Court Opinion

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Opinions of the United
2000 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

12-19-2000

Pennsylvania Ass. Edwards Heirs v. Rightenour
Precedential or Non-Precedential:

Docket 00-3189

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Recommended Citation
"Pennsylvania Ass. Edwards Heirs v. Rightenour" (2000). 2000 Decisions. Paper 252.
http://digitalcommons.law.villanova.edu/thirdcircuit_2000/252

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Filed December 14, 2000

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 00-3189

PENNSYLVANIA ASSOCIATION OF EDW ARDS HEIRS, a
Pennsylvania non-profit corporation,

       Appellant,

v.

DAVID PAUL RIGHTENOUR; HELEN RIGHTENOUR;
DOUGLAS WAYNE EDWARDS; DUDLEY CAROL
EDWARDS; ELEANOR LONGENECKER; BONNIE BLACK
PARSONS; DON WUBE, individually d/b/a "Basic";
WACHOVIA BANK OF GEORGIA, successor in inter est to
First National Bank of Atlanta, formerly the North Georgia
Savings & Loan Association, formerly North Georgia Bank;
WACHOVIA HOLDING CORP., a Geor gia Corporation;
CAPITA RECOVERY SPECIALISTS; FIS VIDEO; FINANCIAL
INVESTMENT SERVICES, INC.; DISCOUNT EXPRESS;
MID-ATLANTIC PHONE ASSOCIATES; THE GRACE
BAPTIST TABERNACLE; RIGHTENOUR & WEYANDT
LUMBER COMPANY, INC.; YOUNG, OAKES BROWN CO.,
a professional corporation.

On Appeal from the United States District Court
for the Western District of Pennsylvania

District Court Judge: Donald E. Ziegler
(D.C. Civ. No. 93-275 J)

Argued October 24, 2000

Before: BECKER, Chief Judge, SCIRICA and FUENTES,
Circuit Judges.

(Opinion Filed: December 14, 2000)
       John P. Smarto (argued)
       329 West Otterman Street
       Greensburg, Pennsylvania 15601
       Attorney for Appellant

       Richard Wile (argued)
       Wile & Norkus
       2704 Gulf Tower
       Pittsburgh, Pennsylvania 15219
       Attorneys for Appellee

OPINION OF THE COURT

FUENTES, Circuit Judge:

Appellant Pennsylvania Association of Edwards Heirs
("the Association") appeals from a grant of summary
judgment dismissing its complaint, which alleged that
Wachovia Bank of Georgia ("W achovia Bank") aided and
abetted in the commission of a RICO violation. In Rolo v.
City Investing Co. Liquidating Trust, 155 F.3d 644 (3d Cir.
1998), we extended the Supreme Court's r easoning in
Central Bank of Denver v. First Interstate Bank of Denver,
511 U.S. 164 (1994), to RICO, and held that, because
RICO's statutory text does not provide for a private cause of
action for aiding and abetting and 18 U.S.C. S 2 cannot be
used to imply this private right, no such cause of action
exists under RICO. Appellant argues that our holding in
Rolo leaves open the possibility that a civil aiding and
abetting RICO claim could be recognized as a common law
civil remedy. We disagree, and hold that Rolo's holding
extends as well to common law-based RICO civil aiding and
abetting claims. Therefore, we will affirm.

I.

The Association is a non-profit corporation dedicated to
pursuing a proper settlement of the ancient estate of a
Welsh seaman, Robert Edwards, who allegedly owned a
significant portion of lower Manhattan, including some
areas in Wall Street, that never passed to his rightful heirs.
This claim dates back to the initial Dutch and British

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settlers who formed a colony in lower Manhattan, well
before the nation's founding. The Association raised funds
through membership contributions by 3,200 pr ospective
heirs, who each paid $450 to buy an equal shar e of the
professed $24 billion estate. The Association raised a large
portion of its membership contributions between 1983 and
1985 when former officers solicited alleged heirs.

By the spring of 1988, the Association discover ed that
some of its former officers had depleted all of the
membership fees for unintended purposes. After electing
new officers, the Association began an effort to trace and
recoup the money. They discovered that the most
significantly involved financial institution was the North
Georgia Savings and Loan Association, a pr edecessor to
Wachovia Bank, in which over $300,000 in membership
fees had been deposited between 1984 and 1986. The
Association contended that Wachovia Bank had aided and
abetted the Association's former officers with
misappropriating membership funds in violation of the
Racketeer Influenced and Corrupt Organizations Act
("RICO"), 18 U.S.C. SS 1962(b), (c), and (d). Specifically, the
Association claimed that Wachovia Bank had aided and
abetted RICO predicate acts of mail and wir e fraud in
violation of 18 U.S.C. SS 1341 and 1343, and further
conspired to commit money laundering and the laundering
of monetary instruments contrary to 18 U.S.C. SS 1956 and
1957.

