mach. Corp., 742 F.2d at 791). “Plaintiffs also must allege who made a misrepresentation to whom and the general content of the misrepresentation.” Id. (citations omitted). *4 In the present case, the RICO cause of action consists of the following allegation of mail and wire fraud: 2. RICO and the PSLRA Defendants Shapiro, Goldberg, McHugh, and Cohn (by reference) argue that Plaintiff's RICO claims against them are preempted by section 107 the Private Securities Litigation Reform Act. (Shapiro, Goldberg, McHugh Dismiss at 18.) Section 107 amended 18 U.S.C. § 1964(c) to provide that “no person may rely upon any conduct that would have been actionable as fraud in the purchase or sale of securities to establish a violation of section 1962.” Moving Defendants rely primarily on Bald Eagle Area School District v. Keystone Financial, Inc., 189 F.3d 321 (3d Cir.1999), to support their argument that the signing of Form 10-K annual reports cannot form the predicate acts of fraud for a RICO action following the enactment of the PSLRA. In Bald Eagle Area School District, investors brought suit against their investment managers alleging securities fraud as the RICO predicate acts. The Third Circuit held that section 107 of the PSLRA prohibited the pleading of conduct that is otherwise actionable as securities fraud as RICO predicate offenses and that, therefore, the RICO action was barred. 189 F.3d 321, 329. In the instant matter, however, Plaintiff did not engage in the purchase or sale of securities nor base its RICO action thereon. Instead, Plaintiff alleges that the 10-Ks were among the fraudulent financial reports and certifications provided to the Fleet Lenders upon which Fleet relied in making credit decisions in continuing to extend credit to DVIFS. While courts have cautioned that defendants should not be permitted to artfully plead around section 107, see e.g. Gatz v. Ponsoldt, 297 F.Supp.2d 719, 730 (D.Del.2003), to implicate section 107 in the instant case would stretch the PSLRA beyond its plain meaning that the fraud that may not be relied upon in a RICO action is that which involves “the purchase or sale of securities.” 18 U.S.C. § 1964(c) (emphasis added). The parties do not cite, and this Court is not aware of, any cases wherein a plaintiff who had not bought or sold securities brought a RICO action alleging as a predicate offense fraud that was held to be barred as securities fraud preempted by the PSLRA. That an act of fraud could be considered securities fraud where committed in connection with the buying or selling of securities does not mean that where documents such as 10-Ks are supplied, not in connection with securities, but as financial information to a lender, that this is not fraud that may form a predicate act under RICO. Therefore, this Court will not bar Plaintiff's RICO claim on this ground. 3. Standing Defendants Shapiro, Goldberg, McHugh, and Cohn (by reference) further argue that Plaintiff lacks standing to bring its RICO claim. (Shapiro, Goldberg, McHugh Dismiss at 20.) These Defendants argue that this Court should adopt the standard used by the Second Circuit and, therefore, that “Fleet must exhaust its collateral remedies in contract and tort” before it can properly bring this action. (Id.) Plaintiff maintains that the Second Circuit standard is not applicable and, moreover, even if it was, that Plaintiff has satisfied it. *5 The Second Circuit has held that a RICO injury does not occur until a debt becomes uncollectible and the note holder exhausts his contractual remedies. First Nationwide Bank v. Gelt Funding Corp., 27 F.3d 763, 767-68 (2d Cir.1994). Plaintiff notes, however, that it has exhausted its contractual rights against the DVI entities in the bankruptcy court “by ultimately resolving its contract claims in the form of a Support and Option Agreement to which no Defendants were a party or any intended third-party beneficiary.” (Pl.'s Opp. at 66.) Moreover, the Third Circuit has stated merely that a plaintiff must at least demonstrate that damages are sufficiently concrete. Mathews v. Kidder, Peabody & Co., Inc., 260 F.3d 239, 246, n. 9 (3d Cir.2001) (citing Maio v. Aetna, Inc., 221 F.3d 472 (3d Cir.2000)). Plaintiff avers that it meets this standard because it has “expressly pled the manner in which DVIFS and DVI breached their contractual agreements ... with Fleet and the various ways in which Fleet's financial losses were concrete and distinct....” Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 36 of 64 Fleet Nat. Bank v. Boyle, Not Reported in F.Supp.2d (2005) 2005 WL 2455673 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 5 This Court agrees with the Plaintiff. The Support and Option Agreement is the means chosen by Plaintiff to assert, and therefore exhaust, its contractual remedies. Moreover, Plaintiff's Complaint sets forth its concrete financial losses. That Plaintiff may not be able to set forth an exact amount that it might eventually recover under the Support and Option Agreement does not deprive it of standing against the present Defendants. The Court will not dismiss this action for want of standing. 4. Sufficiency The RICO Defendants argue that Plaintiff's Complaint does not sufficiently plead nor plead with sufficient particularity its RICO claim. A review of Plaintiff's Complaint elucidates that it has sufficiently stated a cause of action to survive a Motion to Dismiss. Pages 31-101 of Plaintiff's Complaint allege a massive fraud on the part of the Individual Defendants and the SREs, supported by the Examiner's Report. Pages 102-103 outline the transfer of this fraudulent information via U.S. Mail or wire. Pages 103-104 outline Fleet's allegation of financial institution fraud. Pages 104-105 allege a pattern of racketeering activity. Finally, Plaintiff's Count I at pages 106-109 set forth its specific claims against Fleet. The specificity with which Fleet outlines its allegations of Defendants' fraudulent acts, some seventy pages, is sufficient to meet the particularity requirements of Federal Rule of Civil Procedure 9(b). Likewise, Plaintiff's allegations of the additional elements to set forth its RICO claim satisfy the notice requirement of Rule 8(a). Therefore, Defendants' Motions to Dismiss are DENIED as to Count I. B. Choice of Law as to Common Law Claims Plaintiff asserts in its Response that Massachusetts law should apply to the common law claims it has asserted because (1) it is a citizen of Massachusetts, (2) damaged in Massachusetts by (3) fraudulent and/or negligent representations made to it in Massachusetts and (4) reasonably relied on by Plaintiff in Massachusetts. 9 (Pl.'s Opp. at 111.) Defendants argue that Pennsylvania law should apply because the DVI entities are located in Pennsylvania, most of the Individual Defendants are Pennsylvania citizens and because the allegedly fraudulent conduct took place in Pennsylvania. (See e.g. Cohn Dismiss at 19; PresGar Dismiss at 27; Roberts Dismiss at 24.) *6 To determine which state's substantive law applies, the Court applies the conflict rules of the State in which it sits, here Pennsylvania. 10 Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941); Melville v. American Home Assur. Co., 584 F.2d 1306, 1308 (3d Cir.1978). Under Pennsylvania choice of law, the Court must first conduct an “interest analysis” of the policies of the interested states and then, based on the result, characterizes the choice of law problem as a true conflict, false conflict, or unprovided-for case. Budget Rent-a-Car System, Inc. v. Chappell, 407 F.3d 166, 170 (3d Cir.2005). If there is no difference between the laws of the forum state and those of the foreign jurisdiction, “the court may bypass the choice of law issue and rely interchangeably on the law of both states, although presumably the law of the forum state applies.” Liebman v. Prudential Fin., Inc., 2003 WL 22741415, at *2 (E.D.Pa. Nov.14, 2003) (citations omitted). A “true conflict” exists where multiple jurisdictions have an interest in the litigation that would be impaired if their law were not applied. Lacey v. Cessna Aircraft Co., 932 F.2d 170, 187 & n. 15 (3d Cir.1991). In such a case, the court must determine which state has the greater interest in the application of its law. Normann v. Johns-Manville Corp., 406 Pa.Super. 103, 593 A.2d 890, 893 (Pa.Super.1991). In determining which state has the greater interest, Pennsylvania uses a combination of the “government interest” approach and the “significant relationship” approach of Section 145 of the Restatement (Second) of Conflicts. 11 Troxel v. A.I. duPont Inst., 431 Pa.Super. 464, 636 A.2d 1179, 1180 (Pa.Super.1994) (citing Norman v. Johns-Manville Corp., 406 Pa.Super. 103, 593 A.2d 890, 893 (Pa.Super.1991)). In doing so, each state's contacts to the litigation must be considered qualitatively rather than quantitatively. Id. at 1181; Norman v. Johns-Manville Corp., 593 A.2d at 893. In making its decision, the court must analyze “the extent to which one state rather than another has demonstrated, by reason of its policies and their connection and relevance to the matter in dispute, a priority of interest in the application of its rule of law.” Id. (citation omitted). A “false conflict” exists where only one jurisdiction's governmental interest would be impaired by the application of the other jurisdiction's law, in such a case the law of the state that would be harmed must be applied. Lacey v. Cessna Aircraft Co., 932 F.2d 170 (3d Cir.1991). Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 37 of 64 Fleet Nat. Bank v. Boyle, Not Reported in F.Supp.2d (2005) 2005 WL 2455673 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 6 In such a case the law of the only interested jurisdiction is applied. Budget Rent-a-Car System, Inc. v. Chappell, 407 F.3d 166, 170 (3d Cir.2005). An “unprovided-for case” arises when no jurisdiction's interests would be impaired if its laws were not applied. In that case, the law of the place of the wrong governs. Id. (citing Miller v. Gay, 323 Pa.Super. 466, 470, 470 A.2d 1353 (Pa.Super.1983)). As a preliminary point of analysis, faced with a true conflict, the relevant contacts to be taken into account in applying the principles of section 6, pursuant to section 145(2), of the Restatement (Second) of Conflicts include that: (a) the injury occurred in Massachusetts, Fleet's principle place of business (See Pl.'s Opp. at 113); (b) the conduct that allegedly caused the injury occurred in Pennsylvania (See Cohn Dismiss at 19; Roberts Dismiss at 24; Pl.'s Opp. at 113.); (c) the Plaintiff's principle place of business is located in Massachusetts (Pl.'s Opp. at 111; Compl. ¶ 17), while the DVI entities and most of the Individual Defendants are Pennsylvania citizens (See Cohn Dismiss at 19; PresGar Dismiss at 27; Roberts Dismiss at 24); and (d) the place where the relationship between the parties is centered, while difficult to discern, is in Pennsylvania, as the money borrowed pursuant to the Fleet Credit Agreement was used by DVIFS for business purposes in Pennsylvania (See Com pl. ¶¶ 1-8 (describing DVIFS as a Pennsylvania-based business whose primary purpose was the financing of healthcare equipment purchases with funds provided through lines of credit from banks and lenders including the Fleet-agented syndicate).) *7 Qualitatively, citizenship and locus of the injury are weaker contacts in this instance. As Plaintiff noted in its complaint, it is acting as agent for an entire syndicate of banks, none of whom, besides Plaintiff, is alleged to be a citizen of Massachusetts. Moreover, Plaintiff is a national bank with substantial operations outside the state of Massachusetts. (See e.g. Compl. Exh. B at 25 (defining Fleet's “principle office” as being located in New York).) As such, it cannot be said that Plaintiff was in fact injured more in Massachusetts than it was in New York or any other state in which it operated, nor can it be said that Plaintiff would be justified in an expectation that Massachusetts law would govern any actions arising out of its relationship with DVI. A much qualitatively stronger contact is the locus of the conduct giving rise to the alleged injury, Pennsylvania, where Defendants engaged in the performance of DVIFS's reporting obligations to Fleet pursuant to the terms of their contractual relationship. Therefore, the Pennsylvania has the greater contacts to the instant litigation. Moreover, under the factors of section 6, the principles implicated generally favor Pennsylvania. Neither party can be said to have a justified expectation that its state law would apply, having contracted with a party from another state. The considerations of certainty, predictability and uniformity of result, and ease in the determination and application of the law to be applied the relevant policies favor Pennsylvania, the forum state. The general policy interests of the states likewise favor Pennsylvania. In this case, Pennsylvania has a interest in regulating injury-causing conduct occurring nonfortuitously within its borders undertaken by its citizens engaged in business within its borders, while Massachusetts has an interest in protecting its citizens from fraud and misrepresentation resulting in damage within the state. Generally, the conflicting state laws at issue evince a policy in Massachusetts of providing its citizens with broad protections from wrongful acts, while Pennsylvania's law demonstrates an interest in more narrowly-tailored standards to ensure that its citizens are not held liable without an appropriate showing of mens rea and corresponding acts. As a whole, then, the laws of Pennsylvania are favored over those of Massachusetts. This Court will, however, further analyze choice of law issue-by-issue, a process known as dépeçage. While the Pennsylvania Supreme Court has not addressed dépeçage directly, this Court is guided by other courts that have addressed this issue: “In the absence of controlling authority from the Pennsylvania Supreme Court, this Court is guided by the interpretation of Pennsylvania choice of law principles articulated by the Court of Appeals for the Third Circuit, which has repeatedly recognized that the choice of law process is issue-specific.” Manor Care Inc. v. Continental Ins. Co., 2003 WL 22436225 at n.5 (E.D.Pa. Oct. 27, 2003) (quoting Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 38 of 64 Fleet Nat. Bank v. Boyle, Not Reported in F.Supp.2d (2005) 2005 WL 2455673 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 7 Chemetron Inv., Inc. v. Fidelity & Cas. Co. of New York, 886 F.Supp. 1194, 1199 (W.D.Pa.1994) (citing Compagnie des Bauxites Guinee v. Argonaut-Midwest Ins. Co., 880 F.2d 685, 691 (3d Cir.1989))). This process permits a court to outline the conflicting laws and consider, where articulated, the competing policies underlying a particular area of law, as required by section 6. For the reasons set forth above, however, where no such specific policies have been outlined by the courts and a true conflict exists, Pennsylvania law applies. *8 With this background, the Court turns to the competing state laws at issue. As outlined below, true conflicts exist with regard to Plaintiff's Conspiracy, Aiding and Abetting Fraud, Negligent Misrepresentation, Tortious Interference, and Conversion claims. 