FOUNDATION FOR ELDERCARE V. ROCCO J. CRESCENZO

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

FOUNDATION FOR :

ELDERCARE et al., :

Plaintiffs : CIVIL ACTION

v. :

: No. 20-2190

ROCCO J. CRESCENZO, :

Defendant :

MEMORANDUM

PRATTER, J. FEBRUARY 25, 2021

Foundation for Eldercare (“the Foundation’’) and John G. Berg, the Foundation’s Executive

Director and a trustee, brought this action against Rocco J. Crescenzo, a former board member.

Plaintiffs allege six different causes of action and argue that Mr. Crescenzo’s actions caused the

Foundation damages due to a loan default, unpaid taxes, and other adverse financial obligations.

Mr. Crescenzo moves to dismiss two of these causes of action. For the reasons that follow, the

Court grants the motion to dismiss those two.

BACKGROUND

The Foundation is a non-profit corporation and, as stated above, Mr. Berg is its Executive

Director and a trustee. Doc. No. 1 (Compl.) Jf 1, 4. Mr. Crescenzo served as Chairman of the

Foundation’s Board of Trustees. Jd. § 4. In July 2016, the Foundation entered into a loan

agreement with Peoples Bank of York which Mr. Crescenzo personally guaranteed. Id. 4/5. The

Foundation also leased undeveloped property to Mr. Crescenzo. Jd. § 7. Plaintiffs allege that Mr.

Crescenzo failed to pay approximately $400,000 in property taxes on that real estate, causing the

loan to go into default. Jd. § 12.

Mr. Crescenzo was dismissed as a trustee and as Chairman of the Board. Jd.§ 15. A few

months later, in September 2019, he filed suit in state court against the Foundation seeking

Mr. Berg’s removal as Executive Director as well as a judicial declaration that the vote discharging

him from the Board and as Chairman was ineffective. Jd. § 16. Shortly after giving a deposition,

he terminated his litigation against the Foundation. Jd. ¢ 18.

Mr. Berg then allegedly asked Mr. Crescenzo to either pay the property taxes or loan the

Foundation the necessary funds for it to pay the taxes. Jd. Mr. Crescenzo refused. Mr. Berg

alleges that, instead, Mr. Crescenzo agreed to lend Mr. Berg $180,000 personally, which Mr. Berg

planned to use to pay the taxes owed by the Foundation. Jd. ¥ 38. Mr. Berg drafted a promissory

note, listing Mr. Berg’s house as security for the $180,000 loan, and recorded it in Delaware

County on October 18, 2019. Jd. §] 41-42. Mr. Berg then asked Mr. Crescenzo to fund the

agreement, but Mr. Crescenzo refused.' Id. 43.

Plaintiffs filed the instant action against Mr. Crescenzo alleging Breach of Lease

Agreement (Count I), Malicious Prosecution under 42 Pa. C.S.A. § 8351 (Count II), Breach of

Fiduciary Duty to Protect Foundation’s Assets (Count III), Breach of Fiduciary Duty and Demand

for Mandatory Injunction (Count IV), Fraud (Count V), and Breach of Fiduciary Duty as General

Partner of Montgomery-Cecil Limited Partnership (Count VJ).

Mr. Crescenzo has moved to dismiss the Foundation’s claim for malicious prosecution

(Count II) and Mr. Berg’s claim for fraud (Count V). (Doc. No. 12.) The motion leaves intact the

other counts.

LEGAL STANDARD

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests the legal

sufficiency of a complaint. To survive a Rule 12(b)(6) motion to dismiss, a complaint “requires

more than labels and conclusions, and a formulaic recitation of the elements of a cause of action

1 While there are other facts and corresponding claims alleged in the complaint, because they are not

being challenged in this motion to dismiss, the Court will not summarize them here.

will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). The “[flactual allegations

must be enough to raise a right to relief above the speculative level.” Jd.

“The Third Circuit instructs the reviewing court to conduct a two-part analysis. First, any

legal conclusions are separated from the well-pleaded factual allegations and disregarded. Second,

the court determines whether the facts alleged establish a plausible claim for relief.” Satterfield v.

