DEVON DRIVE LIONVILLE, LP et al v. PARKE BANCORP, INC. et al
MEMORANDUM AND/OR OPINION. SIGNED BY HONORABLE MITCHELL S. GOLDBERG ON 12/29/16. 12/29/16 ENTERED AND COPIES E-MAILED.(kw, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
DEVON DRIVE LIONVILLE, LP, et al.,
PARKE BANCORP, INC., et al.,
December 29, 2016
Plaintiffs, six limited partnerships and two individuals involved in those partnerships,
have sued a bank and two of its employees alleging violations of the Racketeer Influence and
Corrupt Organizations Act (“RICO”), 18 U.S.C §§ 1961, et seq. in connection with a series of
substantial commercial loans and subsequent transactions. Plaintiffs assert that these Defendants
used falsified collateral documentation and the money available under the lines of credit
extended to the partnerships as a single “piggy bank.” According to Plaintiffs, Defendants
undertook this activity to create the appearance that the various loans extended to Plaintiffs were
performing in order to protect the bank’s assets, mislead regulators about the health of the bank’s
loan portfolio and fund other separate investment endeavors.
In addition to three RICO claims, Plaintiffs also assert state law claims for fraud,
conversion and civil conspiracy. Before me is Defendants’ motion to dismiss, which, for the
reasons that follow, I will grant in part and deny in part.
FACTS ALLEGED IN THE COMPLAINT
The following facts are taken from the Complaint and viewed in the light most favorable
In 2003, non-party Bruce Earle and Plaintiff George Spaeder entered into an “oral
partnership agreement” for the purpose of buying, selling and developing various real estate
projects. To carry out this business agreement, Earle and Spaeder formed multiple limited
partnerships (“the Partnerships”) in order to purchase a single commercial property. Six of these
Partnerships are Plaintiffs in the instant case: Devon Drive Lionville, L.P. (“Lionville”), North
Charlotte Road Pottstown, L.P. (“Pottstown”), Main Street Peckville, L.P. (“Peckville”), Rhoads
Avenue Newtown Square, L.P. (“Rhoads”), VG West Chester Pike, L.P. (“West Chester”), and
1301 Phoenix, L.P. (“Phoenix”). (Compl. ¶¶ 3-8, 18-19.) Spaeder and another individual, John
M. Shea, are also named as plaintiffs.
Spaeder was principally in charge of managing the day-to-day business of Lionville,
Pottstown and Peckville and served as the Manager of the general partner entities for each.
Earle’s involvement with Lionville, Pottstown and Peckville was as an independent contractor
acting through his wholly-owned company, Rosedon Holding Company L.P. (“Rosedon”).
Rosedon “took custody” of the books and was responsible for monitoring the finances of
Lionville, Pottstown and Peckville. (Compl. ¶ 20.)
Lionville, Pottstown, and Peckville each obtained financing through Parke Bank in order
to purchase and develop the commercial properties held by each Partnership.1 Defendant Vito S.
Pantilione, an officer and director of Parke Bank, facilitated these loan transactions. (Compl.
Parke Bank is a wholly owned-subsidiary of Defendant Bancorp, Inc. (Compl. ¶ 12.) For
simplicity, I refer to these two entities collectively as “Parke Bank.”
In December of 2007, Lionville borrowed $3,098,000 from Parke Bank. In March of
2008, Pottstown borrowed $8,000,000 from Parke Bank. In May of 2008, Peckville borrowed
$5,200,000 from Parke Bank. In connection with each of these transactions, Parke Bank was
provided with copies of the relevant partnership agreements as well as the operating agreement
of each partnership’s general partner entity. (Compl. ¶¶ 26-28.)
In the summer of 2008, Earle approached Pantilione about obtaining a line of credit from
Parke Bank in order to finance other real estate ventures. Pantilione identified a property located
in Margate, New Jersey (“Margate Property”) owned by Earle and his wife as a source of
security to back the line of credit. Pantilione explained to Earle that Earle could not personally
guarantee the line of credit because of Federal Deposit Insurance Corporation (“FDIC”) lending
limit regulations.2 Pantilione suggested that Earle approach Plaintiff John M. Shea about
guaranteeing the line of credit, explaining, although Shea would personally guaranty repayment
of the line of credit, Parke Bank would view the Margate Property as the “real” security. (Compl.
Parke Bank, at Pantilione’s direction, hired a long-time friend of Pantilione’s to appraise
the Margate Property. Although historically valued at $5 million, Pantilione’s contact valued the
Margate Property at $12 million. (Compl. ¶ 31.)
Following Pantilione’s assurance that Parke Bank viewed the Margate Property to be the
actual security for the line of credit, Shea agreed to personally guaranty the $5 million line of
credit extended to Earle. At settlement, Parke Bank represented that $2.35 million would be used
to improve the collateralization of the Lionville, Pottstown and Peckville loans. Despite this
representation, Parke Bank never transferred any of those funds. (Compl. ¶¶ 32-33.)
Plaintiffs do not explain in any detail which FDIC lending limits are at issue. The Complaint
references federal “’loan to one borrower’ lending limit regulations.’” (Compl. ¶ 23.)
In 2011, Earle and Spaeder’s relationship deteriorated and many of their business
ventures began to collapse. Parke Bank’s loans to Peckville and Pottstown went into default.
(Compl. ¶ 34.)
In 2012 Parke Bank confessed judgment against Pottstown in excess of $9.7 million
dollars and against Peckville in excess of $5.6 million. Rosedon and Earle also defaulted on
loans made by Parke Bank, which were pursued by Parke Bank through confessed judgments as
well. (Compl. ¶ 36.)
As detailed more fully below, the Complaint alleges that Parke Bank, Pantilione,
Defendant Ralph Gallo, the Senior Vice President and “Chief Workout Officer” at Parke Bank
and Earle, engaged in a series of “varied, but equally unlawful actions taken in furtherance of the
individual and/or collective interests of Parke Bank, Pantilione, Gallo and Earle.” (Compl. ¶¶ 14,
39.) Plaintiffs refer to the association between the Defendants and Earle as the “BPGE
According to Plaintiffs, the BPGE enterprise engaged in this conduct in order to create
the appearance of performing loans, to protect Parke Bank’s financial health, evade scrutiny by
regulators, increase the amount of funds that could be categorized as ‘income’ rather than a
return of principle and fund additional investment ventures. Plaintiffs posit that the BPGE
enterprise’s wrongdoing was motivated in part by the fact that Parke Bank came under
“increasing pressure to trim back problem loans, ultimately culminating with its entry into a
Consent Order with the FDIC in April 2012.” (Compl. ¶¶ 40, 50, 51.)
Plaintiffs allege that they first uncovered evidence of the BPGE enterprise during the course of
bankruptcy proceedings Spaeder instituted on behalf of Peckville in July of 2013. (Compl. ¶ 39.)
The Complaint summarizes Defendants’ “engagement in a wide variety of RICO
predicate acts involving mail, wire, and bank fraud, by and through:”
(a) Unauthorized transfers of funds between Parke Bank accounts for the
(b) Unauthorized transfers of funds from Parke Bank accounts for the
Partnerships to other bank accounts outside of Parke Bank;
(c) Misdirecting construction draws and payments;
(d) Unauthorized transfer of line of credit funds;
(e) Unilaterally amending the repayment terms of loans;
(f) Instituting unfounded and fraudulent “late charges;” and
(g) Inducing, and later taking legal action on, security instruments obtained under
false presences [sic] from at least one of the Partnerships.
(Compl. ¶ 2.) The specific allegations supporting these supposed predicate acts are as follows:
Parke Bank, Pantilione, Gallo and Earle treated Lionville, Pottstown and
Peckville as a collective source of funds despite the fact that they were
separate entities with discrete assets and ownership structures. The partnership
and operating agreements governing Lionville, Peckville, and Pottstown
vested exclusive management control over all decisions in Spaeder. The
agreements expressly prohibited Earle from any right to manage, control, act
for or obligate Lionville, Peckville and Pottstown. (Compl. ¶¶ 52-54.)
