author: POLOZOLA, District Judge.

text:
    Herbert CASON v. TEXACO, INC.
    Civ. A. No. 83-936-B.
    United States District Court, M.D. Louisiana.
    Nov. 7, 1985.

      A. Justin Ourso, III, Margaret E. Woodward, Barham & Churchill, New Orleans, La., for plaintiff.
    Larry N. Port, C. Suzanne Dittmer, New Orleans, La., G. William Jarman, Kean, Miller, Hawthorne, Darmond, McCowan & Jar-man, Baton Rouge, La., for defendant.
   POLOZOLA, District Judge.

Herbert Cason filed this suit alleging certain violations of the Petroleum Marketing and Practices Act (“PMPA”) and the Louisiana Unfair Trade Practices and Consumer Protection Law. Cason contends that Texaco, Inc. (“Texaco”) has engaged in unfair trade practices and predatory pricing schemes in an effort to terminate his lease of a service station. According to Cason, Texaco engaged in these alleged practices to transform the plaintiff’s dealer operated station into a company operated station.

Texaco has filed three motions for summary judgment. In its motions, Texaco seeks to dismiss the claim brought pursuant to the PMPA, certain of plaintiff’s Unfair Trade Practices and Consumer Law claims, and, finally, seeks to resolve the issue of whether there was a breach of a fiduciary relationship between Texaco and the plaintiff. In addition, Texaco has filed three motions in limine which seek to exclude evidence of (a) unfair trade practices occurring prior to August 30, 1982; (b) a nationwide plan of Texaco to eliminate independent retailers; and (c) Cason’s intent to sublease the retail marketing outlet.

I. Petroleum Marketing and Practices Act

Texaco reurges an earlier motion for summary judgment which seeks to dismiss two claims alleging violations of PMPA. The first claim alleges a violation of 15 U.S.C. § 2802(b)(3)(A) which provides in pertinent part that:

For purposes of this subsection, the following are grounds for nonrenewal of a franchise relationship:
(A) The failure of a franchisor and the franchisee to agree to changes or additions to the provisions of the franchise if
(i) such changes or addition are the result of determinations made by the franchisor in good faith and in the normal course of business; and
(ii) such failure is not the result of the franchisor’s insistence upon such changes or additions for the purpose of preventing the renewal of the franchise agreement.

The plaintiff contends that the only new issue raised by the present motion is his alleged admission that he was not “singled out for harsh treatment by Texaco.” Texaco asserts that this admission is the equivalent of the plaintiff having admitted that Texaco acted in “good faith” in proposing changes as is required by 15 U.S.C. § 2802(b)(3)(A). Senate Report, S.Rep. No. 95-731, 95th Cong.2d Sess. 37, reprinted in 1978 U.S.Code Cong. & Ad.News 873, 895-896, states that the “good faith test is meant to preclude sham determinations from being used as an artifice for termination or nonrenewal.” The good faith requirement of the statute has been interpreted to require only “subjective good faith, i.e. a ‘good heart’ without evil intent.” Munno v. Amoco Oil Co., 488 F.Supp. 1114, 1120 (D.Conn.1980). This Court holds that questions of subjective intent are factual inquiries. Tiller v. Amerada Hess Corp., 540 F.Supp. 160 (D.S.C. 1981). Therefore, this Court is precluded from granting the motion for summary judgment at this time because of the factual dispute regarding the intent of the parties.

Texaco also contends that plaintiff's allegations that Texaco violated 15 U.S.C. § 2802(b)(3)(D)(iii) are without merit. 15 U.S.C. § 2802(b)(3)(D) provides

(3) For purposes of this subsection, the following are grounds for nonrenewal of a franchise relationship:
(D) ... a determination made by the franchisor in good faith and in the normal course of business, if—
(i) such determination is—
(I) to convert the leased marketing premises to a use other than the sale or distribution of motor fuel,
(II) to materially alter, add to, or replace such premises,
(III) to sell such premises, or
(IV) that renewal of the franchise relationship is likely to be uneconomical to the franchisor despite any reasonable changes or reasonable additions to the provisions of the franchise which may be acceptable to the franchisee;
(ii) with respect to a determination referred to in subclause (II) or (IV), such determination is not made for the purpose of converting the leased marketing premises to operation by employees or agents of the franchisor for such franchisor’s own account; and
(iii) in the case of leased marketing premises such franchisor, during the 90-day period after notification was given pursuant to section 104 [15 U.S.C. § 2804], either—
(I) made a bona fide offer to sell, transfer, or assign to the franchisee such franchisor’s interests in such premises; or
(II) if applicable, offered the franchisee a right of first refusal of at least 45-days duration of an offer, made by another, to purchase such franchisor’s interest in such premises.

Cason has alleged in his complaint that Texaco has violated the PMPA by not offering to assign its lease to the plaintiff. Texaco contends, however, that 15 U.S.C. § 2802(b)(3)(D)(iii) requires it to offer to assign its interest in the lease only if it had refused to renew the franchise because of its decision “to materially alter, add to, or replace such premises.” See 15 U.S.C. § 2802(b)(3)(D)(i)(II). Texaco asserts that since it offered to renew the franchise, this section is inapplicable to the present set of facts.

The Court finds that it is premature to make a legal determination of the exclusiveness of the grounds for nonrenewal set forth in 15 U.S.C. § 2802(b)(3). There are genuine issues of material fact to be resolved at the trial which preclude the Court from granting the motion for summary judgment. See Dorden v. Heist, 743 F.2d 1135 (5th Cir.1984) and Williams v. Shell Oil, 677 F.2d 506 (5th Cir.1982), cert. denied, 459 U.S. 1087, 103 S.Ct. 570, 74 L.Ed. 933 (1982). Once these factual determinations are made, the Court can then decide the legal issues based on those factual determinations. See Federal Election Commission v. Lance, 635 F.2d 1132, 1138 (5th Cir.1981), appeal dismissed, cert. denied by Lance v. Federal Election Commission, 453 U.S. 917, 101 S.Ct. 3151, 69 L.Ed.2d 999 (1981).

II. Louisiana Unfair Trade Practices and Consumer Protection Law, Louisiana Revised Statute 51:1401-1418

Texaco’s second motion for summary judgment pertains to plaintiff’s claims which were filed pursuant to Louisiana’s Unfair Trade Practices and Consumer Protection Law. Louisiana Revised Statute 51:1401-1418. Two assertions are advanced by Texaco with regard to these claims.

Texaco contends that all “unfair trade practices” alleged by the plaintiff to have occurred prior to August 30, 1982, have prescribed. This contention is based upon Louisiana Revised Statute 51:1409(E) which provides that “[t]he action provided by this section shall be prescribed by one year running from the time of the transaction or act which gave rise to this right of action.” Cason argues, however, that “Texaco’s continuing and repeated wrongful acts” should be regarded as a continuing violation and as such, prescription did not commence to run until the violation had ceased. In support of this contention, the plaintiff cites several decisions which hold that “[w]here the cause of the injury is a continuous one giving rise to successive damages, prescription dates from cessation of the wrongful conduct causing the damage.” South Central Bell Telephone Co. v. Texaco, Inc., 418 So.2d 531, 533 (La.1982). The cases relied upon by the plaintiff involve the judicial construction of Louisiana Civil Code article 3537, a general prescription statute, and the application of the continuing violation doctrine to this statute. This Court has failed, however, to find a case discussing the applicability of such doctrine to the prescription statute at issue. The present issue before the Court, therefore, is res nova.