Gov't Ins. Employees Co., No. 20-cv-1400, 2020 WL 7229763, at *1 (E.D. Pa. Dec. 8, 2020)

(citing Fowler v. UPMC Shadyside, 578 F.3d 203, 210-11 (3d Cir. 2009)). A plaintiff fails to

demonstrate an entitlement to relief where the facts only allow the court to infer “the mere

possibility of misconduct.” Fowler, 578 F.3d at 211 (quoting Ashcroft v. Iqbal, 556 U.S. 662, 679

(2009)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the

court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”

Iqbal, 556 U.S. at 678.

Federal Rule of Civil Procedure 9(b) requires that a party must state with particularity the

circumstances constituting fraud or mistake, while malice, intent, knowledge, and other conditions

of a person’s mind may be alleged generally. ‘“‘To satisfy the Rule 9(b) pleading requirements, a

complaint may either describe ‘the circumstances of the alleged fraud with precise allegations of

date, time, or place’ or may use ‘some [other] means of injecting precision and some measure of

substantiation into their allegations of fraud.’” Jn re Processed Egg Prod. Antitrust Litig., 851 F.

Supp. 2d 867, 880 (E.D. Pa. 2012) (alterations in original) (quoting Bd. of Trs. of Teamsters Local

863 Pension Fund v. Foodtown, Inc., 296 F.3d 164, 172 n.10 (3d Cir. 2002)).

DISCUSSION

Mr. Crescenzo asks the Court to dismiss the claims for malicious prosecution (Count IT)

and fraud (Count V) for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6).

As to malicious prosecution, Mr. Crescenzo argues that the Foundation has failed to allege any

facts showing that he initiated the eatlier state court litigation without probable cause and for an

improper purpose. As to fraud, Mr. Crescenzo argues that Mr. Berg has failed to allege any facts

showing that he falsely made a misrepresentation so Mr. Berg did not satisfy Federal Rule of Civil

Procedure 9(b)’s particularity requirement for alleging fraud.

I. Wrongful Use of Civil Proceedings

Under Pennsylvania law, a person who initiates civil proceedings against another is subject

to liability to the other for the wrongful use of civil proceedings if:

(1) he acts in a grossly negligent manner or without probable cause and primarily

for a purpose other than that of securing the proper discovery, joinder of parties or

adjudication of the claim in which the proceedings are based; and

(2) the proceedings have terminated in favor of the person against whom they are

brought.

42 Pa. Cons. Stat. § 8351. This statute is familiarly called “the Dragonetti Act.” To prevail on a

claim for the wrongful use of civil proceedings under the Dragonetti Act, a plaintiff must prove

that:

(1) The defendant has procured, initiated or continued civil proceedings against

him.

(2) The proceedings were terminated in his favor.

(3) The defendant did not have probable cause for his action.

(4) The primary purpose for which the proceedings were brought was not that of

securing proper discovery, joinder of parties or adjudication of the claim on which

the proceedings were based.

(5) The plaintiff has suffered damages as set forth in section 8353.

42 Pa. Cons. Stat. § 8354. The Third Circuit Court of Appeals has stated that ““[A] party seeking

redress under [the] Dragonetti [Act] bears a heavy burden,’ because the plaintiff need not only

demonstrate either probable cause or gross negligence, but must also prove the underlying action

was filed for an improper purpose.” Schmidt v. Currie, 217 F. App’x 153, 155 (3d Cir. 2007)

(alterations in original) (quoting U.S. Express Lines Ltd. v. Higgins, 281 F.3d 383, 394 (3d Cir.

2002)); see Bannar v. Miller, 701 A2d 242, 248-49 (Pa. Super. Ct. 1997) (noting examples of

improper purpose include bringing a claim known to be invalid to “harass the person proceeded

against” or to try to prevent someone from exercising their First Amendment rights).