However, without consent from the relevant Partnerships, Parke Bank
unilaterally made multiple transfers of funds from the Lionville, Peckville and
Pottstown accounts to other Parke Bank accounts as well as outside bank
accounts held by Rosedon. Between 2008 and 2013, Parke Bank made
approximately fifteen unauthorized transfers from Lionville’s account totaling
approximately $1.6 million, at least eight unauthorized transfers from
Pottstown’s account totaling approximately $1.2 million and an unspecified
number of unauthorized transfers from Peckville’s accounts in excess of $1.3
million dollars. (Compl. ¶¶ 62-63, 74-75, 92-93.)
Contrary to the terms of a construction loan agreement with Pottstown and
without Pottstown’s authorization, Parke Bank released funds earmarked for
construction draws to Rosedon. Earle then directed a portion of the
misdirected funds to the pertinent construction company as payment and kept
the rest for himself. Parke Bank also misdirected approximately $3.8 million
of Pottstown’s $4.1 million in construction draw funds to Rosedon and/or
Earle. (Compl. ¶¶ 73, 76-79.)
Parke Bank unilaterally extended the maturity date of Peckville’s loan without
Peckville’s consent. Additionally, Parke Bank, Pantilione and Gallo facilitated
the transfer of funds to Rosedon by honoring forged or unsigned checks
payable against Lionville’s, Peckville’s and Pottstown’s accounts with Parke
Bank. (Compl. ¶¶ 64, 80, 95-98.)
The Complaint explains that the foregoing transactions were intended to provide Earle
with additional funds that were not directly tied to him or to Rosedon. In doing so, Defendants
attempted to circumvent FDIC lending limit regulations, enable Earle/Rosedon to make
payments on existing obligations to Parke Bank and create the appearance that these defaulting
loans were performing. (See, e.g., Compl. ¶¶ 63, 94.)
Plaintiffs allege that, in order to conceal the foregoing conduct of the BPGE enterprise,
Earle prevented Spaeder from having access to the Partnership books and encouraged Spaeder to
focus on managing Lionville, Pottstown and Peckville while Earle handled the finances. Earle,
with the knowledge of Pantilione and Gallo, also ensured that correspondence from Parke Bank
to Lionville, Pottstown and Peckville was sent directly to Rosedon’s offices. As a result,
Spaeder, Lionville, Pottstown and Peckville were unaware of the transfers orchestrated by the
BPGE enterprise. (Compl. ¶¶ 55-57.)
As a result of these acts, Plaintiffs assert that the BPGE enterprise’s conduct caused
Lionville, Pottstown and Peckville to loose rental income associated with development projects,
tenants to cancel leases, and the partnerships to ultimately default on their repayment obligations
to Parke Bank. (Compl. ¶¶ 65, 69-70, 81-86, 101-102.)
The other three partnerships, Rhoads, West Chester and Phoenix, were also allegedly
impacted by the BPGE enterprise’s conduct. As part of an investigation into Parke Bank’s
business practices, the FDIC scrutinized the construction loan to Pottstown. As a result of Parke
Bank’s assignment of the wrong appraisal to the Pottstown property and Parke Bank and Earle’s
“plundering” of Pottstown’s liquid assets, the construction loan was under-collateralized.
(Compl. ¶¶ 103-117.)
Facing increasing pressure from the FDIC, Plaintiffs claim that Pantilione advised
Spaeder that Pottstown must present additional collateral or Parke Bank would declare the loan
in default. Pantilione assured Spaeder that he would not record any additional collateral provided
by Pottstown but that he only intended to present evidence of the additional collateral to appease
the FDIC. (Compl. ¶¶ 27, 104-105.)
To comply with Pantilione’s directive, Rhoads allegedly executed a leasehold mortgage
and security agreement in favor of Parke Bank for each of the parcels of land it held and also
executed an assignment of rents it collected from Rite-Aid, a tenant occupying one of the parcels
(“Rite-Aid Documents”). Approximately nine months after their execution, Pantilione recorded
the Rite-Aid Documents. Thereafter, Parke Bank attempted to secure a judgment by confession
against Rhoads. As a result, Rhoads suffered “the loss of use of the undeveloped parcel,” and
other tenants demanded new, less favorable lease terms upon learning of the recorded Rite-Aid
Documents. (Compl. ¶¶ 106-109.)
The Complaint further alleges that, in order to fund the defense of Pottstown and
Peckville in lawsuits brought by Parke Bank, West Chester and Phoenix were “forced” to sell
their respective properties at a loss. Spaeder was likewise compelled to expend significant sums
of his own money to maintain the viability of the Partnerships when they became “cash-starved”
as a result of the BPGE enterprise’s conduct. (Compl. ¶¶ 110-115.)
Plaintiffs press the following claims: (1) conduct and participation in an enterprise
through a pattern of racketeering activity in violation of RICO, 18 U.S.C. § 1962(c);
(2) acquisition and maintenance of an interest in and control of an enterprise engaged in a pattern
of racketeering activity in violation of RICO, 18 U.S.C. § 1962(b); (3) conspiracy to engage in a
pattern of racketeering activity in violation of RICO, 18 U.S.C. § 1962(d); (4) fraud;
(5) conversion; and (6) civil conspiracy. Defendants have moved to dismiss all six claims.
STANDARD OF REVIEW
To survive a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), a
complaint must “contain sufficient factual matter, accepted as true, to ‘state a claim for relief that
is plausible on its face.’” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (quoting Bell Atlantic
Corp. v. Twombly, 550 U.S. 544, 570 (2007)). The plausibility standard requires more than a
“sheer possibility that a defendant has acted unlawfully.” Id.
To determine the sufficiency of a complaint under Twombly and Iqbal, the Court must
take the following three steps: (1) the Court must “tak[e] note of the elements a plaintiff must
plead to state a claim;” (2) the court should identify the allegations that, “because they are no
more than conclusions, are not entitled to the assumption of truth;” and (3) “where there are
well-pleaded factual allegations, a court should assume their veracity and then determine
whether they plausibly give rise to an entitlement for relief.” Burtch v. Milberg Factors, Inc., 662
F.3d 212, 221 (3d Cir. 2011) (citations omitted).
Rule 9(b) provides that: “[i]n alleging fraud or mistake, a party must state with
particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and
other conditions of a person’s mind may be alleged generally.” Fed. R. Civ. P. 9(b).
The United States Court of Appeals for the Third Circuit has explained that Rule 9(b)
“requires plaintiffs to plead with particularity the ‘circumstances’ of the alleged fraud in order to
place the defendants on notice of the precise misconduct with which they are charged, and to
safeguard defendants against spurious charges of immoral and fraudulent behavior.” Seville
Indus. Mach. Corp. v. Southmost Mach. Corp., 742 F.2d 786, 791 (3d Cir. 1984). To meet this
standard, a plaintiff must plead the “date, place or time” of the alleged fraud or may “use
alternative means of injecting precision and some measure of substantiation into their allegations
of fraud.” Id.
a. Preclusive Effect of Prior Litigation on All Claims
Pointing to various judgments, decisions, pleadings, dockets, settlements and releases
from the many other court proceedings between the numerous parties involved in this case,
Defendants move to dismiss the Complaint because at least one of the Plaintiffs has litigated
“nearly every one of the claims that they make in this case.” (Defs.’ Mot. p. 2.) As such,
Defendants argue that the doctrines of res judicata and collateral estoppel preclude Plaintiffs’
claims. To this end, Defendants request that I take judicial notice of thirty-six documents from
ten other court cases which Defendants urge justify dismissal of the Complaint.
Plaintiffs respond that it would be improper to consider the documents cherry-picked by
Defendants without a more complete and accurate record of the prior court proceedings.
Additionally, Plaintiffs urge that the documents and Defendants’ reliance on these documents
raise numerous factual issues which need to be resolved before it can be determined what
preclusive effect, if any, the prior litigation has on this case.4
Plaintiffs also object to Defendants’ motion for judicial notice on the ground that the
documents on which Defendants rely “consist mostly of dockets, filings and court orders that are
the direct result of action or inaction by Defendants’ co-conspirator, Earle, [who] had exclusive
control over the Partnerships from December 2011 to October 2013.” As such, Plaintiffs argue
that “anything that occurred during this time period was in furtherance of the Defendants’
racketeering enterprise. For this reason alone, this Court should decline to glean any factual or
legal conclusions from Defendants’ documents.” (Pls.’ Resp. to Mot. for Judicial Not. p. 4.)
