Pelullo v. National Union Fire Insurance Co.

Full title: PELULLO, et al. v. THE NATIONAL UNION FIRE INSURANCE COMPANY OF…

Court: United States District Court, E.D. Pennsylvania

Date published: May 17, 2004

Civil Action No. 00-5647 (E.D. Pa. May. 17, 2004)

Opinion

Civil Action No. 00-5647.

May 17, 2004

MEMORANDUM

RICHARD B. SURRICK, District Judge

Presently before the Court are four Motions to Dismiss filed by four groups of Defendants (Doc. Nos. 65, 67, 68, and 69), and Plaintiffs' Motion for Leave to File Supplemental Memorandum in Opposition to Defendants' Motions to Dismiss Second Amended Complaint (Doc. No. 89.) For the following reasons, we have granted Plaintiffs' Motion for Leave and we have granted Defendants' motions to dismiss.

I. FACTS

The instant action arises out of years of criminal and civil litigation regarding various business transactions involving Plaintiff Leonard A. Pelullo ("Pelullo") as well as entities under his control. Pelullo has faced three federal criminal prosecutions and was ultimately convicted by juries in two of those prosecutions, one in the Eastern District of Pennsylvania and the other in the District of New Jersey.¹ Pelullo has made a number of attempts at recovering damages based on some, if not all, of the significant fines, judgments, fees, forfeitures, and settlements that have been imposed on him and the entities under his control as a result of these criminal and civil actions. Now, Plaintiffs — who are comprised of Pelullo, two trusts, a trustee, and six corporations — have filed the instant action against various law firms and individuals who were involved in the events related to Pelullo's civil and criminal liability. Plaintiffs seek relief under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962(c) and (d), as well as relief under state law for breach of fiduciary duty, professional negligence, bad faith, and breach of contract. Plaintiffs claim that the Defendants' actions caused Plaintiffs to be civilly liable for their involvement in a number of different business transactions, and caused Pelullo to be wrongfully convicted for his role in those same business transactions. Plaintiffs essentially argue that the Defendants engaged in a RICO conspiracy to keep Pelullo incarcerated, in an attempt to limit both Defendant National Union's insurance exposure and the other Defendants' personal and professional liability. Several Defendants have raised the statute of limitations as a bar to Plaintiffs' claims. We have concluded that they are correct. We have also concluded that Plaintiffs have failed to state a cause of action for which relief can be granted under the RICO statute. Finally, we have declined to exercise supplemental jurisdiction over the state law claims.

1 On January 27, 1995, Pelullo was convicted for racketeering in violation of 18 U.S.C. § 1962(c), by a jury in the United States District Court for the Eastern District of Pennsylvania.United States v. Pelullo, 65 Fed. Appx. 766, 767 (3d Cir. 2003) (citing Criminal Action No. 91cr-00060). Pelullo received a twenty-four year sentence, but was released after 107 months. (Resp. of Pls. in Opp'n to Mot. of Schwartz Defs. to Dismiss Second Am. Compl., Ex. A, at 128.) Pelullo is currently on parole for that conviction, which concludes in 2016. In November 1996, a jury in the United States District Court for the District of New Jersey found Pelullo "guilty on one count charging him with conspiracy to embezzle $4.176 million from two employee pension benefits plans and to engage in money laundering, on 11 counts of embezzlement from these employee pension benefit plans, and on 42 counts of money laundering." United States v. Pelullo, 961 F. Supp. 736, 739 (D.N.J. 1997). Pelullo was sentenced to 210 months, to be served concurrently with his Pennsylvania sentence.United States v. Pelullo, Criminal Action No. 94-276, Doc. No. 233, at 2. On May 17, 2002, Pelullo was granted a new trial in the New Jersey matter. Id. After having served forty-seven months of his conviction, the New Jersey court released Pelullo from prison on a $2 million bond, and noted that Pelullo was still subject to the requirements of his supervised release from his Pennsylvania conviction. Such requirements included "remaining in the Eastern District of Pennsylvania, monthly reporting to the parole officer, no violation of the law or association with the persons involved in criminal activity. . . ." (Resp. of Pls. in Opp'n to Mot. of Schwartz Defs. to Dismiss Second Am. Compl., Ex. A, at 128.) The circumstances surrounding the New Jersey matter will be discussed hereinafter in more detail.

The following facts, which for purposes of a Motion to Dismiss are taken as true, have been alleged in Plaintiffs' Second Amended Complaint and RICO Case Statement.²

2 "In considering the Motions to Dismiss, the Court may also consider the RICO Case Statement filed by Plaintiff which 'is a pleading that may be considered part of the operative complaint for purposes of a motion to dismiss.'" State Farm Mut. Auto. Ins. Co. v. Makris, 2003 WL 924615, at *4 (E.D. Pa. Mar. 4, 2003) (quoting Allen Neurological Assocs., Inc. v. Lehigh Valley Health Network, Civ. A. No. 99-4653, 2001 WL 41143, at *3 n. 1 (E.D. Pa. Jan. 18, 2001)).

Parties

Pelullo is an adult individual who has had various business interactions with the named Defendants. As of the filing of the Second Amended Complaint ("SAC"), Pelullo was incarcerated at F.C.I. Fort Dix, New Jersey for criminal activity related to these business transactions. (SAC ¶ 1.) However, on May 17, 2002, the United States District Court for the District of New Jersey granted Pelullo's motion for a new trial in one of his criminal cases "solely on the ground that the government failed to comply with its obligations [to disclose certain documents] under Brady v. Maryland, 373 U.S. 83 (1963)." Pelullo was released on an appeal bond, and is currently under supervised release.

The Peter D. Pelullo Trust and the Arianna G. Pelullo Trust (collectively "Pelullo Trusts" or "Trusts") are Plaintiffs in the instant case, as is Peter F. Pelullo, trustee of each of these trusts. (SAC ¶¶ 2-4.) Six corporations are also Plaintiffs in this action. G.I.I. Enterprises, Inc. ("G.I.I."), Growth Financial Corporation ("Growth"), Olympia Resource Corporation ("Olympia Resource"), Olympia Holding Corporation ("Olympia Holding"), OHA, Inc. ("OHA"), and One Plaza Corporation ("One Plaza") are all corporations and/or businesses owned, operated, and controlled by the Peter D. Pelullo and/or Arianna G. Pelullo Trusts.³ (SAC ¶ 5.)

3 In the Rico Case Statement, Plaintiffs state that the "Pelullo Trusts" refers to: "(1) Peter D. Pelullo Trust; (2) Arianna G. Pelullo Trust; (3) Peter F. Pelullo; (4) G.I.I. Enterprises, Incorporated; (5) Growth Financial Corporation; (6) Olympia Resource Corporation; (7) Olympia Holding Corporation; (8) OHA, Incorporated; and (9) One Plaza Corporation."

The Defendants have aligned themselves into four broad groups. The so-called "National Union Defendants" include an insurer, three law firms who represented the insurer in various actions, and certain partners and/or associates at those law firms. Specifically, National Union Fire Insurance Co. of Pittsburgh, Pa. ("National Union"), is an insurer whose insureds include some of the law firm Defendants in this action. Since initiating the instant action, Pelullo has dismissed all claims against National Union pursuant to a court order issued in the United States District Court for the Northern District of Georgia.⁴ The law firm of D'Amato Lynch ("D'Amato Lynch") and two of its partners, Richard George and Alfred D'Agostino, served as counsel for both National Union and certain of the law firm Defendants. The law firm of Lewis, D'Amato, Brisbois Bisgaard LLP ("the Lewis Firm") allegedly "was related in practice to D'Amato Lynch." (SAC ¶ 3.) Plaintiffs at times collectively refer to the D'Amato Lynch and Lewis law firms as the "D'Amato Firms." Finally, the law firm of Alston Bird LLP ("Alston") and its attorney, Theodore J. Sawicki, represented National Union against Pelullo in district court actions in Georgia and Pennsylvania.

4 This court order will be discussed in more detail in Section II., infra.

The second group of Defendants consists of the law firm of Wilentz, Goldman Spitzer ("Wilentz") and its partner Kenneth Falk. Wilentz received legal malpractice insurance coverage from National Union during the time period at issue in the instant case. (SAC ¶¶ 7-8.)

The third group of Defendants consists of the law firm of Adorno Zeder, P.A. ("Adorno Firm"), one of its partners, Hank Adorno, and another of its attorneys, Fred Schwartz. The Adorno Firm received legal malpractice insurance coverage from National Union during the time period at issue in the instant case. (SAC ¶¶ 9-11.)

Finally, the fourth group of Defendants includes the law firm of Kerr, Russell, Weber, P.L.C. ("the Kerr Firm") and one of its attorneys, Robert Gissell. The Kerr Firm received legal malpractice insurance coverage from National Union during the time period at issue in the instant case. (SAC ¶¶ 12-13.)

Events

The Second Amended Complaint alleges a series of facts related to several business transactions involving Pelullo and the Plaintiff entities over which he exercised control. (SAC ¶¶ 22-95.)

A. The PIE and Transcon Transactions

In April 1990, Growth and Olympia Holding acquired trucking companies Transcon Lines ("Transcon") and PIE Nationwide ("PIE"), respectively. (SAC ¶¶ 39, 41.) Both Transcon and PIE were approaching insolvency at the time of these acquisitions, but plaintiffs claim they were unaware of the financial condition of these companies. (SAC ¶¶ 24, 32.) Transcon became delinquent in its health, welfare, and pension fund obligations administered by the Central States Fund in July 1989, which put Transcon in jeopardy of a potential withdrawal liability of $20 million.⁵ By the spring of 1990, PIE's similar financial difficulties resulted in a potential withdrawal liability to the Central States Fund of $45 million. Plaintiffs allege that the PIE Board of Directors and its law firm, Kerr, Russell, did not inform either Pelullo or the Trusts of either Transcon and/or PIE's financial circumstances when Plaintiffs conducted due diligence. Rather, both the Kerr Firm and the PIE Board of Directors advised the Pelullo Trusts that in order for the post-acquisition trucking company to succeed, it was necessary to simultaneously acquire PIE and Transcon and consolidate the two entities.

