David H. Marion, Receiver for Bentley Financial Services, Inc. and Entrust Group v. Bryn Mawr Trust Company

Summary

The Pennsylvania Superior Court vacated a judgment in favor of Bryn Mawr Trust Company and remanded for a new trial in an action brought by a receiver for entities involved in Robert Bentley’s Ponzi scheme. The court held that Pennsylvania recognizes a claim for aiding and abetting tortious conduct under Section 876(b) of the Restatement (Second) of Torts and found a triable issue concerning the bank’s alleged intentional ignorance and substantial assistance. The court also addressed the admission of evidence concerning the receiver’s legal expenses and early redemption of certificates of deposit.

Holdings

1. Pennsylvania recognizes a cause of action under section 876(b), and a claim alleging that a defendant aided and abetted fraud is not legally deficient merely because it is labeled aiding and abetting fraud rather than concerted tortious conduct.
2. Actual knowledge of the underlying tort is not necessary to satisfy the knowledge element of section 876(b); the element may be satisfied when the defendant knew or should have known of the underlying actor's misconduct but intentionally ignored it.
3. The evidence presented a triable issue as to whether BMT substantially assisted or encouraged Bentley's fraud by attracting and accommodating him as a customer, facilitating his unusual account activity, and failing to investigate foreseeable red flags.
4. The trial court erred and abused its discretion by admitting evidence of the receiver's attorneys' fees and litigation strategy as mitigation-of-damages evidence where the receiver did not claim those fees as damages and the evidence was irrelevant to liability or the damages claimed.
5. Under the facts of this case, BMT's proposed mitigation theory based on the receiver's early liquidation and redemption of CDs did not establish that the receiver acted unreasonably, and the trial court erred by allowing the theory to go to the jury.

Questions Presented

1. Whether Pennsylvania recognizes a cause of action for aiding and abetting fraud under Restatement (Second) of Torts section 876(b), even when the claim is titled aiding and abetting fraud rather than concerted tortious conduct.
2. Whether the evidence, viewed in the receiver's favor, created a genuine issue of material fact concerning BMT's knowledge or intentional ignorance of Bentley's tortious conduct and BMT's substantial assistance or encouragement.
3. Whether the trial court improperly admitted evidence concerning the receiver's attorneys' fees and litigation strategy as mitigation-of-damages evidence.
4. Whether the trial court improperly allowed BMT to argue that the receiver failed to mitigate damages by redeeming certificates of deposit before maturity.

Disposition

vacated