MEMORANDUM AND ORDER
WILLIAM J. NEALON, CHIEF UNITED STATES DISTRICT JUDGE.
Presently before the court is a motion of defendants First Eastern Bank, N. A. and First Eastern Corporation to dismiss Count III of plaintiffs' Complaint. For the reasons set forth below, the motion to dismiss will be denied, but plaintiffs will be directed to file an amended pleading.
Plaintiffs were formerly shareholders in the Hawley Bank. At all relevant times, defendant Weinberger was a director of the Hawley Bank. See document 11 of the record at 2.
The relationship of defendants Robert Romich and Patricia Romich to the Hawley Bank is unclear from the present record, and the relationship between First Eastern Bank and the Hawley Bank will be discussed infra.
According to plaintiffs' Complaint, Robert Romich purchased 241 shares of Hawley Bank stock from plaintiff Olsen in February 1985 for $ 100.00 per share. See document 1 at para. 17. Weinberger subsequently acquired 4,685 shares of Hawley Bank stock from plaintiffs Thomas E. Sheridan and Wanda Sheridan for $ 110.00 per share pursuant to a stock purchase agreement dated March 8, 1985. Id. at para. 18. Weinberger bought an additional 353 shares of Hawley Bank stock from plaintiff Thomas E. S. Sheridan for $ 110.00 per share pursuant to a stock purchase agreement of the same date. Id. at para. 20. The Sheridans received full consideration for each transaction on June 6, 1985. Id. at paras. 19, 21. Robert Romich and Patricia Romich then purchased 16 shares of Hawley Bank stock from plaintiff Hames and 10 shares from plaintiff Levy on June 28, 1985 for $ 85.00 per share. Id. at paras. 22, 23. All of the above stock transactions purportedly involved illegal use of wires and/or mail by defendants. Id. at paras. 40, 41.
In June 1985, Weinberger allegedly borrowed $ 700,000.00 from First Eastern Bank, N. A. on an unsecured basis. See document 1 at para. 24. Plaintiffs aver that "the funds were used to purchase the Hawley Bank Stock from the named plaintiffs and possibly other Hawley Bank shareholders." Id.
On July 12, 1985, the directors of the Hawley Bank announced their approval of a proposal from First Eastern Corporation and First Eastern Bank, N. A. to merge the Hawley Bank into the latter defendant. See document 1 at para. 25. First Eastern Bank, N. A. agreed to pay $ 147.00 per share for 40% of the Hawley Bank stock and to transfer 4.05 shares of First Eastern Corporation stock, valued at $ 39.00 per share as of July 12, 1985, for each of the remaining shares of Hawley Bank stock. Id. at para. 26(b).
Plaintiffs instituted this action on July 10, 1987. They claim that during the course of the stock transactions noted above, Weinberger and the Romiches failed to disclose material information, made misrepresentations and attempted to conceal their fraudulent conduct. Although plaintiffs do not specifically aver that Weinberger and the Romiches were aware of the pending merger at the time of the stock transactions, such understanding on the part of these defendants is central to plaintiffs' Complaint. Count I alleges violations of Section 10(b) and Rule 10b-5; Count II states a claim under the Pennsylvania Securities Act of 1972; Count III asserts violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1961 et seq.; Count IV avers common law fraud; and Count V charges that defendants engaged in common law conspiracy. Plaintiffs attempt to hold First Eastern Bank, N. A. and First Eastern Corporation jointly liable with the other defendants under each of the above causes of action as aiders and abettors of their codefendants. Specifically, plaintiffs maintain that "as aiders and abettors of securities fraud, [the bank defendants] are equally responsible for the . . . acts committed by the individual defendants." See document 14 at 5. See also Petro-Tech, Inc. v. Western Co. of North America, 824 F.2d 1349, 1356 (3d Cir. 1987) ("an aider and abettor of two predicate acts can be civilly liable under RICO").
First Eastern Bank, N. A. and First Eastern Bank Corporation submitted a Motion to Dismiss Count III of the Complaint on August 31, 1987. These defendants argue that plaintiffs did not properly allege a "pattern" of racketeering activity for RICO purposes, failed to adequately aver the "enterprise" element and did not plead fraud with the requisite particularity. See document 9 at 2.
The parties have briefed the relevant issues, and the pending Motion to Dismiss Count III is now ripe for consideration.
STANDARD OF REVIEW
In examining a motion to dismiss, a district court should confine its inquiry to the pleadings and should liberally construe the complaint in favor of the plaintiffs. See Conley v. Gibson, 355 U.S. 41, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957); Hooten v. Pennsylvania College of Optometry, 601 F. Supp. 1151 (E.D. Pa. 1984). The material allegations of the complaint should be regarded as admitted, and the complaint, or a portion thereof, should not be dismissed unless it appears that the plaintiffs can prove no set of facts in support of their claims which would entitle them to relief. See Conley v. Gibson, supra; District Council 47 v. Bradley, 795 F.2d 310 (3d Cir. 1986).