1. Counts II and IV: Fraud and Aiding and Abetting Fraud There is no conflict between the laws of Pennsylvania and Massachusetts as they relate to common law fraud. Compare Gibbs v. Ernst, 538 Pa. 193, 647 A.2d 882, 889 (Pa.1994) (enumerating the elements of common law fraud in Pennsylvania) with Reisman v. KPMG Peat Marwick LLP, 965 F.Supp. 165, 172 (D.Mass.1997) (enumerating the elements of common law fraud in Massachusetts). Accordingly, the law of the forum state, Pennsylvania, will be applied. The law regarding aiding and abetting fraud, however, differs as between Pennsylvania and Massachusetts. The Pennsylvania Supreme Court has never recognized a cause of action for aiding and abetting fraud. See Klein v. Boyd, 1996 WL 675554, at *33 (E.D.Pa. Nov.19, 1996); S. Kane & Son Profit Sharing Trust v. Marine Midland Bank, 1996 WL 325894, at *9 (E.D.Pa. June 13, 1996). In Massachusetts, “liability for aiding and abetting a tort attaches where: (1) the defendant provides ‘substantial assistance or encouragement to the other party;’ and (2) the defendant has ‘unlawful intent, i.e., knowledge that the other party is breaching a duty and the intent to assist that party's actions.’ ” Austin v. Bradley, Barry & Tarlow, P.C., 836 F.Supp. 36, 40 (D.Mass.1993) (citations omitted). Both states have an interest in having their laws applied in this instance, therefore a true conflict exists. As discussed above, Pennsylvania has a interest in regulating conduct occurring nonfortuitously within its borders undertaken by its citizens engaged in business within its borders, while Massachusetts has an interest in protecting its citizens from fraud and misrepresentation resulting in damage within the state. Neither state, however, has elucidated a specific policy reason why it does or does not permit claims of aiding or abetting fraud. Applying the conclusions reached by this court, above, then, Pennsylvania law applies. 2. Counts III, X, and XIII: Conspiracy to Commit Fraud, Conspiracy to Commit Tortious Interference with Contract, and Conspiracy to Commit Conversion The laws regarding conspiracy are not the same in Pennsylvania and Massachusetts. Although the basic elements of civil conspiracy are the same in both states, Pennsylvania law further requires proof of “malice or intent to injure.” Compare Becker v. Chicago Title Ins. Co., 2004 WL 228672, at *13 (E.D.Pa. Feb.4, 2004) (stating that conspiracy requires 1) “a combination of two or more persons acting with a common purpose to do an unlawful act or to do a lawful act by unlawful means or for an unlawful purpose;” 2) “an overt act done in pursuance of the common purpose;” 3) “actual legal damage” and 4) malice or intent to injure, found only “when the sole purpose of the conspiracy is to cause harm to the party who has been injured”) with Johnson v. Brown & Williamson Tobacco Corp., 122 F.Supp.2d 194, 208 (D.Mass.2000) (citations omitted) (stating that conspiracy requires “1) a common design or agreement between the defendants to commit a wrongful act, and 2) a tortious act done in furtherance of their plan”). Moreover, in cases involving coercion, Massachusetts, unlike Pennsylvania, permits a claim for conspiracy where no underlying tort is otherwise pled. Kurker v. Hill, 44 Mass.App.Ct. 184, 689 N.E.2d 833, 836-37 (Mass.App.Ct.1998). *9 Again, while Massachusetts' law regarding conspiracy evinces a policy of providing its citizens with broad protections from concerted wrongful acts, Pennsylvania's malice requirement demonstrates an interest in a more narrowly-tailored standard to ensure that its citizens are not held liable without an appropriate showing of mens rea and a corresponding act. This is a true conflict. For the reasons stated above in subpart 2, supra, Pennsylvania law applies. 3. Counts V-VII: Breach of Fiduciary Duty The parties agree that Delaware law, the state of DVI's incorporation, applies to Plaintiff's breach of fiduciary Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 39 of 64 Fleet Nat. Bank v. Boyle, Not Reported in F.Supp.2d (2005) 2005 WL 2455673 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 8 duty claims. (See e.g. Roberts Dismiss at 36; Shapiro, Goldberg, McHugh Dismiss at 30 n. 16; Cruikshank Dismiss at 17; Plaintiff's Response at 45-49.) Indeed, breaches of fiduciary duties that involve the internal affairs of a Delaware corporation are controlled by Delaware law. See Coleman v. Taub, 638 F.2d 628, 629 n. 1 (3d Cir.1981) (citations omitted). 4. Count VIII: Negligent Misrepresentation Pennsylvania and Massachusetts law differ on claims of negligent misrepresentation. Although both states draw upon Section 552 of the Restatement (Second) of Torts, Pennsylvania law bars claims of negligent misrepresentation that seek to recover for purely economic losses, while Massachusetts recognizes an exception to the so-called economic loss doctrine for claims of negligent misrepresentation. Compare David Pflumm Paving & Excavathing, Inc. v. Foundation Servs. Co., 816 A.2d 1164, 1171 (Pa.Super.2003) (“the economic loss doctrine bars claims under Section 552 which result in solely economic loss”) with Josefek v. Loitherstein Envtl. Eng'g, Inc., 2004 WL 3218004, at *2 (Mass.Super.2004) (“While it is true that Massachusetts applies the economic loss doctrine and prohibits purely pecuniary recovery in tort absent personal or property damage, the Commonwealth has adopted an exception that permits recovery for pecuniary losses resulting from negligent misrepresentation.”). 12 Pennsylvania has clearly articulated its interest in the application of the economic loss doctrine in claims of negligent misrepresentation, stating that it reflects the concern that tort law (unlike contract law) is not generally intended to compensate parties for losses suffered as a result of a breach of duties which are assumed only by agreement; to recover in tort, there must be a breach of a duty of care imposed by law and a resulting injury. Bilt-Rite Contractors, Inc. v. The Architectural Studio, 581 Pa. 454, 866 A.2d 270, 273 (Pa.2005). The policy underlying the exception to the economic loss doctrine, by contrast, is the recognition that reliance upon a negligent misrepresentation by a party not in privity with the maker of the misrepresentation may be both justified and foreseeable. Here, Pennsylvania has an interest in protecting its citizens from liability in a situation that the Pennsylvania courts would likely view as a mischaracterization of DVI's potential breaches of its contractual duties to Fleet as negligent misrepresentations by the Individual Defendants. Such a scenario is precisely what the Pennsylvania law seeks to avoid. Given the strength of this policy reason, and for the reasons elucidated above, Pennsylvania law applies. 5. Counts IX: Tortious Interference with Contract *10 While the elements of tortious interference are substantially similar in both Pennsylvania and Massachusetts, compare Pawlowski v. Smorto, 403 Pa.Super. 71, 588 A.2d 36, 39-40 (Pa.Super.Ct.1991) with Kelley v. LaForce, 288 F.3d 1, 13 (1st Cir.2002), under Pennsylvania law, agents, officers and directors of a corporation cannot be held liable for tortious interference with the corporation's contracts. Michelson v. Exxon Research and Eng'g Co., 808 F.2d 1005, 1007-08 (3d Cir., 1987); Nix v. Temple Univ., 408 Pa.Super. 369, 596 A.2d 1132, 1137 (Pa.Super.Ct.1991). For the reasons discussed, supra, Pennsylvania law applies. 6. Counts XII: Conversion The elements of a claim for conversion under Pennsylvania Law are: (1) the deprivation of another's right in, or use or possession of, property, (2) without the owner's consent, and (3) without lawful justification. Joyce v. Alti America, Inc., 2001 WL 1251489, at *5 (E.D.Pa.2001) (citations omitted). In Massachusetts the elements of conversion require an intentional or wrongfully exercised act of ownership, control or dominion over personal property to which a defendant has no right of possession at the time. Bleicken v. Stark, 61 Mass.App.Ct. 619, 813 N.E.2d 572, 576 n. 2 (Mass.App.Ct.2004) (citations omitted). Despite these similarities, however, Pennsylvania law, unlike Massachusetts law, requires that a conversion defendant actually appropriate property for her own use. Chrysler Credit Corp. v. Smith, 434 Pa.Super. 429, 643 A.2d 1098, 1100 (Pa.Super.Ct.1994). As discussed above, Pennsylvania law applies. Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 40 of 64 Fleet Nat. Bank v. Boyle, Not Reported in F.Supp.2d (2005) 2005 WL 2455673 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 9 7. Count XIV: Unjust Enrichment There is no conflict between the laws of Pennsylvania and Massachusetts regarding claims of unjust enrichment. Compare Bunnion v. Consol. Rail Corp., 108 F.Supp.2d 403, 427 (E.D.Pa.1999) with Hessleton v. BankNorth, N.A., 2004 WL 1588255, at *3 (Mass.Super. May 11, 2004). Therefore, the law of Pennsylvania, the forum state, applies. C. Counts II-IV: Fraud, Conspiracy to Commit Fraud, and Aiding and Abetting Fraud 1. Fraud Defendants argue that Count II of Plaintiff's Complaint does not allege with the necessary particularity under Federal Rule of Civil Procedure 9(b) the elements of a fraud claim under Pennsylvania law, which are: (1) a material misrepresentation; (2) made with scienter; (3) resulting in justifiable reliance by a plaintiff thereon; and (4) damages. See Fed.R.Civ.P. 9(b) (requiring that averments of fraud be made with particularity); Booze v. Allstate Ins. Co., 750 A.2d 877, 800 (Pa.Super.2000) (citing Hammer v. Nikol, 659 A.2d 617, 620 (Pa.Commw.Ct.1995)). 13 In addition, Defendants object to the use of so-called “group pleading” to attribute fraud to the individual Defendants, given Rule 9(b)'s particularity requirement. (See e.g. Goldenberg Dismiss at 12-15; Colasanti Dismiss at 14.) Defendants further argue that the “gist of the action” doctrine and the “economic loss” doctrine bar Plaintiff's claim. (See e.g. Cruikshank Dismiss at 11-13; O'Hanlon Dismiss at 10-13.) *11 A review of the Complaint elucidates that the following Individual Defendants are not alleged to have made any misrepresentations, either by signing a materially misleading document or making a misleading statement: Turek, Cady, Colisanti, Fear, Miller, Goldenberg and Cruikshank. 14 Plaintiff asserts that these Defendants are liable for statements made because they “knew that the fraudulent misrepresentations were false when made and intended that Plaintiff would be induced by such false and fraudulent representations to cause Plaintiff to lend DVIFS more money....” (Compl.¶ 408.) Such general or “group” pleading is not sufficient to maintain a cause of action under the requirements of Rule 9(b). Therefore, Count II is DISMISSED as to Defendants Turek, Cady, Colisanti, Fear, Miller, and Goldenberg. Defendants Cruikshank and O'Hanlon argue that the “gist of the action” doctrine bars Fleet's claim for fraud. Under Pennsylvania law, tort claims, including fraud, predicated entirely upon the contractual relationship of the parties are not viable causes of action. Werwinski v. Ford Motor Co., 286 F.3d 661, 680 (3d Cir.2002); Caudill Seed and Warehouse Co., Inc. v. Prophet 21, Inc., 123 F.Supp.2d 826 (E.D.Pa.2000). To determine if the alleged tort committed in the course of carrying out a contractual agreement is merely a “breach of contract claim in disguise” and thus not-actionable courts examine the claim to assess whether the “gist of the claims sounds in contract or tort.” Caudill Seed and Warehouse Co., Inc., 123 F.Supp.2d at 833 (E.D.Pa.2000). As articulated by this Court, “a tort claim is maintainable only if the contract is ‘collateral’ to conduct that is primarily tortious.” Id. (citations omitted); Quorum Health Resources, Inc., 49 F.Supp.2d at 432 (E.D.Pa.1999). The test adopted by Pennsylvania courts to characterize the “gist” of a claim looks to the source of the duty imposed on the parties. Id. Mutual consensus imposes a duty on the parties in a contract claim while a party's duty in a tort action is imposed as a matter of social policy. Bohler-Uddeholm America, Inc. v. Ellwood Group, Inc., 247 F.3d 79, 103 (3d Cir.2001) (adopting Pennsylvania state courts' interpretation that the important difference between contract and tort actions is that the latter stems from the breach of duties imposed as a matter of social policy, while the former stems from the breach of duties imposed by mutual consensus). Here, however, the Individual Defendants were not party to the contract and Defendants O'Hanlon and Cruikshank cite no authority for the proposition that they, as nonparties to the contract, are subject to the gist of the action doctrine. Moreover, Plaintiff's claim does sound in tort. While DVI may have breached its contract with the Fleet lenders when its financial situation deteriorated and fell below the requirements of the credit agreement (Compl.Exh. B.), the Individual Defendants' alleged perpetration of an improper scheme to hide that fact-for reasons above and beyond its relationship with the Fleet lenders-is totally separate from the agreement itself. Therefore, the gist of the action doctrine does not bar Plaintiff's fraud claim. *12 Because this Court concludes, above, that Plaintiff's fraud claim is based in tort, it need not address Defendants' “economic loss doctrine” claims. Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 41 of 64 Fleet Nat. Bank v. Boyle, Not Reported in F.Supp.2d (2005) 2005 WL 2455673 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 10 Plaintiff has, with regard to the remaining Individual Defendants, adequately pled fraud. While Pennsylvania law does require a material misrepresentation to set forth a prima facie cause of action, all Defendants against whom Plaintiff asserts Count II are Defendants who, as discussed above, are alleged to have made a misstatement. Therefore, remaining Defendants' Motions to Dismiss Plaintiff's claims for common law fraud are DENIED. 2. Conspiracy to Commit Fraud To make out a claim for common law civil conspiracy under Pennsylvania law, Plaintiff must allege: “(1) a combination of two or more persons acting with a common purpose to do an unlawful act or to do a lawful act by unlawful means or for an unlawful purpose; (2) an overt act done in pursuance of the common purpose; and (3) actual legal damage.” Chantilly Farms, Inc. v. W. Pikeland Twp., 2001 WL 290645, at *12 (E.D.Pa. Mar.23, 2001) (quoting Smith v. Wagner, 403 Pa.Super. 