Louisiana Revised Statute 51:1409 has been interpreted to be penal in nature. Morris v. Rental Tools, Inc., 435 So.2d 528 (La.App. 5th Cir.1983) and Coffey v. Peoples Mortg. & Loan of Shreveport, Inc., 408 So.2d 1153, 1156 (La.App. 2nd Cir.1981). Therefore, it is subject to strict construction. Federal Trade Commission v. Mandel Brothers, 359 U.S. 385, 79 S.Ct. 818, 3 L.Ed.2d 893 (1959) and Diversacon Industries v. National Bank of Commerce of Mississippi, 629 F.2d 1030 (5th Cir.1980). Section 1409(E) is unambiguous and clearly and expressly provides that a civil action brought pursuant to Louisiana Revised Statute 51:1409 prescribes unless such action is brought within one year from the date of the alleged violation. The penal nature of this statute prohibits this Court from applying the doctrine of the continuing violation to prevent the commencement of the running of prescription under Section 1409(E). Therefore, this Court holds that all of the unfair trade practices claims that have occurred prior to one year of the date of the filing of this suit have prescribed. The Court is unable, however, to determine from the record and the facts presented in the briefs which of the alleged unfair trade practices have occurred prior to one year of the filing of the present suit. It is incumbent upon the defendant to prove that a claim has prescribed. See, e.g., DiCarlo v. Laundry & Dry Cleaning Service, 178 La. 676, 152 So. 327 (1933). Since Texaco has not met its burden of proving which of the alleged unfair trade practices occurred pri- or to one year from the filing of suit, the Court is precluded from granting this motion for summary judgment based , upon prescription.

Texaco also urges that the claims asserted in paragraphs 17(a) and 17(b) of the plaintiffs complaint are preempted by PMPA. The claims asserted in these two paragraphs of the complaint are based upon the allegation that the unreasonableness of the rent charged and the unfairness of the renewal lease proposed constitute unfair trade practices under Louisiana Revised Statute 51:1405. The relevant provision of PMPA which controls the relationship between state and local laws and PMPA is 15 U.S.C. § 2806(a) which provides as follows:

To the extent that any provision of this title applies to the termination (or the furnishing of notification with respect thereto) of any franchise, or to the non-renewal (or the furnishing of notification with respect thereto) of any franchise relationship, no State or any political subdivision thereof may adopt, enforce, or continue in effect any provision of any law or regulation (including any remedy or penalty applicable to any violation thereof) with respect to termination (or the furnishing of notification with respect thereto) of any such franchise or to the nonrenewal (or the furnishing of notification with respect thereto) of any such franchise relationship unless such provision of such law or regulation is the same as the applicable provision of this title.

(Emphasis added.)

This statute is unambiguous and clearly preempts only those state laws which apply to the termination of a franchise or the nonrenewal of a franchise relationship (or notice with respect to these) and only to the extent that such state law is in conflict with PMPA. Ted’s Tire Service, Inc. v. Chevron U.S.A., Inc., 470 F.Supp. 163, 164 (D.Conn.1979). In Exxon Corp. v. Georgia Ass’n of Petroleum Retailers, 484 F.Supp. 1008, 1018 (N.D.Ga.1979), the court held that a Georgia state law controlling “the terms of a franchise agreement” is not preempted by 15 U.S.C. § 2806(a) even though the court did recognize that the provision “could have ... some fortuitous and attenuated application to a lawsuit over termination or nonrenewal of a franchise relationship.” The congressional intent is clear and unambiguous and mandates a finding by this Court that Louisiana Revised Statutes 51:1401-1418 is not preempted by Section 2806(a). because these state laws do not attempt to regulate the termination of a franchise, the nonrenewal of a franchise relationship or the furnishing of notice with respect to such termination or renewal.

III. Breach of the Fiduciary Relationship

Texaco’s final motion for summary judgment is based upon the alleged fiduciary duty owed to Cason by Texaco. Texaco contends that no fiduciary duty is owed to Cason under federal or state law. Therefore, Texaco argues that it is entitled to judgment on this issue.

The PMPA is the only federal law which the Court finds could be used as the basis for a fiduciary duty under the present set of alleged facts. The PMPA is replete with references that the franchisor act in good faith with regard to decisions and determinations made concerning termination and nonrenewal of franchises. See, e.g., 15 U.S.C. § 2802(b)(3)(A) and (D). The good faith requirement has been interpreted as mandating only “subjective good faith, i.e. a ‘good heart’ without evil intent.” Munno v. Amoco Oil Co., 488 F.Supp. 1114, 1120 (D.Conn.1980). The Court refuses to judicially expand the good faith requirement of the PMPA beyond this subjective good faith requirement intended by the Congress. Therefore, the Court finds that good faith within the meaning of the PMPA is not the same as that which is required of a fiduciary. Courts have consistently required more than subjective good faith when the fiduciary’s duty to act in good faith is at issue. For example, in Arnott v. American Oil Co., 609 F.2d 873, 881 n. 6 (8th Cir.1979), cert. denied, 446 U.S. 918, 100 S.Ct. 1852, 64 L.Ed.2d 272 (1980), the Eighth Circuit Court of Appeals approved the trial court’s jury instruction describing the fiduciary relationship between a dealer and an oil company, based upon South Carolina law, as requiring that “neither party exert undue influence or pressure upon the other, take selfish advantage of his trust or deal with the subject matter of the trust in such a way as to benefit himself or prejudice the other except in the exercise of the utmost good faith and with the full knowledge and consent of the other person involved.” (Emphasis added.) “Utmost good faith” is significantly different from “subjective good faith.” Therefore, the Court finds as a matter of law that the PMPA does not create a fiduciary relationship between the franchisor and the franchisee.

Since this Court finds that no fiduciary duty can be premised upon federal law, any fiduciary duty owed by Texaco to Cason must be premised upon the laws of Louisiana or jurisprudence established by its courts. Texaco contends that any fiduciary duty based upon The Service Station Dealers Day in Court Act, Louisiana Revised Statute 51:1451-1455, is preempted by the PMPA. As noted above, 15 U.S.C. § 2806(a) mandates the preemption only of those state laws which apply to the termination of a franchise or the nonrenewal of franchise relationship (or notice with respect to these) and only to the extent that such is in conflict with the PMPA. Ted’s Tire Service, Inc. v. Chevron U.S.A., Inc., 470 F.Supp. at 164 and Exxon Corp. v. Georgia Ass’n of Petroleum Retailers, 484 F.Supp. at 1018. The Service Station Dealers Day in Court Act, enacted in 1974, regulates notice requirements for the termination or failure to renew a franchise and the causes for which a franchise may be cancelled during its stated term. Therefore, this Court holds that The Service Station Dealers Day in Court Act, Louisiana Revised Statute 51:1451-1455, which imposes good faith standards upon franchisors (and franchisees) with regard to termination and nonrenewal of franchises is preempted by the PMPA in so far as it imposes a greater duty of good faith than that required by the PMPA.