5 According to Plaintiffs, "[u]nder the Multi-Employer Pension Plan Amendments Act of 1980 ("MEPAA"), employers were required to pay their proportionate shares of unfunded vested benefit liabilities of pension funds when they completely or partially withdrew or terminated participation in the pension fund." (SAC ¶ 25.) And "[b]ecause of the MEPAA, if Transcon failed, it would trigger a withdrawal liability . . . to the Central States Fund." (Id. ¶ 26.)

As part of the consolidation of PIE and Transcon, the entities agreed to: (1) an equipment agreement involving a transfer of equipment leases from Transcon to OHA, and the subsequent leasing of this equipment from OHA to PIE; and (2) a consulting agreement between PIE and Plaintiff One Plaza, in which One Plaza would receive two percent of PIE's operating revenues in exchange for various financial consulting services, including, among other services, assistance in the day-to-day operations of PIE "in order to extricate PIE from its financial difficulty."⁶ (SAC ¶¶ 44, 50.)

6 We note that this statement appears to be inconsistent with Plaintiffs' earlier allegations that it was unaware of the financial condition of PIE.

On May 1, 1990, Transcon's creditors filed an involuntary bankruptcy petition against it in federal bankruptcy court in Los Angeles, California. PIE filed its own voluntary Chapter 11 bankruptcy petition on October 16, 1990, in federal court in Jacksonville, Florida. By March 1991, PIE's petition was converted to a Chapter 7 liquidation, and a bankruptcy trustee was appointed. (SAC ¶¶ 53, 55.)

The Transcon and PIE bankruptcy trustees filed lawsuits against Pelullo and his wife, as well as against OHA, One Plaza, and various law firms, seeking the return of millions of dollars. In 1994, a federal grand jury in the Jacksonville, Florida indicted Pelullo for fraudulent acts arising out of PIE's business operations. (SAC ¶¶ 56, 57.)

1. Wilentz's and Falk's Role in the PIE and Transcon Transactions

Plaintiffs allege that during the acquisition of PIE and Transcon, (1) Wilentz and Falk served as counsel to Transcon, (2) Wilentz and Falk represented Pelullo individually and provided legal advice to Pelullo and the Pelullo Trusts, and (3) Falk served as an officer of OHA. (SAC ¶¶ 60-63.)

As counsel to Pelullo and the Trusts, Plaintiffs allege that Wilentz and Falk drafted the equipment lease and consulting agreements that were conceived to sell Transcon's assets and assign its equipment leases to OHA. (SAC ¶ 64.) Plaintiffs claim that Wilentz and Falk, who had prepared all of the relevant documents for the lease transaction, advised Pelullo and the Trusts that the lease transaction could be accomplished without adverse legal consequences. (SAC ¶¶ 44-45, 50-51, 64-67.) However, Plaintiffs claim that after the Transcon and PIE bankruptcy filings, when OHA sued the PIE bankruptcy trustee for the return of equipment, the PIE bankruptcy trustee counterclaimed and obtained a judgment of $6.5 million against OHA "and others" on allegations that the payments made under the lease and consulting agreements were fraudulent conveyances and preferences constituting a breach of fiduciary duty by the PIE board members. (SAC ¶¶ 68-70.) As a result of this judgment against OHA, the Pelullo Trusts were required to pay $2.4 million as part of an October 1997 settlement agreement. (SAC ¶ 71.) In addition, certain of the Pelullo Trusts were found liable for PIE's withdrawal liability to Central States, because the transfer of fifteen percent of PIE's stock to OHA as part of the lease agreement triggered the Trusts' liability. Default judgment was entered in favor of Central States and against Pelullo in excess of $45 million. When Pelullo filed for personal bankruptcy protection, Central States filed a complaint seeking a declaration that the $45 million judgment was not dischargeable (SAC ¶ 72.)⁷ Pelullo and the Trusts incurred damages in connection with these litigations. (SAC ¶ 75.)

7 The Second Amended Complaint does not allege the result of this legal action.

In 1992, the PIE and Transcon bankruptcy trustees commenced separate actions against Wilentz seeking damages arising from the law firm's role in the PIE/Transcon transaction. Plaintiffs allege that by drafting the lease and consulting agreements, Wilentz participated in looting PIE and Transcon before their bankruptcy filings. (SAC ¶¶ 76-77, 80-81.) Wilentz settled these claims with the PIE trustee for $2 million, and with the Transcon trustee for $1.8 million. Its insurer, National Union, paid each settlement. (SAC ¶¶ 78-79, 82-83.)

B. The Compton Press Transaction

Plaintiffs also allege that in 1989, Wilentz and Falk, in connection with the Pelullo Trusts' acquisition of Compton Press, Inc., simultaneously represented Pelullo and the Pelullo Trusts as well as the Compton sellers, including Moshe Milstein, without obtaining conflict waivers from any of the parties. (SAC ¶¶ 84-85.) Then, in 1990, Wilentz and Falk represented Pelullo, the Pelullo Trusts, and the Compton sellers in a federal court lawsuit in which the former trustees of Compton's pension fund sought to recover money which they alleged was unlawfully transferred out of the pension fund. (SAC ¶¶ 84-86.) Subsequently, Milstein and the other Compton sellers sued Wilentz and Falk for allegedly providing conflicting representation. (SAC ¶¶ 88-89.) As part of a settlement in the lawsuit against Wilentz and Falk, National Union paid Milstein $750,000, and paid $250,000 to "purchase the approximate $3.0 million civil judgment" that had been entered against Milstein in the Compton pension fund lawsuit. (SAC ¶¶ 90-91.)

On November 8, 1996, Pelullo was convicted in federal court in New Jersey for (1) improperly transferring Compton's pension funds to a Florida travel agency called "Away to Travel South" ("ATTS"); (2) removing Compton pension funds to enable a corporation controlled by the Pelullo Trusts to acquire another corporation; and (3) transferring pension funds from a UNUM Annuity Contract. (SAC ¶ 96.) Pelullo was found guilty of multiple counts of embezzlement and money laundering, and conspiracy to commit those acts. The Third Circuit affirmed Pelullo's conviction in 1999. As mentioned above, in May 2002 the New Jersey district court granted Pelullo a new trial "solely on the ground that the government failed to comply with its obligations under Brady v. Maryland, 373 U.S. 83 (1963)." In the Second Amended Complaint, Plaintiffs allege that during this trial, Falk "falsely swore that Mr. Pelullo possessed no attorney client privilege vis-a-vis the Wilentz Firm, leaving him free to testify against Mr. Pelullo" and that Falk did, in fact, testify against Pelullo. (SAC ¶ 97.) Plaintiffs claim that Pelullo was convicted and sentenced in the New Jersey federal action as a result of Wilentz's "dual representation" and advice in connection with the Compton pension fund.

C. The Lyons Transportation Transaction

Plaintiffs also allege that Wilentz and Falk simultaneously represented Pelullo and the Pelullo Trusts in a 1990 proposed acquisition of Lyons Transportation, Inc. (SAC ¶¶ 92-93.) Sherwin-Williams, Lyons's parent company, sued Wilentz and Falk and others for fraud in connection with the proposed acquisition and the conflict of interest. National Union paid Lyons over $1 million to settle this lawsuit on behalf of Wilentz. (SAC ¶¶ 94-95.)

D. The Kerr Firm and Attorney Robert Gissell

Plaintiffs allege that the Kerr Firm and attorney Gissell served as outside counsel to PIE at all times relevant to the instant lawsuit. (SAC ¶ 99.) In connection with the 1990 acquisition of PIE, the Kerr Firm and Gissell simultaneously represented PIE, Maxitron,⁸ and Plaintiff Olympia Resources and its affiliates. (SAC ¶ 100.) Additionally, Plaintiffs allege that connections between Gissell, Gissell's wife, and Maxitron were concealed from both the directors of PIE and the Plaintiffs. Specifically, Gissell was the nephew of a Mr. Rogers "of Rogers Doyle — the controlling Maxitron entity," and Gissell's wife owned a partnership interest in Rogers-Doyles Associates. (SAC ¶ 101.)

8 Prior to the sale of PIE to Olympia Holding, Maxitron owned 65% of PIE. (SAC ¶ 38.)

During PIE's Chapter 7 liquidation, the PIE bankruptcy trustee sued the Kerr Firm and Gissell, seeking reimbursement for PIE's payments to the Kerr Firm and Gissell of over $1 million between 1987 and October 1990, for services rendered to Rogers-Doyle Associates and Maxitron. (SAC ¶¶ 103, 104.) In connection with that lawsuit, on July 28, 1993, the PIE bankruptcy trustee sent a confidential memorandum to the Kerr Firm and Gissell. In this memorandum — which the PIE bankruptcy trustee instructed the Kerr Firm and Gissell to not disclose to Pelullo, the Pelullo Trusts, and their affiliates — the PIE trustee allegedly threatened to expand the lawsuit against the Kerr Firm and Gissell for their failure to advise Olympia Resource of PIE's financial condition. (SAC ¶¶ 105-106.) Plaintiffs allege that in violation of their fiduciary duty to do so, the Kerr Firm and Gissell never showed this memorandum to Pelullo, the Pelullo Trusts, or their affiliates. (SAC ¶ 107.) Pelullo discovered this document in 2000 during the Jacksonville criminal action.

National Union ultimately paid $5 million to settle the dispute between the Kerr Firm and Gissell, and the PIE bankruptcy trustee. Plaintiffs claim that also pursuant to this settlement, the Kerr Firm and Gissell, through their attorneys at D'Amato Lynch, "the law firm handpicked by National Union," turned over confidential documents related to their representation of Pelullo, the Pelullo Trusts, and their affiliates to the PIE trustee. (SAC ¶ 107-108.) Plaintiffs state that the use of these documents was key to various civil and criminal actions. First, they claim that the PIE bankruptcy trustee used these documents in the action against OHA, which settled in 1997 for $2.5 million. (SAC ¶ 109.) Plaintiffs claim that if OHA had known in 1997 that these events had occurred, it would have moved to exclude these documents from evidence based on work product and attorney-client privileges, and would have successfully defended against the PIE bankruptcy trustee's action. (SAC ¶ 111.) Second, the PIE bankruptcy trustee referred these documents to the FBI. (SAC ¶ 109.) In 1994, Pelullo was indicted in the Jacksonville criminal action. This indictment was dismissed in 2000. (SAC ¶ 109.) Third, the PIE bankruptcy trustee used these documents in various civil cases involving Pelullo and the Trusts, "and as a result prevented and/or substantially delayed Mr. Pelullo" from obtaining proceeds from a Directors and Officers ("D O") insurance policy. Plaintiffs claim that this delay resulted in Pelullo's conviction in the Newark criminal action and forced Pelullo to pay for significant attorneys fees to defend against the Jacksonville criminal action. (SAC ¶ 110.)