316, 588 A.2d 1308, 1311-12 (Pa.Super.1991)). “Proof of malice, i.e., an intent to injure, is an essential proof of a conspiracy.” Skipworth v. Lead Industries Ass'n, Inc., 547 Pa. 224, 690 A.2d 169, 174 (Pa.1997) (citation omitted). The element of malice requires a showing that “the sole purpose of the conspiracy is to cause harm to the party who has been injured.” Becker v. Chicago Title Ins. Co., 2004 WL 228672, at *13 (E.D.Pa. Feb.4, 2000) (citing Thompson Coal Co. v. Pike Coal Co., 488 Pa. 198, 412 A.2d 466, 472 (Pa.1979)). Defendants argue that (1) Plaintiff has failed to plead a prima facie case with particularity; (2) Plaintiff has failed to make specific allegations that Defendants acted with the required “malicious intention” solely to injure Plaintiff; (3) a corporation cannot conspire with its employees and agents; and (4) the conspiracy count must be dismissed because the underlying tort must be dismissed. In light of the finding, below, that Plaintiff did not sufficiently allege that the sole purpose of the conspiracy was to harm the it, the Court does not reach Defendants' other objections. In Thompson Coal Co. v. Pike Coal Co., 488 Pa. 198, 412 A.2d 466 (Pa.1979) the Supreme Court of Pennsylvania held that where the facts show that a person acted to advance his own business interests, those facts constitute justification and negate any alleged intent to injure. Likewise, here, Plaintiff's Amended Complaint makes clear that the Defendants' purpose in entering into the alleged conspiracy was to enable DVI to raise new capital to fund its growth, to avoid an adverse impact on DVI's reported financial condition, and to insure its continued access to the Securitizations market and the Fleet line of credit. The fact that it may have been necessary to deceive Plaintiff in order to carry out their scheme in no way indicates that they acted with malice solely to injure Plaintiff. Therefore, the Defendants' Motions to Dismiss are GRANTED with regard to Count III for Civil Conspiracy to Commit Fraud. 3. Aiding and Abetting Fraud *13 Defendants argue, and Plaintiff admits, that no Pennsylvania court has recognized a cause of action Aiding and Abetting Fraud. This Court follows the lead of the majority of other courts in this district, in declining to expand Pennsylvania law, and holds that the Pennsylvania Supreme Court would not permit such an action. See Klein v. Boyd, 1996 WL 675554, at *33 (E.D.Pa. Nov.19, 1996); S. Kane & Son Profit Sharing Trust v. Marine Midland Bank, 1996 WL 325894, at *9 (E.D.Pa. June 13, 1996). Therefore, Defendants' Motions to Dismiss are GRANTED with respect to Count IV, which is hereby DISMISSED. D. Counts V-VII: Breach of Fiduciary Duty, Breach of Fiduciary Duty, and Breach of Fiduciary Duty- Failure to File for Bankruptcy Protection Earlier As discussed above, Delaware law applies to Counts V- VII. Under Delaware law, directors owe fiduciary duties to creditors when an entity is in the zone of insolvency. Geyer v. Ingersoll Publications Co., 621 A.2d 784, 787 (Del.Ch.1992). Defendants contend that Plaintiff's Breach of Fiduciary Duty claims must be dismissed because (1) Defendants have not engaged in self-dealing; (2) DVI's Restated Certificate of Incorporation contains an exculpatory provision that shelters the Defendants from the duty of care claims; (3) Fleet has not overcome the protections of the business judgment rule; and (4) Fleet misconstrues the duty owed by a creditor. In addition, Defendants Goldenberg and Colisanti argue that they cannot be held liable because they were not officers or directors of DVI or DVIFS. Finally, Defendant Cruikshank argues that Fleet has not alleged that DVI was insolvent or in the zone of insolvency prior to her Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 42 of 64 Fleet Nat. Bank v. Boyle, Not Reported in F.Supp.2d (2005) 2005 WL 2455673 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 11 departure in 2001. (Cruikshank Dismiss at 19.) Plaintiff asserts that none of the Defendants' objections are valid because its claims are for direct, rather than derivative, harm. As set forth below, this Court concludes that Plaintiff's Breach of Fiduciary Duty Claims are derivative, not direct, and do not overcome the exculpatory provision of the DVI Certificate of Incorporation nor the presumptions of the Business Judgment Rule. Therefore the Court need not reach the Defendants' remaining arguments. 1. Direct versus Derivative claims by Creditors A creditor's right to maintain an action for breach of fiduciary duty arises when a director of an insolvent corporation, through a breach of fiduciary duty, injures the corporation itself. In that case, the claim against the director for breach of fiduciary duty belongs to the corporation, but the class of persons who may press the fiduciary claim derivatively expands, to include creditors of the corporation. Production Resources Group, L.L.C. v. NCT Group, Inc., 863 A.2d 772, 792-93 (Del.Ch.2004). However, the Delaware Chancery Court has explained that there may be some circumstances wherein when a firm is insolvent, not only do the directors take on a fiduciary relationship to the company's creditors, but there might possibly exist “circumstances in which the directors display such a marked degree of animus towards a particular creditor with a proven entitlement to payment that they expose themselves to a direct fiduciary duty claim by that creditor.” Id. Fleet relies on this statement in bringing its breach of fiduciary duty claims. *14 In finding that a direct fiduciary duty claim might exist, the court in Production Resources Group explained the alleged wrongdoing as follows, the complaint alleges that the NCT board has: 1) not convened an annual stockholder meeting for several years; 2) caused NCT to issue or pledge billions of shares more than are authorized by its charter; 3) permitted Salkind [NCT's primary creditor and wife of a former director] to obtain liens on the assets of the corporation; 4) retained no less than 8 companies affiliated with Salkind under substantial consulting contracts while refusing to cause the company to pay its [5 year old] debt to PRG; 5) placed funds from Salkind into a company subsidiary, rather than NCT itself, in order to avoid collection efforts by PRG; and 6) paid substantial salaries and bonuses to Parrella and Lebovics [NCT's CEO and President, respectively] while refusing to cause the company to pay its debt to PRG. Id. at 799-800. The court concluded that these facts “raise a sufficient inference of scienter to fall outside the reach of the exculpatory charter provision especially given the extreme financial distress NCT has been suffering for several years.” Id. at 799. And concluded that “[t]his strange method of proceeding is suggestive of self-interest on the part of Salkind, Parrella, and Lebovics and of bad faith on the part of the NCT board members who are putatively independent.” Id. at 800. Production Resources Group, however, is readily distinguished from the facts before this Court. Indeed, the court in Production Resources Group stressed multiple times the unusual and particularized facts that gave rise to its holding. The court in Production Resources Group based its conclusion that Plaintiff's direct breach of fiduciary duty claim survived the motion to dismiss on the fact that “NCT's board has taken particular steps to disadvantage PRG as a creditor and to frustrate its efforts at collection.” The court concluded that “[i]n view of the odd facts pled and the flavor of self-dealing they generate, [the court is] not prepared to rule out the possibility that PRG can prove that the NCT board has engaged in conduct towards PRG that might support a direct claim for breach of fiduciary duty by it as a particular creditor” where “NCT breached specific promises made to PRG and has taken steps to accept new capital in a manner that was intentionally designed to hinder PRG's effort to obtain payment.” Id. (emphasis added). The court raised “the legitimate concern that the NCT board is not pursuing the best interests of NCT's creditors as a class with claims on a pool of insufficient assets, but engaging in preferential treatment of the company's primary creditor and de facto controlling stockholder (and perhaps of its top officers, Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 43 of 64 Fleet Nat. Bank v. Boyle, Not Reported in F.Supp.2d (2005) 2005 WL 2455673 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 12 who are also directors) without any legitimate basis for the favoritism.” Id. In the case before this Court, Plaintiff does assert that Merrill Lynch was given preferential treatment as a creditor. However, Plaintiff does not make allegations of self-dealing or allege that these actions were “intentionally designed to hinder [Fleet's] effort to obtain payment.” Id. Because Fleet does not established the facts upon which the Production Resources Group court relied in permitting a direct claim, Fleet's breach of fiduciary duty claims must proceed derivatively and, therefore, fail. 2. Exculpatory Charter Provision *15 The Individual Defendants argue that DVI's certificate of incorporation contained an exculpatory charter provision established pursuant to 8 Del. C. § 102(b)(7) (authorizing a certificate of incorporation to contain “[a] provision eliminating or limiting the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director....”). However, “[o]nly claims of the corporation asserted derivatively by creditors fall within the charter defense.” Production Resources Group, L.L.C. v. NCT Group, Inc., 863 A.2d 772, 794 (Del.Ch.2004). An exculpatory charter provision does not protect directors from liability for various acts of disloyalty towards the firm. “Thus, to the extent that directors have engaged in conscious wrongdoing or in unfair self-dealing, the exculpatory charter provision does not insulate them from fiduciary duty claims asserted on the firm's behalf by creditors.” Id. at 397. See 8 Del. C. § 102(b)(7) (prohibiting exculpation for a variety of faithless acts including “(i) for any breach of the director's duty of loyalty to the corporation or its stockholders; (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (iii) under section 174 of this title; or (iv) for any transaction from which the director derived an improper personal benefit.”). Plaintiff does not deny that an exculpatory clause exists, but instead argues that under Production Resources Group it does not apply. Because this Court concluded, above, that Plaintiff may not bring a “direct” breach of fiduciary duty claim, the rationale suggested in Production Resources Group does not apply. However, because, as noted above “affirmative defenses generally will not form the basis for dismissal under Rule 12(b)(6)” we consider the other grounds on which Plaintiff's claim fail. As set forth below, Plaintiff has not made such a showing of bad faith or self-dealing as to exempt the conduct of the Defendants from the exculpatory clause. 3. The Business Judgment Rule and Self Dealing Under Delaware law, the business judgment rule “is a presumption that directors act in good faith, on an informed basis, honestly believing that their action is in the best interests of the company.” In re: Tower Air, Inc., 416 F.3d 229, 238 (3d Cir.2005) (citing Aronson v. Lewis, 473 A.2d 805, 812 (Del.1984)). Therefore, Plaintiff must plead that it overcomes the presumption created by that rule-that DVI's directors and officers acted in good faith and on an informed basis. In re Walt Disney Co. Derivative Litig., 825 A.2d 275, 286 (Del.Ch.2003). Delaware courts have said that overcoming the presumptions of the business judgment rule may be accomplished by showing either irrationality or inattention. A plaintiff may overcome the presumption that directors and officers acted in good faith by establishing that a decision was so egregious as to constitute corporate waste. In re: Tower Air, Inc., 416 F.3d at 238 (citing Gagliardi v. TriFoods Int'l, Inc., 683 A.2d 1049, 1053 (Del.Ch.1996)). To show irrationality a plaintiff must demonstrate that no reasonable businessperson could possibly authorize the action in good faith, such that the only explanation is bad faith. Id. Alternatively, a plaintiff may overcome the presumption that directors and officers acted on an informed basis by establishing that a decision was the product of an irrational process or that directors failed to establish an information and reporting system reasonably designed to provide the senior management and the board with information regarding the corporation's legal compliance and business performance, resulting in liability. In re Caremark Int'l Inc. Derivative Litig., 698 A.2d 959, 967-70 (Del.Ch.1996). According to the Third Circuit, “[V]iewing these methods along a different axis, action may lead to liability where the action or the process that led to it were irrational; inaction may lead to liability where no red flag monitoring system is installed and non- compliance with applicable legal standards results.” In re: Tower Air, Inc., 416 F.3d at 239. *16 To overcome the presumption of the business judgment rule, then, Plaintiff must allege bad faith, self dealing, waste, or irrationality. Plaintiff has sufficiently demonstrated none of these. Plaintiff does not deny Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 44 of 64 Fleet Nat. Bank v. Boyle, Not Reported in F.Supp.2d (2005) 2005 WL 2455673 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 13 that it has made no allegations of self dealing. And, instead, mistakenly argues that Defendants must make an affirmative evidentiary showing that they properly exercised their business judgment. (Pl.'s Opp. at 55.) Plaintiff also misconstrues the nature of fiduciary duty in insolvency. Plaintiff argues that Defendants must demonstrate that they made decisions for the benefit of the creditors. As discussed above and in Production Resources Group, L.L.C. v. NCT Group, Inc., 863 A.2d 772 (Del.Ch.2004), except in the limited circumstance set forth in Production Resources Group, officers and directors always owe a fiduciary duty to the corporation. Insolvency merely widens that circle of potential plaintiffs who may bring a derivative claim to include creditors. As Production Resources Group makes clear, it does not transfer the duty once owed to the corporation over to the creditors. Nor does it place an affirmative burden on officers and directors that reverses the presumption of the business judgment rule. Generally, affirmative defenses such as the business judgment rule and the exculpatory clause do not trigger dismissal of a complaint under Rule 12(b)(6), unless an unanswered affirmative defense appears on its face. Id. Here, however, Plaintiff does not directly deny those affirmative defenses. Because this Court concludes that Plaintiff's Breach of Fiduciary Duty Claims are derivative and do not overcome the exculpatory provision of the DVI Certificate of Incorporation nor the presumptions of the Business Judgment Rule, Counts V, VI, and VII are hereby DISMISSED. E. Count VIII: Negligent Misrepresentation Defendants argue that the economic loss doctrine bars this claim. Plaintiff contend that under the Pennsylvania Supreme Court's decision in Bilt-Rite Contractors, Inc. v. The Architectural Studio, 866 A.2d 270,287 (Pa.2005), it can maintain its negligent misrepresentation claim. Plaintiff does not deny, however, that its losses are purely economic. 