In relevant part, Federal Rule of Evidence 201(b)(2) provides that “[t]he court may
judicially notice a fact that is not subject to reasonable dispute because it . . . can be accurately
and readily determined from sources whose accuracy cannot reasonably be questioned.” The
court “must take judicial notice if a party requests it and the court is supplied with the necessary
information.” Fed. R. Evid. 201(c). “While the rules allow a court to take judicial notice at any
stage of the proceedings, Fed. R. Evid. 201(f)”, the Third Circuit has stated “that it should be
done sparingly at the pleadings stage. Only in the clearest of cases should a district court reach
outside the pleadings for facts necessary to resolve a case at that point.” Victaulic Co. v. Tieman,
499 F.3d 227, 236 (3d Cir. 2007).
When confronted with similar arguments in a RICO case, the Honorable Harvey Bartle
III of this Court declined to resolve the preclusive effect of prior litigation and a “binding
release” at the motion to dismiss stage. Kaiser v. Stewart, 1997 WL 476455 n.28 (E.D. Pa. Aug.
19, 1997). Judge Bartle agreed with the plaintiff “that these fact-based defenses are not proper to
consider on a motion to dismiss. An affirmative defense may only be argued on a motion to
dismiss if the affirmative defense clearly appears on the face of the pleading.” Id. at *21.
I agree with Judge Bartle’s reasoning because it is consistent with the standards of
review applicable at the motion to dismiss stage and the limitations on the Court’s ability to take
judicial notice. Defendants’ request that I review the pleadings, dockets, orders, complaints and
judgments that they have selectively culled from ten separate cases and make a determination as
to the preclusive effect that the prior litigation has on a particular Plaintiffs’ ability to litigate
particular portions of the RICO claims they have brought in the present case. Under Rule 201(c),
This argument raises additional factual issues which are not appropriately resolved at this
nascent stage of the litigation.
I decline to take judicial notice of these documents because, at this stage of the case, I do not
have the “necessary information” from the prior litigation.
b. Count I – Civil RICO – 18 U.S.C. § 1962(c)
In count one, all Plaintiffs bring a claim against all Defendants pursuant to 18 U.S.C.
§ 1962(c) which provides:
It shall be unlawful for any person employed by or associated with any enterprise
engaged in, or the activities of which affect, interstate or foreign commerce, to
conduct or participate, directly or indirectly, in the conduct of such enterprise’s
affairs through a pattern of racketeering activity or collection of unlawful debt.
18 U.S.C. § 1962(c). A violation of this section requires “(1) conduct (2) of an enterprise (3)
through a pattern (4) of racketeering activity.” Lum v. Bank of Am., 361 F.3d 217, 223 (3d Cir.
2004) (citing Sedima v. Imrex Co., 473 U.S. 479, 496 (1985)).5
In order to state a claim under this subsection, a plaintiff must plead: “(1) the existence of
an enterprise engaged in or affecting interstate commerce; (2) that the defendant was employed
by or associated with the enterprise; (3) that the defendant participated, directly or indirectly, in
the conduct or the affairs of the enterprise; and (4) that the defendant participated through a
pattern of racketeering activity that must include the allegation of at least two racketeering acts.”
Munsif v. Cassel, 331 F. Appx. 954, 958 (3d Cir. 2009).
In reviewing Plaintiffs’ Complaint, I remain mindful that the RICO statute provides that
its terms are to be “liberally construed to effectuate its remedial purposes.” Boyle v. United
States, 556 U.S. 938, 944 (2009) (citing § 904(a) of Pub.L. 91–452, 84 Stat. 947, see note
following 18 U.S.C. § 1961).
The caption to Count I states that the § 1962(c) claim is brought by “all Plaintiffs.” (Compl
p. 29.) However, the allegations that follow refer to the Partnerships alone. For example, when
setting forth the allegations regarding the injury caused by Defendants the Complaint states
“each of the plaintiff Partnerships suffered substantial injury. . .” (See, e.g., Compl. ¶¶ 126-127.)
If Plaintiffs choose to file an amended complaint, they should clarify whether Spaeder and Shea
are also bringing a § 1962(c) claim.
i. Allegations Regarding the Existence of an Enterprise
Defendants argue that Plaintiffs’ § 1962(c) claim must be dismissed because the
Complaint fails to adequately allege the existence of an enterprise. Defendants urge that the
allegations do not adequately establish a plausible shared purpose, a structure within the
enterprise for directing its activity, or an existence separate and apart from the pattern of
racketeering activity in which the enterprise’s members were allegedly engaged.
The RICO statute defines an “enterprise” as “any individual, partnership, corporation,
association, or other legal entity, and any union or group of individuals associated in fact
although not a legal entity.” 18 U.S.C. § 1961(4). The Supreme Court has established an
expansive understanding of this requirement, observing that “[t]he [RICO] statute does not
specifically define the outer boundaries of the ‘enterprise’ concept,” and that “this enumeration
of included enterprises is obviously broad, encompassing ‘any . . . group of individuals
associated in fact.’” Boyle v. United States, 556 U.S. 938, 944 (2009) (quoting § 1961(4))
(emphasis in Boyle); see also In re Ins. Brokerage Antitrust Litig., 618 F.3d 300, 366 (3d Cir.
2010) (“the Boyle Court highlighted several elements of the RICO statute that pointed toward a
capacious construction of the term.”)
While the “enterprise” element remains distinct from the “racketeering activity” element,
“the evidence used to prove the pattern of racketeering activity and the evidence establishing an
enterprise ‘may in particular cases coalesce.’” In re Ins. Brokerage Antitrust Litig., 618 F.3d at
368 (quoting United States v. Turkette, 452 U.S. 576, 583 (1981)). In this regard, “proof of a
pattern of racketeering activity may be sufficient in a particular case to permit a jury to infer
existence of an association-in-fact enterprise.” Id.
Here, Plaintiffs allege the existence of an association-in-fact enterprise. This type of
enterprise “must have at least three structural features: a purpose, relationships among those
associated with the enterprise, and longevity sufficient to pursue the enterprise’s purpose.” Id. at
366 (quoting Boyle, 556 U.S. at 946).
In support of their motion, Defendants first assert that the purpose of the BPGE
enterprise’s alleged scheme – where Parke Bank rendered the Partnerships that owed it over $14
million dollars unable to repay – is implausible. Defendants note that the Complaint alleges that
Earle drained the Partnerships of their funds for his own use and Defendants, while on the other
hand, participated in this scheme to avoid FDIC scrutiny of their loan portfolio. According to
Defendants, these are “cross purposes” because Earle’s alleged theft from the Partnerships would
necessarily render the Partnership’s loans non-performing and subject to increased scrutiny from
regulators. As such, Defendants urge that the alleged shared purpose is implausible and the claim
fails under Iqbal.
Plaintiffs respond that the purpose element of Boyle is not synonymous with the
motivation behind each RICO defendant’s actions. As such, Plaintiffs argue that Earle’s
motivation for taking part in the BPGE enterprise need not be the same as that of Parke Bank.
Rather, Plaintiffs contend that they have satisfied Boyle because the Complaint alleges that each
Defendant facilitated the BPGE enterprise’s common purpose of misappropriating funds from
Additionally, Defendants urge that the BPGE enterprise as alleged is nothing more than
the sum of the alleged pattern of racketeering activity and that, in this case, those allegations are
an insufficient basis in which to infer the existence of an association-in-fact enterprise. Plaintiffs
respond that a section 1962(c) enterprise need not have a particular structure for making
decisions and/or controlling and directing its activity.