Finally, the Court must consider whether there is a jurisprudential basis upon which a fiduciary duty may be premised. Although Cason cites several cases which stand for the proposition that a fiduciary relationship exists between franchisor and franchisee, these cases are from jurisdictions other than Louisiana and are not based on Louisiana law. This Court has failed to find a Louisiana case where a Louisiana court has decided the issue of whether a fiduciary relationship exists between a franchisor and a franchisee. Since there are no decisions from a Louisiana state court, this Court must develop the rule of law pertaining to this issue which it believes the Louisiana Supreme Court would be likely to develop in the future if it was confronted with this issue. Green v. Amerada-Hess Corp., 612 F.2d 212 (5th Cir.1980), rehearing denied 614 F.2d 1298 and cert. denied, 449 U.S. 952, 101 S.Ct. 356, 66 L.Ed.2d 216 (1980). Based upon a review of those relationships where Louisiana courts have found fiduciary relationships, this Court holds that if the Louisiana Supreme Court was confronted with this issue, it would hold that there is no fiduciary duty between a franchisor-franchisee under the facts of this case. Therefore, since this Court holds that Texaco does not owe Cason a fiduciary duty under Louisiana law or jurisprudence, Texaco’s motion for summary judgment based on the ground that there exists no fiduciary duty owed by Texaco to the plaintiff must be granted. It is clear that there are no material issues of fact to be resolved at trial on this issue and Texaco is entitled to summary judgment as a matter of law. See Dorden v. C.H. Heist, 743 F.2d 1135 and Williams v. Shell Oil, 677 F.2d 506.

IV. Evidence of Alleged Unfair Trade Practices Occurring Prior to August 30, 1982

Texaco, in its first motion in limine, seeks to prohibit the introduction of evidence concerning alleged unfair trade practices that have occurred prior to one year before the institution of the present suit. Texaco asserts that since recovery for these alleged unfair trade practices is barred by prescription, evidence of these alleged practices is irrelevant, immaterial and extremely prejudicial. In opposition to the motion, Cason contends that evidence of Texaco’s alleged unfair trade practices occurring prior to the prescriptive period is admissible to prove “the continuing and cummulative effect” of the practices of Texaco, some of which have allegedly occurred within the prescriptive period.

The question of the admissibility of evidence is governed by the Federal Rules of Evidence. Rule 402 of the Federal Rules of Evidence provides that “[a]ll relevant evidence is admissible, except as otherwise provided by the Constitution of the United States, by Act of Congress, by these rules, or by other rules prescribed by the Supreme Court pursuant to statutory authority. Evidence which is not relevant is not admissible.” The fact that an alleged activity has occurred prior to the prescriptive period does not ipso facto make evidence of such activity irrelevant. In Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 82 S.Ct. 1404, 8 L.Ed.2d 777 (1962), the United States Supreme Court vacated a judgment and ordered a remand of the case because the trial court persistently excluded evidence of alleged activities occurring prior to the year the plaintiffs entered the vanadium industry. The Court held that evidence of activities allegedly occurring prior to this date was relevant to the plaintiffs’ allegation that there was a conspiracy and a monopoly when they entered the industry and which continued on until they were eliminated from such industry in furtherance of such conspiracy and monopoly. Although the evidence was held admissible, the Continental Court issued a caution by stating that “[w]e do not mean that a trial court may not place reasonable limits upon such evidence or set a reasonable cutoff date, evidence before which point is to be considered too remote to have sufficient probative value to justify burdening the record with it.” Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. at 710, 82 S.Ct. at 1416. Furthermore, the district court has wide discretion in ruling upon questions concerning the remoteness of evidence. Keyes v. School District No. 1, Denver, Colorado, 521 F.2d 465 (10th Cir.1975); United States v. Kahaner, 317 F.2d 459 (2nd Cir.1963), cert. denied, 375 U.S. 835, 836, 84 S.Ct. 62, 73, 74, 11 L.Ed.2d 65, reh’g denied, 375 U.S. 926, 982, 84 S.Ct. 263, 478, 11 L.Ed.2d 169, 429 (1963); Miller v. Alexandria Truck Lines, Inc., 273 F.2d 897 (5th Cir.1960) rehearing denied and opinion corrected 274 F.2d 942 (5th Cir.1960). In applying the foregoing principles to the present case, the Court finds that evidence of alleged unfair trade practices occurring prior to August 30, 1982, has sufficient probative value to justify its admission as the record now stands. Contrary to the defendant’s assertion that such evidence has no purpose in this lawsuit, the Court finds that such evidence is probative of, inter alia, the issue of Texaco’s good or bad faith.

Texaco further contends that such evidence should be excluded because its introduction would be prejudicial to Texaco’s case. Presumably the defendant is relying upon Rule 403 of the Federal Rule of Evidence. The determination as to whether the probative value of relevant evidence is substantially outweighed by danger of unfair prejudice is within the sound discretion of the trial court. United States v. Marino, 617 F.2d 76 (5th Cir.1980), reh’g denied, 620 F.2d 300, cert. denied, 449 U.S. 1015, 101 S.Ct. 575, 66 L.Ed.2d 474 (1980). The Court finds that evidence of these alleged unfair trade practices would not create unfair prejudice to the defendant. Therefore, the Court concludes that such evidence should not be excluded at this time.

V. Evidence Concerning an Alleged Nationwide Plan of Texaco to Eliminate Independent Retailers

Texaco has filed a second motion in limine which seeks to prohibit the introduction of evidence concerning an alleged nationwide plan of Texaco to eliminate independent retailers. Texaco asserts that evidence of alleged actions by Texaco with respect to other retailers is irrelevant because the only criterion of Texaco’s conduct at issue in this case is the requirement under PMPA that Texaco act in good faith with regard to Cason.

15 U.S.C. § 2802(b)(3)(A) provides that nonrenewal may be based upon the failure to agree to changes in the provisions of a franchise provided that:

(i) such changes or additions are the result of determinations made by the franchisor in good faith and in normal course of business; and
(ii) such failure is not the result of the franchisor’s insistence upon such changes or additions for the purpose of preventing the renewal of the franchise agreement.

Cason has alleged inter alia, that a new lease proposed by Texaco was not proposed in good faith. Instead, Cason alleges, the proposal was a sham to prevent the renewal of his franchise. As noted previously, the good faith test was inserted into the act to preclude the use of sham determinations to terminate or to fail to renew a franchise. Texaco contends that “[t]he only basis for plaintiff's attempt to introduce that kind of testimony [evidence of the nationwide plan] would be to show some type of evil purpose behind Texaco’s action.” The Court feels that it is exactly this “evil purpose behind Texaco’s actions” that Cason wants to demonstrate by the introduction of this evidence since the good faith requirement has been interpreted to require only “subjective good faith, i.e., a ‘good heart’ without evil intent.” Munno v. Amoco Oil Co., 488 F.Supp. at 1120. The Court, therefore, holds that evidence of an alleged nationwide plan to eliminate independent retailers is relevant to the issue of Texaco’s good faith with regard to the lease proposed because “subjective intent is usually a matter of inference to be derived from all of the objective facts and evidence.” Tiller v. Amerada Hess Corp., 540 F.Supp. at 160.