1. The Economic Loss Doctrine Pennsylvania law generally bars claims of negligent misrepresentation that seek to recover for purely economic losses. David Pflumm Paving & Excavating, Inc. v. Foundation Servs. Co., 816 A.2d 1164, 1171 (Pa.Super.2003) (“the economic loss doctrine bars claims under Section 552 which result in solely economic loss”). As stated above, the doctrine reflects the concern that tort law (unlike contract law) is not generally intended to compensate parties for losses suffered as a result of a breach of duties which are assumed only by agreement; to recover in tort, there must be a breach of a duty of care imposed by law and a resulting injury. Bilt-Rite Contractors, Inc. v. The Architectural Studio, 581 Pa. 454, 866 A.2d 270, 273 (Pa.2005). *17 Recently, in Bilt-Rite, the Pennsylvania Supreme Court adopted an exception from the economic loss doctrine “where information is negligently supplied by one in the business of supplying information, such as an architect or design professional, and where it is foreseeable that the information will be used and relied upon by third persons, even if the third parties have no direct contractual relationship with the supplier of information.” Bilt- Rite Contractors, Inc. v. The Architectural Studio, 581 Pa. 454, 866 A.2d 270, 287 (Pa.2005). In Bilt-Rite, a general contractor sued an architect for alleged negligent misrepresentations in plans and specifications upon which the contractor relied in submitting the winning bid for construction of a school. This holding recognized that reliance upon a negligent misrepresentation by a party not in privity with the maker of the misrepresentation is both justified and foreseeable in the particular context. Because the Court stressed the narrowness of its holding, and the parties do not contend that Defendants are “in the business of providing information” this Court concludes that the Bilt-Rite is not applicable in the instant case. Accordingly, Plaintiff's Negligent Misrepresentation claim is DISMISSED. F. Counts IX-X: Tortious Interference with Contract and Conspiracy to Commit Tortious Interference with Contract Defendants argue that (1) Fleet's claim is barred by its loan agreement with DVIFS because DVIFS cannot tortiously interfere with a contract to which it is a party and officers are deemed to act on behalf of the corporation; (2) Fleet has not adequately pled malice; and (3) Fleet has failed to allege any intentional act by the Defendants. Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 45 of 64 Fleet Nat. Bank v. Boyle, Not Reported in F.Supp.2d (2005) 2005 WL 2455673 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 14 In order to prevail on a claim for intentional interference with contractual relations under Pennsylvania law, a plaintiff must prove: (1) existence of a contractual relation between itself and a third party; (2) purposeful action on the part of defendant, specifically intended to harm existing relation; (3) absence of privilege or justification on part of defendant; (4) occasioning of actual legal damage as result of defendants' conduct; and (5) for prospective contracts, a reasonable likelihood that relationship would have occurred but for the interference of defendant. Restatement (Second) of Torts § 768; Pelagatti v. Cohen, 370 Pa.Super. 422, 536 A.2d 1337, 1343 (1988). Under Pennsylvania law, agents officers and directors of a corporation cannot be held liable for tortious interference with the corporation's contracts. See Nix v. Temple Univ., 408 Pa.Super. 369, 596 A.2d 1132, 1137 (Pa.Super.1991). The only exception arises if the officer's sole motive in causing the corporation to breach the contract is actual malice directed toward the Plaintiff or the officer's conduct is against the interest of the corporation. American Trade Partners, L.P. v. A-I International Importing Enterprises, Inc., 757 F.Supp. 545, 555 (E.D.Pa.1991); Avins v. Moll, 610 F.Supp. 308, 318 (E.D.Pa.1984). *18 Plaintiff does not outline what “purposeful action” each Defendant took that was “specifically intended to harm existing relation.” Nor does it allege malice as the Individual Defendants' sole motive. (See Compl.) Therefore, Count IX, Tortious Interference with Contract is DISMISSED. Likewise, Count X, Conspiracy to Commit Tortious Interference with Contract is DISMISSED. See Boyanowski v. Capital Area Intermeiate Unit, 215 F.3d 395, 405-06 (3d Cir.2000) (holding that “when a party fails to sufficiently allege in other counts any unlawful act or unlawful means, the conspiracy claim must also fail”). G. Count XI: Violation of Mass. Gen. Laws Ch. 93A, Sec. 11 Section 11 of the Massachusetts Consumer Protection Act provides a remedy to: Any person who engages in the conduct of any trade or commerce and who suffers any loss of money or property, real or personal, as a result of the use or employment by another person who engages in any trade or commerce of an unfair method of competition or an unfair or deceptive act or practice.... However, the Act further provides that: No action shall be brought or maintained under this section unless the actions and transactions constituting the alleged unfair method of competition or the unfair or deceptive act or practice occurred primarily and substantially within the commonwealth. For the purposes of this paragraph, the burden of proof shall be upon the person claiming that such transactions and actions did not occur primarily and substantially within the commonwealth. Mass. Gen. Laws. Ch. 93A, § 11. As discussed above, Massachusetts' contacts to the instant litigation are tenuous. Plaintiff has not demonstrated that the alleged culpable behavior occurred primarily and substantially within Massachusetts. Therefore, Plaintiff's claim under the Consumer Protection Act is DISMISSED. H. Counts XII-XIII: Conversion and Conspiracy to Commit Conversion Conversion is a deprivation, by a defendant, of a plaintiff's right to a chattel or an interference with a plaintiff's use or possession of a chattel without the plaintiff's consent and without lawful justification. Pittsburgh Const. Co. v. Griffith, 834 A.2d 572, 581-82 (Pa.Super.2003) (citing Chrysler Credit Corporation v. Smith, 434 Pa.Super. 429, 643 A.2d 1098, 1100 (Pa.1994)). “A plaintiff has a cause of action in conversion if he or she had actual or constructive possession of a chattel at the time of the alleged conversion.” Id. Money may be the subject of conversion. Francis J. Bernhardt, III, P.C. v. Needleman, 705 A.2d 875, 878 (Pa.Super.1997) (quoting Shonberger v. Oswell, 365 Pa.Super. 481, 530 A.2d 112, 114 (Pa.Super.1987)). However, the failure to pay a debt is not conversion. Id. As discussed above, the gist of the action doctrine does not bar Plaintiff's claims as they properly sound in tort. Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 46 of 64 Fleet Nat. Bank v. Boyle, Not Reported in F.Supp.2d (2005) 2005 WL 2455673 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 15 However, Plaintiff's Complaint does not allege that any of the Defendants appropriated the lenders' property for their own use. Therefore, Plaintiff's Conversion and Conspiracy to Commit Conversion claims are DISMISSED. I. Count XIV: Unjust Enrichment *19 Under Pennsylvania law the elements of an unjust enrichment claim are: (1) the plaintiff conferred benefits upon the defendant; (2) the defendant realized those benefits; and (3) the defendant accepted and retained the benefits under circumstances in which it would be inequitable for it to retain them without payment of value. Bunnion v. Consolidated Rail Corp., 108 F.Supp.2d 403, 427 (E.D.Pa.1999) (citing Schenck v. K.E. David, Ltd., 446 Pa.Super. 94, 666 A.2d 327, 328 (Pa.Super.1995)). Plaintiff fails to allege facts establishing any of the required elements for a claim of unjust enrichment, therefore its claim fails. V. CONCLUSION For the foregoing reasons, Defendants' Motions to Dismiss are GRANTED with respect to Counts III, IV, V, VI, VII, VIII, IX, X, XI, XII, XIII, and XIV; DENIED with respect to Count I; GRANTED in part with respect to Count I as to Defendants Turek, Cady Colisanti, Fear, Miller, Goldenberg, and Cruikshank; and DENIED in part with respect to Count I as to Defendants O'Hanlon, Garfinkel, Boyle, Cohn, Shapiro, Goldberg, Roberts, McHugh, and Jackson. An appropriate order follows. ORDER AND NOW, this 12 th day of September, 2005, upon consideration of Defendants' Motions to Dismiss (Doc. Nos. 72, 74, 75, 79, 80, 81, 82, 83, 85, 86, 87, 89, 91, 111, and 112) and Plaintiff's Amended Omnibus Response in Opposition (Doc. No. 125), it is hereby ORDERED that Defendants' Motions to Dismiss are GRANTED in part and DENIED in part. It is further ORDERED as follows: 1. Defendants' Motions to Dismiss Count I of the Complaint are DENIED; 2. Defendants' Motions to Dismiss Count II of the Complaint are GRANTED as to Defendants Turek, Cady Colisanti, Fear, Miller, Goldenberg, and Cruikshank; 3. Defendants' Motions to Dismiss Count II of the Complaint are DENIED as to Defendants O'Hanlon, Garfinkel, Boyle, Cohn, Shapiro, Goldberg, Roberts, McHugh, and Jackson; 4. Defendants' Motions to Dismiss Counts III-XIV of the Complaint are GRANTED; The Clerk of Court is hereby directed to terminate the pending Motions to Dismiss (Doc. Nos. 72, 74, 75, 79, 80, 81, 82, 83, 85, 86, 87, 89, 91, 111, and 112) in this matter. All Citations Not Reported in F.Supp.2d, 2005 WL 2455673 Footnotes 1 Plaintiff voluntarily dismissed this action as against OnCure Medical Corp. on May 17, 2005 (Doc. No. 127). Adopting the language used by the parties, named executives and board members may be collectively referred to as “the Individual Defendants,” while PresGar, Radnet and Dolphin may be collectively referred to as “the Special Relationship Entities” or “SREs.” Fleet also identifies certain of the so-called Individual Defendants as the “Individual RICO Defendants,” including O'Hanlon, Garfinkel, Boyle, Cady, Miller, Turek, Cohn, Shapiro, Goldberg, Roberts and McHugh. 2 The Court notes that Defendants have, in several instances, adopted by reference each other's arguments for dismissal. As distinguishing amongst the Defendants in this context will not affect the analysis, the Court for simplicity purposes declines to so do. 3 The relevant portion of the RICO statute, 18 U.S.C. § 1962, provides: (a) It shall be unlawful for any person who has received any income derived, directly or indirectly, from a pattern of racketeering activity or through collection of an unlawful debt in which such person has participated as a principal within the meaning of section 2, title 18, United States Code, to use or invest, directly or indirectly, any part of such income, or the proceeds of such income, in acquisition of any interest in, or the establishment or operation of, any enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce. A purchase of Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 47 of 64 Fleet Nat. Bank v. Boyle, Not Reported in F.Supp.2d (2005) 2005 WL 2455673 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 16 securities on the open market for purposes of investment, and without the intention of controlling or participating in the control of the issuer, or of assisting another to do so, shall not be unlawful under this subsection if the securities of the issuer held by the purchaser, the members of his immediate family, and his or their accomplices in any pattern or racketeering activity or the collection of an unlawful debt after such purchase do not amount in the aggregate to one percent of the outstanding securities of any one class, and do not confer, either in law or in fact, the power to elect one or more directors of the issuer. (b) It shall be unlawful for any person through a pattern of racketeering activity or through collection of an unlawful debt to acquire or maintain, directly or indirectly, any interest in or control of any enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce. (c) It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt. (d) It shall be unlawful for any person to conspire to violate any of the provisions of subsection (a), (b), or (c) of this section. 4 18 U.S.C. § 1341 provides: Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, or to sell, dispose of, loan, exchange, alter, give away, distribute, supply, or furnish or procure for unlawful use any counterfeit or spurious coin, obligation, security, or other article, or anything represented to be or intimated or held out to be such counterfeit or spurious article, for the purpose of executing such scheme or artifice or attempting so to do, places in any post office or authorized depository for mail matter, any matter or thing whatever to be sent or delivered by the Postal Service, or deposits or causes to be deposited any matter or thing whatever to be sent or delivered by any private or commercial interstate carrier, or takes or receives therefrom, any such matter or thing, or knowingly causes to be delivered by mail or such carrier according to the direction thereon, or at the place at which it is directed to be delivered by the person to whom it is addressed, any such matter or thing, shall be fined under this title or imprisoned not more than 20 years, or both. If the violation affects a financial institution, such person shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both. 5 18 U.S.C. § 1343 provides: Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, transmits or causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice, shall be fined under this title or imprisoned not more than 20 years, or both. If the violation affects a financial institution, such person shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both. 6 18 U.S.C. § 1344 provides: Whoever knowingly executes, or attempts to execute, a scheme or artifice- (1) to defraud a financial institution; or (2) to obtain any of the moneys, funds, credits, assets, securities, or other property owned by, or under the custody or control of, a financial institution, by means of false or fraudulent pretenses, representations, or promises; shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both. 7 18 U.S.C. § 1961(1) defines “racketeering activity” as inter alia “... (B) any act which is indictable under any of the following provisions of title 18, United States Code: ... section 1341 (relating to mail fraud), section 1343 (relating to wire fraud), or section 1344 (relating to financial institution fraud)....” 8 Conspiracy claims under subsection (d), however, are not held to the Rule 9(b) pleading standards. Odesser v. Continental Bank, 676 F.Supp. 1305 (E.D.Pa.1987). 