Plaintiffs also assert that the Kerr Firm and Gissell falsely filed a motion to dismiss when they claimed that, in a 1996 action, Pelullo failed to allege fraud with particularity, despite having in their possession the PIE trustee's memorandum "exhaustively detailing the Kerr, Russell defendants' gross lapses in judgment, multitudinous breaches of fiduciary duty, and, most importantly, knowledge of PIE's insolvency prior to Olympia [Resource's] 1990 purchase of PIE." (SAC ¶¶ 112-114.)

In 1999, Pelullo and the Trusts requested that the Kerr Firm turn over documents related to civil and criminal proceedings involving Pelullo. Plaintiffs allege that, upon the advice of D'Amato Lynch, the Kerr Firm denied that it represented Pelullo, the Trusts, or the Trusts' affiliates, and continued to conceal the July 28, 1993 memorandum. (SAC ¶ 115.)

Plaintiffs state that the collective actions of the Kerr Firm and attorney Gissell outlined above "were part of a hub-and-spoke conspiracy to obstruct justice between the Kerr Firm defendants, National Union and other law firms." (SAC ¶ 116.) Plaintiffs claim that the Kerr Firm and Gissell's purpose in this conspiracy was to conceal their role in the PIE bankruptcy trustee's lawsuit against Plaintiffs; to shield the Kerr Firm and Gissell from criminal and civil liability; to limit National Union's exposure as their insurer; and to ensure Pelullo's conviction in the Jacksonville criminal action so that Pelullo would be required to reimburse National Union for the legal fees and costs it paid under PIE's D O policy. (SAC ¶ 117.)

Plaintiffs claim that in 2000, they discovered both the 1993 confidential memorandum and the Kerr Firm's 1994 disclosure of confidential documents to the PIE bankruptcy trustee. (SAC ¶ 118.)

E. The Adorno Firm and Fred Schwartz

The Adorno Firm served as counsel to Pelullo, the Trusts, corporations controlled by the Trusts, Compton Press, Inc., and the Compton Press Pension Fund on a variety of civil and criminal litigation matters over a five-year period. (SAC ¶ 120.) Plaintiffs allege that as the partner who handled these litigation matters, Fred Schwartz was also an officer and board member of ATTS, the travel agency to which Pelullo was convicted of transferring Compton pension funds. (SAC ¶ 121.) Fred Schwartz and the Adorno Firm served as counsel to ATTS, "and possessed an undisclosed interest in the company." (SAC ¶ 123.) The Adorno Firm utilized the assets of ATTS for legal fees, expenses, and travel costs. (SAC ¶ 124.)

1. The Newark Criminal Action

Plaintiffs allege that Fred Schwartz provided perjured testimony during Pelullo's 1996 Newark criminal action in an effort to obstruct justice. (SAC ¶¶ 128, 145.) Fred Schwartz was the key government witness concerning the transfer of Compton's pension funds to ATTS. (SAC ¶ 125.) Plaintiffs claim that the government relied on Fred Schwartz's testimony to support its theory that Pelullo disguised the transfer to ATTS as a loan that had been secured by worthless assets. (SAC ¶¶ 125-126.) In originally upholding Pelullo's conviction, the district court found that the ATTS transfer was an elaborate scheme to extract money from the Compton funds for his own use. (SAC ¶ 127.) Plaintiffs allege that Fred Schwartz committed perjury during the Newark criminal action. Plaintiffs further allege that, based on Fred Schwartz's perjured testimony, the jury concluded that Pelullo's civil action testimony was false. (SAC ¶ 136.)

Plaintiffs assert that documents discovered after Pelullo's Newark conviction, support Plaintiffs' claim that Fred Schwartz provided perjured testimony, and that these documents will demonstrate the veracity of Pelullo's defense. However, we note that in his decision to grant Pelullo a new trial in the Newark criminal action, Judge Debevoise addressed the significance of these documents in light of the evidence as a whole against Pelullo:

It can be observed that even if [Pelullos's] version of all the transactions were accepted by the jury, the jury could still have found that he had the criminal intent requisite to establish the charges of conspiracy, embezzlement, and money laundering. The loans and investments of pension plan funds that [Pelullo] admittedly directed were shocking and outrageous. However [Pelullo's characterization of] them would not have precluded the jury from finding that he had the requisite criminal intent. Nevertheless the government relied on particular characterizations of the relevant transactions upon which the new evidence casts doubt and the government relied upon witnesses whose credibility is challenged by evidence that was not produced.

United States v. Pelullo, Crim. No. 94-276 (DRD), Civ. No. 01-124 (DRD) (D.N.J. filed May 17, 2002) (emphasis added).

2. The Philadelphia Federal Criminal Action

Plaintiffs claim that the Adorno Firm and Fred Schwartz also obstructed justice in Pelullo's Philadelphia criminal action. (RICO Case Statement at 19.) In the Philadelphia action, the government argued that Pelullo made certain admissions of guilt during an FBI interview in which Pelullo and Fred Schwartz were present. (SAC ¶¶ 149-150.) Despite the government's position that Fred Schwartz could testify in Pelullo's defense, "[Fred] Schwartz repeatedly refused to testify for Mr. Pelullo and refused to turn over exculpatory work-product materials for Mr. Pelullo's defense, even though he knew that Mr. Pelullo never made any admissions of guilt at the FBI interview in question." (SAC ¶¶ 151-52.) However, Fred Schwartz, who was a government informant against Pelullo, did turn over confidential records to the government "in an attempt to assist in Pelullo's prosecution in both the Philadelphia and Newark actions." (SAC ¶¶ 152, 154.) Plaintiffs allege that as a result of an agreement with the government "which was unknown to Mr. Pelullo," Fred Schwartz was unwilling to provide testimony about the FBI interview during the trial.

Plaintiffs claim that Fred Schwartz's refusal to either testify or turn over documents during the same time that he and the Adorno Firm represented Pelullo and the Trusts was done in furtherance of a conspiracy between the Adorno Defendants and National Union. The purpose of this conspiracy was to limit National Union's exposure as Adorno's insurer, and limit the Adorno Firm's civil and criminal liability. (SAC ¶ 154.) Furthermore, Plaintiffs claim that at the same time Fred Schwartz and the Adorno Firm were representing Pelullo and the Trusts, Fred Schwartz provided attorney-client information to the government and others which was used against Pelullo in the Philadelphia and Newark criminal actions as well as in civil litigation. (SAC ¶ 156.)

3. Civil Actions

The RICO Case Statement alleges that Fred Schwartz gave perjured testimony in civil litigation with the Compton Press Pension Fund in 1991 and 1993, and filed false pleadings from 1991 through 1994, which the Fund used to force the Pelullo Trusts to pay civil judgments and fees in excess of $2 million. In addition, Fred Schwartz gave perjured testimony and filed false pleadings in civil litigation with Wilentz in 1994. (RICO Case Statement at 26.)

F. The D'Amato and Lewis Firms

Plaintiffs assert that the D'Amato and Lewis law firms, which were retained by National Union to represent Wilentz, the Kerr Firm, and the Adorno Firm, coordinated the misconduct of these law firms and their attorneys "along with defendants Alston Bird, Todd Sawicki and National Union." (SAC ¶ 158.) Plaintiffs allege that the D'Amato and Lewis firms, and D'Amato partners, George and D'Agostino, used confidential, attorney-client information obtained from the firms that had represented Pelullo and the Trusts in order to protect the law firms from civil and criminal litigation, as well as to limit the exposure of National Union. Plaintiffs further allege that the D'Amato and Lewis firms "have turned over this confidential, attorney-client privileged information to the government or to other individuals in the course of civil litigation (including . . . Fred Schwartz, Moshe Milstein, the PIE trustee and the Transcon trustee), who in turn turned them over to the government for use against Mr. Pelullo." (SAC ¶ 159.) Plaintiffs assert that D'Amato and Lewis "have made numerous false statements in written correspondence, and have filed false and fraudulent pleadings" in the various litigations. (SAC ¶ 160.)

G. National Union, Alston Bird, and Attorney Sawicki

In addition to providing malpractice insurance coverage to the Wilentz, the Kerr Firm, and Adorno firms, National Union also provided a D O Policy to PIE. As a director of PIE, Pelullo is insured under this policy. (SAC ¶¶ 162-163.) Plaintiffs allege that National Union and the D'Amato and Lewis law firms sought to limit National Union's exposure by refusing to provide coverage to Pelullo in the Jacksonville criminal action until a Georgia district court ordered National Union to provide such coverage in March 1997, and that National Union, D'Amato, and Lewis took steps to "sabotage" Pelullo and the Trusts. (SAC ¶¶ 164-167.) Notwithstanding this allegation, however, the Georgia court record shows that National Union did not contest Pelullo's claims for the advancement of certain defense costs in the Jacksonville Criminal Action, as is discussed in Section II, infra.

Despite the March 1997 court order to provide coverage, Plaintiffs allege that National Union, through the law firm of Alston Bird, "continued to deny Mr. Pelullo counsel of his choice" in the Jacksonville criminal action. (SAC ¶ 168.) The Second Amended Complaint asserts that in 1998, due to a defense funding agreement executed by Pelullo and National Union, Pelullo did retain an attorney. (SAC ¶ 169-170.) Plaintiffs claim that although National Union did pay some of the costs associated with the Jacksonville criminal action, National Union, through Alston Bird and Sawicki, breached this funding agreement because it refused to pay the balance of the costs associated with that representation, and has refused to pay for the shipment of records recovered in the Jacksonville action that were needed in the Philadelphia and Newark criminal actions and civil cases. Plaintiffs claim that National Union took these actions despite having notice of the importance of these documents, and despite the direct connection between the Jacksonville and Newark criminal actions. (SAC ¶¶ 171-78.) Plaintiffs claim that National Union's refusal to provide coverage for Pelullo's defense in the Newark and Philadelphia actions, as required by the parties' funding agreement and the D O policy, amount to a subversion of Pelullo's efforts to defend himself in these actions. (SAC ¶ 179.)⁹ Plaintiffs assert that National Union's conduct has made it impossible for Pelullo to comply with court orders in the Newark criminal action, and "continues to threaten his freedom and well being." (SAC ¶¶ 180-81.)