VI. Evidence Concerning the Plaintiff’s Intent to Sublease the Retail Marketing Outlet

Texaco, in its final motion in limine, seeks to prohibit the introduction of evidence concerning Cason’s intent to sublease the service station. Texaco contends that evidence of the alleged attempted assignment of the lease is irrelevant because such evidence would not have probative value for the claims pursuant to either PMPA or the state Unfair Trade Practices Act. The Court finds that this contention is without merit. Such evidence could be probative for claims under both PMPA and the Louisiana Unfair Trade Practices Act. With regard to the PMPA claims, evidence regarding Cason’s alleged attempted assignment and the reasons for the failure to sublease the station may be relevant to the issue of Texaco’s bad faith in proposing the changes in the lease which subsequently were rejected by Cason and then asserted by Texaco as the reason for the nonrenewal of the franchise in accordance with 15 U.S.C. § 2802(b)(3)(A). In addition, Texaco’s alleged actions with regard to the proposed assignment of the lease may be factually characterized as an unfair trade practice that is prohibited by Louisiana Revised Statute 51:1405. Therefore, Texaco’s motion in limine which seeks to prohibit the introduction of evidence of Cason’s intent to sublease the station is hereby denied.

Therefore, for the foregoing reasons:

IT IS ORDERED that the motion of Texaco, Inc. for summary judgment on plaintiff’s claims filed pursuant to the Petroleum Marketing and Practices Act, 15 U.S.C. §§ 2801-2806, be and it is hereby DENIED.

IT IS FURTHER ORDERED that the motion of Texaco, Inc. for summary judgment on plaintiff’s claims filed pursuant to the Louisiana Unfair Trade Practices and Consumer Protection Law, Louisiana Revised Statute 51:1401-1418, be and it is hereby DENIED.

IT IS FURTHER ORDERED that the motion of Texaco, Inc. for summary judgment on the issue of the breach of fiduciary duty owed by Texaco to the plaintiff be, and it is hereby GRANTED.

IT IS FURTHER ORDERED that Texaco, Inc’s motion in limine’seeking to prohibit the introduction of evidence concerning alleged unfair trade practices occurring pri- or to August 30, 1982, be and it is hereby DENIED.

IT IS FURTHER ORDERED that Texaco, Inc.’s motion in limine seeking to prohibhibit the introduction of evidence concerning an alleged nationwide plan of Texaco to eliminate independent retailers be, and it is hereby DENIED.

IT IS FURTHER ORDERED that Texaco, Inc.’s motion in limine seeking to prohibit the introduction of evidence concerning the plaintiff’s intent to sublease the retail marketing outlet be, and it is hereby DENIED.

      . 15 U.S.C. § 2801-2806.

      . Louisiana Revised Statutes 51:1401-1418.

      . In its first motion, Texaco reurges an earlier motion for summary judgment which was denied by the Court on June 29, 1984.

      . See also Roberts v. Amoco Oil Co., 740 F.2d 602 (8th Cir.1984).

      . See also Brack v. Amoco Oil Co., 677 F.2d 1213 (7th Cir.1982); Meyer v. Amerada Hess Corp., 541 F.Supp. 321, 330 (D.N.J.1982); Palmieri v. Mobil Oil Corp., 529 F.Supp. 506, 509-511 (D.Conn.1982), aff’d, 682 F.2d 295 (2d Cir.1982).

      . The Court notes that this subjective intent does not need to be proved by direct evidence of actual state of mind. Munno v. Amoco Oil Co., 488 F.Supp. 1114, 1120 (D.Conn.1980). Instead, "subjective intent is usually a matter of inference to be derived from all of the objective facts and evidence.” Tiller v. Amerada Hess Corp., 540 F.Supp. 160 (D.S.C.1981).

      . A motion for summary judgment may be granted only when there is no material issue of fact to be resolved at trial and the mover is entitled to judgment as a matter of law. Dorden v. C.H. Heist, 743 F.2d 1135 (5th Cir.1984); Williams v. Shell Oil, 677 F.2d 506 (5th Cir.1982), cert. denied, 459 U.S. 1087, 103 S.Ct. 570, 74 L.Ed.2d 933 (1982).

      . See also Craig v. Montelepre Realty Co., 252 La. 502, 211 So.2d 627 (1968); Devoke v. Yazoo & M.V.B. Co., 211 La. 729, 30 So.2d 816 (1947); DiCarlo v. Laundry & Dry Cleaning Service, 178 La. 676, 152 So. 327 (1933); Wilson V. Hartzman, 373 So.2d 204 (La.App. 4th Cir.1979), writ denied 376 So.2d 961 (1979); Landry v. Pierre Part Natural Gas Company, Inc., 344 So.2d 412 (La.App. 1st Cir.1977); Florsheim v. Department of Highways, 201 So.2d 155 (La.App.2d Cir. 1967).

      . Presently articles 3492 and 3493.

      . See Butler v. Charity Hosp. of New Orleans, 442 So.2d 531, 535 (La.App. 1st Cir.1983), where the First Circuit Court of Appeals refused to apply the continuing violation theory to Civil Service actions.

      . The Court is confused why mover asks that all actions allegedly occuring prior to August 30, 1982, be dismissed when the suit was filed on August 29, 1983.

      . However, in view of the Court’s legal ruling herein, Texaco may wish to review its motion for summary judgment if the parties cannot stipulate which of the acts occurred more than one year from the date suit was filed.

      . Ga.Code § 106-1104(h) provides that it is unlawful "to provide any term, or condition in any marketing agreement, or other agreement, ancillary or collateral thereto, which term or condition directly or indirectly violates this Chapter____”

      . In Exxon Corp. v. Busbee, 644 F.2d 1030 (5th Cir.1981), cert. denied 454 U.S. 932, 102 S.Ct. 430, 70 L.Ed. 239 (1981) the 5th Circuit affirmed the district court’s holding that the Georgia Act was not unconstitutionally vague and unenforceable. The precise issue before this Court, however, was not addressed by the 5th Circuit.

      . See also Brack v. Amoco Oil Co., 677 F.2d 1213 (7th Cir.1982); Meyer v. Amerda Hess Corp., 541 F.Supp. 321, 330 (D.N.J.1982); Palmieri v. Mobil Oil Corp., 529 F.Supp. 506, 509-511 (D.Conn.1982), aff’d, 682 F.2d 295 (2nd Cir.1982).

      . For a discussion of the scope of preemption mandated by 15 U.S.C. § 2806(a) see Part II of this opinion.