9 Recalling that in deciding a Motion to Dismiss pursuant to Rule 12(b)(6), the court may look only to the facts alleged in the complaint and its attachments, Jordan v. Fox Rothschild, O'Brien & Frankel, 20 F.3d 1250, 1261 (3d Cir.1994), it is notable that Plaintiff's Complaint alleges only that “Fleet is a national banking association with its principal place of business in Boston, Massachusetts.” (Compl.¶ 17.) 10 Plaintiff improperly cites J.C. Penney Life Ins. Co. v. Pilosi, 393 F.3d 356 (3d Cir.2004), for the proposition that application of Pennsylvania conflicts of law principles would be proper only where there is diversity jurisdiction-not where, as here, a court is exercising supplemental jurisdiction over state common law claims. J.C. Penney Life Insurance, however, does not stand for such a proposition. See 393 F.3d 356, 360 (stating simply: “Where federal jurisdiction is based on diversity of Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 48 of 64 Fleet Nat. Bank v. Boyle, Not Reported in F.Supp.2d (2005) 2005 WL 2455673 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 17 citizenship, as it is here, we apply the choice of law rules of the state in which the District Court sat.”). Courts in this District have made clear that whether jurisdiction is pursuant to 28 U.S.C. § 1332 (diversity jurisdiction) or 28 U.S.C. 1367(a) (supplemental jurisdiction) courts should apply the choice of law rules of the forum state. See Apple Corps. Ltd. v. Button Master, P.C.P., Inc., 1998 WL 126935, at *13 n. 15 (E.D.Pa. Mar.19, 1998); Ramsey v. AT & T Corp., 1997 WL 560183, at *2 (E.D.Pa. Aug.27, 1997); Beckwith v. Medex, Inc., 1995 WL 612938, at *3 n. 1 (E.D.Pa. Oct.11, 1995) (all holding that a court exercising supplemental jurisdiction over state law claims should apply the choice of law rules of the forum state). 11 The Restatement (Second) of Conflicts § 145 provides: (1) The rights and liabilities of the parties with respect to an issue in tort are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the occurrence and the parties under the principles stated in § 6. (2) Contacts to be taken into account in applying the principles of § 6 to determine the law applicable to an issue include: (a) the place where the injury occurred, (b) the place where the conduct causing the injury occurred, (c) the domicile, residence, nationality, place of incorporation and place of business of the parties, and (d) the place where the relationship, if any, between the parties is centered. These contacts are to be evaluated according to their relative importance with respect to the particular issue. The Restatement (Second) of Conflicts § 6 provides: (1) A court, subject to constitutional restrictions, will follow a statutory directive of its own state on choice of law. (2) When there is no such directive, the factors relevant to the choice of the applicable rule of law include (a) the needs of the interstate and international systems, (b) the relevant policies of the forum, (c) the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue, (d) the protection of justified expectations, (e) the basic policies underlying the particular field of law, (f) certainty, predictability and uniformity of result, and (g) ease in the determination and application of the law to be applied. 12 Notably, however, the Pennsylvania Supreme Court recently adopted an exception from the economic loss doctrine “where information is negligently supplied by one in the business of supplying information, such as an architect or design professional, and where it is foreseeable that the information will be used and relied upon by third persons, even if the third parties have no direct contractual relationship with the supplier of information.” Bilt-Rite Contractors, Inc. v. The Architectural Studio, 581 Pa. 454, 866 A.2d 270, 287 (Pa.2005). In doing so, the Court cited Nota Construction Corp. v. Keyes Assoc., 45 Mass.App.Ct. 15, 694 N.E.2d 401 (Mass.App.Ct.1998). See Bilt-Rite, 866 A.2d at 284-85. Because the Court stressed the narrowness of its holding, this Court concludes that the exception recognized in Bilt-Rite does not apply in the instant case. 13 Defendant Philip Jackson does not put forth an argument to dismiss Count II. 14 With regard to Defendant Cruikshank, the Complaint does allege that some Borrowing Notices were signed “in prior years” by Defendant Cruikshank. (Compl.¶ 90.) This alone, however, is not sufficient under Rule 9(b) to allege a misstatement. End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 49 of 64 Tab E Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 50 of 64 M.J. McPherson Services, L.L.P. v. Sports Images, Inc., Not Reported in F.Supp.2d (2006) 2006 WL 2505925 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 2006 WL 2505925 Only the Westlaw citation is currently available. United States District Court, N.D. Ohio, Eastern Division. M.J. McPHERSON SERVICES, L.L.P., Plaintiff, v. SPORTS IMAGES, INC., Defendant. No. 5:06 CV 465. | Aug. 28, 2006. Attorneys and Law Firms Morris H. Laatsch, Akron, OH, for Plaintiff. Johnathan E. Sullivan, Squire, Sanders & Dempsey, Columbus, OH, Kimberly A. Eberwine, Squire, Sanders & Dempsey, Cleveland, OH, for Defendant. MEMORANDUM OPINION AND ORDER PETER C. ECONOMUS, District Judge. *1 This matter is before the Court upon Defendant Sports Images, Inc .'s Motion to Dismiss (Dkt.# 10). I. BACKGROUND Plaintiff, M.J. McPherson Services LLP (“McPherson”) and Defendant, Sports Images Inc. (“Sports Images”) are both distributors and wholesalers of sports trading cards. (Dkt. # 1, Ex. A (“Complaint”) at ¶¶ 1-2). In November 2001, Plaintiff began purchasing trading cards from Defendant, who delivered the cards to Plaintiff's warehouse in Cuyahoga Falls, Ohio. (Id. at ¶ 2). In August 2002, Plaintiff and Defendant entered into an oral agreement whereby the card manufacturers who supplied Plaintiff would ship Plaintiff's cards to a warehouse owned by Defendant in Columbus, Ohio. (Id. at ¶ 4). Pursuant to the agreement, Defendant packaged and shipped the cards to Plaintiff's customers. (Id.). Each shipment was to bear Plaintiff's packing slips and contain invoices bearing Plaintiff's logo. (Id.). Plaintiff paid Defendant a fee for this service. (Complaint at ¶ 4). As a result of this agreement, and in order to complete delivery, Defendant acquired the names and addresses of all Plaintiff's clients. (Id. at ¶ 4). In December 2002, Defendant contacted Plaintiff in an attempt to negotiate acquisition of Plaintiff's customer list and business. (Id. at ¶ 5). After several months, the discussions ended without agreement. (Id. at ¶ 6). Plaintiff contends that shortly after the negotiations failed, Defendant “unilaterally and without consent of [Plaintiff] endeavored to sell sports trading cards directly to [Plaintiff's] customers under [Defendant's] logo, packing slips and invoices thereby eliminating McPherson as the vendor.” (Id.). Since that time, Plaintiff's principal customers Hartley Convenient Stores (“Hartley”) and Dairy Mart/Mac's Convenient Stores (“Dairy Mart”) have stopped purchasing trading cards from Plaintiff. (Id . at ¶¶ 7-8). In June 2003, Dairy Mart rejected a shipment of trading cards delivered by Defendant, and informed Plaintiff that Dairy Mart would no longer purchase cards from either Plaintiff or Defendant. (Complaint at ¶ 7). Plaintiff also alleges that since June 2003 Hartley has been a customer of the Defendant. (Id. at ¶ 8). Plaintiff filed a Complaint on January 30, 2006 in the Court of Common Pleas, Summit County, Ohio. (Dkt.# 1, Ex. A). The Complaint asserts two causes of action. Count 1 asserts a claim for tortious interference with business arising from Defendant's misappropriation of Plaintiff's customer base. (Id.). Count 2 asserts a claim for misappropriation of trade secrets pursuant to Ohio Revised Code § 1333.61. (Id.). On March 1, 2006, Defendant, pursuant to 28 U.S.C. § 1441, removed the action to this Court invoking diversity jurisdiction. (Dkt.# 1). Thereafter, Defendant submitted the instant Motion to Dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, for failure to state a claim upon which relief may be granted. II. STANDARD OF REVIEW *2 A 12(b)(6) motion tests whether a plaintiff has plead a cognizable claim. See Scheid v. Fanny Farmer Candy Shops, Inc., 859 F.2d 434, 436 (6th Cir.1988). Essentially, it allows the court to dismiss meritless cases and claims which would otherwise waste judicial resources and result in unnecessary discovery. See e.g., Nietzke v. Williams, 490 U.S. 319, 326-27 (1989). A court, however, is to presume that well plead allegations are true, resolve all doubts and inferences in favor of the pleader, and view the pleading in the light most favorable to the non-moving party. See Cent. States, Southeast & Southwest Areas Pension Fund Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 51 of 64 M.J. McPherson Services, L.L.P. v. Sports Images, Inc., Not Reported in F.Supp.2d (2006) 2006 WL 2505925 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 v. Mahoning Nat'l Bank, 112 F.3d 252 (6th Cir.1997). “[A] complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Conley v. Gibson, 355 U.S. 41, 45-46 (1957); see Neitzke, 490 U.S. at 326-27; Lewis v. ACB Bus. Serv., Inc., 135 F.3d 389, 405 (6th Cir.1997); Ang v. Proctor & Gamble Co., 932 F.2d 540, 544 (6th Cir.1991). Therefore, the standard applied in evaluating a motion to dismiss for failure to state a claim is very liberal in favor of the party opposing the motion. See Westlake v. Lucas, 537 F.2d 857, 858 (6th Cir.1976). Before deciding to grant a motion to dismiss, the court must first examine the complaint. The complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” FED.R.CIV.P. 8(a). The complaint must provide the defendant with “fair notice of what the plaintiff's claim is and the grounds upon which it rests.” Conley, 355 U.S. at 47; see Westlake, 537 F.2d at 858. The plaintiff must allege the essential material facts of the case. See Scheid, 859 F.2d at 436-37. Where there are conflicting interpretations of the facts, they must be construed in the plaintiff's favor. See Sinay v. Lamson & Sessions Co., 948 F.2d 1037, 1039-40 (6th Cir.1991). In considering a 12(b)(6) motion, however, the court must not accept plaintiff's legal conclusions or unwarranted factual inferences as true. See Lewis, 135 F.3d at 405-06; see also Mezibov v. Allen, 411 F.3d 712, 716 (6th Cir.2005) (“[C]onclusory allegations or legal conclusions masquerading as factual conclusions will not suffice to prevent a motion to dismiss.”); Tahfs v. Proctor, 316 F.3d 584, 590 (6th Cir.2003) (quoting Scheid, 859 F.2d at 436) (“ ‘Although the standard for rule 12(b) (6) dismissals is quite liberal’ the complaint must contain ‘either direct or inferential allegations respecting all the material elements' and the allegations must constitute ‘more than bare assertions of legal conclusions.’ ”). III. LAW AND ANALYSIS A. Trade Secrets Violation Count two of the Complaint asserts that Defendant misappropriated a trade secret and identifies the trade secret as Plaintiff's customer list. In an action for misappropriation of a trade secret, a plaintiff must establish “that a trade secret exists.” Penetone Corp. v. Palchem Inc., 627 F.Supp. 997, 1005 (N.D.Ohio 1985); see Ex. Rel. Besser v. Ohio State University, 89 Ohio St.3d 396, 401, 732 N.E.2d 373 (Ohio 2000); Alta Analytics Inc. v. Muuss, 75 F.Supp.2d 773, 785, (S.D.Ohio 1999). The Ohio Uniform Trade Secrets Act (“UTSA”) defines trade secret as follows: *3 “Trade secret” means information, including the whole or any portion or phrase of any scientific or technical information, design process, procedure, formula, pattern, compilation, program, device, method, technique, or improvement, or any business information or plans, financial information, or listing of names, addresses, or telephone numbers, that satisfies both of the following: (1) It derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use. (2) It is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. OHIO REV.CODE § 1333.61(D) (emphasis added). “A customer list is an intangible asset that is presumptively a trade secret when the owner of the list takes measures to prevent its disclosure in the ordinary course of business to persons other than those selected by the owner.” State ex rel. Lucas County Board of Commissioners v. Ohio Environmental Protection Agency, 88 Ohio St.3d 166, 173, 724 N.E.2d 411, 418 (Ohio 2000). In other words, customer lists are entitled to trade secret status when the owner of the alleged secret took reasonable measures to prevent or limit disclosure. See id. (quoting State ex rel. The Plain Dealer v. Ohio Dept. of Ins., 80 Ohio St.3d 513, 529, 687 N.E.2d 661, 675 (Ohio 1997)) (“a document is entitled to trade secret status ‘only if the information is not generally known or readily ascertainable to the public.’ ”); Fred Siegel v. Arter & Hadden, 85 Ohio St.3d 171, 182, 707 N.E.2d 853 (Ohio 1999) (“A possessor of a potential trade secret must take some active steps to maintain its secrecy in order to enjoy presumptive trade secret status, and a claimant asserting trade secret status has the burden to identify and demonstrate that the material is included in categories of protected information under the statute.”); Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 52 of 64 M.J. McPherson Services, L.L.P. v. Sports Images, Inc., Not Reported in F.Supp.2d (2006) 2006 WL 2505925 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 Penetone Corp. v. Palchem, Inc., 627 F.Supp. 997, 1005 (N.D.Ohio 1985) (quoting Water Management, Inc. v. Stayanchi, 15 Ohio St.3d 83, 85-86, 472 N.E.2d 715 (1984)) (“ ‘there is no presumption that any particular idea ... is a trade secret unless the possessor takes active steps to maintain the secrecy.’ ”); see also State ex rel. The Plain Dealer, 687 N.E.2d at 675. Plaintiff's Complaint fails to state a recognizable claim under the UTSA, because it fails to allege that Plaintiff took any steps to protect the secrecy of its customer list. Indeed, the Complaint acknowledges that through its agreement with Defendant, Plaintiff provided the customer list to Defendant. (Complaint at ¶ 4). The Complaint's allegation that the customer list is a trade secret is merely a legal conclusion, unsupported by facts in the Complaint. See Tahfs, 316 F.3d at 590. In order to “support a claim for misappropriation of trade secrets, a[p]laintiff is required to present evidence of facts which show the extent to which the information is known outside of the business and the precautions which Plaintiff has taken to guard the secrecy of the information.” Northeast Ohio College of Massotherapy v. Burek, 144 Ohio App.3d 196, 208, 759 N.E.2d 869 (Ohio Ct.App. 7 Dist.2001). Plaintiff fails to allege it took precautions to prevent Defendant from using the customer list for business outside of the agreement; that the agreement contained a non-disclosure or confidentiality clause; or that it communicated to Defendant that it believed the customer list to be a trade secret. Consequently, Plaintiff's Complaint fails to state a claim for misappropriation of trade secrets under the Ohio USTA, see OHIO REV.CODE § 1333.61(D), and Plaintiff's trade secrets claim is dismissed. B. Tortious Interference *4 Count one of the Complaint asserts Defendant tortiously interfered with Plaintiff's business relations by misappropriating Plaintiff's customer base. A claim for tortious interference exists under Ohio law when “a person, without a privilege to do so, induces or otherwise purposely causes a third person not to enter into or continue a business relation with another, or not to perform a contract with another.” A & B-Abell Elevator Co., Inc v. Columbus/Central Ohio Bldg. & Const. Trades Council, 73 Ohio St.3d 1, 14, 651 N.E.2d 1283, 1294 (Ohio 1995). To establish tortious interference with a business relationship, a plaintiff must therefore show: (1) a business relationship; (2) the wrongdoer's knowledge thereof; (3) an intentional interference causing a breach or termination of the relationship; (4) lack of justification and (5) damages resulting therefrom. See Sancap Abrasives Corp. v. Swiss Indus. Abrasives, 19 Fed. Appx. 181, 193 (6th Cir.2001) (quoting Chandler and Assocs., Inc. v. America's Healthcare Alliance, Inc., 125 Ohio App.3d 572, 709 N.E.2d 190, 197 (Ohio Ct.App. 8th Dist.1997)); Kenty v. Transamerica Premium, 72 Ohio St.3d 415, 419, 650 N.E.2d 863 (Ohio 1995). The business relationship cause of action differs from Ohio's tortious interference with contractual rights “only in that the former tort does not require proof of a contractual relationship.” Franklin Tractor Sales v. New Holland N. America, Inc., 106 Fed. Appx. 342, 344, n. 1 (6th Cir.2004); Super Sulky, Inc. v. U.S. Trotting Ass'n, 174 F.3d 733, 741 (6th Cir.1999). The Complaint alleges the existence of a business relationship between Plaintiff and two customers: Dairy Mart and Hartley, but fails to set fort facts alleging unjustified interference by Defendant. A defendant's action, or interference, is unjustified only if it was improper, and a plaintiff bears the burden of showing that a defendant's interference was improper. See Kenty, 72 Ohio St.3d at 419; Doyle v. Fairfield Machine Co., 120 Ohio App.3d 192, 217, 697 N.E.2d 667 (Ohio Ct.App. 11th Dist.1997) (“the law in this state imposes the burden of proving lack of privilege or justification upon the plaintiff.”). Facts demonstrating unjust or improper interference include the nature of the actor's conduct; the motive behind the conduct; the interests of the other with which the actor's conduct interferes; the interests sought to be advanced by the actor; the proximity or remoteness of the actor's conduct to the interference; the social interests in protecting the freedom of contract and the interference with such; and the relations between the parties. See Sancap Abrasives, 19 Fed. Appx. at 193; Fred Siegel, 707 N.E.2d at 860. Plaintiff's Complaint fails to set forth facts demonstrating Defendant acted improperly. The Complaint asserts that Defendant engaged in “willful misconduct,” and “unilaterally and without consent of the Plaintiff misappropriated the customer base of the Plaintiff.” (Complaint at ¶ 10). Yet, the Complaint fails to state facts to support this legal conclusion. As discussed supra, the Complaint fails to assert the existence of a trade secret and consequently fails to state that Defendant improperly made use of Plaintiff's customer list. Since the Court has determined that the Plaintiff has Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 53 of 64 M.J. McPherson Services, L.L.P. v. Sports Images, Inc., Not Reported in F.Supp.2d (2006) 2006 WL 2505925 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 not asserted a cognizable claim under the Ohio USTA, Plaintiff cannot use an alleged Ohio USTA violation to support the tortious interference claim. Aside from the misappropriation of trade secrets allegation, the Complaint fails to elucidate how Defendant's actions were improper. For example, the Complaint fails to assert the nature of Defendant's relationship with Plaintiff's former customers Dairy Mart and Hartley. The Complaint merely states Defendant “took over” the Hartley account and fails to state why such action was unjustified, and in regards to Dairy Mart, the Complaint acknowledges that Dairy Mart does not even do business with Defendant. (Complaint ¶¶ 7-8). *5 The Complaint fails to allege improper conduct by the Defendant and satisfy the justification element of a tortious interference claim. Consequently, Plaintiff's Complaint fails to state a claim for tortious interference with business relations, and said claim is dismissed. IV CONCLUSION For the foregoing reasons, Defendant's Motion to Dismiss (Dkt.# 10) is GRANTED. Accordingly, the above-noted matter is DISMISSED. IT IS SO ORDERED All Citations Not Reported in F.Supp.2d, 2006 WL 2505925 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 54 of 64 Tab F Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 55 of 64 Spitzer v. Abdelhak, Not Reported in F.Supp.2d (1999) 1999 WL 1204352, RICO Bus.Disp.Guide 9810 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 1999 WL 1204352 United States District Court, E.D. Pennsylvania. Stanley SPITZER, M.D., Daniel Mason, M.D.; Jerrold Schwaber, Ph.D. and Donald Fox, M.D., on behalf of themselves and all others similarly situated, Plaintiffs, v. Sherif ABDELHAK, Donald Kaye, M.D., David McConnell, Leonard L. Ross, Ph.D, Nancy A Wynstra, ESQ. Dwight Kasperbauer, Anthony M. Sanzo, William P. Snyder, III, Douglas D. Danforth, J. David, Barnes, Frank Cahouet, Harry R., Edelman, III, Robert L. Fletcher, Francis B. Nemick, Jr., Thomas, O'Brien, Robert B. Palmer, and John Does 1-100, Defendants. No. CIV. A. 98-6475. | Dec. 15, 1999. MEMORANDUM BUCKWALTER. *1 Presently before the Court are the Motions to Dismiss of various Defendants. 1 Separate motions to dismiss have been submitted by Officer Defendants Abdelhak, Kaye, McConnell, Wynstra and Sanzo, as well as by Trustee Defendant O'Brien. Defendants Kasperbauer and Ross submitted a joint motion and the Trustee Defendants submitted a group motion 2 . For the reasons stated below, the Motions of all Defendants are denied in part and granted in part. I. FACTUAL BACKGROUND This action for civil violations of the RICO statute, as well as claims for intentional interference with contractual relations and civil conspiracy, arises from the demise of Allegheny Health Education and Research Foundation, a now bankrupt charitable foundation. (“AHERF”). AHERF consisted of many separate legal entities which operated through several subsidiaries. See Compl. ¶ 13. The two main subsidiaries relevant to this case are Allegheny East and Allegheny West. Allegheny East consisted of the following facilities: a. Allegheny University of the Health Sciences (“AUHS”) b. Allegheny University Medical Practices (“AUMP”) c. Allegheny University Hospitals, Centennial including Graduate, City Avenue and Parkview Hospitals d. Allegheny University Hospitals East including Bucks County, Elkins Park, Hahnemann, MCP and St. Christopher's Hospital for Children Hospitals. e. Rancocas General Hospital in New Jersey All of the Allegheny East entities, with the exception of Rancocas General Hospital, filed for Chapter 11 bankruptcy in July, 1998. The path to bankruptcy began in 1988 when, under the leadership of Abdelhak, AHERF began to create the Allegheny East network with the purchase of the Medical College of Pennsylvania (“MCP”). The rationale behind this move was to affiliate Allegheny General Hospital (“AGH”) in Pittsburgh with a teaching hospital in order to continue the stream of federal money that AGH had been receiving to train medical interns. Compl. ¶ 17. Throughout the 1990's, Allegheny East continued to grow by acquiring hospitals in the Philadelphia area. It also began purchasing the private practices of physicians. Compl. ¶ 21. However, by early 1998, Allegheny East was losing a great deal of money, up to $1 million a day. Although several attempts were made to salvage the division, they all ultimately failed. Therefore, on July 21, 1998 AHERF filed under Chapter 11 for itself and Allegheny East. The hospitals operated through the Allegheny West subsidiary were exempted from the bankruptcy. Compl. ¶ 41. II. PROCEDURAL BACKGROUND This action was originally filed on December 14, 1998. The proceedings were stayed by this Court on March 25, 1999 pending a determination by the Bankruptcy Court whether this action would violate the automatic stay of the related bankruptcy proceedings. However, on August 17, 1999, this Court's stay was lifted for the limited purpose of allowing the parties to proceed with motions to dismiss. Thereupon the Officer and Trustee Defendants submitted the present Motions to Dismiss. Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 56 of 64 Spitzer v. Abdelhak, Not Reported in F.Supp.2d (1999) 1999 WL 1204352, RICO Bus.Disp.Guide 9810 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 III. LEGAL STANDARD *2 When deciding to dismiss a claim pursuant to Rule 12(b)(6) a court must consider the legal sufficiency of the complaint and dismissal is appropriate only if it is clear that “beyond a doubt ... the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” McCann v. Catholic Health Initiative, 1998 WL 575259 at *1 (E.D.Pa. Sep.8, 1998) (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)). The court assumes the truth of plaintiff's allegations, and draws all favorable inferences therefrom. See, Rocks v. City of Philadelphia, 868 F.2d 644, 645 (3d. Cir.1989). However, conclusory allegations that fail to give a defendant notice of the material elements of a claim are insufficient. See Sterling v. SEPTA, 897 F.Supp. 893, 895 (E.D.Pa.1995). The pleader must provide sufficient information to outline the elements of the claim, or to permit inferences to be drawn that these elements exist. Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d. Cir.1993). IV. DISCUSSION The Plaintiffs assert a substantive RICO claim as well as RICO conspiracy by Defendants under 18 U.S.C. §§ 1962(c) and (d) respectively (Count I). In addition, they allege intentional interference with current and prospective contractual relations (Count II), and civil conspiracy (Count III), under state law. Pursuant to § 1962(c), it is unlawful “for any person employed by or associated with any enterprise engaged in or the activities of which affect interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity ....“ § 1962(d) dictates that “[i]t shall be unlawful for any person to conspire to violate any of the provisions of subsections (a), (b), or (c) of this section.” 3 Not only does the Defendant have to meet all the requirements of § 1962(c), but the Plaintiff must properly allege that the Defendant committed the elements of the predicate acts that form the basis for the “pattern of racketeering activity”. A. Rico Standing The Defendants' first challenge the Plaintiffs' standing to bring this suit. In order to have RICO standing, a plaintiff must allege facts sufficient to establish that the RICO pattern complained of is the proximate cause of one's injury. Holmes v. Securities Investor Protection Corp., 503 U.S. 258, 268-70, 112 S.Ct. 1311, 117 L.Ed.2d 532 (1992). A plaintiff fails to satisfy RICO standing requirements if his injury merely flows from that incurred by a third party. Id. at 271. The Holmes Court found that it was unlikely that Congress intended an expansive reading of RICO. Id. Therefore, “but for” causation is not enough to confer standing under RICO. See In re Phar Mor, Inc. Securities Litigation, 900 F.Supp. 777, 781-83 (W.D.Pa.1994) (plaintiff's injury caused by fraud considered derivative when fraud was not directed towards plaintiffs and damages sustained were incidental to the injuries suffered by the corporation). The directness relationship of injury to fraud has been central to the analysis of proximate causation for several reasons. See Assoc. Gen. Contractors of Calif. v. Calif. St.. Council of Carpenters, 459 U.S. 519 540, 103 S.Ct. 897, 74 L.Ed.2d 723 (1983). First, the less direct an injury is, the more difficult it becomes to ascertain the amount of a plaintiff's damages attributable to the violation, as distinct from other, independent, factors. Holmes, 503 U.S. at 269-270. Second, distinct from the problems of proving factual causation, recognizing claims of the indirectly injured would force courts to adopt complicated rules apportioning damages among plaintiffs removed at different levels of injury from the violative acts, to obviate the risk of multiple recoveries. Blue Shield of Virginia v. McCready, 457 U.S. 465, 473-475, 102 S.Ct. 2540, 73 L.Ed.2d 149 (1982). Third, directly injured individuals can generally vindicate the law without raising these two problems. Holmes, 503 U.S. at 270. *3 Applying these factors to the present case shows that Plaintiffs have standing to assert their RICO claims. The Plaintiffs in this case allege that the requisite predicate acts were directed towards them. See Compl. ¶¶ 18-19, 21, 27. They claim that the Defendants, as a necessary part of the fraudulent scheme, defrauded them in order to profit from Plaintiffs' businesses and professional reputations. Following the current pleadings as now alleged, a trier of fact could trace the cause of Plaintiff's loss directly to Defendants' actions. Since they now allege injuries to both their property and reputation, the injury is direct. Second,, the Plaintiffs are not seeking the same damages for the same injury as other parties. AHERF could not possibly make a claim for loss of “professional reputation”, as can the Plaintiffs. Therefore, the claims by Plaintiffs could not be raised by AHERF or any other third party. Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 57 of 64 Spitzer v. Abdelhak, Not Reported in F.Supp.2d (1999) 1999 WL 1204352, RICO Bus.Disp.Guide 9810 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 It is clear that Plaintiffs do not have automatic standing under RICO merely because of their status as employees. See Rehkop v. Berwick Healthcare Corp. 95 F.3d 285 (3d Cir.1996) (hospital employee did not have standing because hospital's alleged racketeering did not substantially cause his termination). However, this holding does not establish a black letter rule against any employee bringing suit alleging RICO injuries. See Shearin v. E.F. Hutton Group, Inc., 885 F.2d 1162, 1170 (3d Cir.1989) (loss of earnings, benefits, and reputation were sufficient injuries to state claim under section 1962(d)). So long as the plaintiffs can allege a direct relationship between their injury and the racketeering activity engaged in by the Defendants, standing can be conferred. See Mruz v. Caring, Inc., 991 F.Supp. 701, 712 (D.N.J.1998) (plaintiff had standing because his termination was a direct result of the enterprise's racketeering activity). Plaintiffs allege that their injuries would have resulted even without the insolvency of AHERF and Allegheny East. See Compl. ¶ 43. This helps distinguish this case from many other cases where Plaintiffs incurred losses only as a result of an entity's insolvency. See, e.g. Kaiser v. Stewart, 965 F.Supp. 684 (E.D.Pa.1997) (Policyholders of failed insurance company had no standing because the fraud was directed at Insurance Commission and no injuries would have resulted if the company had not failed). In the long run, Plaintiffs may not be able to prove direct damages unrelated to the insolvency of AHERF and Allegheny East. The facts may clearly show that Plaintiffs' injuries resulted only from the demise of the entities that provided their income. If that becomes the case, then their injuries would be derivative and their RICO claim would have to be dismissed because of a lack of standing. However, at this point, the Court can not find that there is no set of facts under which the Plaintiffs could prove that their injuries are directly related to the alleged fraud perpetrated by the Defendants. Therefore, the motion to dismiss must be denied on the standing issue. B. Elements of a RICO Claim *4 The Defendants challenge every element of the Plaintiffs' substantive RICO claim. In order to state a RICO claim under 1962(c), Plaintiffs' must allege the existence of an enterprise, that the person was associated with the enterprise and participated in its affairs, through a pattern of racketeering activity. 