9 Despite this allegation, however, as discussed in Section II, infra, a Georgia district court granted summary judgment to National Union in an interpleader action on all of Pelullo's claims for coverage and defense costs in the Philadelphia and Newark Criminal Actions. This ruling was affirmed by the Eleventh Circuit Court of Appeals.

Damages

Based on the above allegations, Plaintiffs assert that Pelullo has suffered damages totaling $33.393 million, and that the Pellulo Trust entities have suffered damages totaling $28.08 million, in the form of attorneys fees, fines, settlements, forfeitures, and judgments. (SAC ¶ 182.)

Claims

Plaintiffs seek relief pursuant to the following claims: all Defendants violated 18 U.S.C. § 1962(c), RICO (Count I); all Defendants engaged in a RICO conspiracy in violation of 18 U.S.C. § 1962(d) (Count II); Wilentz's and Kenneth Falk's actions constituted a breach of fiduciary duty owed to the Plaintiffs (Count III); the Kerr Firm's and Gissell's actions constituted a breach of fiduciary duty owed to the Plaintiffs (Count IV); the Adorno Firm, Hank Adorno, and Fred Schwartz breached their fiduciary duty to the Plaintiffs (Count V); a claim of professional negligence against Wilentz and Falk (Count VI); a claim of professional negligence against the Adorno Firm, Hank Adorno, and Fred Schwartz (Count VII); a claim of professional negligence against the Kerr Firm and Gissell (Count VIII); a claim of bad faith (asserted by all Plaintiffs except Pelullo) against National Union for its refusal to comply with the parties' defense funding agreement (Count IX); and a claim for breach of contract and breach of the implied covenant of good faith and fair dealing (asserted by all Plaintiffs except Pelullo) against National Union for its breach of the funding agreement and its efforts to subvert the interests of Pelullo (Count X). (SAC ¶¶ 208.)

Plaintiffs seek compensatory damages, treble damages under 18 U.S.C. § 1964(c), punitive damages, and other relief the Court deems appropriate. (SAC, "Wherefore" Clause.)

II. NATURE AND STAGE OF PROCEEDINGS

Plaintiffs initially filed a Complaint in the instant action on November 7, 2000,¹⁰ and subsequently filed the Amended Complaint on February 26, 2001. After Defendants filed various motions to dismiss the Amended Complaint, the Court granted leave for Plaintiffs to file a Second Amended Complaint ("SAC"), which was filed on November 21, 2001. The Second Amended Complaint alleged RICO violations based on a pattern of predicate acts of mail fraud, wire fraud, and obstruction of justice. Plaintiffs then filed a RICO Case Statement pursuant to a Court order on December 14, 2001. In the RICO Case Statement, Plaintiffs expressly declined to pursue RICO violations based on predicate acts of mail fraud or wire fraud. Instead, Plaintiffs rely only on the predicate acts characterized as obstruction of justice.

10 It appears that this original Complaint was not served on any of the defendants.

On January 9, 2002, a federal district court in the Northern District of Georgia held Pelullo and one of his attorneys in the instant action, Joseph M. Fioravanti, in civil contempt of a permanent injunction for filing the instant lawsuit naming National Union as a defendant. That court had presided over an interpleader action instituted by National Union, in which the insurer sought to resolve competing claims under the PIE D O policy at issue in the instant action. In that action, the district court granted summary judgment to National Union on all of Pelullo's claims for coverage and defense costs in the Philadelphia criminal action and in the Newark criminal action, as well as Pelullo's other claims for coverage under the D O Policy. Regarding the Jacksonville criminal action, the Georgia district court also explained that "[b]ecause National Union did not contest Pelullo's claims for the advancement of certain defense costs in the Jacksonville Criminal Action, the court granted Pelullo's motion for partial summary judgment as to those claims." The Eleventh Circuit Court of Appeals affirmed the district court ruling on an appeal filed by Pelullo. The Georgia district court entered an amended judgment on March 31, 1997, which, inter alia, granted National Union a permanent injunction pursuant to 28 U.S.C. § 2361, permanently enjoining Pelullo "from commencing or prosecuting any action affecting the proceeds of the [PIE D O] policy." In its January 2002 civil contempt order, the Georgia district court held that Pelullo and Fioravanti violated its permanent injunction when they commenced the instant lawsuit, ordered dismissal of claims against National Union in the instant action, and imposed sanctions. Pelullo dismissed his claims against National Union on January 17, 2002.

III. STANDARD OF REVIEW

When considering a motion to dismiss a complaint for failure to state a claim under Rule 12(b)(6),¹¹ this Court must "accept as true the facts alleged in the complaint and all reasonable inferences that can be drawn from them. Dismissal under Rule 12(b)(6) . . . is limited to those instances where it is certain that no relief could be granted under any set of facts that could be proved." Markowitz v. Northeast Land Co., 906 F.2d 100, 103 (3d Cir. 1990) (citing Ransom v. Marrazzo, 848 F.2d 398, 401 (3d Cir. 1988)); see H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 249-50 (1989). For this reason, district courts strongly disfavor Rule 12(b)(6) motions.Melo-Sonics Corp. v. Cropp, 342 F.2d 856 (3d Cir. 1965);Kuromiya v. United States, 37 F. Supp.2d 717, 722 (E.D. Pa. 1999). A court will only dismiss a complaint if "'it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations.'" H.J. Inc., 492 U.S. at 249-50 (quoting Hishon v. King Spalding, 467 U.S. 69, 73 (1984)); Nietzke v. Williams, 490 U.S. 319, 326-327 (1984). Nevertheless, a court need not credit a plaintiff's "bald assertions" or "legal conclusions" when deciding a motion to dismiss. Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997).

11 Rule 12(b)(6) provides that:

Every defense, in law or fact, to a claim for relief in any pleading . . . shall be asserted in the responsive pleading thereto if one is required, except that the following defenses may at the option of the pleader be made by motion: . . . (6) failure to state a claim upon which relief can be granted. . . .

Fed.R.Civ.P. 12(b)(6).

RICO claims are generally subject to notice pleading requirements under Federal Rule of Civil Procedure 8(a): "[I]t is enough that a [RICO] complaint put the defendant on notice of the claims against him. It is the function of discovery to fill in the details, and of trial to establish fully each element of the cause of action." Rose v. Bartle, 871 F.2d 331, 356 (3d Cir. 1989) (quoting Seville Indus. Mach. Corp. v. Southmost Mach. Corp., 742 F.2d 786, 790 (3d Cir. 1984)). Pursuant to Rule 8(a) pleading requirements, a RICO plaintiff need not state every element necessary for recovery with precision in his or her complaint. Id. at 356.

However, RICO allegations constituting fraud are nevertheless subject to the heightened pleading requirements of the Federal Rules, which state that "[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake are to be pleaded with particularity." Fed.R.Civ.P. 9(b). See also Nolan Bros., Inc. v. United States, 266 F.2d 143, 145-46 (10th Cir. 1959) (holding that Rule 9(b) merely requires that circumstances constituting fraud be pleaded with particularity, regardless of whether the terms "fraud" or "fraudulent" appear on the face of a pleading). The purpose of Rule 9(b) "is to provide notice of the 'precise misconduct' with which defendants are charged and to prevent false or unsubstantiated charges. . . . However, courts should apply the rule with some flexibility and should not require plaintiffs to plead issues that may have been concealed by the defendants." Livingston v. Shore Slurry Seal, Inc., 98 F. Supp.2d 594, 597 (D.N.J. 2000) (citations omitted). To satisfy Rule 9(b), "plaintiffs may plead the specific conduct alleged to be fraudulent along with the 'date, place and time' that the alleged fraud occurred or use some 'alternative means of injecting precision and some measure of substantiation into their allegations of fraud.'" Poling v. K. Hovnanian Enters., 99 F. Supp.2d 502, 508 (D.N.J. 2000) (citing Seville Indus. Machinery Corp. v. Southmost Machinery Corp., 742 F.2d 786, 791 (3d Cir. 1984), cert. denied, 469 U.S. 1211 (1985)).

Finally, "[i]t is well-settled that in deciding a motion to dismiss, courts generally may consider only the allegations contained in the complaint, exhibits attached thereto, and matters of public record." Beverly Enters., Inc. v. Trump, 182 F.3d 183, 190 n. 3 (3d Cir. 1999).

IV. DISCUSSION

A. Personal Jurisdiction

As an initial matter, two of the Motions to Dismiss assert that this Court lacks personal jurisdiction as to at least some of the Defendants. Many courts have held that, pursuant to the RICO statute's nationwide service provision contained within 18 U.S.C. § 1965, a RICO defendant "need only have sufficient minimum contacts with the United States to satisfy due process."American Trade Partners, L.P v. A-1 Int'l Importing Enters., Ltd., 757 F. Supp. 545, 556 (E.D. Pa. 1991). However, upon a review of 18 U.S.C. § 1965, a better reading of the venue and process provision of RICO requires that a district court has jurisdiction to entertain a civil RICO claim only where personal jurisdiction based on minimum contacts is first established as to at least one defendant pursuant to 18 U.S.C. § 1965(a). Once minimum contacts is established as to at least one defendant, the nationwide service of process provision of 18 U.S.C. § 1965(b) enables a plaintiff to bring before a single court all members of a RICO conspiracy. See also PT United Can Co. v. Crown Cork Seal Co., Inc., 138 F.3d 65, 71 (2d Cir. 1998) (adopting this approach); Boone v. Thompson, No. 02-CV-1580, 2002 WL 31478834, * 3 (E.D. Pa. Nov. 1, 2002) (requiring sufficient contacts with the forum state to establish personal jurisdiction over RICO defendant). Here, since Plaintiffs (minus Pelullo) have named National Union as a defendant in this action with minimum contacts in Pennsylvania, and since the parties do not dispute the existence of personal jurisdiction with respect to the RICO claims, this Court has jurisdiction over all of the named Defendants.

B. Plaintiffs' RICO Claims are Barred by the Statute of Limitations ¹²

12 Statute of limitations defenses were raised by the National Union and Kerr Firm Defendants.

The Second Amended Complaint alleges that Defendants collectively, by and through their individual members, have constituted an enterprise through which the Defendants participated in a pattern of racketeering in violation of 18 U.S.C. § 1962(c) and (d). (SAC ¶¶ 184-194.) Two of the Motions to Dismiss raise statute of limitations defenses. We agree that the instant RICO claims are barred by the statute of limitations.