According to the Association, its vice-pr esident at the
time, a local Baptist preacher named Douglas W ayne
Edwards, had a close and personal relationship with the
financial institution's president. The Association alleged
that Edwards and the Association's treasur er, David Paul
Rightenour, wrongly applied for, and received, personal
loans from Wachovia Bank's predecessor by using as
collateral certificates of deposit belonging to the
Association. Allegedly, when Edwards and Rightenour
defaulted on the loans, Wachovia Bank's pr edecessor
improperly cashed the certificates and used the proceeds to
satisfy any outstanding loan debt. In addition, the
Association claimed that $50,000 of a cashed certificate,
the proceeds of which were at least partly paid over to

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Edwards, remained unaccounted. In sum, the Association
alleged that Wachovia Bank allowed itself to be used as a
conduit by aiding and abetting the fraudulent schemes of
its former officers, resulting in the dissipation of nearly
$1.5 million in membership contributions.

After having unsuccessfully applied for summary
judgment on timeliness grounds, Wachovia Bank filed a
second summary judgment motion arguing that the
Association's claim against it was barred because no private
cause of action exists under RICO for aiding and abetting.
This argument was based on a case we decided during the
course of the litigation, Rolo v. City Investing Co. Liquidating
Trust, 155 F.3d 644 (3d Cir . 1998), which extended the
Supreme Court's reasoning in Central Bank of Denver v.
First Interstate Bank of Denver, 511 U.S. 164 (1994).

In Central Bank, 511 U.S. at 177, 191, the Supreme
Court had ruled that private aiding and abetting suits were
not authorized by S 10(b) of the Securities Exchange Act of
1934, 15 U.S.C. S 78j. In Rolo, 155 F .3d at 656-57, we
applied similar reasoning in the RICO context, ruling that
a private plaintiff could not maintain a claim of aiding and
abetting an alleged RICO violation. The Association
responded by relying upon Jaguar Cars, Inc. v. Royal Oaks
Motor Car Co., 46 F.3d 258 (3d Cir . 1995), which had been
decided after Central Bank, but befor e Rolo, and dealt with
a RICO aiding and abetting claim on the merits. The
Association argued that a conflict exists in this circuit
between Jaguar Cars and Rolo, which should be resolved by
rejecting Rolo.

In an order entered March 22, 1999, the District Court
concluded that Rolo was controlling and granted summary
judgment in favor of Wachovia Bank. The Court further
opined that, to the extent a conflict existed, we would have
to resolve it.

II.

Our review of a grant of summary judgment is plenary,
and the record is judged by the same standard district
courts use. Witkowski v. Welch, 173 F.3d 192, 198 (3d Cir.

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1999). Federal Rule of Civil Procedure 56 governs summary
judgment motions. Subsection 56(c) provides, in part, that:

       [t]he judgment sought shall be render ed forthwith if the
       pleadings, depositions, answers to interrogatories, and
       admissions on file, together with the affidavits, if any,
       show that there is no genuine issue as to any material
       fact and that the moving party is entitled to a judgment
       as a matter of law.

The moving party has the burden of demonstrating that
there is no genuine issue as to any material fact, and
summary judgment is to be entered if the evidence is such
that a reasonable fact finder could find only for the moving
party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986); Doherty v. Teamsters Pension T rust Fund, 16 F.3d
1386, 1389 (3d Cir. 1994).

III.

A.

Prior to Central Bank, private aiding and abetting claims
relating to S 10(b) of the Securities Exchange Act were
widely thought to be legitimate.

        In hundreds of judicial and administrative
       proceedings in every Circuit in the federal system, the
       courts and the SEC have concluded that aiders and
       abettors are subject to liability under S 10(b) . . . .
       While we have reserved decision on the legitimacy of
       the theory in two cases that did not present it, all 11
       Courts of Appeals to have considered the question have
       recognized a private cause of action against aiders and
       abettors under S 10(b) . . . .