1. Enterprise: RICO requires that Plaintiffs plead the existence of an enterprise (affecting interstate commerce), comprised of a group of persons or entities associated together, formally or informally, for the purpose of engaging in a course of conduct. An enterprise is proved by evidence of an ongoing organization, formal or informal, and by evidence that the various associates function as a continuing unit. United States v. Turkette, 452 U.S. 576, 583, 101 S.Ct. 2524, 69 L.Ed.2d 246 (1981). The Plaintiff's have pleaded four alternative enterprises. For example, one alleged enterprise, consists of AHERF and Allegheny East, formed and operated for the common purpose of benefitting the individual Defendants and AHERF's western operations. See Compl. ¶¶ 61(c). Plaintiffs have alleged that it was controlled by Defendants and operated as a continuing unit. At this stage of the proceedings Plaintiffs have alleged enough information for Defendants to understand which enterprise was used to conduct racketeering activity. The Court also disagrees with the Trustee Defendants assertion that the Plaintiffs have failed to allege the five elements necessary to plead the existence of a RICO enterprise found by the district court in Lujan v. Mansmann, 956 F.Supp. 1218, 1231 (E.D.Pa.1997). See Trustees' Memo at 15. The Court also finds that an enterprise which controlled 10 hospitals in Pennsylvania and one in New Jersey would likely have an effect on interstate commerce. 2. Control: In order to state a claim for violation of § 1962(c), a plaintiff must allege that defendants participated directly or indirectly in the conduct or affairs of the enterprise. The Supreme Court has clarified this prerequisite to liability as requiring that the defendant participate in the operation or management of the enterprise itself. Reves v. Ernst & Young, 507 U.S. 170, 183, 113 S.Ct. 1163, 122 L.Ed.2d 525 (1993). The Reves Court held that operation and control could extend beyond the upper levels of management to anyone who exerts control over its affairs. Id. The Officer Defendants were top management and are alleged to have played active roles in the management of AHERF and Allegheny East. See Jaguar Cars v. Royal Oak Motor Car Co., 46 F.3d 258, 264 (3d Cir.1995) (corporate officers and directors managing affairs are no longer shielded from liability after Reves). The Trustee Defendants were members of the key committees within AHERF. These Defendants voted on compensation and other crucial Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 58 of 64 Spitzer v. Abdelhak, Not Reported in F.Supp.2d (1999) 1999 WL 1204352, RICO Bus.Disp.Guide 9810 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 matters that are alleged to be part of the overall fraudulent scheme behind this action. Liability under § 1962(c) is not limited to those with primary responsibility for the enterprise's affairs, and while defendants must have participated in the enterprise's affairs, the level of that participation need not be substantial. Reves, 507 U.S. at 179. The Plaintiffs have adequately plead control by all Defendants. 3. Predicate Acts: *5 In the instant case, the predicate acts alleged are mail fraud in violation of 18 U.S.C. § 1341; wire fraud (18 U.S.C. § 1343), money laundering (18 U.S.C. § 1957) and interstate transportation of fraudulently obtained money (§ 18 U.S.C. 2314). All of these predicate acts contain an element of fraud. Rule 9(b) of the Federal Rules of Civil Procedure provides that “[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity.” Fed.R.Civ.P. 9(b). The Third Circuit has held that Rule 9(b) requires plaintiffs to plead with particularity the “circumstances” of the alleged fraud in order to place the defendants on notice of the precise misconduct with which they are charged, and to safeguard defendants against spurious charges of immoral and fraudulent behavior. See Seville Indus. Mach. Corp. v. Southmost Mach. Corp., 742 F.2d 786, 791 (3d Cir.1984), cert denied, 469 U.S. 1211, 105 S.Ct. 1179, 84 L.Ed.2d 327 (1985). Allegations of “date, place or time” fulfill these functions, but nothing in the rule requires them. Id. The rule is satisfied where some precision and some measure of substantiation is present in the pleadings. See Killian v. McCulloch, 850 F.Supp. 1239, 1254 (E.D.Pa.1994). The Defendants argue that the Plaintiffs have not adequately plead the requisite predicate acts as to each of the individual Officer and Trustee Defendants. The federal mail and wire fraud statutes prohibit the use of mails or interstate wire for the purpose of carrying out any scheme or artifice to defraud. 18 U.S.C. §§ 1341 and 1343. Wholly intrastate use of the mails for fraud violates the mail fraud statute. In re Burzynski, 989 F.2d 733, 742 (5th Cir.1993). However, the wire fraud statute is only violated through the interstate use of the wire. See Smith v. Ayrees, 845 F.2d 1360, 1366 (5th Cir.1988). Since mere intrastate use of the wire in furtherance of fraud can not constitute wire fraud, it follows that these same acts cannot serve as predicate acts for a RICO Complaint. Id. In the present Complaint, it is alleged that the defendants used interstate wires and/or the mails in furtherance of their scheme to defraud the Plaintiffs because by these mediums the Plaintiffs received their pay. See Compl. ¶ 47. The Plaintiffs do not state which wire transfers in furtherance of the fraud were made interstate. They also do not explain how “mailing or wiring salary checks” furthered the fraudulent scheme. For purposes of the motion to dismiss, though, the Plaintiffs do not need to further explain how the mailing or wiring of checks contributed to fraud. See Tabas v. Tabas, 47 F.3d 1280, 1295 n. 18 (3d. Cir.1995) (wholly innocent mailings can satisfy the making element). “Mailings designed to lull victims into a false sense of security .... and therefore make the apprehension of defendants less likely than if no mailings had taken place” can constitute actionable fraud. See Kehr Packages v. Fidelcor, Inc., 926 F.2d 1406, 1416 n. 3 (3d Cir.1991). The law of this Circuit suggests that if Plaintiffs received any mail or interstate wires which are remotely connected to a concurrent scheme to defraud, the predicate acts of mail and wire fraud are met. Since in this case the Plaintiffs have alleged both a scheme to defraud and that they received mailings and wires from the Defendants, the Plaintiffs have adequately plead “predicate acts”. *6 Defendants argue that Plaintiffs have failed to connect the fraud to the mailing or wirings. But that is not true, even if the connection is somewhat nebulous. The Plaintiffs allege that the Defendants' fraud of portraying Allegheny East as a viable health care system would have been exposed earlier if the Defendants had not used the mail and wires to send paychecks to them. The inference that could be drawn is that Plaintiffs would have realized much sooner the precarious position of Allegheny East if they had not received their pay by wire or mail. In order to plead mail or wire fraud as a predicate act of which each Defendant must have participated two or more times, the Plaintiff must allege facts giving rise to a strong inference of scienter on the part of each Defendant. See, e.g., Beck v. Manufacturer's Hanover Trust, Co., 820 F.2d 46, 49-50 (2d Cir.1987), cert. denied 484 U.S. 10005, overruled on other grounds by, United States v. Indelicato, 865 F.2d 1370, (2d Cir.1989). Plaintiffs can establish scienter by pleading facts showing conscious or reckless behavior to defraud. Knowledge concerning a company's key businesses or transactions may be attributable to the company, its officers and directors. See, Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 59 of 64 Spitzer v. Abdelhak, Not Reported in F.Supp.2d (1999) 1999 WL 1204352, RICO Bus.Disp.Guide 9810 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 5 In re Aetna Inc. Sec. Litigation, 34 F.Supp.2d 935, 953 (E.D.Pa.1999) (Padova, J.); Epstein v. Itron, 993 F.Supp. 1314, 1325 (E.D.Wash.1998) (“facts critical to a business' core operation or an important transaction generally are so apparent that their knowledge may be attributed to the company and its officers”). The major purchases engaged in by AHERF during the 1990's were important transactions and the precarious state of the foundations finances were facts critical to such transactions. Therefore, each of the Officer Defendants, all of who are alleged to have played a key role in the operations of AHERF and Allegheny East, could probably have attributed to them the knowledge of the fraud alleged by Plaintiffs, as could many of the Trustee Defendants. Another method for establishing a strong inference of scienter is to allege facts showing a motive for committing fraud and a clear opportunity for doing so. See Goldman v. Belden, 754 F.2d 1059, 1070 (2d Cir.1985). Plaintiffs have pleaded facts establishing motive for each of the Defendants. In essence, the Plaintiffs allege that Abdelhak and the other Defendants defrauded the Plaintiffs in order to “raid the assets” of Allegheny East so as to increase their wealth and prestige. That the “mailing” part of the fraud was “routine” does not affect its qualification as a predicate act. The Plaintiffs have alleged fraud that was at least incidentally assisted by the use of the mails and the wires. The motive for all Defendants to engage in this fraud was to increase their salary and prestige in the community. The Plaintiffs specifically allege that the Defendants voted to increase their own salaries even in the face of bankruptcy. Compl. ¶¶ 7, 26, 34. Since Plaintiffs also allege that the misleading statements concerning the goals and health of the Allegheny system were made in order to increase prestige, a favorable inference towards Plaintiffs' position could be made that by increasing the size of the enterprise they controlled, the Trustee Defendants and Officer Defendants expected to increase their professional prestige. Prestige and wealth could also be inferred to be the motivations behind the misrepresentations made both to Plaintiffs and in AHERF's financial statements concerning the financial health of the organization. *7 The opportunity prong of the “motivation and opportunity” scienter analysis essentially asks whether each of the Defendants played a part or had the opportunity to defraud Plaintiffs. The Plaintiffs have not, in each instance, alleged specific acts against each individual defendant. However, such an absence, at this stage of the proceedings is not fatal to a complaint. The Plaintiffs state, and we accept as true, that the information before them at this point is not adequate to more fully detail their fraud allegations against the individual defendants. 4 When Defendants remain in control of the necessary details, the requirements of Rule 9(b) can be more leniently met. See S & W Contracting Services, Inc., 1998 U.S. Dist. LEXIS 3966 at *10-12. (Plaintiff's complaint met 9(b) requirements despite failure to provide date, time or details of alleged frauds where that information lay within the sole possession of the defendants.) The Plaintiffs do make specific allegations against the Defendants as a group. For example, they allege that the Defendants caused the removal of large amounts of funds from restricted accounts in order to cover Allegheny East's pitiful financial state. Compl. ¶¶ 27-30. The Plaintiffs also state that every Officer Defendant signed the fraudulent 1997 Annual Report. As for the Trustee Defendants, even if their position within AHERF were not central enough to attribute knowledge of the fraudulent scheme to them, they at least had the opportunity to participate in the fraud through the positions that they held. Trustee Defendants Snyder, Barnes and Edelman also allegedly signed the 1997 Annual Report. The named Trustees are members of the Executive, Compensation and Ethics Committee of the Boards. According to the Complaint, they quadrupled AHERF's D & O insurance in the Spring of 1998 with the intention of protecting themselves and the officers against disaster in the coming collapse of Allegheny East. See Compl. ¶ 10. The unique position that these individuals held within the larger group of trustees gave them an opportunity to participate in the continuing fraud. Therefore, on the basis of the Complaint, the Court finds that Plaintiffs have adequately plead predicate acts against each of the Officer and Trustee Defendants. 4. Pattern: In order to show a pattern of racketeering activity, the Plaintiffs must show that “the racketeering predicates are related, and that they amount to or pose a threat of continued criminal activity.” H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 241, 109 S.Ct. 2893, 106 L.Ed.2d 195 (1989). The H.J. Court described continuity as referring to either a closed period of repeated conduct, or to past conduct that by its nature projects into the future with a threat of repetition. Id. at 241. A party Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 60 of 64 Spitzer v. Abdelhak, Not Reported in F.Supp.2d (1999) 1999 WL 1204352, RICO Bus.Disp.Guide 9810 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 6 may establish closed end continuity by proving a series of related predicates extending over a substantial period of time. Id. at 242. The Third Circuit has consistently held that periods of less than one year are not “substantial periods of time” for purposes of forming a RICO pattern. Tabas, 47 F.3d at 1293. Defendants argue that Plaintiff only has alleged fraudulent statements that were made after the beginning of 1998 (thereby extending over less than a twelve-month period). However, this does not recognize that what Plaintiffs have alleged is that the Defendants have engaged in a fraudulent scheme since 1994, and used the mails to conduct the fraud by mailing salary checks to Plaintiffs and others. Activity extending over four years satisfies the continuity requirement. See United States v. Pelullo, 964 F.2d 193, 209 (3d Cir.1992) (holding that a jury could find nineteen month period sufficient to establish continuity). Even so the Plaintiffs have clearly stated that the June 1997 Annual Report contained misrepresentations. See Compl. ¶ 22. Therefore, contrary to Defendant's position, the Plaintiff's have alleged specific fraudulent acts extending beyond the twelve month limit needed to satisfy the continuity requirement. In determining continuity, the Court looks beyond the mailing prong of the mail fraud predicate to the duration of the “scheme to defraud”. Tabas, 47 F.3d at 1293. The Plaintiffs have sufficiently alleged that Defendants planned to defraud them since 1994 by falsely stating the goals and viability of the Allegheny System. The Plaintiffs have plead continuity. 