There is a four-year statute of limitations for civil RICO claims. Agency Holding Corp. v. Malley-Duff Assocs. 483 U.S. 143 (1987). In Rotella v. Wood 528 U.S. 549 (2000), the Supreme Court adopted the injury discovery rule for determining when the statute of limitations began to run on a civil RICO claim. Under this rule the statute begins to run when plaintiff knew or should have known of his injury. In adopting this rule the court specifically rejected the injury and pattern discovery rule under which a civil RICO claim accrues only when the claimant discovers, or should discover, both an injury and a pattern of RICO activity. Citing its decision in Klehr v. A.O. Smith Corp. 521 U.S. 179 (1997), the Court also rejected the last predicate act rule under which each predicate act forming a part of the same pattern starts the statute anew. In adopting and applying the injury discovery rule in a civil RICO malpractice case, the Court observed:

A person suffering from inadequate treatment is thus responsible for determining within the limitation period then running whether the inadequacy was malpractice. We see no good reason for accepting a lesser degree of responsibility on the part of a RICO plaintiff. It is true, of course, as Rotella points out, that RICO has a unique pattern requirement. . . . And it is true as well that a pattern of predicate acts may well be complex, concealed, or fraudulent. But identifying professional negligence may also be a matter of real complexity, and its discovery is not required before the statute starts running. . . . Although we said that the potential malpractice plaintiff "need only ask" if he has been wronged by a doctor, considerable enquiry and investigation may be necessary before he can make a responsible judgement about the actionability of the unsuccessful treatment he received. The fact, then, that a considerable effort may be required before a RICO plaintiff can tell whether a pattern of racketeering is demonstrable does not place him in a significantly different position from the malpractice victim. A RICO plaintiff's ability to investigate the cause of his injuries is no more impaired by his ignorance of the underlying RICO pattern than a malpractice plaintiff is thwarted by ignorance of the details of treatment decisions or of prevailing standards of medical practice.

Rotella, 528 U.S. at 556-57.

In the case of Forbes v. Eagleson, the Third Circuit applied the injury discovery rule to civil RICO, indicating that the four-year statutory period begins to run when the plaintiff "has discovered or, by the exercise of reasonable diligence, should have discovered (1) that he or she has been injured, and (2) that the injury has been caused by another party's conduct." 228 F.3d 471, 485 (3d Cir. 2000). This approach "[does] not require any knowledge of the other RICO elements." Mathews v. Kidder, Peabody Co., Inc., 260 F.3d 239, 245 (3d Cir. 2001).

Plaintiffs filed their initial complaint in the matter on November 7, 2000. Obviously, Plaintiffs were aware of much of the injury that they allegedly suffered well before November of 1996. Count I of Plaintiffs' Second Amended Complaint alleges that, pursuant to the RICO statute, the Defendants comprised an enterprise whose individuals engaged in a pattern of racketeering activity in violation of 18 U.S.C. § 1962(c).¹³ Plaintiffs state that as a proximate result of the Defendants' alleged RICO conduct, which included, inter alia, obstruction of justice in the Philadelphia federal criminal action, Plaintiffs suffered the following injuries in the Philadelphia federal criminal action: $3.6 million in legal fees, $3.48 million in fines, $2.02 million in restitution, and $14.5 million in forfeitures. (RICO Case Statement at 7.) Court records indicate that Pelullo was convicted in Philadelphia in 1995, and initiated proceedings before the Third Circuit to appeal his judgment and vacate his sentence on September 27, 1995 and October 12, 1995. Moreover, publicly available records indicate that the court entered an order of forfeiture in the Philadelphia action on September 14, 1995. United States v. Pelullo, No. Crim. 91-00060, 1996 WL 257345, *1 (1996 E.D. Pa. May 10, 1996). Also, we note that on June 4, 1996, the district court in Georgia handling the interpleader action granted summary judgment to National Union for all of Pelullo's claims for coverage and defense costs in the Philadelphia and Newark actions, but granted judgment to Pelullo for the advancement of certain costs in the Jacksonville action.

13 Specifically, Count I states:

184. From in or about 1989 to up through and including the present, the defendants National Union and the Wilentz Firm (and Falk), the Kerr Firm (and Gissell), the Adorno Frim (and [Fred] Schwartz) and the D'Amato Firm, by and through their individual members, have constituted an association in fact which comprised an enterprise, as that term is defined at Title 18, U.S. Code, § 1961(4).

185. At all times herein referenced, the defendants participated in the affairs of the enterprise through a pattern of racketeering activity, which pattern of racketeering activity affected interstate commerce, in violation of 18 United States Code, § 1962(c).

(SAC ¶ 184.)

In addition to having knowledge of injuries in the Philadelphia action prior to November 1996, based upon their allegations, Plaintiffs were on notice that these injuries were caused by another party's conduct. According to Plaintiffs, Pelullo and Fred Schwartz met with Assistant United States Attorney Ronald Cole and FBI agents in 1990. At this meeting, Fred Schwartz witnessed Pelullo give an exculpatory statement and took notes. (RICO Case Statement at 19.) After promising Pelullo that he would testify at trial in the Philadelphia criminal action that Pelullo was innocent of the offenses charged, Fred Schwartz failed to honor a subpoena, despite being able to provide exculpatory testimony and "other exculpatory work-product materials," and refused to testify in any of the four Philadelphia criminal trials in 1991, 1993, 1994, and 1995. (RICO Case Statement at 19.) Plaintiffs allege that this failure to testify was part of the pattern by Defendants to obstruct justice in effort to further the goals of the RICO enterprise. (RICO Case Statement at 20.) Plaintiffs assert that these actions caused their injuries in the Philadelphia criminal action. (RICO Case Statement at 6.) Clearly, Plaintiffs' RICO cause of action began to accrue more than four years prior to November 7, 2000.

These are only a few examples of Plaintiffs' knowledge of their injury at the hands of Defendants well before November of 1996. There are many others. It is ludicrous to suggest that, prior to November 1996, Plaintiffs did not know of the injury which they allegedly suffered as a result of this alleged RICO enterprise.

"In a civil RICO case where all the requisite elements are present, a claim accrues immediately upon the plaintiff's discovery of her injury. Absent equitable tolling doctrines, ignorance of the remaining elements of her claim, including the pattern required by RICO, is immaterial. A plaintiff has four years from the time she discovers her injury to investigate, gather evidence, and bring suit. At the end of the four years, her claim expires." Matthews, 260 F.3d at 257, n. 26 (citations omitted). This is exactly the case here.

Plaintiffs suggest that the four-year limitations period is tolled because of Defendants' fraudulent concealment of the existence of a RICO claim. As explained in Matthews, to establish fraudulent concealment, the plaintiff has the burden of proving:

(1) "active misleading" by the defendant, (2) which prevents the plaintiff from recognizing the validity of her claim within the limitations period, (3) where the plaintiff's ignorance is not attributable to her lack of "reasonable due diligence in attempting to uncover the relevant facts."

Id. at 256 (citations omitted). As emphasized in Davis v. Grusemeyer, "[a] key aspect of a plaintiff's case alleging fraudulent concealment is therefore proof that the plaintiff was not previously on notice of the claim he now brings." 996 F.2d 617, 624 (3d Cir. 1993).

Assuming for the sake of argument that Plaintiffs were actually mislead by Defendants, we fail to see how this prevented Plaintiffs from recognizing their claim, given the activities and interaction of these parties between 1990 and 1995, as alleged by Plaintiffs and as recited above. Moreover, given these activities and this interaction, it is clear that if Plaintiffs were ignorant of their claim, that ignorance is attributable to Plaintiffs' lack of due diligence, not Defendants' active misleading.

In addition, it appears that Plaintiffs do not allege facts sufficient to support the claim of fraudulent concealment of the RICO claims. As with all allegations constituting fraud, fraudulent concealment must be pled subject to the heightened pleading requirements of Federal Rule of Civil Procedure 9(b).Byrnes v. DeBolt Transfer, Inc., 741 F.2d 620, 626 (3d Cir. 1984). Plaintiffs have made no allegations concerning their exercise of reasonable due diligence in uncovering the RICO claim. Given the massive injury that Plaintiffs' allege that they sustained between 1990 and 1995 and given Plaintiffs' unique propensity for litigation, this is particularly significant. Despite all of the assertions of perjury, of fraudulent pleadings in order to hide the conspiracy, and of concealed documents, Plaintiffs do not point us to any reasonably diligent efforts on their part to uncover any wrongdoing of which they were unaware. Based upon the allegations contained in the Second Amended Complaint and the RICO Case Statement, we reject any assertion that Plaintiffs have properly plead or can prove that fraudulent concealment tolled the statute of limitations in this matter.

C. Plaintiffs have not Stated Any RICO Claims Pursuant to 18 U.S.C. § 1962(c)

To state a RICO claim under 18 U.S.C. § 1962(c), a plaintiff must allege (1) standing to bring a RICO claim, i.e., that he or she has been injured in his or her business or property by reason of a violation of 18 U.S.C. § 1962; (2) that the defendants were employed by or associated with an enterprise affecting interstate commerce; and (3) that the defendants participated in the conduct of the enterprise's affairs through at least two predicate acts of racketeering activity. See 18 U.S.C. § 1964(c), 1962(c), 1961(3)-(5).¹⁴ See also Rose v. Bartle, 871 F.2d 331, 358 (3d Cir. 1989) (stating elements of a RICO claim under section 1962(c)). Section 1961 of Title 18 of the United States Code defines "racketeering activity" to include, inter alia, acts which are indictable under the federal mail fraud, wire fraud, and obstruction of justice statutes, 18 U.S.C. § 1341, 1343, 1503. 18 U.S.C. § 1961(1)(B). Upon careful review of the Second Amended Complaint and the RICO Case Statement, we conclude that Plaintiffs have failed to state a claim under 18 U.S.C. § 1962(c).

14 The RICO statute states:

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 or collection of unlawful debt.