Mr. Crescenzo argues that the Foundation has failed to allege facts sufficient for this Court

to infer a plausible claim for the wrongful use of civil proceedings. In the complaint, the

Foundation states that three months after Mr. Crescenzo was dismissed as a trustee and Chairman

of the Board, he filed suit in state court seeking Mr. Berg’s removal as Executive Director and a

judicial declaration that the vote to dismiss Mr. Crescenzo was ineffective. Compl. ff 15-16. As

a result of defending the litigation, the Foundation alleges it incurred over $16,000 in legal fees.

Id. § 20. The Foundation further alleges that Mr. Crescenzo initiated the litigation without

probable cause and for a malicious purpose. /d. § 19. In support, the Foundation contends that

during his September 2019 deposition in that case, Mr. Crescenzo stated that he was not interested

in being on the Board of the Foundation, that he had no familiarity with the Foundation’s records,

that he had not attended a board meeting in ten years as a trustee, and that he had not read any of

the annual tax returns prepared by the Foundation. Jd. ¥ 17.

Mr. Crescenzo asserts that the Foundation failed to allege facts demonstrating that he was

either grossly negligent or lacked probable cause to initiate the litigation. (Doc. No. 12-1 at 9.)

Specifically, he argues that the Foundation does not allege any facts that he should have known

that his lawsuit was not viable. (Doc. No. 12-1 at 9.) Furthermore, Mr. Crescenzo contends that

the Foundation failed to allege facts showing that he acted with an improper purpose. Thus, he

argues that in the absence of facts the complaint would require the Court to infer the mere

possibility that he initiated the earlier litigation for a reason other than to remove Mr. Berg and to

secure a declaration that Mr. Crescenzo’s discharge was ineffective.? (Doc. No. 12-1 at 9-10.)

Accepting the Foundation’s allegations as true, the Court still cannot reasonably infer that

Mr. Crescenzo’s state court litigation was a wrongful use of civil proceedings. As noted above, a

plaintiff has a heavy burden in ever proving wrongful use of civil proceedings. However, at this

stage when looking at the complaint, the Foundation has not demonstrated a right to relief above

the speculative level.

Mr. Crescenzo initiated civil proceedings against the Foundation in state court in

September 2019. Then he withdrew the litigation shortly after being deposed. The parties dispute

whether Mr. Crescenzo had probable cause to initiate his lawsuit in the first instance. Probable

cause exists where a person who takes part in the initiation of civil proceedings against another

“reasonably believes that under those facts the claim may be valid under the existing or developing

law.” 42 Pa. Cons. Stat. § 8352. The Foundation claims that Mr. Crescenzo lacked probable

cause to file his lawsuit because he testified soon thereafter during his deposition that he had no

interest in being on the Board and had not participated in a Board meeting in ten years—thus,

presumably, the Plaintiffs’ argument is that he had no basis for believing his removal was somehow

improper. Compl. 7; Doc. No. 16-1 at 8. While not explicitly stated in the complaint, a

reasonable inference could be drawn that Mr. Crescenzo did not have probable cause to seek to

remove Mr. Berg or chalienge the vote that removed Mr. Crescenzo because he had not

meaningfully participated in anything related to the Foundation for quite some time. Taking the

2 Mr. Crescenzo does not argue that the underlying proceedings were not terminated in favor of the

Foundation. This aligns with the fact that Mr. Crescenzo withdrew the litigation shortly after his deposition.

3 Probable cause can also exist in other situations, such as reliance on advice of counsel or if a claim

is being brought against the attorney of record who in good faith believed that the civil proceedings were

not intended to merely harass. See 42 Pa. Cons. Stat. §§ 8352(2)-(3).

factual allegations as true, as is required at this stage, Mr. Crescenzo was not competent or

interested in being on the Board, thus arguably calling into question the bona fides of his suit to

regain his position on the Board and to remove Mr. Berg.

However, in addition to pleading facts sufficient to establish that Mr. Crescenzo acted in a

grossly negligent manner or without probable cause when he initiated the state court litigation, the

Foundation must also plead facts demonstrating that he acted with an improper purpose. This is

where Plaintiffs run into a Rule 9(b) and Dragonetti Act obstacle. The complaint merely states

that Mr. Crescenzo filed his lawsuit “primarily for a malicious purpose other than that of

adjudicating” his claim. Compl. ¥ 19. But aside from reciting one of the elements for a wrongful

use of civil proceedings cause of action, the Foundation does not describe, even loosely, what this

malicious purpose was. In its response to the motion to dismiss, the Foundation reiterates its

argument that Mr. Crescenzo lacked probable cause to initiate the state court litigation. (Doc. No.