At this stage, I conclude that the Complaint sufficiently spells out the “structural
features” of an association-in-fact enterprise. Plaintiffs have alleged a plausible shared purpose –
defrauding the Partnerships and using the ill-gotten assets to further Defendants’ own financial
interests. Although the members of the BPGE enterprise may have intended to use the ill-gotten
funds to further their independent but inarguably related and mutually beneficial interests, the
Complaint plausibly alleges that Defendants engaged in a common course of conduct for the
purpose of misappropriating funds from the partnerships.
The Complaint also alleges that the objectionable conduct occurred from 2008 through
2012. This four year span satisfies the longevity requirement in Boyle as it is sufficient to allow
Defendants to pursue the enterprise’s purpose. See United States v. Eiland, 738 F.3d 338, 360
(D.C. Cir. 2013) (two years sufficient); Laudien v. Caudill, 92 F. Supp. 3d 614, 619 (E.D. Ky.
2015) (three years sufficient); Automated Teller Mach. Advantage LC v. Moore, 2009 WL
2431513, at *7 (S.D.N.Y. 2009) (approximately two years sufficient).
I recognize that Plaintiffs do not allege a formal structure which is wholly distinct from
the racketeering activity. However, post-Boyle, an association-in-fact enterprise need not have an
ascertainable structure. In fact, “the evidence establishing the pattern of racketeering activity and
the evidence establishing an enterprise ‘may in particular cases coalesce.’” Ins. Brokerage
Antitrust Litig., 618 F.3d at 368.
Plaintiffs allege that the enterprise consisted of an association of the following
individuals: Parke Bancorp, Inc., Parke Bank, Pantilione, Gallo and Earle. With the exception of
Gallo, (see footnote 6), the Complaint also sufficiently alleges how each individual was involved
in the alleged pattern of racketeering activity and how the BPGE enterprise functioned as a
As explained in further detail below, the Complaint also sufficiently alleges a pattern of
racketeering activity. These allegations coupled with the aforementioned allegations regarding
purpose and longevity are sufficient to sustain Plaintiffs’ burden to plead the existence of the
association-in-fact enterprise. Boyle, 556 U.S. at 942 n.1 (“Common sense suggests that the
existence of an association-in-fact enterprise is oftentimes more readily proven by what it does,
rather than by abstract analysis of its structure”).
ii. Whether Defendants are Distinct Individuals Associated with the
Defendants also argue that Plaintiffs’ § 1962(c) claim fails because they have not alleged
a distinct individual that is associated or employed by the enterprise. See Cedric Kushner
Promotions, Ltd. v. King, 533 U.S. 158, 161 (2001) (to state a claim under § 1962(c), a plaintiff
must allege “the existence of two distinct entities: (1) a ‘person’ [who operates or manages the
enterprise]; and (2) an ‘enterprise’ that is not simply the same ‘person’ referred to by a different
The Complaint does not adequately set forth what specific role Gallo played in the alleged
wrongful conduct. A careful review of the Complaint reveals that the overwhelming majority of
allegations against Gallo are conclusory and, therefore, not entitled to the presumption of truth.
See, e.g., (Compl. ¶ 58 (“by and through the unlawful actions of Parke Bank, Pantilione, Gallo
and Earle in furtherance of the BPGE Enterprise, the Lionville, Pottstown and Peckville
partnerships were plundered. . .”)) Many of the few remaining allegations pertaining to Gallo are
qualified by the statement “based on information and belief.”
While the requirements of Federal Rule of Evidence 9(b) are relaxed when factual information is
peculiarly within the defendant’s knowledge and control, as is arguably the situation here,
“boilerplate and conclusory allegations will not suffice.” In re Rockefeller Center Properties,
Inc., 311 F.3d 198, 216 (3d Cir. 2002). “Plaintiffs must accompany their legal theory with factual
allegations that make their theoretically viable claim plausible.” Id. If Plaintiffs choose to file an
amended complaint and press claims against Gallo, they should endeavor to provide additional
factual assertions regarding Gallo’s involvement in the alleged wrongdoing.
Specifically, Defendants posit that Parke Bank, Gallo and Pantilione are one individual
because a corporation acts through its employees and agents. Therefore, according to
Defendants, the enterprise allegedly consists of essentially two individuals – Parke Bank and
Earle. Citing a settlement agreement reached in a separate case whereby Spaeder purportedly
agreed to release all claims against Earle,7 Defendants assert that “without Earle,” the enterprise
that Plaintiffs have alleged consists entirely of Parke Bank and Parke Bank cannot comprise both
the person and enterprise for purposes of a § 1962(c) claim.
In support of this proposition, Defendants cite to Brittingham v. Mobil Corporation, 943
F.2d 297, 301 (3d Cir. 1991) where the Third Circuit stated:
We believe a § 1962(c) enterprise must be more than an association of individuals
or entities conducting the normal affairs of a defendant corporation. A corporation
must always act through its employees and agents, and any corporate act will be
accomplished through an “association” of these individuals or entities. . . . [W]e
must examine the enterprise allegation to determine whether it is no more than an
association of individuals or entities acting on behalf of a defendant corporation.
Our decision is in accord with numerous courts that have rejected attempts to
circumvent the distinctiveness requirement by alleging enterprises that are merely
combinations of individuals or entities affiliated with a defendant corporation.
Brittingham v. Mobil Corp., 943 F.2d 297, 301 (3d Cir. 1991). The Third Circuit reasoned that
“[w]ithout allegations or evidence that the defendant corporation had a role in the racketeering
A large portion of Defendants’ preclusion arguments focus on a settlement agreement that
resolved a lawsuit Spaeder filed against Earle, Earle’s wife and Rosedon in the Court of
Common Pleas of Delaware County. Defendants cite to this settlement agreement in multiple
sections of their motion to dismiss. Given the centrality of this document to Defendants’ motion,
I address it separately briefly below.
Defendants urge that pursuant to the settlement agreement Spaeder released all claims, “known
or unknown,” against Earle, Rosedon and their “affiliates” and “agents” from “the beginning of
time” until September 30, 2013. (Defs.’ Mot. to Dismiss p. 23.) Based on this settlement,
Defendants seem to argue that, in light of the settlement agreement, Earle may not properly be
included as a member of the BPGE enterprise.
A determination regarding the effect of the release is inappropriate at the motion to dismiss
stage. As such, at this juncture, I will consider allegations regarding Earle’s involvement in the
activity that was distinct from the undertakings of those acting on its behalf, the distinctiveness
requirement is not satisfied.” Id. at 302.
Plaintiffs point out that the portion of Brittingham on which Defendants rely was
overruled by Jaguar Cars, Inc. v. Royal Oaks Motor Car Co., 46 F.3d 258, 260 (3d Cir. 1995). In
Jaguar, the Third Circuit further explained that in an § 1962(c) action against officers conducting
a pattern of racketeering activity through a corporate enterprise, “the plaintiff can only recover
against the defendant officers and cannot recover against the corporation simply by pleading the
officers as the persons controlling the corporate enterprise, since the corporate enterprise is not
liable under § 1962(c) in this context.” Id. Rather “a corporation would be liable under
§ 1962(c), only if it engages in racketeering activity as a ‘person’ in another distinct ‘enterprise,’
since only ‘persons’ are liable for violating § 1962(c).” Id.
The parties’ foray into the parameters of the distinctness requirement post-Jaguar is
somewhat academic because Plaintiffs have not alleged that the enterprise consists of Parke
Bank and its employees. Rather, a fair reading of the Complaint reveals that the alleged
enterprise is an amalgam of a corporation (Parke Bank), two of its employees (Pantilione and
Gallo) and a third-party non-employee (Earle).
Courts in this circuit have found that similarly composed enterprises satisfy section
1962(c)’s distinctiveness requirement. For example, in Mega Concrete, Inc. v. Smith, 2013 WL
3716515, (E.D. Pa. July 15, 2013), the enterprise was alleged to consist of a corporation, its
president and an accounting clerk employed by a separate entity. The court denied a motion to
dismiss the plaintiff’s § 1962(c)’s claims brought against the corporation and its president on
distinctiveness grounds. The court reasoned that the enterprise “involves a third-party member
who does not come within the other members’ corporate sphere. Inclusion of [the third party]
tends to negate the notion that the enterprise is [the corporation] or [its employee], simply called
by another name, and presents at least reason to doubt that distinctiveness concerns defeat [the
plaintiff’s] RICO claim against them.” Id. at *13.