      . La.R.S. 51:1453(A) provides in pertinent part that:
      A refiner or retailer shall not cancel or fail to renew a franchise unless he furnishes notice of intent to the other party. Such notice of intent shall be in writing and sent to such party by certified mail not less than ninety days prior to the dates on which such franchise will be cancelled or not renewed____ Such notice of intent shall contain in the case of cancellation a statement of intention to cancel, together with the reasons therefor, and the date on which such action shall take effect. In the case of nonrenewal, such notice shall recite the date on which such franchise term expires.

      . La.R.S. 51:1453(B) provides that:
      A refiner or retailer shall not cancel a franchise during the stated term of any franchise unless the party whose franchise is attempted to be cancelled has failed to comply with any essential and reasonable requirement of such franchise, or has failed to comply substantially with any other condition, provision or stipulation of the franchise, unless the grounds for cancellation are such which do not require notice pursuant to Subsection A of this section, or unless the cancellation is otherwise authorized by other laws of this state, or unless such refiner or retailer withdraws entirely from the sale of motor gasoline in this state, or unless the parties mutually consent to the cancellation in writing.

      . La.R.S. 51:1452(4) defines the term "good faith” as the duty of each party to any franchise, and all officers, employees or agents thereof, to act in a fair and equitable manner toward each other so as to guarantee the one party freedom from coercion, intimidation, or threats of coercion or intimidation from the other party; provided, that recommendation, endorsement, exposition, urging or argument shall not be deemed to constitute a lack of good faith.

      . See Amott v. American Oil Company, 609 F.2d 873 (8th Cir.1979), cert. denied, 446 U.S. 918, 100 S.Ct. 1852, 64 L.Ed.2d 272 (1980); Atlantic Richfield Co. v. Razumic, 480 Pa. 366, 390 A.2d 736 (1978); Ashland Oil, Inc. v. Donahue, 159 W.Va. 463, 223 S.E.2d 433 (W.Va.1976); Shell Oil Company v. Marinello, 120 N.J.Super. 357, 294 A.2d 253 (1972), aff'd, 63 NJ. 402, 307 A.2d 598 (1973), cert. denied, 415 U.S. 920, 94 S.Ct. 1421, 39 L.Ed.2d 475 (1974); Seegmiller v. Western Men, Inc., 20 Utah 2d 352, 437 P.2d 892 (1968).

      . For example, Louisiana courts have held that a fiduciary relationship exists between the following: (a) attorney-client [Louisiana State Bar Ass'n v. Drury, 455 So.2d 1387 (La.1984) cert. denied — U.S. -, 105 S.Ct. 1358, 84 L.Ed. 379 (1985); Louisiana State Bar Ass'n v. Orpys, 427 So.2d 842 (La. 1983); Louisiana State Bar Ass'n v. Jordan, 375 So.2d 89 (La.1979); Louisiana State Bar Association v. Quaid, 368 So.2d 1043 (La.1979)] (b) insured-insurer [Foster v. American Deposit Ins. Co., 435 So.2d 571 (La. App. 3rd Cir.1983)] (c) majority shareholder-minority shareholder [Levy v. Billeaud, 443 So.2d 539 (La.1983); Johansen v. Port Jewell, Inc., 351 So.2d 184 (La.App. 4th Cir.1977) application not considered by Johansen v. Port Jewell, Inc., 352 So.2d 705 (La.1977)] (d) outside salesman-employer [Dufau v. Creole Engineering, Inc., 465 So.2d 752 (La.App. 5th Cir.1985) writ denied 468 So.2d 1207 (La.1985)].

      . See Part II of the present opinion for the Court’s reasons that recovery for such alleged unfair trade practices is barred by the application of the doctrine of prescription.

      . See also United States v. John Clyde Abel, — U.S. -, 105 S.Ct. 465, 83 L.Ed.2d 450 (1984).

      . In Standard Oil Co. of New Jersey v. United States, 221 U.S. 1, 75-76, 31 S.Ct. 502, 520-21, 55 L.Ed. 619 (1911), the United States Supreme Court approved the consideration of evidence as to the defendants’ activities eleven years prior to the enactment of the Sherman Act in 1890 to determine the monopolistic intent of the establishes of the Standard Oil Trust. See also Klein v. American Luggage Works, Inc. 206 F.Supp. 924, 936 (D.Del.1962), where evidence of activities that had occurred more than four years prior to the commencement of the suit for conspiracy to violate anti-trust laws was admissible although the statute of limitation applicable was four years. Judgment reversed on other grounds, 323 F.2d 787 (3rd Cir.1963).

      . See the discussion of Standard Oil Co. of New Jersey v. United States, 221 U.S. 1, 75-76, 31 S.Ct. 502, 520-21, 55 L.Ed. 619 (1911), at note 23, supra.

      . Rule 403 states that “[ajlthough relevant, evidence may be excluded if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury, or by considerations of undue delay, waste of time, or needless presentation of cumulative evidence.”

      . See the discussion of the good faith requirement pursuant to PMPA in Part I of this opinion.

      . Senate Report, S.Rep. No. 95-731, 95th Cong.2d Sess. 37, reprinted in 1978 U.S.Code Cong. & Ad.News 873, 895-896.

      . See Brief in Support of Texaco, Inc.'s Motions in Limine, p. 6.


source: Caselaw Access Project

author: GOETTEL, District Judge:

license: Public Domain

text:
    Eliot H. LUMBARD, as Trustee of the Estate of Meritum Corporation, and David M. Green, as Trustee of the Estate of Carla Leather, Inc., Plaintiffs, v. MAGLIA, INC. (a/k/a “Carla Maglia, Inc.”), Kalish, Rubinroit & Co., Brancorp Factors, Inc., Washington Druker, Aron Vaisman, Bernardo Druker, Hyman Rubinroit, Jack Lindner, Egidia Vaisman (a/k/a “Vivian Kopcow Vaisman”), Cristina Druker, and James Vaisman, Defendants.
    No. 84 Civ. 0008 (GLG).
    United States District Court, S.D. New York.
    Nov. 12, 1985.

      Cleary, Gottlieb, Steen & Hamilton, New York City, for plaintiffs, Richard F. Ziegler, Robert J. Stillman, of counsel.
    Philip E. Silberberg, New York City, for defendant Washington Druker.
    Wiener, Zuckerbrot, Weiss & Brecher, New York City, for defendants Brancorp Factors, Inc. and Jack Lindner; Irvin Rothfarb, Theresa Dunn Fougner, of counsel.
    D’Amato & Lynch, New York City, for defendants Kalish Rubinroit & Co. and Hyman Rubinroit; Andrew R. Simmonds, of counsel.
   OPINION

GOETTEL, District Judge:

Before the Court are motions by the various defendants pursuant to Rules 12(b)(6), 9(b), and 12(f) of the Federal Rules of Civil Procedure. For the reasons stated below, these motions are denied.

I. Background.

The amended complaint alleges the following facts which we deem true for the purpose of evaluating the defendants’ motions to dismiss. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957).