18 U.S.C. § 1962(c).
A "pattern of racketeering" requires "at least two acts of racketeering activity, one of which occurred after the effective date of this chapter and the last of which occurred within ten years (excluding any period of imprisonment) after the commission of a prior act of racketeering activity." 18 U.S.C. § 1961(5). An enterprise "includes 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). A plaintiff has standing to sue under the RICO statute if he has been "injured in his business or property by reason of a violation of section 1962." 18 U.S.C. § 1964(c).

1. Wilentz and Falk

The Third Circuit requires that a RICO plaintiff, under 18 U.S.C. § 1964(c), make a threshold showing "(1) that the plaintiff suffered an injury to business or property; and (2) that the plaintiff's injury was proximately caused by the defendant's violation of 18 U.S.C. § 1962." Maio v. Aetna, Inc., 221 F.3d 472, 483 (3d Cir. 2000). Since we find that Plaintiffs have failed to allege facts which demonstrate that either Wilentz or Falk proximately caused Plaintiffs' injuries, Plaintiffs lack standing to assert RICO claims against these Defendants.

"Standing to assert RICO claims requires that the alleged RICO violation proximately caused a plaintiff's injury — i.e., the violation is not too remote from the injury." Allegheny Gen. Hosp. v. Phillip Morris, Inc., 228 F.3d 429, 443 (3d Cir. 2000) (citing Holmes v. Sec. Investor Prot. Corp., 503 U.S. 258, 268 (1992)). It is not enough that the defendant's violation was the "but for" cause of plaintiff's injury. Holmes, 503 U.S. at 268 (1992). The Third Circuit has identified the formal factors of proximate cause as:

(1) the directness of the injury — "the more indirect the injury, 'the more difficult it becomes to ascertain the amount of a plaintiff's damages attributable to [defendant's wrongdoing], as distinct from other, independent, factors;'" (2) the difficulty of apportioning damages among potential plaintiffs . . . and, (3) the possibility of other plaintiffs vindicating the goals of RICO — "direct victims could generally be counted on to vindicate the policies underlying" RICO in a better manner than indirect victims.

Allegheny Gen. Hosp., 228 F.3d at 443 (first alteration in original). Plaintiffs must show a "direct relation between the injury asserted and the injurious conduct alleged." Holmes, 503 U.S. at 268. Although we will assume that the second and third factors in the Third Circuit's proximate causation test will not bar Plaintiffs' claims, we conclude that Plaintiff is unable to establish a direct relation between the injury asserted and the injurious conduct alleged with respect to Wilentz and Falk.

With respect to Wilentz and Falk, Plaintiffs' RICO Case Statement and Second Amended Complaint makes the following allegations. Wilentz withheld, concealed, and responded falsely to requests for documents vital to Pelullo's defense and post-conviction relief in the Newark criminal action. Falk obstructed justice by providing perjured testimony in the Newark criminal action. Specifically, Falk falsely swore that Pelullo possessed no attorney-client privilege with respect to Wilentz, and testified against him. Wilentz obstructed justice by giving perjured testimony and filing false pleadings and documents in civil litigation brought by Milstein against Wilentz. Wilentz obstructed justice when it used attorney-client privileged documents obtained while representing Plaintiffs in defending civil actions brought by Fred and Murray Schwartz, the PIE and Transcon trustees, Milstein, and civil litigation in Ohio involving Sherwin-Williams and Lyons Transportation. Plaintiffs allege that the PIE trustee obtained these confidential records and subsequently submitted them to the government, which used them to indict Pelullo in Jacksonville and Newark, and force OHA to enter into a $2.4 million settlement with the PIE trustee. Plaintiffs then allege that as a result of Wilentz's dual representation of Pelullo and the Trusts, as well as the sellers of Compton Press during the Compton Press transaction, Pelullo was convicted in the Newark criminal action. With respect to the PIE and Transcon acquisitions, the SAC alleges that due to Wilentz's and Falk's erroneous advice and poor drafting of the Lease Agreement, Pelullo and the Pelullo Trusts were forced to pay a settlement of $2.4 million to the PIE bankruptcy estate and $45 million to the Central States Fund.

The above averments fail to allege that Wilentz's or Falk's actions were the proximate cause of Plaintiffs' harm. Normally, the proximate cause of a criminal conviction is the defendant's own actions unless the defendant has obtained relief from that conviction. A number of cases establish this point. In Rowe v. City of Ft. Lauderdale, 279 F.3d 1271, 1287 (11th Cir. 2002), the plaintiff sought relief for allegations that defendants had lost or destroyed exculpatory evidence that would have proven that he was arrested and prosecuted without probable cause. The Eleventh Circuit rejected this claim, finding:

"[W]ithout obtaining relief from the conviction or sentence, the criminal defendant's own actions must be presumed to be the proximate cause of the injury.". . . That is, until Rowe won his release, a court would have had to presume that proximate cause of any impairment in his ability to prove he was maliciously prosecuted was the fact that he was not, in fact, maliciously prosecuted, but instead had been validly convicted as a consequence of his own actions. . . . Without such a presumption there would be a real danger of the "relitigation of supposedly settled matters."

Id. (citations omitted) (relying on Florida law) (emphasis in original). Similarly, under Pennsylvania law, in order for a plaintiff to establish that a defense lawyer's actions were the proximate cause of his conviction, he "must prove that he is innocent of the crime or any lesser included offense." Bailey v. Tucker, 621 A.2d 108, 113 (Pa. 1993). See also, e.g., McCurvin v. Law Offices of Koffsky Walkley, No. Civ. A. 3:98CV182(SRU), 2003 WL 223428, at *3 (D. Conn. Jan. 27, 2003).

Although it is true that Pelullo was granted a new trial on his conviction in the federal court in New Jersey, this development does not alter our assessment that Plaintiffs have failed to establish that Wilentz's or Falk's alleged actions proximately caused Pelullo's harm. First, the grant of a new trial is not based on assertions regarding either Wilentz or Falk. Second, in granting a new trial to Pelullo, the district court noted that a jury could have still convicted him despite this new evidence, as the evidence went to the credibility of the government's case and did not, on its own, serve to exonerate Pelullo: "It can be observed that even if defendant's version of all the transactions were accepted by the jury, the jury could still have found that he had the criminal intent requisite to establish the charges of conspiracy, embezzlement, and money laundering." United States v. Pelullo, Crim. No. 94-276 (DRD), Civ. No. 01-124 (DRD) (D.N.J. filed May 17, 2002).⁵ Third, the above allegations did not appear in Pelullo's motion for a new trial, or in any other attempt by the Plaintiff to obtain relief from his convictions that we have been able to locate. Plaintiff did not provide us with any information that would disclose this. Therefore, the fact that Pelullo was granted a new trial due to the discovery of new documents which the district court found might affect the credibility of some of the government witnesses, (including, we note, Defendant Fred Schwartz), fails to establish a connection between Wilentz and Falk's actions, and Plaintiffs' harm.

5 We also note that in a more recent opinion, Judge Debevoise, the same judge who granted Pelullo a new trial, describes Pelullo's career as having "consisted of engineering one fraudulent transaction after another," and "has left in his wake many victims." United States v. Pelullo, Criminal Action No. 94-276, Doc. No. 233, at 4.

Moreover, Plaintiffs have not alleged how any of the Defendants' actions have proximately caused the injuries alleged. Plaintiffs have not provided us with any substantiation of the alleged role these actions played in his conviction or civil judgments. Plaintiffs claim that Falk falsely swore that testimony offered by him would not be subject to attorney-client privilege and then proceeded to testify against Pelullo, yet Plaintiffs provide no evidence that they ever objected to this testimony — at trial, on appeal, or in any legal proceeding — until now. We find this particularly remarkable given Pelullo's extensive efforts to avoid incarceration and civil liability. In fact, Plaintiffs utterly fail to state how Falk's testimony played any role whatsoever in any of the jury convictions, settlements, or judgments awarded against Pelullo. We have no indication of the content of this testimony, its significance, or the extent to which it was ever challenged. This lack of information is fatal to the allegations surrounding Falk, particularly given the fact that these allegations would be within Plaintiffs' knowledge, and that Plaintiffs did not take the opportunity to clarify their allegations in their RICO Case Statement. See First Commodity Corp. of Boston v. Jasek, No. 85 C 2266, 1987 WL 5229, *5 (N.D. Ill. 1987) (finding that a RICO counterclaim failed to state how the counterdefendants' alleged obstruction of justice proximately caused injury to the counterplaintiffs, despite the fact that "[t]he allegations that are missing . . . should be within [the counterplaintiffs'] personal knowledge);see also Northland Ins. Co. v. Shell Oil Co., 930 F. Supp. 1069, 1075 (D.N.J. 1996) ("The mission of the [RICO] case statement is to amplify the allegations of the complaint. It provides clarity and precision in the statement of a civil RICO claim and . . . may help in the early screening of ill conceived RICO claims. . . .") (citation omitted).

In addition to the perjury allegations, Plaintiffs allege that "the Wilentz firm corrupted the Newark Criminal Action by withholding documents in its possession which it knew were critical to Mr. Pelullo's defense." (RICO Case Statement at 11.) Plaintiffs substantiate this statement by alleging that in connection with the Milstein/Wilentz Action from 1995 to 1999, Wilentz represented in discovery and court documents that it had not represented Plaintiffs from 1989 through 1991; that in January 1999, Milstein's lawyers filed a court document containing Falk's testimony which demonstrated that Wilentz had in fact represented Plaintiffs during that time period; that the sworn declaration of a lawyer at the D'Amato firms contradicts that lawyer's earlier statement that the Wilentz firm did not represent Pelullo individually; and that the Wilentz firm "corrupted the Newark Criminal Action and Jacksonville Criminal Action by withholding documents necessary to the defense of Mr. Pelullo which it had in its possession, and which it knew would be critical to Mr. Pelullo's defense." (RICO Case Statement at 11; SAC ¶¶ 187 (k, l, n, s).) After a thorough review of Plaintiffs' Second Amended Complaint and RICO Case Statement, we do not see the connection between these allegations and Pelullo's multiple criminal convictions, civil settlements, and judgments. The Second Amended Complaint gives no indication of how these actions led to Plaintiffs' injuries. There is no indication as to what type of evidence was included in this information or the role it played in these lawsuits. Moreover, as with Falk's alleged perjury, we note that Plaintiffs have failed to include these missing allegations despite having access to all of this information, despite having amended their complaint twice, despite having been given the opportunity to file a supplemental RICO Case Statement, and despite filing multiple memoranda in opposition to Wilentz and Falk's Motion to Dismiss.