Levine v. First American Title Insurance Co., 682 F. Supp. 2d 442 (E.D. Pa. 2010) is also
instructive. There, the enterprise was alleged to consist of a title insurance company and outside
agents it hired to perform title searches and other settlement services. Id. at 460. In denying a
motion to dismiss the §1962(c) claim brought against the title insurance company, the court
emphasized that the title agents were not employees of the title insurance company but rather
“nonexclusive agents who work with different title insurance companies,” and as such, the
agents were “separate, independent entities who do not function as subsidiaries or employees of”
the title insurance company. Id. at 459. In light of these allegations, the court concluded that the
plaintiffs had “satisfied the minimum ‘person’ and ‘enterprise’ distinctiveness requirement
because the combination of [the title insurance corporation] and the title agents constitute a
single ‘enterprise’ separate and distinct from the ‘person’ of [the title insurance company], and
this combination is permissible under RICO jurisprudence.” Id. at 460.
Similar to the enterprises alleged in Mega Concrete and Levine, here, the BPGE
enterprise is alleged to consist of a corporation and its employees as well as a third-party outside
of the corporate structure. At this stage, Plaintiffs have plausibly pled that the enterprise is
distinct from the individuals who allegedly operated and managed the enterprise.
iii. Predicate Acts of Racketeering Activity
Plaintiffs allege bank fraud, wire fraud and mail fraud as the RICO predicate acts.
Defendants respond that Plaintiffs have failed to plead a pattern of racketeering activity or, in the
case of bank fraud, any racketeering activity at all.
“Racketeering activity,” as defined by the RICO statute, is not so much a definition as a
list of offenses which can serve as a predicate offense for establishing a RICO claim. Included in
this list is “any act which is indictable under  the following provisions of title 18 United States
Code: . . . section 1341 (relating to mail fraud), section 1343 (relating to wire fraud), section
1344 (relating to financial institution fraud).” 18 U.S.C. § 1961(1). Further, a “‘pattern of
racketeering activity’ requires at least two acts of racketeering activity . . . the last of which
occurred within ten years  after the commission of a prior act of racketeering activity.” 18
U.S.C. § 1961(5).
1. Bank Fraud
The bank fraud statute, 18 U.S.C. § 1344, prohibits knowingly executing or attempting to
execute, a scheme or artifice:
(1) to defraud a financial institution; or
(2) to obtain any of the moneys, funds, credits, assets, securities, or other property
owned by, or under the custody or control of, a financial institution, by means of
false or fraudulent pretenses, representations, or promises.
The elements of bank fraud are “the defendant knowingly (1) engaged in a scheme to defraud a
federally insured financial institution, or (2) participated in a scheme to obtain money under
custody or control of the financial institution by means of false statements or representations.”
United States v. Goldblatt, 813 F.2d 619, 624 (3d Cir. 1987). Section 1344(1) of the bank fraud
statute “includes the requirement that a defendant intend to ‘defraud a financial institution’;
indeed, that is § 1344(1)’s whole sum and substance.” Loughrin v. United States, 134 S. Ct.
2384, 2389-90 (2014).
According to Defendants, the Complaint is deficient because it does not allege that
Defendants defrauded or intended to defraud a financial institution, a necessary element under
section 1344(1).8 On this point, I agree with Defendants. The Complaint alleges only that the
BPGE enterprise defrauded Plaintiffs, who are individuals and limited partnerships. The
Complaint does not allege that Defendants intended to defraud Parke Bank. The Complaint
states, without differentiation, that Parke Bank, as a defendant, is a party who committed the
fraudulent acts. These allegations do not satisfy the requirements of § 1344(1). Put another way,
Section 1344(1) does not contemplate a financial institution defrauding itself. Additionally, there
is no basis to infer that the Defendants, including Parke Bank, intended to defraud some other
unspecified financial institution.
2. Mail Fraud
The elements of mail fraud are: “(1) a scheme to defraud; (2) use of the mails to further
that scheme; and (3) fraudulent intent.” United States v. Pharis, 298 F.3d 228, 233-34 (3d Cir.
Defendants argue that Plaintiffs’ predicate acts of mail fraud also fail because the
Complaint does not allege a plausible scheme to defraud.10 This argument fails for the reasons
previously discussed in the context of the plausibility of the enterprise’s shared purpose.
Additionally, Defendants assert that Plaintiffs have failed to plead the predicate acts of
mail fraud with the specificity required by Federal Rule of Civil Procedure 9(b). Defendants
While allegations contained in the Complaint suggest that Defendants’ conduct was motivated
in part by a desire to mislead or defraud the FDIC, that entity does not constitute a “financial
institution.” See 18 U.S.C. § 20 (defining financial institution as ten types of entities none of
which encompass the FDIC itself).
“The scheme need not involve affirmative misrepresentation . . . but the statutory term
‘defraud’ usually signifies ‘the deprivation of something of value by trick, deceit, chicane or
overreaching.’” Kehr Packages, Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1415 (3d Cir. 1991)
(quoting McNally v. United States, 483 U.S. 350, 358 (1987)) (internal citations omitted).
Defendants renew their argument that it is not plausible that Parke Bank would seek to render
the Partnerships that owed it over $14 million dollars insolvent.
contend that Plaintiffs have failed to allege any “specifics like date, sender, recipient and
content” or offer an explanation as to how any particular mailing was misleading or how it
contributed to the alleged fraudulent scheme. (Defs. Mot. pp. 37-38.)
Plaintiffs respond that the Complaint provides adequate information to place Defendants
on notice of the transactions alleged to be fraudulent and “to permit Defendants to defeat [the
Complaint] would distort the purpose” of Rule 9(b) because Defendants have control and access
to all of the relevant transactional records. (Pls.’ Resp. pp. 33-34.)
In their response in opposition to the motion to dismiss, Plaintiffs submitted five charts
which list “examples of some of the predicate acts in greater detail.” (Pls.’ Resp. p. 34 n.11.)
These charts, which were not referenced in the Complaint, list the dates, amount, and relevant
accounts involved in the allegedly fraudulent transfers. (Pls.’ Resp., Exs. 18-23.)
After careful review of the Complaint, I conclude that it does not allege the predicate acts
of mail fraud with the requisite degree of particularity. Where acts of mail and wire fraud
constitute the alleged predicate RICO racketeering acts, those acts are subject to the heightened
pleading standards of Federal Rule of Civil Procedure 9(b). Warden v. McLelland, 288 F.3d 105,
114 (3d Cir. 2002). While the Complaint sets out the overall fraudulent scheme with great detail,
it lacks sufficient detail as to the date, place or time of the alleged fraud or how Defendants used
the mails in furtherance of the scheme.11 Nor does the Complaint employ other measures which
provide Defendants with fair notice of the allegations underlying the mail fraud predicate acts.
When assessing the sufficiency of the allegations of the Complaint, I have not considered
the information contained in the exhibits Plaintiffs submitted along with their response in
I note that contrary to Defendants’ assertion, Plaintiffs need not allege that the mailings
themselves were “misleading.” Completely “innocent” mailings can satisfy the mailing element.
Schmuck v. United States, 489 U.S. 705, 715 (1989), As such, Plaintiffs are not required to
allege that the mailings were themselves inaccurate or fraudulent in some way.
opposition to Defendants’ motion to dismiss. See Pension Ben. Guar. Corp. v. White Consol.
Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993) (“To decide a motion to dismiss, courts
generally consider only the allegations contained in the complaint, exhibits attached to the
complaint and matters of public record”). If Plaintiffs choose to file an amended complaint, they
should include the information contained in these exhibits and attempt to set forth additional
details regarding the mailings which were made in furtherance of the alleged fraudulent
3. Wire Fraud
The elements of wire fraud are “(1) a scheme or artifice to defraud for the purpose of
obtaining money or property, (2) participation by the defendant with specific intent to defraud,
and (3) use of wire transmissions in furtherance of the scheme.” Nat’l Sec. Sys., Inc. v. Iola, 700
F.3d 65, 105 (3d Cir. 2012).