Central Bank, 511 U.S. at 192 (Stevens, J., dissenting).
However, the Supreme Court dramatically altered the
landscape with its decision in Central Bank, wherein the
majority ruled that, "[b]ecause the text ofS 10(b) does not
prohibit aiding and abetting, we hold that a private plaintiff
may not maintain an aiding and abetting suit under
S 10(b)." Id.

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As the Supreme Court recognized, the judiciary had
previously determined that private S 10(b) enforcement
actions had been impliedly authorized from the statutory
language. See id. at 171. Beyond that, however, the Court
emphasized that "[w]ith respect . . . to. . . the scope of
conduct prohibited by S 10(b), the text of the statute
controls our decision. . . . We have r efused to allow [S 10(b)]
challenges to conduct not prohibited by the text of the
statute." Id. at 173. Thus, the Supr eme Court directed that
"the statutory text controls the definition of conduct
covered by S 10(b)." Id. at 175. Applying this paradigm, the
Court wrote:

        Congress knew how to impose aiding and abetting
       liability when it chose to do so. If . . . Congr ess
       intended to impose aiding and abetting liability, we
       presume it would have used the words "aid" and "abet"
       in the statutory text. But it did not.

        We reach the uncontroversial conclusion, accepted
       even by those courts recognizing a S 10(b) aiding and
       abetting cause of action, that the text of the 1934 Act
       does not itself reach those who aid and abet aS 10(b)
       violation. Unlike those courts, however, we think that
       conclusion resolves the case. It is inconsistent with
       settled methodology in S 10(b) cases to extend liability
       beyond the scope of conduct prohibited by the
       statutory text. To be sure, aiding and abetting a
       wrongdoer ought to be actionable in certain instances.
       The issue, however, is not whether imposing private
       civil liability on aiders and abettors is good policy but
       whether aiding and abetting is covered by the statute.

        . . . . The [S 10(b)] proscription does not include
       giving aid to a person who commits a manipulative or
       deceptive act. We cannot amend the statute to create
       liability for acts that are not themselves manipulative
       or deceptive within the meaning of the statute.

Id. at 177-78 (citations omitted). In r eaching this holding,
the majority also addressed and discounted numerous
arguments, including policy considerations, that would
have supported a civil aiding and abetting claim r elevant to
S 10(b). See id. at 175-91.

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B.

Several years later, in Rolo v. City Investing Co.
Liquidating Trust, we affirmed the dismissal of a private
plaintiff 's RICO aiding and abetting claim because we were
"convinced that a private cause of action for aiding and
abetting a RICO violation cannot survive the Supr eme
Court's decision in [Central Bank]." Rolo, 155 F.3d at 656.
After briefly reviewing Central Bank's reasoning, we
concluded "that the same analysis controls our
construction of the civil RICO provision." Id. at 657.

       Like S 10(b), the text of [RICO] S 1962 itself contains no
       indication that Congress intended to impose private
       civil aiding and abetting liability under RICO. . . .

        . . . [D]espite the existence of cogent policy
       arguments in support of extending civil liability to
       aiders and abettors of RICO violations, under [ Central
       Bank], we must "interpret and apply the law as
       Congress has written it, and not [ ] imply private
       causes of action merely to effectuate the purported
       purposes of the statute." Because the text of the RICO
       statute does not encompass a private cause of action
       for aiding and abetting a RICO violation, "in
       accordance with the policies articulated in Central
       Bank of Denver", we have no authority to imply one.
       On this basis, we will affirm the district court's
       dismissal of the RICO claims . . . .

Id. (citations omitted). We find this reasoning as fully
persuasive today as when we decided Rolo, and therefore,
reject the Association's argument.

In arguing for a different r esult, the Association sets forth
three arguments, all of which we find unpersuasive. First,
the Association submits that Central Bank's reasoning is
limited to the Securities Exchange Act. However , nothing in
Central Bank indicates that its reasoning is specific to the
particular statute presented in that case. Rather, the
majority's reasoning concerning when a private claim for
aiding and abetting is available, which hinges on an
analysis of statutory language, is equally applicable to
RICO as well.

