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KRANZDORF v. GREEN

July 28, 1983

NORMAN M. KRANZDORF, Trustee of FIDELITY AMERICAN FINANCIAL CORPORATION, FIDELITY AMERICA MORTGAGE CO. (A Pennsylvania Corporation), FIDELITY AMERICA MORTGAGE CO. (A Delaware Corporation) and FIDELITY AMERICA MORTGAGE CO. (A Nevada Corporation)
v.
HOWARD I. GREEN, et al.



The opinion of the court was delivered by: VANARTSDALEN

 VanARTSDALEN, J.

 Defendant Alan T. Schiffman has moved to dismiss plaintiff trustee's complaint against him. For the reasons which follow, the motion will be denied.

 On February 3, 1983, Norman Kranzdorf, trustee of the estates of Fidelity America Financial Corp. (FAFCO) (a Pennsylvania corporation) and its three subsidiaries, Fidelity America Mortgage Co. (a Delaware corporation), and Fidelity America Mortgage Co. (a Nevada corporation), collectively referred to as the FAMCO companies, filed an eleven-count complaint against Howard I. Green (the former president and chairman of the board of FAFCO and a FAMCO director) and John G. Berg (the former president and chairman of the board of FAMCO). The complaint also names as defendants several entities affiliated with Messrs. Green and Berg, as well as other former directors and persons involved in the FAFCO/FAMCO investment group. One such person is defendant Alan T. Schiffman, who performed certain accounting and auditing services for FAFCO and FAMCO.

 Five counts of the complaint state claims against defendant Schiffman: Count V alleges that he aided and abetted, inter alia, fraud and the mismanagement and waste of corporate assets by defendants Berg and Green; Count VII alleges that he aided and abetted the principals in FAFCO and FAMCO in violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1961 et seq.; Counts IX and X, respectively, seek to void an alleged preferential transfer and an alleged fraudulent conveyance made to defendant Schiffman; Count XI seeks the award of punitive damages for Schiffman's alleged outrageous, wanton, reckless and intentional misconduct.

 Defendant Schiffman moves to dismiss the complaint on the grounds that Counts V and VII fail to state claims upon which relief can be granted and that this court lacks subject matter jurisdiction to adjudicate claims arising under the Bankruptcy Reform Act of 1978, 11 U.S.C. § 101 et seq. In addition, he moves to dismiss the claim for punitive damages.

 Counts V and VII: Aiding and Abetting

 The elements of a claim for common law aiding and abetting are: "(1) that an independent wrong exist; (2) that the aider or abettor know of that wrong's existence and (3) that substantial assistance be given in effecting that wrong." Walck v. American Stock Exchange, Inc., 687 F.2d 778, 791 (3d Cir. 1982), quoting Landy v. Federal Deposit Insurance Corp., 486 F.2d 139, 162-63 (3d Cir. 1973), cert. denied, 416 U.S. 960, 40 L. Ed. 2d 312, 94 S. Ct. 1979 (1974).

 Defendant Schiffman argues initially that plaintiff has not and cannot allege actual knowledge on the part of Schiffman of either fraud, corporate waste and mismanagement (Count V) or racketeering activities (Count VII).

 Count V of the complaint, in paragraph 84, provides:

 
This count is brought against defendants Donahue, Murray, Tucker, U.S. Management, Schiffman, Cohen, Green Trust, Oppenheim and FCA as aiders and abbettors, each of whom had knowledge, or, but for their reckless disregard of the facts should have had knowledge, of Green and Berg's aforementioned course of conduct and/or their mismanagement, waste, breaches of fiduciary duties or gross negligence and lent substantial assistance thereto.

 Complaint, para. 84 (emphasis added).

 In addition, paragraphs 96 and 97 of Count V provide:

 
96. At the request of Green and Berg, Schiffman prepared pro forma financial statements, projections and other information in connection with various of the limited partnership syndications and certified financial statements of FAFCO and the FAMCO companies for use in ...

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