16-1 at 7.) However, throwing down the “lacks probable cause” gauntlet is not enough. And, like

the complaint, the Foundation’s response does not identify what Mr. Crescenzo’s alleged improper

purpose was in suing the Foundation. As a result, the Court can only guess as to what this alleged

malicious purpose was. More is required at this stage.

When, as here, “a complaint is subject to a Rule 12(b)(6) dismissal, a district court must

permit a curative amendment unless such an amendment would be inequitable or futile.” Phillips

v. Cty. of Allegheny, 515 F.3d 224, 245 (3d Cir. 2008). While the Foundation did not request leave

to amend in its opposition to Mr. Crescenzo’s motion, the opportunity to amend will still be

provided in the absence of confidence that any such new effort would be futile. Jd.

For these reasons, the Court will dismiss Count II of the complaint without prejudice.

Il. Fraud

Mr. Berg alleges fraud. This count is comprised of four one-sentence paragraphs, the first

of which incorporates by reference the prior four counts of the complaint. Mr. Berg alleges that

Mr. Crescenzo made a material misrepresentation when he falsely promised to loan Mr. Berg

$180,000 in return for a note and mortgage on Mr. Berg’s personal residence. Compl. □ 51.

Mr. Berg further contends that Mr. Crescenzo made this representation knowing that Mr. Berg

would rely on it, which he did, and that Mr. Crescenzo actually then proceeded to refuse to fund

the loan. Jd. J§ 52-53.

Mr. Crescenzo moves to dismiss the fraud claim because, he argues, the complaint “fails

to include an exact or even approximate date that this alleged promise was made, and fails to

describe the mode of this alleged agreement.” (Doc. No. 12-1 at 6.) Mr. Crescenzo highlights that

Mr. Berg alleged in the complaint that Mr. Crescenzo made “continuous and repeated

confirmations of the arrangement” but that Mr. Berg failed to include any specifics with alleged

dates or modes of confirming communications. Compl. ff 41, 45; Doc. No. 12-1 at 6.

To prove fraud under Pennsylvania law, a plaintiff must show: “‘1) a misrepresentation, 2)

material to the transaction, 3) made falsely, 4) with the intent of misleading another to rely on it,

5) justifiable reliance resulted, and 6) injury was proximately caused by the reliance.” Santana

Prod., Inc. v. Bobrick Washroom Equip., Inc., 401 F.3d 123, 136 (3d Cir. 2005). Furthermore,

besides the Rule 12(b)(6) plausibility requirement, a plaintiff must plead with particularity the

circumstances alleging fraud, as required by Rule 9(b), so that the defendant is on notice of the

“precise misconduct” that is being allged. Frederico v. Home Depot, 507 F.3d 188, 200 (3d Cir.

2007).

The sole factual allegation in the complaint under Count V is that Mr. Crescenzo falsely

promised that he would loan Mr. Berg $180,000 in return for a note and mortgage on Mr. Berg’s

personal residence. Compl. § 51. Mr. Crescenzo asserts that Mr. Berg alleges no facts that

Mr. Crescenzo agreed to lend this money for the purpose of contributing to the Foundation. (Doc.

No. 12-1 at 11.) Even if Mr. Berg did assert a plausible claim for relief, Mr. Crescenzo contends

that Mr. Berg failed to state with particularity any information to put Mr. Crescenzo on notice as

to what Mr. Berg really was alleging.

Mr. Berg acknowledges that when alleging fraud a plaintiff “must specify who, what,

where, when, and how.” (Doc. No. 16-1 at 8.) Mr. Berg argues that he has done this because the

complaint alleges that Mr. Crescenzo, through several conversations, orally agreed to lend

Mr. Berg a certain amount of money to pay the Foundation’s delinquent property taxes. (Doc. No.