From 1975 until mid-1984, Carla Leather, Inc. (“Carla”), a New York corporation, manufactured, distributed, and sold women’s leather apparel. Beginning in 1976, Meritum Corporation (“Meritum”) acted as Carla’s factor. Meritum held a continuing security interest in Carla’s present and after-acquired inventory, products, and the proceeds thereof. Carla’s two owner-principals, Washington Druker and Aron Vaisman, and their wives, personally guaranteed all of Carla’s obligations to Meritum.

Despite increased sales throughout its operating history, Carla sustained substantial and steady operating losses. In early 1982, it became apparent that Carla could not repay its substantial Meritum debt nor could it survive without additional financing. Meritum and Carla jointly sought financing from an outside source and engaged in extensive negotiations to that end with another factor, defendant Brancorp Factors, Inc. (“Brancorp”). Defendant Jack Lindner, Brancorp’s controlling officer, represented Brancorp in those negotiations. (Brancorp and Lindner are sometimes collectively referred to as “Bran-corp”.) Although Brancorp was willing to inject new funds into Carla, the negotiations broke down because Brancorp was unwilling to recognize Meritum’s position as senior creditor. Carla was thus unable to locate a new source of financing. Carla considered commencing bankruptcy proceedings but rejected that alternative because it believed such proceedings would ultimately result in the liquidation of its assets for Meritum’s benefit.

In May 1982, following Carla’s and Meritum’s unsuccessful joint efforts, Carla ceased operating and began liquidating its inventory and other assets. Carla’s creditors, the largest of which was Meritum, were left with several million dollars in outstanding loans to Carla.

During the same period, Carla and others allegedly arranged for the creation of another entity — Carla Maglia (“Maglia”) — to carry on Carla’s business purportedly free of Carla’s debts. Maglia was incorporated on or about May 25, 1982. Washington Druker and Aron Vaisman allegedly engaged Washington Druker’s brother, Bernardo Druker, to assume nominal ownership of Maglia. Maglia commenced operations managed by the same persons, making the same products, selling them to the same customers, purchasing goods from the same suppliers, operating out of the same premises, employing substantially the same personnel, and utilizing the same trade names as Carla. As part of this arrangement, Carla transferred to Maglia, for little or no consideration, the tangible and intangible assets necessary for the uninterrupted continuation of Carla’s business. Within weeks of its inception, Maglia completed the successful accession to Carla’s business by obtaining financing from defendant Brancorp.

Defendant Kalish, Rubinroit & Co. (“the Rubinroit firm”) and its member Hyman Rubinroit were key participants in this allegedly fraudulent scheme. The Rubinroit firm, through Hyman Rubinroit, (collectively “Rubinroit”) provided accounting and financial advisory services to Carla and has provided the same services to Maglia since its inception. Hyman Rubinroit was Carla’s principal negotiator, spokesman, and accountant. He attended all or substantially all of the spring 1982 meetings between Carla and Meritum, Carla and Brancorp, and Carla and Meritum’s banks. Thereafter, Rubinroit performed the same tasks for Maglia. During the time that Carla liquidated and transferred its assets, Rubinroit was simultaneously retained by Carla and Maglia. Rubinroit allegedly advised Washington Druker, Aron Vaisman, and Bernardo Druker on how to conduct such transfers to avoid detection of the fraudulent scheme and arranged for Brancorp to finance Maglia.

Meritum filed a voluntary reorganization petition under Chapter 11 of the Bankruptcy Code, 11 U.S.C. §§ 1101-1174 (1982), on May 28, 1982. The bankruptcy court converted that Chapter 11 proceeding into a Chapter 7 proceeding, see U.S.C. §§ 701-766 (1982), on September 27, 1982. Following his appointment and confirmation as trustee of the Meritum estate, Elliot H. Lumbard (the “Meritum Trustee”) commenced a one-year investigation into Meritum’s affairs.

In January 1984, the Meritum Trustee brought this action against Maglia, Bran-corp, Rubinroit, Vaisman, Washington Druker and others on claims arising out of those defendants’ allegedly fraudulent scheme to transfer the income, assets, and business of Carla to Maglia. The Meritum Trustee sought recovery of Carla’s debt to Meritum, which had allegedly grown to $12.2 million. Carla, by then an assetless shell, was joined as a nominal defendant.

Carla filed a voluntary petition for liquidation under Chapter 7 of the Bankruptcy Code on May 8, 1984, four months after the commencement of the Meritum action. The amended complaint alleges that Washington Druker and Brancorp arranged for this bankruptcy filing for the primary purpose of obstructing the Meritum action. They allegedly anticipated that the Carla bankruptcy trustee (the “Carla Trustee”), by virtue of a provision of the bankruptcy law, would displace the Meritum Trustee as the party in control of the claims in Meritum’s action. Since the Carla estate had no assets, the defendants anticipated that the Carla Trustee would pursue these claims less effectively than would the Meritum Trustee.

On May 8, 1984, David M. Green was appointed by the United States Trustee to serve as interim trustee of the Carla estate. On June 22, 1984, after completing a one month investigation into Carla’s affairs, Green, on behalf of the Carla estate, reached a settlement with the Meritum estate. The settlement provides that the Carla and Meritum Trustees will jointly prosecute the Meritum action dividing the eventual proceeds. In conjunction with the settlement, the Meritum complaint has been amended to add the Carla Trustee as a joint plaintiff.

The amended complaint contains sixteen claims for relief, the first thirteen of which are the subject of motions now before us. The first claim seeks to recover Carla’s debt to its creditors from Maglia, as Carla’s successor. In the second and third claims, the plaintiffs seek to hold Rubinroit, Bran-corp, Washington Druker, Aron Vaisman, and Bernardo Druker liable for Carla’s debt for aiding and abetting and conspiring in the scheme to avoid Carla’s creditors.

The fourth through seventh claims arise under the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. §§ 1961-65 (1982). These claims seek to recover treble the amount of Carla’s debts from Maglia and from those who helped to transfer Carla’s business to Maglia.

Claims eight through ten arise under Article 10 of New York’s Debtor and Creditor Law, N.Y.Debt. & Cred. §§ 270-81 (McKinney 1945), and under Section 544(b) of the Bankruptcy Code, 11 U.S.C. §§ 544(b) (1982). These claims seek to recover the property transferred to Maglia — or its monetary equivalent. Claim eight is asserted against Maglia. The ninth and tenth claims are for conspiracy and aiding and abetting and are asserted against the defendants named in the second and third claims. Claims eleven and thirteen seek the turnover to the Carla estate of the Carla property that Maglia and Brancorp now possess. See 11 U.S.C. § 542 (1982). The twelfth claim alleges that Brancorp tortiously converted to its own use property in which Meritum had a security interest.

