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CITIZENS SAV. ASSN. v. FRANCISCUS

December 30, 1986

Citizens Savings Association, on its own behalf and derivatively; Colonial Savings Association, on its own behalf and derivatively; W-C Service Corporation, on its own behalf and derivatively; and Citizens Savings Association, as successor in interest by way of merger on behalf of Citizens Savings Association and Colonial Savings Association, Plaintiffs
v.
Barry N. Franciscus; Vivian K. Spiese, Executrix of the Estate of Lloyd Kline, deceased; Mary B. Rothrock; Grover C. Artman; Frederic P. Bromer; Albert H. Spinner; Linda S. Kauffman; James I. Bovender; D. Clyde Long; Preston L. Horn; William Logeman; Guy U. Sheffer; Charles C. Dietz; John M. Boddington; Grover Fred Artman, II; McKonly & Co.; and McKonly & Asbury, Defendants



The opinion of the court was delivered by: NEALON

 Plaintiffs instituted this action on December 30, 1985. The named defendants were allegedly officers and directors of Colonial Savings Association ("Colonial"), accountants for Colonial and the state regulatory agency *fn1" for banking. Plaintiffs averred that Citizens Savings Association ("Citizens") and Colonial merged on December 29, 1983 and that Citizens subsequently discovered delinquencies and related problems with regard to certain "nationwide" loans. *fn2" Plaintiffs claimed that defendants violated the Racketeering Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961, et seq., by fraudulently misrepresenting the status of the nationwide loans during merger negotiations. Specifically, plaintiffs maintained that defendants committed indictable offenses under 18 U.S.C. § 1341 (mail fraud) and 18 U.S.C. § 1343 (wire fraud). Plaintiffs also asserted various pendent claims based upon state law.

 On September 19, 1986, defendants Franciscus, Rothrock, Grover C. Artman, Bromer, Spinner, Kauffman, Bovender, Long, Horn, Logeman, Sheffer, Dietz, Boddington and Grover Fred Artman, II filed a Motion for Summary Judgment, a Statement of Material Facts Presenting No Genuine Issue for Trial and a Brief in Support of their dispositive motion. Said defendants also submitted a Memorandum on October 6, 1986. They asserted in their Statement of Material Facts and in attached affidavits that defendants Boddington and Grover Fred Artman, II were never officers or directors of Colonial as averred in plaintiff's Complaint and are thus not proper defendants in this action. In addition, they maintained that "plaintiffs have no evidence to support the charges that each of the Defendants herein was guilty of two acts of racketeering activity." See defendants' Statement of Material Facts at para. 11.

 These defendants reiterated the latter proposition in their Brief in Support of their summary judgment motion when they stated:

 
With respect to the officers and directors other than Franciscus, Plaintiffs have no evidence. Despite the detailed nature of the Interrogatories served upon them, Plaintiffs have failed to supply facts as to what representations were made, the specific manner in which the representations were false and the facts that support an inference of fraud by each Defendant. The Plaintiffs are required to show the nature of each individual Defendant's participation in the alleged fraud including facts which constitute scienter. They must show which documents were fraudulent and how. There is absolutely no indication regarding the roles of the various Defendants in the preparation and dissemination of information and how such information was fraudulent (citation omitted).
 
Not a single representation or omission is attributed to these Defendants, much less a date on which the representations or omissions occurred. . . . Defendants are group[ed] together indiscriminately with an inference that each Defendant is responsible for the acts of the others.

 See Document 28 of the record at p. 13. Defendants further argued that plaintiffs failed to plead fraud with particularity, to aver the element of enterprise, to plead a pattern of racketeering with specificity and to identify the subsections of 18 U.S.C. § 1962 upon which their RICO claim is based. A main theme of defendants' argument was that plaintiffs should not be allowed to institute a RICO action without any basis for it and then attempt to search for a basis through discovery. Defendants also requested sanctions under Rule 11.

 Plaintiffs filed a Brief in Opposition to defendants' dispositive motion on October 17, 1986. They indicated that the predicate acts upon which they based their RICO claim were the transmission by mail of a series of reports, prepared by defendant Kauffman, to the Federal Home Loan Bank Board as well as a series of reports by defendant Franciscus to Citizens during merger negotiations. Plaintiffs submitted affidavits which detailed the alleged misrepresentations contained in the above-noted reports. Finally, they argued that defendants' summary judgment motion was premature since plaintiffs' interrogatories and requests for production of documents are still outstanding.

 Defendants submitted a Reply Brief on October 29, 1986. They reiterated their position as presented in their earlier brief, adding that the matters set forth in their Statement of Material Facts should be deemed admitted under Local Rule 401.4 since plaintiffs did not contest said Statement.

 Meanwhile, defendant Spiese, executrix of the estate of Lloyd Kline, filed a Motion for Summary Judgment, a Brief in Support thereof and a Statement of Material Facts on October 3, 1986. She incorporated the summary judgment motion and supporting briefs of her fellow defendants and added that she was insulated from liability in this action because Mr. Kline's estate had been closed on March 20, 1984. Plaintiffs submitted a responsive Statement of Material Facts, a Brief in Opposition and an Affidavit on October 17, 1986.

 This matter is now ripe for disposition. The court will deny defendants' summary judgment motions. *fn3"

 DISCUSSION

 When examining a motion for summary judgment, the court must view all facts in the light most favorable to the party opposing the motion. Betz Laboratories, Inc. v. Hines, 647 F.2d 402 (3d Cir. 1981). If there exists a genuine issue as to any material fact, summary judgment must be denied. Fed.R.Civ.P. 56(c). Against this background, the court will examine the requisite elements for establishing a "pattern of racketeering activity" under 18 U.S.C. § 1962. *fn4"

 The definitional section of RICO provides that a pattern of racketeering "requires at least two acts of racketeering activity." 18 U.S.C. § 1961(5). The Supreme Court further defined the pattern requirement in Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. ...


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