The opinion of the court was delivered by: HUYETT
In this civil action, plaintiffs William A. Gardner and Sidney L. Hofing, have sued defendants, Frank Surnamer, Bruce Rothrock and Saul Schussel, in connection with the sale, by defendants Surnamer and Rothrock, of 51% of the stock of Jordan Industries, Inc. ("Jordan") and of 50% interest in central Valley Real Estate ("Central Valley"). Plaintiffs allege, in a five count complaint, that defendants fraudulently concealed from them and misrepresented to them material facts relating to the financial condition of Jordan. In Count One, plaintiffs allege a violation of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961-1968 ("RICO"); in Count Two plaintiffs allege a violation of section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and certain regulations promulgated thereunder; in Count Three, plaintiffs allege fraud, in violation of state common law; in Count Four, plaintiffs allege breach of warranties under state law; and in Count Five, plaintiffs allege that defendants Surnamer and Schussel have refused to turn over to them the books and financial records of Jordan, in violation of state common law.
Before me are defendants' motions to dismiss the complaint. For the reasons which I state below, the motions will be granted in part and denied in part.
In deciding a motion to dismiss, I must take as true all well pleaded allegations and I must resolve all reasonable inferences to be drawn from those allegations in the light most favorable to the plaintiffs as the non-moving parties. Dismissal is appropriate only when it appears beyond doubt that plaintiffs "can prove no set of facts in support of [their] claim which would entitle [them] to relief. Conley v. Gibson, 355 U.S. 41, 45-46, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957); Rogin v. Bensalem Township, 616 F.2d 680, 685 (3d Cir. 1980); Bogosian v. Gulf Oil Corp., 561 F.2d 434, 444 (3d Cir. 1977).
Plaintiffs contend that after they purchased the Jordan stock and the interest in Central Valley, they discovered that defendants had fraudulently concealed and misrepresented material facts concerning the two businesses, including:
1. Jordan's capital stock and paid-in surplus had been represented to be $280,000 when in fact they were worth no more than $251,848;
2. The debt which had been represented to be owed by Jordan to Surnamer ($38,000) was in fact assigned to a bank for collateral on the bank's loans to Jordan;
3. Jordan had been represented as having no outstanding prepayments of rent, when in fact it had prepaid rents of $18,000 to defendants Surnamer and Rothrock;
4. Jordan had been represented as having no sums due for workmen's compensation premiums when in fact Jordan owed $10,512 for which it has since been sued;
5. Jordan had been represented as owning nothing to the Edward A. Lynch Machinery Co., when in fact $28,276 was owed; Jordan had also been represented as having a $14,376 reduction in accounts payable to that company, when in fact that sum was merely a deposit;
6. Jordan's investment in its subsidiary, Weldel, Inc., had been represented as $80,000 when in fact it was only $8,000;
7. Defendants Surnamer and Rothrock had appropriated $13,000 from the Jordan account for themselves when there was no liability to them for such an amount;
8. Defendants Surnamer and Rothrock had appropriated $12,000 from the Jordan account for services performed on property owned by Surnamer and not acquired by plaintiffs in the sale;
9. Defendants failed to reveal the existence of a corporate supplier, Blue Valley Service, and accounts payable to it;
10. Defendants knew that Jordan had been pricing its goods well below the levels necessary to ...