As a final observation, we note that despite asserting in the Second Amended Complaint and Rico Case Statement that Wilentz and Falk engaged in RICO predicate acts of obstruction of justice under 18 U.S.C. § 1503, actions which would normally be subject to notice pleading standards, Plaintiffs repeatedly characterized these RICO allegations as "fraud" throughout the Second Amended Complaint. See, e.g., SAC ¶ 187(a)-(v) (entitling subsections as "The Wilentz Firm: Fraud" and "The Wilentz Firm: Obstruction of Justice and Fraud" and encompassing the above RICO allegations). We agree with Plaintiffs that the above allegations constitute circumstances involving fraud.¹⁰ This provides support for the conclusion that Plaintiffs have failed to sufficiently allege a connection between the Wilentz Defendants' actions and Plaintiffs' injuries.

10 In Pennsylvania, a fraud claim has six elements, all of which must be pleaded with particularity: "(1) a representation; (2) which is material to the transaction at hand; (3) made falsely, with knowledge of its falsity or recklessness as to whether it is true or false; (4) with the intent of misleading another into relying on it; (5) justifiable reliance on the misrepresentation; and (6) the resulting injury was proximately caused by the reliance." Huddleston v. Infertility Ctr. of America, Inc., 700 A.2d 453, 461 (Pa.Super. 1997).

2. The Kerr Firm and Attorney Gissell

With respect to the Kerr Firm and Gissell, Plaintiffs have made the following allegations. In 1990, the Kerr Firm and Gissell represented Plaintiffs in the acquisition of the PIE and Transcon trucking companies, but simultaneously represented PIE in a conflict of interest that resulted in negligent representation. The Kerr Firm and Gissell then gave Plaintiffs improper legal advice regarding the acquisition, concealed the fact that these trucking companies were insolvent, advised Pelullo that the transactions were legal, and prepared the documentation for these transactions. Despite these representations, Transcon and PIE suffered bankruptcies in 1990 which led to lawsuits against certain of the Plaintiffs, and civil liability resulted. In 1993, the PIE bankruptcy trustee sent a "confidential" memorandum¹¹ to the Kerr Firm and Gissell threatening to expand the PIE bankruptcy action to seek damages from Kerr and Gissell for alleged breaches of duty. The PIE trustee instructed the Kerr Defendants not to disclose the memorandum to Plaintiffs, and the Kerr Defendants did not disclose the memorandum despite having a fiduciary duty to do so. Plaintiffs did not discover this memorandum until 2000 in the Jacksonville criminal action. National Union later paid the PIE trustee $5 million dollars to settle the action. Also as part of the settlement, the Kerr Defendants turned over numerous confidential documents that pertained to Plaintiffs. In 1997, the PIE trustee then used these documents in litigation, to force a $2.5 million settlement with OHA. If Plaintiffs had realized the source of these documents during the litigation, they would have moved to exclude them from evidence and would have successfully defended against this action.

11 Although neither the RICO Case Statement nor the Second Amended Complaint goes into detail regarding the contents of this 1993 memorandum, Plaintiffs' Memorandum in Opposition to the Kerr Defendants' Motion to Dismiss describes it:

[The memorandum] describes Kerr's gross negligence in connection with the PIE transaction and demonstrates that Kerr knew or should have known of PIE's troubled condition before plaintiff Olympia purchased the company. The memorandum establishes that Kerr should have advised Olympia of PIE's precarious state prior to Olympia's purchase but failed to do so because of a severe conflict of interest, viz., defendants' simultaneous representation of PIE, Olympia and other related parties.

(Pl. Mem. in Opp'n to Kerr Mot. at 12.)

The Kerr Defendants then allegedly concealed the disclosure by filing false pleadings in a 1996 action brought by Pelullo. On December 9, 1996, the Kerr Defendants responded to Pelullo's Complaint which alleged fraud, breach of fiduciary duty, and malpractice by filing a motion to dismiss for failure to allege fraud with particularity. The Kerr Defendants filed this motion despite having in their possession the 1993 memorandum detailing their "gross lapses in judgment, multitudinous breaches of fiduciary duty, and . . . knowledge of PIE's insolvency prior to Olympia's 1990 purchase of PIE." (RICO Case Statement at 31.) Finally, the Kerr Defendants failed to turn over documents in 1999 to Plaintiffs that were germane to various civil and criminal proceedings involving Pelullo, denying that they represented Pelullo or the Trusts.

Again, Plaintiffs have failed to sufficiently allege facts, which would establish that the Kerr Defendants' RICO predicate actions proximately caused Plaintiffs' harm. First, with regard to the 1993 memorandum from the PIE trustee to the Kerr Defendants, according to Plaintiffs' pleadings, the contents of this memorandum would have put Plaintiffs on notice of the Kerr Defendants' conflict of interest and knowledge of the poor financial condition of PIE prior to Olympia's purchase. However, Pelullo sued the Kerr Defendants on exactly these issues in an adversary complaint in Pelullo v. Kerr, Russell Weber, PLC, No. 96-2254 (filed Bankr. E.D. Pa. 1996).¹² We reject Plaintiffs' contention that the alleged concealment of this letter, which Plaintiffs say they did not discover until 2000, concealed the wrongdoing by Kerr. Accordingly, the alleged concealment of this letter could not have caused any of Plaintiffs' injuries alleged herein.¹³

12 Specifically, the 1996 adversary complaint states, in pertinent part:

4. Defendants represented P*I*E and performed legal services on behalf of P*I*E beginning in October 1987. . . .

6. Kerr, Russell also acted as the escrow agent for [Olympia's] P*I*E acquisition. . . .

7. During the negotiations and due diligence Olympia conducted, defendants made material misrepresentations and failed to disclose the following information:

a) The true financial condition of P*I*E in and before April 1990, i.e. P*I*E was insolvent;

b) The 1989 P*I*E financial statements were materially misleading;

c) The preparation of a bankruptcy plan for P*I*E before the April 1990 sale to Olympia, and that they had discussed the bankruptcy plan with the then officers and directors of P*I*E. . . .

11. If defendants had disclosed accurate information, and not omitted material facts, Olympia would not have purchased P*I*E. . . .

13 We note also that any claims based on the supposed role of this letter would be barred by res judicata, as this letter, as alleged, only provides evidence of claims for which Plaintiffs have already unsuccessfully sought relief.

With respect to the allegations that the Kerr Defendants turned over confidential documents as part of a settlement with the PIE trustee, and then concealed this fact from Plaintiffs, which eventually allowed the PIE trustee to force a settlement with OHA, such allegations are not pleaded with sufficient particularity. These assertions — although Plaintiffs have attempted to characterize them as obstruction of justice in violation of 18 U.S.C. § 1503 — allege circumstances involving fraudulent concealment for purposes of federal civil pleading requirements. Plaintiffs have provided the Court with the declaration of Charles B. Tomm, PIE's executive vice-president and chief operating officer of PIE's bankruptcy estate, to support their claim that Kerr turned over privileged documents. However as to the Kerr Defendants, Tomm's statements provide little more information than do the SAC and the Rico Case Statement. In fact, Tomm's declaration essentially parrots the allegations made by Plaintiffs. Plaintiffs provide no indication of what type of information the Kerr Defendants handed over, and make no factual allegations to support the assertion that these documents were attorney-client privileged or that the PIE bankruptcy trustee relied upon these documents in forcing a settlement.

Moreover, the actions that Plaintiffs claim the Kerr Defendants took to conceal the disclosure of these documents, do not establish that Plaintiffs were injured by reason of any predicate acts of obstruction of justice by the Kerr Defendants. An attorney's decision to file a motion to dismiss a complaint based on a plaintiff's failure to plead fraud with particularity is a proper litigation strategy, regardless of what information that attorney may or may not have known regarding the allegations, as the burden to plead fraud properly falls on the plaintiff, not on the defendant. FED. R. CIV. P. 9(b). We reject the effort by Plaintiffs to portray this pleading as obstruction of justice¹⁴ or any other criminal predicate act. Finally, the Kerr Defendants' failure to turn over documents in 1999 based on a claim that they did not represent Plaintiffs amounts, at best, to a discovery dispute which Plaintiffs did not pursue. Although Plaintiffs now claim that the Kerr Defendants took this action in an effort to conceal their prior disclosure of documents to the PIE trustee, they do not support this allegation involving circumstances of fraudulent concealment with any particularity, nor do they allege facts which would allow us to conclude that such actions amounted to obstruction of justice pursuant to 18 U.S.C. § 1503.

14 The obstruction of justice statute states, in its so-called "Omnibus Clause":

Whoever corruptly . . . endeavors or endeavors to influence, obstruct, or impede, the due administration of justice, shall be punished as provided in subsection (b). . . .

18 U.S.C. § 1503(a). The Third Circuit has stated that the elements of a prima facie case of obstruction of justice are "(1) the existence of a judicial proceeding, (2) knowledge or notice of the pending proceeding, (3) acting corruptly with the intent of influencing, obstructing, or impeding the proceeding in the due administration of justice, and (4) that the action had the 'natural and probable effect' of interfering with the due administration of justice." In re Impounded, 241 F.3d 308, 317 n. 8 (3d Cir. 2001).

3. The D'Amato and Lewis Firms

Plaintiffs assert that the D'Amato and Lewis Firms, through Defendants George and D'Agostino, have been using confidential attorney-client privileged information obtained from the law firms that previously represented Plaintiffs to protect these law firms from civil and criminal prosecution, and to limit the exposure of National Union in the lawsuits that have been filed against these law firms. (RICO Case Statement at 33.) Plaintiffs further allege that the D'Amato and Lewis Firms have turned over this confidential, attorney-client privileged information to the government and other individuals, who in turn provided this information to the government for use against Pelullo. To support these assertions, Plaintiffs allege as follows.

First, the D'Amato and Lewis Firms have made false statements in written correspondence, and "have filed false and fraudulent pleadings" in the courts having jurisdiction over these matters. (Id. at 34.) Specifically, D'Amato Lynch deliberately denied that Wilentz and Falk represented Plaintiffs to avoid turning over documents that Plaintiffs had requested. D'Amato Lynch also instructed Falk to testify falsely during the Newark criminal action that neither he nor Wilentz represented Plaintiffs. This misconduct prevented Pelullo and the Trusts from obtaining documents that were necessary to their defenses in criminal and civil cases. (Id.)