The moving defendants have directed a variety of motions at the amended complaint. Washington Druker has moved, pursuant to Fed.R.Civ.P. 12(b)(6), to dismiss the RICO claims in the amended complaint for failure to state a claim on which relief can be granted. Rubinroit joins in this motion. In the event that the RICO claims are dismissed, the moving defendants ask the Court to dismiss the remaining claims for lack of subject matter jurisdiction, or, alternatively, to abstain from hearing those claims. Defendant Brancorp moves to dismiss the second and third claims for failure to state a claim, and Brancorp moves to dismiss so much of the eleventh through thirteenth claims as rely on Meritum’s security interest taking precedence over Brancorp’s current interest in Maglia’s property. Rubinroit joins in these motions, as does Washington Druker, to the extent that they apply to allegations of the amended complaint directed against him. Brancorp and Rubinroit also move pursuant to Fed.R.Civ.P. 9(b) to dismiss the fraud claims and the related aiding and abetting and conspiracy claims for failure to plead fraud with particularity. Bran-corp and Rubinroit also move to strike certain allegations in the amended complaint or to disqualify the plaintiffs’ litigation counsel pursuant to Model Code of Professional Responsibility DR 5-102(A) if these allegations are not stricken. Finally, the defendants variously challenge each trustee’s standing to bring this action.

II. Discussion

A. Motions to Dismiss

1. The RICO Claims

The defendants originally moved to dismiss each of the amended complaint’s RICO counts. They asserted that the plaintiffs had not shown a distinct “racketeering injury” as required by Sedima S.P.R.L. v. Imrex Co., 741 F.2d 482 (2d Cir.1984), rev’d, — U.S. -, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985), and by Bankers Trust Co. v. Rhoades, 741 F.2d 511 (2d Cir.1984), vacated, — U.S. -, 105 S.Ct. 3550, 87 L.Ed.2d 673 (1985). They also maintained that the plaintiffs had failed to establish another prerequisite to a civil RICO suit, a prior criminal conviction. See Sedima S.P.R.L. v. Imrex Co., supra, 741 F.2d at 496-504. The Supreme Court has since struck down both of these requirements. In Sedima S.P.R.L. v. Imrex Co., — U.S. -, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985), the Court found “no support in the statute’s history, its language, or considerations of policy for a requirement that a private treble damages action under § 1964(c) can proceed only against a defendant who has already been criminally convicted.” Id. at 3284. It also held that “[tjhere is no room in the statutory language for an additional, amorphous racketeering injury requirement.” Id. The defendants’ original objection to the RICO claims is deemed withdrawn.

In a letter dated August 29, 1985, the defendants raised a new objection to those claims. They asserted that the Second Circuit’s recent decision in Bennett v. United States Trust Co., 770 F.2d 308, 315 (2d Cir.1985), vitiated those claims. The Bennett decision construed section 1962(c) of the RICO statute. That section states that

[i]t shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity or collection of unlawful debt.

11 U.S.C. § 1962(c) (1982). The Bennett Court held that in order to state a claim under section 1962(c), a complaint must identify an enterprise distinct from the person or persons (defendants)) who conduct the enterprise’s affairs.

The amended complaint is consistent with this guidance. None of the RICO claims name an entity as both enterprise and as the defendant responsible for its conduct. In the fourth claim, the “enterprise” is Maglia. The defendants on that claim are those persons and entities who allegedly participated in the conduct of Maglia’s affairs. Maglia is not a defendant on the fourth claim. In each of the three remaining RICO claims, Carla is named as the “enterprise.” In none of those claims is Carla a defendant. Moreover, two of these claims do not involve violations of section 1962(c) upon which the Bennett court ruled. The defendants’ motion to dismiss the RICO claims in the amended complaint is denied.

2. The Successor Liability Claims

Where one company sells or otherwise transfers all its assets to another company the latter is not liable for the debts and liabilities of the transferor, except where: (1) the purchaser expressly or impliedly agrees to assume such debts; (2) the transaction amounts to a consolidation or merger of the seller and purchaser; (3) the purchasing corporation is merely a continuation of the selling corporation; or (4) the transaction is entered into fraudulently in order to escape liability for such debts.

15 Fletcher Cyclopedia of the Law of Private Corporations § 7122 at 190 n. 1 (perm ed. 1983) (hereinafter “Fletcher”); see also Ladjevardian v. Laidlaw-Coggeshall, Inc., 431 F.Supp. 834, 838 & n. 3 (S.D.N.Y.1977) (citing Fletcher); Schumacher v. Richards Shear Co., 59 N.Y.2d 239, 451 N.E.2d 195, 198, 464 N.Y.S.2d 437, 440 (1983). The amended complaint seeks to hold Maglia, its co-conspirators, and those who aided and abetted it liable under each of these theories. Strangely, only two of those theories are the subject of motions to dismiss the first claim for failure to state a claim on which relief can be granted.

The two theories that are the subject of the defendants’ substantive motion, consolidation or merger and continuation, tend to overlap. Consequently, “no criteria can be identified that distinguish them in any useful manner.” J. Phillips, Product Line Continuity and Successor Corporation Liability, 58 N.Y.U.L.Rev. 906, 909 (1983) [hereinafter Successor Corporation Liability ]. We shall refer to these collectively as the “de facto merger theory.”

For a de facto merger to occur, there must be continuity of the successor and predecessor corporation as evidenced by (1) continuity of ownership; (2) a cessation of ordinary business and dissolution of the predecessor as soon as practically and legally possible; (3) assumption by the successor of the liabilities ordinarily necessary for the uninterrupted continuation of the business of the predecessor; and (4) a continuity of management, personnel, physical location, assets, and general business operation. See Arnold Graphics Industries, Inc. v. Electronic Tabulating Corp., 775 F.2d 38 (2d Cir.1985) (listing factors); 15 Fletcher, supra, § 7165.5 at 339-40 (same); Successor Corporation Liability, supra, at 909 (same). “Not all of these factors are needed to demonstrate a merger; rather, these factors are only indicators that tend to show a de facto merger.” Menacho v. Adamson United Co., 420 F.Supp. 128, 133 (D.N.J.1976). See also 15 Fletcher, supra, § 7165.5 at 339 (describing these as “[fjactors which are indicative of a de facto merger____”).

Brancorp’s assertion that identity of ownership is a prerequisite to successor liability finds no support in the case law. Not only is identity of ownership one of several factors, but the cases uniformly hold that continuity, not uniformity, is the significant variable. One court stated, Dairy Cooperative Association v. Brandes Creamery, 147 Or. 488, 30 P.2d 338, 341-42 (1934), quoted with approval in Peterson v. Harville, 445 F.Supp. 16, 24 (D.Ore.1977), aff'd, 623 F.2d 611 (9th Cir.1980). Accord Brockmann v. O’Neill, 565 S.W.2d 796, 798 (Mo.App.1978) (lack of complete identity of ownership, but successor held liable for debts of predecessor). The amended complaint’s allegation that Carla’s principals engaged Washington Druker’s brother Bernardo “to assume nominal ownership of the company that had already been named Carla Maglia,” Amended Complaint II 44(a), is sufficient, at this stage, to plead continuity of ownership.

We think that the dissolution of [predecessor] and the organization of [successor] had but one purpose, and that was to avoid the contractual liability of [predecessor]____ It is true that preferred stock in [successor] was issued to a number of persons who were not stockholders in [predecessor]; but the fact remains that the plant and business of the older corporation were taken over by the later one, the same organization was continued, and the names of the two corporations differ only by reason of the addition of the abbreviation ‘Inc.’
[W]e deem the later organization merely a continuation of the former.