16-1 at 9.) As to misrepresentation, apparently hoping to invoke the idea of crimen falsi which

has greater familiarity in criminal law, Mr. Berg argues that Mr. Crescenzo previously

misrepresented other matters under oath in the past, and that gives rise to a reasonable inference

that Mr. Crescenzo misrepresented to Mr. Berg that he would loan Mr. Berg the money. (Doc.

No. 16-1 at 9.)

Despite Mr. Berg’s acknowledgement that a plaintiff must include specific information

when alleging fraud, the complaint fails to do so. To start, Mr. Berg’s fraud claim seemingly has

only one brief conclusory paragraph that arguably alleges any facts—namely, that Mr. Crescenzo

“committed a material misrepresentation of a presently existing fact with knowledge of its falsity

when he falsely promised he would loan Berg the sum of $180,000 in return for a note and

mortgage on Berg’s personal residendé,” Compl. 451. A complaint alleging fraud fails to state a

claim with particularity if it does not include “essential factual background . .. that is the who,

what, when, where and how of the events at issue.” Jn re Lipitor Antitrust Litig., 868 F.3d 231,

249 (3d Cir. 2017) (quoting U.S. ex rel. Moore & Co., P.A. v. Majestic Blue Fisheries, LLC, 812

F.3d 294, 307 (3d Cir. 2016)). Indeed, to satisfy the heightened Rule 9(b) standard, a “plaintiff

must plead or allege the date, time and place of the alleged fraud or otherwise inject precision or

some measure of substantiation into a fraud allegation.” Frederico, 507 F.3d at 200.

Here, even if Mr. Berg has raised a plausible allegation of fraud under Rule 12(b)(6), which

the complaint just barely might, he has not pled his fraud claim with particularity. Even when

relying on facts pled earlier in the complaint, Mr. Berg does not meet Rule 9(b)’s heightened

pleading requirements. In the response to the motion to dismiss, Mr. Berg cites to various sections

of the complaint as support for his fraud claim, but none of them include the specific information

the Third Circuit Court of Appeals requires for particularity. Doc. No. 16-1 at 9; see Compl. □□□

38-43, 44, 51-52.

At most, the complaint provides the who and the what of the alleged fraud, namely that

Mr. Crescenzo promised to loan $180,000 to Mr. Berg. However, Mr. Berg fails to explain the

where, when, and how. The complaint alleges that Mr. Crescenzo “finally agreed to lend Berg

$180,000 personally” and that he made “continuous and repeated confirmations of the

arrangement,” but then provides no specifics of when, where or how this occurred. Compl. □□ 38,

41. The only date listed in the complaint is October 18, 2019—the date Mr. Berg allegedly

recorded the mortgage for $180,000. Jd. § 42. The complaint then states that Mr. Berg asked

Mr. Crescenzo to fund their agreement “[w]ithin one hour” of Mr. Berg recording the mortgage

on his residence. Id. § 43. While the complaint does refer to emails and personal conversations,

10

it fails to identify when these took place. /d. 37. No copies of any alleged correspondence are

attached to the complaint. Similarly, the complaint alleges Mr. Berg “attempted to communicate

with [Mr.] Crescenzo” but no further information is given. Jd. 45. Lastly, the only support for

the allegation regarding Mr. Crescenzo falsely making a material misrepresentation appears to be

that because, according to Mr. Berg, Mr. Crescenzo had allegedly made erroneous statements

under oath in the past, this is supposed to suffice as a reasonable inference that Mr. Crescenzo

falsely made a misrepresentation to Mr. Berg. Jd. 44. This Court is not prepared to accept that

facile approach to pleading such an important matter.

For the foregoing reasons, the Court will dismiss Mr. Berg’s fraud claim (Count V) without

prejudice. See In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1435 (d Cir. 1997)

(“Ordinarily, complaints dismissed under Rule 9(b) are dismissed with leave to amend.”).

CONCLUSION

For the reasons set forth in this Memorandum, the Court grants Mr. Crescenzo’s motion to

dismiss. An appropriate order follows.

BY THE COURT:

UNITED STATES DISTRICT JUDGE

ll.