Defendants argue that Plaintiffs’ predicate acts of wire fraud fail because they have failed
to allege a plausible scheme to defraud.13 This argument fails for the reasons discussed above in
the context of the plausibility of the enterprise’s shared purpose.
Additionally, according to Defendants, Plaintiffs only pled two wire transfers with
anything approaching the requisite level of particularity14 – a transfer of Pottstown funds to
Defendants also argue that Plaintiffs’ mail fraud allegations fail because, under the various
Partnership agreements, Earle was authorized to direct Parke Bank to make the transfers at issue
and, therefore, the transfers cannot be fraudulent. This argument raises factual issues which are
in dispute and cannot be resolved at this stage.
The Complaint alleges that Defendants “used interstate wire transfers to” unlawfully move
Partnership funds and misdirect construction draw funds. (Compl. § 125(a), (b).) This conclusory
allegation, taken alone, is not entitled to the presumption of truth.
Defendants also argue that the Complaint fails to set forth the allegations regarding the other
transfers with the level of particularity required under Rule 9(b). For the reasons discussed above
Rosedon on July 2, 2008 and a transfer of Peckville funds to Rosedon on February 12, 2009.
Defendants contend that even these two transfers are not adequately alleged because the
Complaint does not plausibly allege that the transfers were interstate in nature. In support,
Defendants note that the location of Rosedon’s account is not pled in the Complaint.
Although wholly intrastate use of the mails for fraudulent purposes can constitute a
violation of the mail fraud statute, the wire fraud statute is violated only through interstate use of
the wires. See Annulli v. Panikkar, 200 F.3d 189, 200 n.9 (3d Cir. 1999) (overruled on other
grounds). The Complaint alleges that Parke Bank has its principal place of business in Sewell,
NJ and maintains a branch office in Philadelphia, PA. The Complaint also alleges that Pantilione
and Gallo maintained their business addresses in Sewell, NJ. The Partnerships are all alleged to
have principal places of business in Pennsylvania. At this stage, a reasonable inference from
these allegations is that the wire transfers at issue crossed the state line between New Jersey
(Parke Bank’s principal place of business) and Pennsylvania (the Partnerships’ principal place of
business). As such, Plaintiffs have pled sufficient facts to support their allegation that Defendants
used “interstate” wire transfers in furtherance of the alleged fraudulent conduct.
Next, Defendants argue that the two transfers mentioned above alone do not constitute a
pattern of racketeering activity because they occurred less than twelve months apart. See Tabas
v. Tabas, 47 F.3d 1280, 1293 (3d Cir. 1995) (collecting cases holding that “conduct lasting no
more than twelve months did not meet the standard for closed-ended continuity” for establishing
a pattern of racketeering activity).
Defendants’ argument suggests that predicate acts of like kind must be viewed in
isolation for purposes of determining whether a Complaint alleges a pattern of racketeering
in the context of the mail fraud allegations, I agree. Again, if Plaintiffs choose to file an amended
complaint, they should attempt to address these deficiencies.
activity. No precedent directs that a RICO complaint should be subject to the piecemeal review
c. Pattern of Racketeering Activity
As discussed above, Plaintiffs have failed to adequately allege certain elements of the
predicate offenses of bank, mail, and wire fraud. For purposes of completeness, I will also
analyze whether those predicate acts, if adequately alleged, would satisfy the pattern
A pattern of racketeering activity requires the predicate acts be “related, and that they
pose a threat of continued criminal activity.” H.J. Inc. v. Nw. Bell Tel. Co., 492 U.S. 229, 239
(1989) (emphasis in original). Predicate acts are “related” when they have “the same or similar
purposes, results, participants, victims, or methods of commission, or otherwise are interrelated
by distinguishing characteristics and are not isolated events.” Id. at 240. The continuity
requirement can be satisfied by pointing “either to a closed period of repeated conduct, or to past
conduct that by its nature projects into the future with a threat of repetition.” Id. at 241. If a
plaintiff alleges a RICO violation over a “closed period (‘closed-ended’ scheme), she must prove
a series of related predicates lasting a ‘substantial period of time.’” Hughes v. ConsolPennsylvania Coal Co., 945 F.2d 594, 609 (3d Cir. 1991) (quoting H. J., 492 U.S. at 242). The
Third Circuit has interpreted “substantial period of time” to mean at least a period of time in
excess of twelve months. Hughes, 945 F.2d at 611.
Here, viewing the allegations in the light most favorable to Plaintiff, the alleged pattern
of racketeering activity satisfies the relatedness requirement. The predicate acts alleged share
similar purposes, participants and victims. Plaintiffs allege that predicate acts were committed
for the purposes of unlawfully obtaining funds from the Partnerships and funneling them
elsewhere and in accordance with Defendants’ financial self-interests. These acts were allegedly
committed by the same individual Defendants – Gallo, Pantilione, Earle and Parke Bank – and
targeted the same victims – the Partnerships and those involved in their affairs as principals or
Regarding the continuity requirement, the Complaint sufficiently alleges that the
predicate acts occurred over a substantial period of time – approximately four years. For these
reasons, the Complaint sufficiently alleges a pattern of racketeering activity.
d. Proximate Cause of the Alleged Injury to Phoenix and West Chester
Defendants urge that Phoenix and West Chester have failed to state a claim under
§ 1962(c) because the injuries they claim are too attenuated to be deemed to have been
proximately caused by Defendants’ alleged wrongful conduct.
“Any person injured in his business or property by reason of a violation of section 1962
of this chapter may sue therefor in any appropriate United States district court. . .” 18 U.S.C.
§ 1964(c). The United States Supreme Court has held that, pursuant to § 1964(c), a plaintiff must
make a threshold showing that he suffered an injury to business or property and that the injury
was proximately caused by the defendant’s racketeering activities. Holmes v. Security Investor
Protection Corp., 503 U.S. 258, 268 (1992). In Holmes, the Supreme Court identified three
factors in assessing whether a RICO claim is premised on an injury too remote from the alleged
First, the less direct an injury is, the more difficult it becomes to ascertain the
amount of a plaintiff's damages attributable to the violation, as distinct from other,
independent, factors. Second, quite apart from problems of proving factual
causation, recognizing claims of the indirectly injured would force courts to adopt
complicated rules apportioning damages among plaintiffs removed at different
levels of injury from the violative acts, to obviate the risk of multiple recoveries.
And, finally, the need to grapple with these problems is simply unjustified by the
general interest in deterring injurious conduct, since directly injured victims can
generally be counted on to vindicate the law as private attorneys general, without
any of the problems attendant upon suits by plaintiffs injured more remotely.
Id. at 269-270. A plaintiff who complains of “harm flowing merely from the misfortunes visited
upon a third person by the defendant’s acts” may not recover under § 1964. Id. at 268-69.
Phoenix and West Chester allege that they were injured by Defendants’ racketeering
activity because they were forced to sell “their respective properties at considerable losses in
order to fund the defense of the Pottstown and Peckville partnerships” in lawsuits between those
entities and Parke Bank. (Compl. ¶ 112.) While the alleged forced sale of assets constitutes an
“injury” to business or property, the Complaint fails to allege facts to plausibly suggest that this
injury was proximately caused by Defendants’ alleged racketeering activity. Even though
Spaeder is involved in all of the Partnerships, Phoenix, West Chester, Pottstown and Peckville
are separate legal entities. Nothing in the Complaint explains how Defendants conduct “forced”
Phoenix and West Chester to fund the legal defense of two distinct legal entities. The fact that
Spaeder was involved in each of the Partnerships does not obviate Plaintiffs of the duty to plead
facts which plausibly suggest that the sale of property held by Phoenix and West Chester was
proximately caused by Defendants’ alleged racketeering activity.15
e. Count II – Civil RICO – 18 U.S.C. § 1962(b)
In count two, all Plaintiffs bring a claim against all Defendants for a violation 18 U.S.C.