5. Relatedness: *8 Predicate acts are sufficiently related when they have similar purposes, results, participants, victims or methods of commission or are otherwise interrelated by distinguishing characteristics and are not isolated events. H.J. Inc., 492 U.S. at 240. As the Third Circuit has stated, the “relatedness” test as outlined in H.J. is broad. See Bank v. Wolk, 918 F.2d 418, 422 (3d Cir.1990). Plaintiffs have alleged that the same Officer and Trustee Defendants committed a series of illegal predicate acts for the same purpose, to enrich themselves personally and professionally. That is sufficient to show relatedness. Therefore, Plaintiffs have adequately plead a pattern of racketeering activity. C. RICO Conspiracy In order to state a claim under RICO's § 1692(d), a plaintiff must allege (1) an agreement to commit the predicate acts of fraud, and (2) knowledge that those acts were part of a pattern of racketeering activity conducted in such a way as to violate § 1962(a), (b), or (c). Odesser v. Continental Bank, 676 F.Supp. 1305, 1312 (E.D.Pa.1987). “Allegations of conspiracy are not measured under the ... [Fed.R.Civ.P.] 9(b) standard, which requires greater particularity of allegation of fraud, but are measured under the more liberal ... Fed.R.Civ.P. 8(a) pleading standard.” Rose v. Bartle, 871 F.2d 331, 366 (3d. Cir.1989). To plead conspiracy adequately, a plaintiff must set forth the period and objective of the conspiracy as well as certain actions taken by the defendants to achieve its purpose. See Shearin v. Hutton, 885 F.2d 1162, 1166 (3d Cir.1989). The Plaintiffs have stated that the time of the conspiracy was from 1994 to the present (the time of the filing of the Complaint). See Compl. ¶ 51. The objective alleged by Plaintiffs was to expand and operate Allegheny East by fraudulently representing its financial stability in order to reap benefits on the Defendants. See Compl. 2-3. Finally, Plaintiffs allege many acts committed by Defendants in furtherance of the conspiracy, including expansion through the purchase of hospitals and physician practices, falsifying financial statements and misrepresenting the viability of the organization. See Compl. ¶¶ 16-34. It is also necessary for the Plaintiffs to allege an agreement among the conspirators. See United States v. Boffa, 688 F.2d 919, 937 (3d Cir.1982) (individual, by his words or actions, must have objectively manifested an agreement to participate, directly or indirectly, in the affairs of an enterprise through the commission of two or more predicate crimes). The Plaintiffs specifically allege that all of the Defendants agreed to participate in the fraudulent scheme. See Compl. ¶ 63. Therefore, the Plaintiffs have adequately plead conspiracy under § 1962(d). D. State Law Claims This Court has subject matter jurisdiction over the federal claims of the Plaintiffs under 28 U.S.C. § 1331. Now having determined that the Plaintiffs have stated federal RICO claims under § 1962(c)-(d), the Court can have supplemental subject matter jurisdiction over the Plaintiffs state law claims as well. See 28 U.S.C. § 1367(a). 1. Civil Conspiracy: *9 A cause of action for civil conspiracy requires that two or more persons combine or enter an agreement to commit an unlawful act or to do an otherwise lawful act Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 61 of 64 Spitzer v. Abdelhak, Not Reported in F.Supp.2d (1999) 1999 WL 1204352, RICO Bus.Disp.Guide 9810 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 7 by unlawful means. Slaybaugh v. Newman, 330 Pa.Super. 216, 221, 479 A.2d 517 (1984). Proof of malice is an essential part of a cause of action for conspiracy. Thompson Coal Co. v. Pike Coal Co., 488 Pa. 198, 211, 412 A.2d 466 (1979). However, an action will lie only where the sole purpose of the conspiracy is to cause harm to the party who claims to be injured. Id. (“Proof of malice, i.e., an intent to injure, is essential in proof of conspiracy ... There are no facts of record which indicate that [appellee] acted solely to injury appellants”). See Sim Kar Lighting Fixture Co. v. Genlyte, Inc. 906 F.Supp. 967, 977 (D.N.J.1995) (claim dismissed when plaintiff failed to allege facts suggesting that conspiracy's objective was solely to harm plaintiff). Civil conspiracy becomes actionable when some overt act is done in pursuance of the common purpose or design held by the conspirators, and actual damage results. See Cohen v. Pelagatti, 364 Pa.Super. 573, 528 A.2d 657 (Pa.Super.1987). The plaintiff must expressly allege an agreement or make averments of communication, consultation, cooperation, or command from which such an agreement can be inferred. See Flanagan v. Shively, 783 F.Supp. 922, 928 (M.D.Pa.1992). But plaintiffs are not required to allege exactly where, when and with what words an agreement was made. Id. at 929. As discussed above with regard to the RICO conspiracy, Plaintiffs have alleged an agreement by the Defendants to conduct unlawful acts and that Defendants took actions in furtherance of the conspiracy. However, the state law differs from the federal law in its requirement that the Plaintiffs also allege malice. Merely describing something as malicious is not sufficient to give the proper inference of malice, meaning an intent to injure. As described above, malice requires an allegation that the sole purpose of the conspiracy was to injure the Plaintiffs. See Thompson, 488 Pa. at 211, 412 A.2d 466 (the Pennsylvania Supreme Court held that where the facts show that a person acted to advance his own business interests, those facts constituted justification and negate any alleged intent to injure ) As Plaintiffs have stated elsewhere, the Defendant's purpose of the conspiracy was to benefit themselves personally and professionally. The fact that it may have been necessary to deceive Plaintiffs in order to carry out their scheme in no way indicates that they acted with malice solely to injure Plaintiffs. Therefore, the Defendants Motion to dismiss Count III for Civil Conspiracy is granted. 2. Intentional Interference with Contractual Relations: To maintain an action for intentional interference with contractual relations a plaintiff must allege: (1) the existence of a contractual, or prospective contractual relation between the complainant and a third party; *10 (2) purposeful action on the part of the defendant, specifically intended to harm the existing relation, or to prevent a prospective relation from occurring; (3) the absence of a privilege or justification on the part of the defendant; and (4) the occasioning of actual legal damage as a result of the defendant's conduct. Shiner v. Moriarty, 706 A.2d 1228, 1238 (Pa.Super.1998). Plaintiffs adequately allege existing contractual relations with third parties. See Compl. ¶ 66. The Plaintiffs also allege that Defendants acted purposefully, with knowledge that their actions would damage Plaintiffs' contractual relations. See Compl. ¶ 67. The issue remains whether Defendants had the specific intent to harm the Plaintiffs existing and prospective contractual relations. But intent may be shown “where the actor knows an injury is certain or substantially certain to occur as a result of his action. Total Care Sys., Inc. v. Coons, 860 F.Supp. 236, 241 (E.D.Pa.1994). Since Plaintiffs have alleged that Defendants had knowledge that Plaintiffs would be injured, they have satisfied the intent requirement 5 . The third element of a tortious interference claim is met by Plaintiffs claim that Defendants improper conduct was without justification or privilege. Compl. ¶ 68. The gravamen of this tort is the lost pecuniary benefits flowing from the contract itself; other losses, such as emotional distress and loss of reputation, are consequential harms. Shiner, 706 F.2d at 1239. Although non-pecuniary harms are recoverable in an intentional interference action, such an action cannot be maintained in the absence of pecuniary loss flowing from the interference. Pelagatti v. Cohen, 370 Pa.Super. 422, 435, 536 A.2d 1337 (1987). Plaintiffs do claim injury to both their reputations and incomes. See Compl. ¶ 69. As long as some pecuniary loss has been alleged, non-pecuniary damages can be granted as well. See Shiner, 706 A.2d at 1239. The Court disagrees with Defendant Abdelhak's assertion that Plaintiffs have not alleged direct pecuniary Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 62 of 64 Spitzer v. Abdelhak, Not Reported in F.Supp.2d (1999) 1999 WL 1204352, RICO Bus.Disp.Guide 9810 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 8 loss. See Abdelhak Mem. at 29. Although Plaintiffs do not state how their patient income decreased as a direct result of Defendants' illegal conduct, they do allege that the income has decreased as an injury separate from their loss of professional reputation. See Compl. ¶ 69. Therefore, Plaintiffs claim for intentional interference with contractual relations will not be dismissed. V. CONCLUSION The Defendants' Motions to Dismiss are denied with respect to Count I (violations of 18 U.S.C. § 1962(c)- (d)-substantive RICO claim and RICO conspiracy) and Count II (intentional interference with contractual relations). However, Defendants' Motions are granted with respect to Count III (Civil Conspiracy). An appropriate order follows. ORDER AND NOW, this 15th day of December, 1999, after consideration of the Defendants' Motions to Dismiss (Docket Nos. 34, 35, 36, 38, 39, 40, 41 and 45) and the Plaintiffs' response to the Motion to Dismiss (Docket No. 46), as well as the Defendants' Reply (Docket No. 47, 48, 49, 50, 51, 52, 57, and 64) and Plaintiffs' Sur-Reply (Docket No. 63), it is hereby ORDERED that: *11 1. The Motions to Dismiss of all Defendants are DENIED as to Counts I & II; and 2. The Motions to Dismiss of all Defendants are GRANTED as to Count III. All Citations Not Reported in F.Supp.2d, 1999 WL 1204352, RICO Bus.Disp.Guide 9810 Footnotes 1 Seven of the defendants were officers of the various entities discussed throughout the memo (“Officer Defendants”). The remaining defendants were trustees of the same entities, specifically AHERF (the “Trustee Defendants”). The Officer Defendants are as follows: Sherif Abdelhak (“Abdelhak”) was at all relevant times, the President and CEO of AHERF; Donald Kaye (“Kaye”) was President and CEO of Allegheny University Hospitals-East and the Allegheny University of the Health Sciences (“AUHS”); David C. McConnell (“McConnell”) was Vice-President and Chief Financial Officer (“CFO”) of AHERF; Leonard Lester Ross, Ph.D (“Dr.Ross”) served as Provost of AUHS and previously was the dean of MCP Hahnemann School of Medicine; Nancy Ann Wynstra, Esq. (“Wynstra”) was at all relevant times the Executive Vice President, General Counsel and Secretary of AHERF; Dwight L. Kasperbauer (“Kasperbauer”) was at all relevant times Executive Vice President and Chief Human Resources Officer at AHERF; Anthony M. Sanzo (“Sanzo”) replaced Abdelhak as AHERF CEO in June, 1998 and before that had held several key positions within AHERF and related entities. The Trustee Defendants include William P. Snyder (“Snyder”), Douglas D. Danforth (“Danforth”), J. David Barnes (“Barnes”), Frank Cahouet (“Cahouet”), Harry R. Edelman, III (“Edelman”), Robert L. Fletcher (“Fletcher”), Francis B. Nemick (“Nemick”), Thomas O'Brien (“O'Brien”) and Robert B. Palmer (“Palmer”). 2 The Court will refer throughout this memorandum to the various Defendants' Motions to Dismiss as the “Defendants' Motion to Dismiss”. When applicable, it will refer to the specific Defendant's Motion. 3 Under the Definitions section of the statute set forth at 18 U.S.C. § 1961; (1) “Racketeering activity” means (A) any act or threat involving murder, kidnaping, gambling, arson, robbery, bribery, extortion, dealing in obscene matter, or dealing in a controlled substance or listed chemical ... which is chargeable under State law and punishable by imprisonment for more than one year; (B) any act which is indictable under any of the following provisions of > title 18, United States Code:....Section 1341 (relating to mail fraud), ... Section 1343 (relating to wire fraud) ...; (3) “person” includes any individual or entity capable of holding a legal or beneficial interest in property; (4) “enterprise” includes any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity; (5) “pattern of racketeering activity” requires at least two acts of racketeering activity, one of which occurred after the effective date of this chapter and the last of which occurred within ten years (excluding the period of imprisonment) after the commission of a prior act of racketeering. Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 63 of 64 Spitzer v. Abdelhak, Not Reported in F.Supp.2d (1999) 1999 WL 1204352, RICO Bus.Disp.Guide 9810 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 9 4 The situation here is distinguishable from Saporito v. Combustion Eng'g, Inc., in which the Court found no indication by Plaintiffs that the evidence needed to flesh out its allegations were not available to them at the time of the Complaint. 5 The Plaintiffs allegations survive here because knowledge can be used to show intent and they allege knowledge by defendants. However, in the civil conspiracy context, the malice element requires the higher showing that the motivation behind the conspiracy be to injure the Plaintiffs. They have not alleged this set of facts. End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 1:16-cv-02526-CCC Document 33-1 Filed 05/11/17 Page 64 of 64 CERTIFICATE OF WORD COUNT COMPLIANCE Pursuant to Local Rule 7.8(b)(2), I hereby certify that although the instant Reply Brief exceeds 15 pages, it complies with the word count limitation described in Local Rule 7.8(b)(2). This Reply Brief contains 4,996 words. This word count was performed using Microsoft Word 2010. s/Andrew C. Whitney Andrew C. Whitney Case 1:16-cv-02526-CCC Document 33-2 Filed 05/11/17 Page 1 of 1