Second, the Lewis Firm used privileged documents without Plaintiffs' permission in defending actions brought by the PIE trustee, the Transcon trustee, Milstein, and in civil litigation in Ohio involving Sherwin-Williams and Lyons Transportation. The Lewis Firm used these documents in the Ohio action in the course of defending the Wilentz Firm. Then, "Mr. Pelullo's adversaries obtained these confidential records" and submitted them to grand juries in Jacksonville and Newark who used them to indict Pelullo. (Id. at 35.) Further, the Lewis Firm used these documents without Plaintiffs' permission in defending Wilentz in a Florida civil action brought by Fred Schwartz. Fred Schwartz then turned over these documents to the government for use against Pelullo in the Newark and Jacksonville criminal actions.

With regard to the allegations involving D'Amato Lynch, these allegations amount to circumstances involving fraud that have not been pleaded with sufficient particularity to establish that any of these actions proximately caused Plaintiffs' harms. This is particularly so given Plaintiffs' own knowledge concerning these allegations. Plaintiffs chose to characterize these allegations as fraud in their Second Amended Complaint, and were given the opportunity to clarify these documents in their RICO Case Statement, but did not do so. Plaintiffs do not allege how these actions prevented Pelullo from obtaining the documents he needed in his defense, what type of information these documents allegedly contain, or the role that these missing documents would have played in Pelullo's defense — despite having access to all of these missing documents. Rather, we are only assured that these documents were necessary to Pelullo's defense. As discussed with respect to the allegations regarding Wilentz above, Plaintiffs have not alleged that any of these actions proximately caused Plaintiffs' injuries. Furthermore, although Plaintiffs assert that these actions constitute obstruction of justice, they have not provided any factual allegations which, taken as true, would support the claim that Defendants acted corruptly with the intent of influencing, obstructing, or impeding the proceeding in the due administration of justice.

With regard to the Lewis Firm, Plaintiffs fail to support these assertions with factual allegations which would demonstrate either that these acts constituted obstruction of justice, or that these actions proximately caused Plaintiffs' harm. Plaintiffs claim the Lewis Firm used documents without Plaintiffs' permission, and that this caused harm to Plaintiffs. However, there are no factual allegations to support the conclusion that the Lewis Firm took these actions, even though such facts would be within Plaintiffs' own knowledge. Moreover, Plaintiffs' base allegations, that adversaries then obtained these documents and used them against Plaintiffs, fail to overcome proximate causation problems. We fail to see how the Lewis Firm can be the proximate cause of Plaintiffs' harm which resulted from actions allegedly taken by others.¹⁵ Holmes v. Sec. Investor Prot. Corp., 503 U.S. 258, 268 (1992).

15 And, in any event, as discussed below, the allegations that Fred Schwartz turned over documents to federal authorities cannot be the proximate cause of Plaintiffs' harm.

4. National Union, Alston Bird and Attorney Sawicki ("National Union Defendants")

Plaintiffs assert that the following allegations demonstrate that National Union denied insurance coverage and access to records as part of a pattern of racketeering designed to protect its insureds from civil and criminal prosecution, to limit National Union's exposure in the lawsuits filed against these firms, and to keep Pelullo subject to criminal penalties imposed in the Newark Criminal Action. National Union's law firm, Alston Bird (and its attorney, Sawicki) refused to provide Pelullo with his counsel of choice in the Jacksonville criminal action even though the district court in Georgia directed National Union to provide coverage for Pelullo's defense of the Jacksonville action.¹⁶ Also, National Union breached the parties' Defense Costs Funding Agreement by refusing to pay fees and costs incurred by Pelullo in the Jacksonville action, and for refusing to pay for the movement of records recovered in the Jacksonville action "which Pelullo desperately needed in order to defend himself in the Philadelphia and Newark Criminal Actions, and which the Pelullo trusts desperately need in order to defend themselves in various civil actions." Finally, National Union, "through Alston Bird and Sawicki," refused to provide coverage for the Newark action even though it has been held to be substantially related as a matter of law to the Jacksonville action.¹⁷ In their RICO Case Statement, Plaintiffs asset that they are not seeking D O proceeds from National Union, but rather are seeking damages based on their pattern of obstructing justice.

16 We note that, as stated earlier, National Union never contested their obligation to provide coverage in the Jacksonville action in the Georgia action.

17 As noted earlier, the Georgia district court granted summary judgment to National Union on all claims for coverage and defense costs in the Philadelphia and Newark actions.

Plaintiffs provide no facts to support the notion that any of these actions were improper, let alone obstructions of justice. Regarding the assertion that Alston Bird did not give Pelullo his lawyer of choice, Plaintiffs provide no facts which would establish that Pelullo was unilaterally entitled to the lawyer of his choice pursuant to the parties' policy, or that such an action was taken corruptly with the intent of influencing, obstructing, or impeding the proceeding in the due administration of justice pursuant to 18 U.S.C. § 1503. With respect to allegations that National Union breached the party's defense funding agreement by refusing to pay certain Jacksonville criminal action costs or pay for the movement of documents needed in the Newark Criminal Action, and that National Union has refused to provide coverage in the Newark criminal action even though the action is related to the Jacksonville action as a "matter of law", Plaintiffs make no factual allegations to support the claim that National Union violated any of its contractual or legal obligations. In fact, the only available information regarding such accusations is that the Georgia district court granted summary judgment for National Union in the interpleader action, regarding the Newark criminal action. Absent any factual support allegations, we fail to see how National Union's alleged failure to pay for costs and the movement of documents in the Newark criminal action, or certain Jacksonville criminal action costs, could constitute obstruction of justice for purposes of the RICO statute. It is particularly significant that Plaintiffs have provided no indication of National Union's obligations or of any corrupt intent to influence, obstruct, or impede any proceedings in the due administration of justice, where such in formation would clearly be within Plaintiffs' knowledge.

Moreover, we have no indication what statements such as "through Alston Bird and Sawicki" mean. Such an assertion does not demonstrate obstruction of justice on the part of the Alston Bird Defendants. There are no allegations to support the pleading requirement that they acted corruptly with the intent of influencing, obstructing, or impeding the proceeding in the due administration of justice.

5. The Adorno Firm and Fred Schwartz Philadelphia Criminal Action. The pattern of racketeering asserted regarding the Adorno Firm and Fred Schwartz includes the following allegations regarding the Philadelphia Criminal Action. Fred Schwartz became a government informant while at the same time representing Pelullo. According to Plaintiffs, Fred Schwartz refused to testify on Pelullo's behalf¹⁸ in any of the four trials that took place in the Philadelphia Criminal Action, despite the fact that Fred Schwartz represented Pelullo during the pre- and post-indictment stages of the Philadelphia criminal action, and would have been able to provide exculpatory testimony for Pelullo. Plaintiffs state that "[d]ue to his status as government informant, [Fred] Schwartz refused to produce notes of a 1990 meeting involving himself, Mr. Pelullo, the federal prosecutor and FBI agents which would have exculpated Mr. Pelullo" in Pelullo's four trials in the Philadelphia Criminal Action.

18 Plaintiffs do not appear to be concerned with the likelihood that were Fred Schwartz to testify as Pelullo's lawyer, Pelullo would be waiving his attorney-client privilege.

Newark Criminal Action. Fred Schwartz gave perjured testimony in the Newark Criminal Action trial in 1996. Pelullo did not realize he was a government informant until that trial. Fred Schwartz also destroyed and/or concealed crucial documents in the Newark Criminal Action. Plaintiffs allege that newly discovered documents will demonstrate that Fred Schwartz's statements constituted perjury, and that Pelullo's defense was legitimate.

Civil Litigation. Fred Schwartz gave perjured testimony in civil litigation with the Compton Press Pension Fund in 1991 and 1993, and filed false pleadings in 1991 through 1994, which the Fund used to force the Pelullo Trusts to pay civil judgments and fees in excess of $2 million. In addition, Fred Schwartz gave perjured testimony and filed false pleadings in civil litigation with Wilentz in 1994.

With regard to the Philadelphia Criminal Action, as explained above, Pelullo's own actions, and not those of anyone else, are the proximate cause of his conviction unless he obtains relief or demonstrates his innocence, neither of which has occurred. With regard to the Newark criminal action, any assertion that Fred Schwartz's testimony, whether or not it qualifies as obstruction of justice, caused Pelullo's conviction is belied by Judge Debevoise's statement in granting Pelullo a new trial in the Newark Criminal Action. As above discussed, Judge Debevoise stated: "It can be observed that even if defendant's version of all the transactions were accepted by the jury, the jury could still have found that he had the criminal intent requisite to establish the charges of conspiracy, embezzlement, and money laundering." Moreover, we do not agree that Fred Schwartz's status as a government informant amounts to obstruction of justice. Finally, the allegations regarding Fred Schwartz's testimony in civil actions, if taken as true, are not sufficient to establish a connection between his actions and Plaintiffs' injuries.

Thus, for all of these reasons, Plaintiffs have failed to properly allege a violation of RICO pursuant to 18 U.S.C. § 1962(c).

D. Plaintiffs have Failed to Allege a RICO Conspiracy Pursuant to 18 U.S.C. § 1962(d).

Since Plaintiffs' § 1962(c) claim has not survived, the § 1962(d) claim must similarly fail. Jaguar Cars, Inc. v. Royal Oaks Motor Car Co., Inc., 46 F.3d 258, 262 (3d Cir. 1995) ("[T]he viability of [a plaintiff's] section [1962](d) claim depends on the legal sufficiency of its § 1962(c) claim.").

E. The Court Will Not Exercise Jurisdiction over Plaintiffs' State Law Claims

Plaintiffs invoked this Court's federal question jurisdiction over their RICO claims. 28 U.S.C. § 1331. "The District Court may decline to exercise supplemental jurisdiction over state law claims when the District Court has dismissed all claims over which it has original jurisdiction." Shaev v. Saper, 320 F.3d 373, 384 (3d Cir. 2003). Accordingly, we decline to exercise jurisdiction over Plaintiffs' remaining state law claims.

V. CONCLUSION

For the foregoing reasons, we entered the Order granting Plaintiffs' Motion for Leave to File Supplemental Memorandum in Opposition to Defendants' Motions to Dismiss Second Amended Complaint, and granting the four motions to dismiss filed by the Defendants.