§ 1962(b) which provides:
It shall be unlawful for any person through a pattern of racketeering activity or
through collection of an unlawful debt to acquire or maintain, directly or
indirectly, any interest in or control of any enterprise which is engaged in, or the
activities of which affect, interstate or foreign commerce.
18 U.S.C. § 1962(b).
Section 1964(c) and the related proximate cause requirement articulated in Holmes apply to all
claims brought under § 1962. Therefore, the claims Phoenix and West Chester bring under
§ 1962(b) and (d) also fail for want of proximate cause.
To state a cause of action under § 1962(b), a plaintiff must allege: “(1) defendant has an
interest in an enterprise; (2) defendant gained or maintained that interest through a pattern of
racketeering; and (3) the enterprise affects interstate commerce.” Sarpolis v. Tereshko, 26 F.
Supp. 3d 407, 430 (E.D. Pa. 2014) (quoting Lightning Lube, Inc. v. Witco Corp., 4 F.3d 1153,
1190 (3d Cir. 1993)). Additionally, “a plaintiff must show injury from the defendant’s
acquisition or control of an interest in a RICO enterprise, in addition to injury from the predicate
The enterprise in a § 1962(b) claim is “something acquired through the use of illegal
activities or by money obtained from illegal activities.” Nat’l Org. for Women, Inc. v. Scheidler,
510 U.S. 249, 259 (1994). Therefore, unlike the enterprise in a § 1962(c) claim, the enterprise in
a § 1962(b) “is the victim of unlawful activity.” Id. (the “enterprise” “in subsection (c) connotes
generally the vehicle through which the unlawful pattern of racketeering activity is committed,
rather than the victim of that activity.”)
Defendants urge that the Complaint does not allege that the BPGE enterprise is a victim
in which Defendants acquired an interest in or control of through racketeering activity. Rather,
according to Defendants, the Complaint alleges that the BPGE enterprise is the vehicle through
which Defendants allegedly carried out the racketeering activity which victimized Plaintiffs. As
such, Defendants contend that Plaintiffs have not stated a claim under § 1962(b).
Plaintiffs present an alternative theory to support their § 1962(b) claim, explaining that
the allegations in the Complaint support a theory that Defendants acquired an interest in
Pottstown, Peckville and Lionville through a pattern of racketeering activity. In other words,
Plaintiffs urge that Pottstown, Peckville and Lionville constitute the enterprises for purposes of
their § 1962(b) claim.
The Complaint’s allegations to do not support this alternative theory. See Buttermore v.
Loans, 2016 WL 308875, at *6 (W.D. Pa. Jan. 25, 2016) (a theory presented in opposition to a
motion to dismiss “cannot be deemed adequately pled [where] the facts alleged in the complaint
directly contradict it”). The paragraphs setting forth Plaintiffs’ § 1962(b) claim clearly allege that
Defendants “acquired and/or maintained, directly or indirectly, an interest in or control of the
BPGE Enterprise . . .” and Defendants and Earle “by and through their active participation in
and/or by exercising control of the BPGE Enterprise, in violation of 18 U.S.C. § 1962(b), caused
the Partnerships to be undercapitalized.” (Compl. ¶¶ 129, 131) (emphasis added).
Based on the foregoing, the Complaint explicitly alleges that Defendants gained an
interest in or control over the BPGE Enterprise, not Pottstown, Peckville and Lionville. Even
viewed in the light most favorable to Plaintiffs and taken as a whole, the Complaint does not
plausibly allege that the BPGE Enterprise is a victim that Defendants acquired an interest in
through racketeering activity. Rather, the gravamen of the Complaint is that Defendants carried
out their racketeering activity through the vehicle of the BPGE Enterprise. As such, Plaintiffs
have failed to state a claim under § 1962(b).
f. Count III – Conspiracy to Engage in Civil RICO – 18 U.S.C § 1962(d)
In count three, all Plaintiffs bring a claim against all Defendants for a violation 18 U.S.C.
§ 1962(d) which provides that it “shall be unlawful for any person to conspire to violate any of
the provisions of subsection (a), (b), or (c) of this section.”
Defendants argue that Plaintiffs’ § 1962(d) RICO conspiracy claims fail because
Plaintiffs’ underlying RICO claims pursuant to § 1962(b) and (c) claims fail. “Any claim under
section 1962(d) based on a conspiracy to violate the other subsections of section 1962
necessarily must fail if the substantive claims are themselves deficient.” Lightning Lube, 4 F.3d
As discussed above, there are deficiencies in Plaintiffs’ underlying substantive claims
that Defendants violated § 1962(b) and (c). As such, Plaintiffs have also failed to state a claim
for RICO conspiracy under § 1962(d).
g. Count IV – Fraud
In Count IV, Lionville, Pottstown, Peckville and Shea bring a claim against all
Defendants for common law fraud.16 Defendants argue that these fraud claims are barred by the
applicable statute of limitations and, alternatively, fail on substantive grounds.
i. Statute of Limitations
Under Pennsylvania law, a claim of fraud has a two-year statute of limitations. 42 Pa.
Con. Stat. Ann. § 5524(7). Defendants note the Complaint, which was filed on June 19, 2015,
alleges that Defendants began their fraudulent conduct in 2008. Therefore, according to
Defendants, Plaintiffs’ fraud claims are time-barred.
Plaintiffs respond that they did not discover the fraudulent scheme until Defendants
produced certain revealing documents in the course of Peckville’s bankruptcy proceedings in late
While Shea is listed in the caption of Count IV, the substantive paragraphs setting forth the
fraud allegations, (Compl. ¶¶ 137-144), do not contain a single reference to Shea. Perhaps, the
inclusion of Shea in the caption was in error. If Plaintiffs elect to file an amended complaint,
they should rectify this deficiency by either removing his name from the caption or including
allegations setting forth his fraud claim.
I also note that the substantive paragraphs, (Compl. ¶¶ 137-144), contain language suggesting
that Rhoads and Spaeder are bringing a fraud claim against Defendants. ((Compl. ¶ 142)
(“Rhoads reasonably relied on Pantilione’s representations to Spaeder and provided Parke Bank
with the requested security instruments”)); (Compl. ¶ 141) (“Pantilione falsely and fraudulently
misrepresented to Spaeder. . .”)) However, the caption for Count IV does not list Rhoads or
Spaeder as a Plaintiff. If Rhoads and/or Spaeder intend to bring a fraud claim against
Defendants, this omission should be corrected in any amended complaint.
2013 or early 2014. As such, Plaintiffs urge that the statute of limitations applicable to the fraud
claims was tolled under until that time pursuant to the “discovery rule.”17
In response to Plaintiffs’ invocation of the “discovery rule,” Defendants argue that
Plaintiffs raised the same allegedly fraudulent conduct that forms the basis of the instant claims
in pleadings from other cases filed in 2012 and early 2013. The Complaint was filed on June 19,
2015 and, therefore, Defendants argue that the fraud claims are barred by the statute of
At this early stage of the litigation, I decline to dismiss Plaintiffs’ common law fraud
claims on the basis of the two-year statute of limitations. “The discovery rule is a judicially
created device which tolls the running of the applicable statute of limitations until the point
where the complaining party knows or reasonably should know that he has been injured and that
his injury has been caused by another party’s conduct.” Crouse v. Cyclops Indus., 745 A.2d 606,
611 (Pa. 2000). “In order to determine when the statute should begin to run, the finder of fact
focuses on whether the plaintiff was reasonably diligent in discovering his injury.” Id. “Pursuant
to application of the discovery rule, the point at which the complaining party should reasonably
be aware that he has suffered an injury is a factual issue best determined by the collective
judgment, wisdom and experience of jurors.” Id. (internal quotations omitted.) The plaintiff bears
the burden of showing that the discovery rule tolls the statute of limitations. Schmidt v. Skolas,
770 F.3d 241, 251 (3d Cir. 2014).
While “a court may entertain a motion to dismiss on statute of limitations grounds, it may
not allocate the burden of invoking the discovery rule in a way that is inconsistent with the rule
Plaintiffs also invoke the doctrine of adverse domination as a basis for tolling the applicable
statute of limitations. As discussed below, I believe that dismissal based on the statute of
limitations is premature at this juncture and, therefore, I need not resolve the adverse domination
issue at this time.
that a plaintiff is not required to plead, in a complaint, facts sufficient to overcome an affirmative
defense.” Id. (internal citations omitted). The Third Circuit has stated, “in the context of the
discovery rule, that when ‘the pleading does not reveal when the limitations period began to run .