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Second, the Association opines that Rolo is not
dispositive because it is in conflict with Jaguar Cars, an
earlier but post-Central Bank decision, that: (1) reiterated
that aiding and abetting liability may be available under
RICO, and (2) assessed that issue on the merits. See
Jaguar Cars, 46 F.3d at 270. This ar gument lacks merit. As
the Rolo panel persuasively explained, no conflict really
exists. In justifying its holding that, after Central Bank,
aiding and abetting liability under RICO was no longer
available, the Rolo court wrote:

        [w]e reach this result despite our discussion of aiding
       and abetting liability in Jaguar Cars, a case decided
       after [Central Bank]. See 46 F .3d at 270. In Jaguar
       Cars, the opinion did not address the impact of [Central
       Bank] on earlier cases that had recognized a private
       cause of action for aiding and abetting under RICO . The
       decision in Jaguar Cars focused on whether there had
       been sufficient evidence to find the defendant liable for
       aiding and abetting a RICO violation. See 46 F.3d at
       270. The parties did not challenge the existence of a
       cause of action for aiding and abetting, and we did not
       raise the issue sua sponte. Although, under this
       Court's Internal Operating Procedur es, we are bound
       by, and lack the authority to overrule, a published
       decision by a prior panel, see I.O.P . 9.1, we conclude
       that the discussion of a private cause of action for
       aiding and abetting a RICO violation in Jaguar Cars
       does not control our analysis in this case. The decision
       in [Central Bank] was not called to the attention of the
       panel in Jaguar Cars, and the panel's opinion neither
       explicitly nor implicitly decided the impact of[Central
       Bank] on the continued availability of a private cause of
       action for aiding and abetting a RICO violation.

Rolo, 155 F.3d at 657 (emphasis added). This reasoning is
consistent with long established stare decisis principles.
See Cohens v. Virginia, 19 U.S. (6 Wheat.) 264, 399-400
(1821).

Finally, the Association argues that: (1) co mmon law civil
principles require that a private aiding and abetting claim
be recognized under RICO, and (2) various pol icy

                                8
arguments favor recognizing a private aiding and abetting
RICO claim. We reject each of these contentions.

As to the former, acceptance of the Association's common
law argument would fundamentally under mine the
constrained approach to aiding and abetting liability that
the Supreme Court set forth in Central Bank and which we
subsequently followed in Rolo. Moreover , the common law
perspective is significantly undermined, if not totally
discredited, by the Supreme Court's discussion in Central
Bank regarding the history of aiding and abetting liability.

        Aiding and abetting is an ancient criminal law
       doctrine. Though there is no federal common law of
       crimes, Congress in 1909 enacted what is now 18
       U.S.C. S 2, a general aiding and abetting statute
       applicable to all federal criminal offenses. The statute
       decrees that those who provide knowing aid to persons
       committing federal crimes, with the intent to facilitate
       the crime, are themselves committing a crime.

        . . . .

        . . . Congress has not enacted a general civil aiding
       and abetting statute--either for suits by the
       Government (when the Government sues for civil
       penalties or injunctive relief) or for suits by private
       parties. Thus, when Congress enacts a statute under
       which a person may sue and recover damages fr om a
       private defendant for the defendant's violation of some
       statutory norm, there is no general presumption that
       the plaintiff may also sue aiders and abettors.

        Congress instead has taken a statute-by-statute
       approach to civil aiding and abetting liability.

Central Bank, 511 U.S. at 181-82 (emphasis added and
citations omitted). The Supreme Court's language makes it
abundantly clear that, in the absence of statutory
authorization, there is no presumption in favor of
recognizing a civil aiding and abetting claim. Therefore, we
must reject the Association's argument that, under
common law principles, a civil aiding and abetting claim
must be recognized with respect to RICO.

                               9
With regard to the policy ar guments, Central Bank
instructs that they are of no avail to the Association unless
an unacceptably aberrant result would entail."Policy
considerations cannot override our interpretation of the text
and structure of the Act, except to the extent that they may
help to show that adherence to the text and structure
would lead to a result `so bizarre' that Congress could not
have intended it." Central Bank, 511 U.S. at 188 (quoting
Demarest v. Manspeaker, 498 U.S. 184, 191 (1991)). The
Association is unable to identify any such "bizarre"
consequences of any merit. Thus, the controlling issue "is
not whether imposing private civil liability on aiders and
abettors is good policy but whether aiding and abetting is
covered by the statute." Central Bank , 511 U.S. at 177. In
Rolo, we answered that inquiry in the negative with respect
to the RICO statute. We accordingly adhere to our prior
decision.

IV.

For the reasons explained above, we will affirm the
District Court's order.

A True Copy:
Teste:

       Clerk of the United States Court of Appeals
       for the Third Circuit

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