or abettor; and (3) substantial assistance or encouragement by
the aider or abettor in effecting that breach. SDK Investments,
Inc. v. Ott, No. CIV.A. 94-1111, 1996 WL 69402, at *12 (E.D.Pa.
Feb. 15, 1996). The court in Schuylkill Skyport Inn did not
require the direct and knowing participation that the Defendants
contend is required. Rather, the court allowed the claim to
proceed based upon a showing of "substantial assistance or
encouragement." Moreover, even if such a heightened involvement
were required, the Plaintiffs sufficiently alleged that the Cohn
Defendants were indeed knowing and active participants in
Malecki's breach. Accordingly, Plaintiffs have sufficiently
alleged a claim of aiding and abetting a breach of fiduciary
duty against the Cohn Defendants.
Fourth, the Cohn Defendants argue that the individual
Plaintiffs, as shareholders, have no standing to sue for damage
to Adena resulting from the alleged breach of fiduciary duty or
the alleged RICO violation. As discussed above, a claim of
aiding and abetting a breach of fiduciary duty is cognizable.
Malecki, as the majority shareholder, owed a fiduciary duty to
the minority shareholders, the individual Plaintiffs. Shanno v.
Magee Indus. Enters., Inc., 856 F.2d 562, 565 (3d Cir. 1988)
(citing Weisbecker v. Hosiery Patents, Inc., 356 Pa. 244,
51 A.2d 811, 813-14 (1947)). Therefore, a claim of aiding and
abetting a breach of fiduciary duty can be made out against the
Cohn Defendants by virtue of their alleged involvement in
Malecki's breach. As for the alleged RICO violations, Plaintiffs
claim that they made payments and loans to acquire Malecki's
shares of Adena, and that they were induced to do so in reliance
on a Stock Transfer Agreement prepared by Malecki and the Cohn
Defendants as part of the on-going RICO conspiracy. The
individual Plaintiffs allege that they have suffered personal
financial losses separate from the losses incurred by Adena and,
therefore, they have standing to pursue their claims against the
E. RICO Claims
Finally, the Cohn Defendants argue that the mere failure to
segregate bills for services rendered to Adena and to Malecki
does not constitute a RICO violation. The extensive allegations
set forth in the Complaint, however, go beyond merely claiming
faulty billing practices on the part of Cohn and, therefore,
sufficiently state a claim for RICO violations.
To establish "a pattern of racketeering" as required by §
1962(b) and (c), a plaintiff must show that the defendant
committed at least two predicate acts enumerated in § 1961(1)
over a ten year period and "that the racketeering predicates are
related, and that they amount to or pose a threat of continuous
criminal activity." Lubart v. Riley and Fanelli, P.C., No.
CIV. A. 97-6392, 1998 WL 398253, at *2 (E.D.Pa. June 22, 1998)
(quoting H.J. Inc. v. Northwestern Bell Tel. Co.,
492 U.S. 229, 239, 109 S.Ct. 2893, 106 L.Ed.2d 195 (1989)). In the
present matter, the Plaintiffs allege that the Cohn Defendants
engaged in repeated acts of mail fraud.*fn5 The elements of
mail fraud include "(1) a scheme to defraud; and (2) the use of
the mails . . . for the purpose of executing the scheme." Id.
(quoting Schuylkill Skyport Inn, 1996 WL 502280, at *14). The
element requires that the act "involve some sort of fraudulent
misrepresentations or omissions reasonably calculated to deceive
ordinary persons of ordinary prudence and comprehension." Id.
at *3 (quoting Kehr Packages v. Fidelcor, Inc. 926 F.2d 1406,
1415 (3d Cir. 1991)). The Plaintiffs met this requirement by
alleging that Cohn repeatedly billed, and accepted payment from,
Adena for legal services purported to have been rendered on
behalf of the corporation but which were actually rendered
exclusively to Malecki and were unrelated, and often in
opposition to, to the interests of Adena. To satisfy the second
element of mail fraud, the use of the mail communications must
be "incident to an essential part of the scheme." Id. (quoting
Schmuck v. United States, 489 U.S. 705, 710-11, 109 S.Ct.
1443, 103 L.Ed.2d 734 (1989)). The Plaintiffs in the present
matter sufficiently alleged that Cohn used the United States
Mail to seek and receive payment from Adena for services
rendered to Malecki personally.
In addition, the requisite two predicate acts must be related
and continuous. See id. The element of relatedness "will
nearly always be satisfied" if the plaintiff alleges at least
two acts of mail fraud or wire fraud "stemming from the same
fraudulent transaction. . . ." Id. at *4 (quoting Kehr
Packages, 926 F.2d at 1414). The element of continuity can be
established "by proving a series of related predicates extending
over a substantial period of time," or, in the alternative, the
"threat of future racketeering activity." Id. (quoting H.J.,
Inc., 492 U.S. at 242, 109 S.Ct. 2893). In this case, the
Plaintiffs satisfied both elements by alleging that the
Defendants engaged in multiple acts of mail fraud in connection
with the billing of Adena and that those multiple acts continued
for over a year.
The Cohn Defendants also argue that the Plaintiffs have not
alleged the manner in which Cohn used the proceeds he acquired
through racketeering activities as, according to the Defendants,
is required under § 1962(b). The Cohn Defendants fail to cite
any cases in support of this proposition, and the plain language
of the statute does not require that there be a "use" of the
proceeds. Similarly, the Defendants' assertion that Malecki's
knowledge of the services rendered to the corporation is imputed
to Adena is without merit. A corporation is permitted to bring
various causes of action against its officers and directors.
Furthermore, Malecki is also being sued for his involvement in
the alleged racketeering activity.
In their Complaint, the Plaintiffs allege facts sufficient to
state their claims of RICO violations, breach of fiduciary duty,
civil conspiracy and malpractice against the Cohn Defendants. In
light of these allegations, the Court cannot say that the
Plaintiffs have set forth no facts under which relief may be
granted. Therefore, the Cohn Defendants' motion to dismiss and,
in the alternative for summary judgment is denied. Because the
claims are outside the scope of the fee agreement, the Cohn
Defendants' motion for a stay is also denied.