. . the statute of limitations cannot justify Rule 12 dismissal.’” Schmidt v. Skolas, 770 F.3d 241,
251 (3d Cir. 2014) (quoting Barefoot Architect, Inc. v. Bunge, 632 F.3d 822, 835 (3d Cir.
2011)). However, dismissal may be warranted where a plaintiff “effectively pleads herself out of
court by alleging facts that are sufficient to establish the defense.” Id. (quoting Jones v. Rogers
Mem. Hosp., 442 F.2d 773, 775 (D.C. Cir. 1971)).
The Complaint does not reveal when the statute of limitations period began to run.
Nothing in the Complaint clearly confirms the date on which Lionville, Pottstown and Peckville
became aware of the conduct that forms the basis of their fraud claims. In other words, the
Complaint does not reveal when the limitations period began to run nor does the Complaint
contain allegations sufficient to establish Defendants’ invocation of the statute of limitations
defense. And as Plaintiffs need not plead facts sufficient to overcome this affirmative defense,
dismissal of the fraud claim on the basis of statute of limitations is premature and inappropriate.
ii. Merits - Fraud
In addition to the statute of limitations challenge, Defendants argue that the fraud claims
brought by Lionville, Pottstown, Peckville and Shea fail on substantive grounds. The elements of
fraud are: “(1) a misrepresentation; (2) known to be false; (3) intended to induce action;
(4) justifiable reliance on the misrepresentation; and (5) damages as a proximate result.” Kutner
Buick, Inc. v. Am. Motors Corp., 868 F.2d 614, 620 (3d Cir. 1989) (citing Delahanty v. First Pa.
Bank, 464 A.2d 1243, 1252 (Pa. Super. 1983).18
The Supreme Court has held that, unlike in common law fraud, reliance is not an element of a
RICO claim predicated on mail fraud. Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639, 661
Defendants urge that the Complaint fails to adequately allege the elements of
misrepresentation and reliance with respect to the fraud claim. Defendants contend that the
Complaint does not plead any “affirmative misrepresentation” by Defendants to Lionville,
Pottstown, Peckville or Shea nor does it plead that Lionville, Pottstown, Peckville and Shea
justifiably relied upon any misrepresentation by Parke Bank.
Plaintiffs respond that Defendants’ argument rests on an improperly narrow
understanding of their claims. Plaintiffs cite to the following actions as examples of the conduct
they state forms the basis of their fraud claims: Defendants: (1) transferred funds from Lionville,
Pottstown and Peckville’s accounts to Rosedon’s accounts without authorization; and (2)
fabricated construction invoices.
I agree with Defendants that Plaintiffs have not sufficiently alleged the elements of
misrepresentation and reliance. If Plaintiffs elect to file an amended complaint, they should
endeavor to specify the nature of the alleged misrepresentations and the resulting reliance on
those alleged misrepresentations.
h. Count V – Conversion
In Count V, Lionville, Pottstown, Peckville and Shea have brought a claim against Parke
Bancorp and Parke Bank for conversion.19
(2008). “[A] plaintiff asserting a RICO claim predicated on mail fraud need not show, either as
an element of its claim or as a prerequisite to establishing proximate causation, that it relied on
the defendant’s alleged misrepresentations.” Id. at 2144.
As with the fraud claim, although the heading indicates that Shea is bringing a conversion
claim, nothing in the paragraphs setting forth the claim reference Shea. ((See, e.g., Compl. ¶ 149)
(“The actions of Parke Bancorp. Inc. and Parke Bank in converting property that was known to
belong to Lionville, Pottstown and Peckville. . .”)) If Plaintiffs choose to file an amended
complaint, they should either omit Shea’s name from the caption or include allegations which
explain the basis for his conversion claim.
i. Statute of Limitations
Defendants argue that Plaintiffs’ conversion claims are also barred by the statute of
limitations. A two-year statute of limitations applies to conversion under Pennsylvania law. 42
Pa. Stat. and Cons. Stat. Ann. § 5524(3); Sabella v. Appalachian Development Corp., 103 A.3d
83, 92 n.3 (Pa. Super. Ct. 2014) (applying § 5524(3) to conversion claims). For the reasons
discussed above in the context of Plaintiffs’ fraud claims, Defendants’ argument to dismiss
Plaintiffs’ conversion claims on statute of limitation grounds fails.
ii. Merits – Conversion
Additionally, Defendants urge that the conversion claims fail on the merits. Defendants
note that the Complaint includes an allegation that Parke Bank converted commercial property
held by Lionville, Pottstown and Peckville. Defendants argue that this allegation cannot support
the instant claim because real property is not subject to a claim for conversion.
I agree. “[R]eal property cannot be the subject of an action for conversion.” Sterling v.
Redevelopment Auth. of City of Philadelphia, 836 F. Supp. 2d 251, 270 (E.D. Pa. 2011).
Therefore, Lionville, Pottstown and Peckville cannot premise their conversion claims on the
forced sale of commercial property owned by those Partnerships.
However, the Complaint also alleges that Parke Bank converted loan proceeds and bank
account balances belonging to Lionville, Pottstown and Peckville. These funds constitute
personal property and, as such, Lionville, Pottstown and Peckville have sufficiently alleged the
nature of the supposedly converted property. MacKay v. Benjamin Franklin Realty & Holding
Co., 135 A. 613, 614 (Pa. 1927) (an action for “conversion can be maintained for almost any
kind of personalty, including money, notes, bonds, certificates of stock, title deeds, etc”).
i. Count VI – Civil Conspiracy
In Count VI, each Plaintiff brings a state law claim for civil conspiracy against each
Defendant. Defendants have moved to dismiss the conspiracy claims on both statute of
limitations and substantive grounds.
i. Statute of Limitations
Defendants argue that the civil conspiracy claim is time barred for the same reasons
argued in the context of Plaintiffs’ claims for fraud and conversion. See In re Asbestos Sch.
Litig., 768 F. Supp. 146, 150 (E. D. Pa. 1991) (“[I]n Pennsylvania a cause of action for civil
conspiracy adopts the statute of limitations applicable to the overt act allegedly committed in
furtherance of the conspiracy.”) For the reasons discussed above in the context of Plaintiffs’
fraud and conversion claims, Defendants’ argument to dismiss Plaintiffs’ conspiracy claims on
statute of limitation grounds fails.
ii. Merits - Conspiracy
Additionally, Defendants urge that the civil conspiracy claims fail because the underlying
torts of fraud and conversion fail. As discussed above, Plaintiffs, in part, have not adequately
alleged the underlying torts of fraud and conversion. Therefore, Plaintiffs’ conspiracy claims fail
j. Prior Pending Action
As a final matter, Defendants argue that, should Spaeder’s claims relating to his
guarantee of the Pottstown loan survive, they must be dismissed pursuant to the “prior pending
action doctrine” because Spaeder is simultaneously litigating these claims in action currently
pending in state court.
The prior pending action rule “provides that a party does not have a “right to maintain
two separate actions involving the same subject matter at the same time in the same court and
against the same defendant.” Conklin v. Warrington Twp., 2008 WL 2704629, at *13 (M.D. Pa.
July 7, 2008). The rule, however, applies where the two actions are both filed in the “same
federal court.” Walton v. Eaton Corp., 563 F.2d 66, 70 (3d Cir. 1977).“[A]s between state and
federal courts, the rule is that the pendency of an action in the state court is no bar to proceedings
concerning the same matter in the Federal court having jurisdiction.” Colorado River Water
Conservation Dist. v. United States, 424 U.S. 800, 817 (1976) (internal citations omitted).
Defendants’ invocation of the prior pending action doctrine is unavailing because the
other action is pending in state court.
For the aforementioned reasons, Defendants’ motion to dismiss will be granted in part
and denied in part. An appropriate Order follows.
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