The pertinent RICO provision, 18 U.S.C. § 1961(5), states, "[A] '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 . . . after the commission of a prior act of racketeering activity." The United States Supreme Court has cautioned that "two isolated acts of racketeering activity do not constitute a pattern" and that the factor of "continuity plus relationship" is a necessary ingredient in the formation of a pattern for RICO purposes. Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 105 S. Ct. 3275, 3285 n. 14, 87 L. Ed. 2d 346 (1985).
The moving defendants maintain that "a 'pattern' requires more than one scheme to defraud" and that "plaintiffs have failed to allege, as a predicate for a 'pattern,' acts which are sufficiently unconnected in time or substance to be considered separate criminal episodes." See document 9 at 4, 7. The moving defendants also argue that regardless of whether or not this court insists upon separate schemes, plaintiffs' allegations do not involve conduct which was sufficiently continuous, i.e., of ample duration, to establish a pattern. See document 12 at 6-8.
Federal courts have reached varying conclusions on the question of whether a RICO pattern must involve more than one fraudulent scheme or criminal episode. Compare Madden v. Gluck, 815 F.2d 1163 (8th Cir. 1987), International Data Bank, Ltd. v. Zepkin, 812 F.2d 149 (4th Cir. 1987), Holmberg v. Morrisette, 800 F.2d 205 (8th Cir. 1986), and Superior Oil Co. v. Fulmer, 785 F.2d 252 (8th Cir. 1986) (series of predicate acts related to one fraudulent scheme or criminal episode does not constitute a pattern) with Sun Sav. and Loan Ass'n v. Dierdorff, 825 F.2d 187 (9th Cir. 1987), Cal Arch. Bldg. Prod. v. Franciscan Ceramics, 818 F.2d 1466 (9th Cir. 1987), Roeder v. Alpha Indus., Inc., 814 F.2d 22 (1st Cir. 1987), United States v. Ianniello, 808 F.2d 184 (2d Cir. 1986), cert. denied, 483 U.S. 1006, 107 S. Ct. 3229, 97 L. Ed. 2d 736 (1987), Morgan v. Bank of Waukegan, 804 F.2d 970 (7th Cir. 1986), Bank of America v. Touche Ross & Co., 782 F.2d 966 (11th Cir. 1986), and Illinois Department of Revenue v. Phillips, 771 F.2d 312 (7th Cir. 1985) (series of predicate acts related to one fraudulent scheme or criminal episode can constitute a pattern).
The Court of Appeals for the Third Circuit had on a number of occasions expressly declined to define the parameters of a pattern of racketeering activity. See Town of Kearney v. Hudson Meadows Urban Renewal Corp., 829 F.2d 1263, slip op. at 9-12 (3d Cir. 1987); Petro-Tech v. Western Co. of North America, supra, at 1353-56 (3d Cir. 1987); United States v. Grayson, 795 F.2d 278, 290 (3d Cir. 1986), cert. denied, 479 U.S. 1054, 107 S. Ct. 927, 93 L. Ed. 2d 978 (1987); and Malley-Duff Associates, Inc. v. Crown Life Co., 792 F.2d 341, 353 n.20 (3d Cir. 1986), aff'd, 483 U.S. 143, 107 S. Ct. 2759, 97 L. Ed. 2d 121 (1987). Most recently, however, the Third Circuit has ruled that a complaint alleging two or more predicate acts in furtherance of single, not necessarily on-going and open-ended, unlawful scheme may be sufficient to establish a pattern of racketeering activity. Barticheck v. Fidelity Union Bank/First National State, 832 F.2d 36, slip op. at 8 (3d Cir. 1987).
Even prior to the Barticheck opinion, it was the established position of the undersigned judge that "two or more related acts which arise out of the same transaction may establish a pattern of racketeering." Citizens Sav. Ass'n v. Franciscus, 656 F. Supp. 153, 158 (M.D. Pa. 1986) (Nealon, C.J.). See also A Pocono Country Place v. Peterson, 675 F. Supp. 968, slip op. at 15 (M.D. Pa. 1987) (Nealon, C.J.); and Metropolitan Intern., Inc. v. Alco Standard Corp., 657 F. Supp. 627, 634 (M.D. Pa. 1986) (Nealon, C.J.) ("it is for Congress and not this court to limit the use to which RICO has been put").
In light of the precedent established by the Barticheck, Citizens, Pocono, and Metropolitan opinions, with which the majority of circuit courts addressing the pattern issue are in agreement, the court rejects the moving defendants' contention that "a 'pattern' requires more than one scheme to defraud."
In the Citizens decision, this court described the pattern requirement as follows:
Any examination to determine if a pattern exists involves several factors other than the number of criminal transactions present. Indeed, to say that the test for a pattern of racketeering is whether at least two criminal episodes are present is an oversimplistic response to a complex inquiry. This court chooses to follow the middle course outlined in Morgan v. Bank of Waukegan, supra, which focuses attention on the interplay between a number of relevant factors, including: the number and variety of the predicate acts, the length of time over which they were committed, the number of victims, the presence of separate schemes and the occurrence of distinct injuries.