The defendants’ contention that the plaintiffs cannot state any claim for successor liability because Carla had no viable business to transfer at the time of the alleged merger is also meritless. In fact, Carla’s insolvency argues for the application of the various theories of successor liability. Where a transferor, like Carla, receives little if anything in exchange for its assets, it cannot respond to actions by creditors. Creditors must then pursue the transferee, here Maglia. Cf. Successor Corporation Liability, supra, 58 N.Y.U.L. Rev. at 915. (“[Successor liability is unnecessary as long as the predecessor is available as a defendant.”).

Even if the amended complaint does not thoroughly describe every indicator of a de facto merger, it clearly describes the wholesale transformation of one company, Carla, into another, Maglia. The amended complaint alleges that Maglia continued the enterprise of Carla with the same employees, assets, and management. It further states that these transactions reduced Carla to a “shell.” Amended Complaint ¶ 20. Viewed in a light most favorable to the plaintiffs, these allegations are sufficient to state a de facto merger claim against Maglia.

The defendants have not challenged the plaintiffs’ other theories of successor liability, see supra p. 1535. The absence of any such challenge, in itself, mandates the rejection of the defendant’s argument that the first cause of action does not state a claim for relief under any theory of successor liability.

Brancorp and Rubinroit next address the second and third claims charging them with conspiring and aiding and abetting the fraud through which Carla was transformed into Maglia. They first assert that successor liability extends only to the successor, in this case Maglia. They also argue that any liability on those claims can issue only to the extent of their participation in the fraud. These contentions ignore a fundamental principle of tort law: those who aid and abet or conspire in tortious conduct are jointly and severally liable with other participants in the tortious conduct, regardless of the degree of their participation or culpability in the overall scheme. W. Prosser, Handbook of the Law and Torts 292-93 (4th ed. 1971). See also Valdan Sportswear v. Montgomery Ward & Co., 591 F.Supp. 1188, 1191 (S.D.N.Y.1984) (Weinfeld, J.) (“Allegations of a civil conspiracy ... are proper ... for the purpose of establishing joint liability by co-participants in tortious conduct.”) The liability remains joint and several, notwithstanding the amount of any direct benefit conferred upon them through the fraudulent transaction. Superintendent of Insurance v. Freedman, 443 F.Supp. 628, 638 (S.D.N.Y.1977), aff'd, 594 F.2d 852 (2d Cir.1978) (citing Munzer v. Blaisdell, 183 Misc. 777, 49 N.Y.S.2d 919 (Sup.Ct.N.Y.County 1944), modified, 269 A.D. 970, 58 N.Y.S.2d 360 (1st Dep’t 1945); Ballantine v. Ferret-ti, 28 N.Y.S.2d 668 (Sup.Ct.N.Y.County 1941). Brancorp and Rubinroit do not challenge the sufficiency of the pleadings that state that they are conspirators and aiders and abettors, nor do they challenge the sufficiency of the allegation that the conduct alleged was fraudulent and, therefore, tortious. They may be found liable to the full extent of that fraud, regardless of the nature or extent of their participation therein.

Alternate grounds exist for rejecting the defendants’ contention that they are liable on the second and third claims only to the extent of their participation in the fraud. In particular, Fed.R.Civ.P. 12(b)(6), under which the plaintiffs move, does not authorize the relief they request. In order to survive a motion to dismiss under that rule, “it need not appear that plaintiff can obtain the particular relief prayed for, as long as the court can ascertain that some relief may be granted.” C. Wright & A. Miller, 5 Federal Practice and Procedure § 1357 at 602 & n. 77 (1969) (citing Norwalk CORE v. Norwalk Redevelopment Agency, 395 F.2d 920 (2d Cir.1968), and Lewis v. Dansker, 68 F.R.D. 184 (S.D.N.Y.1974)). The defendants’ motion to limit their liability on the second and third claims is denied.

3. The Claims Seeking Equitable Relief

Brancorp also challenges the relief requested in the first, and eleventh through thirteenth claims. Specifically, they contest that aspect of the first claim which seeks to substitute Meritum for Brancorp as the secured creditor in all of Maglia’s property. They also challenge the request in the eleventh through thirteenth claims for a turnover of Brancorp’s property to the plaintiffs. As noted above, the Court cannot dismiss these claims because the wrong relief is requested. Moreover, dismissal, even if possible, would be inappropriate at this juncture. Given the seriousness of the allegations with respect to the fraud and the defendants’ participation therein, we cannot now specify what relief will be appropriate if the allegations are proven true.

We note, however, that there is ample precedent for awarding far-reaching equitable relief in circumstances similar or more egregious than those alleged herein. “Where the release or satisfaction of a lien is the result of fraud, accident or mistake, it will not inure to the benefit of a person acquiring an interest in the property who did not rely or advance anything on the faith of such discharge.” United States v. 168.8 Acres of Land, 35 F.Supp. 724, 726 (M.D.N.C.1940). Instead, equity will restore the lien. Id. A fortiori, when a person acquiring an interest in property knowingly participated in a fraud that enabled him to acquire that interest, an equitable lien will issue, the extent of which lien will vary with the circumstances. See, e.g., Klinzing v. Blauw Bros. Inc., 160 N.Y.S. 631 (Sup.Ct. Monroe County 1916). Likewise, a creditor of a corporation may follow the corporation’s assets or property into the hands of a successor when there is fraud or collusion between the corporations. Hurd v. New York and Commercial Steam Laundry Company, 167 N.Y. 89, 95, 60 N.E. 327 (1901) (“ ‘The assets of a corporation are a trust fund for the payment of its debts, upon which the creditors have an equitable lien, both as against stockholders and all transferees, except those purchasing in good faith and for value.’ ”) (quoting Cole v. The Millerton Iron Co., 133 N.Y. 164, 168 (1892)).

Although we know of no case granting the precise relief requested, that fact cannot alone rule out a grant of certain equitable relief tailored to the circumstances of this case — nor can it assure such relief. Indeed, any determination with regard to the appropriate relief must await an examination of what other relief, if any, is afforded in this case. 35 N.Y.Jur., supra, § 15 at 204. The motion to dismiss the first and the eleventh through thirteenth claims on the ground that equity will not afford the relief demanded therein must be denied. In this case “[e]quity [will] regard[ ] as done that which ought to be done.” 35 N.Y.Jur. § 15 at 204-05 (1964).

Alternatively, Brancorp and Rubinroit move, pursuant to Fed.R.Civ.P. 12(f), to strike the allegedly excessive damage allegations in the various claims. Such allegations will be stricken from a complaint only when clearly excessive and unattainable. Quinn v. Straus Broadcasting Group, Inc., 309 F.Supp. 1208, 1210 (S.D.N.Y.1970). Our previous discussion makes clear that that is not the case in this instance. The motion to strike is, therefore, denied.

B. The Rule 9(b) Motions

Both Brancorp and Rubinroit move pursuant to Fed.R.Civ.P. 9(b) to dismiss the claims against them for failure to plead fraud with particularity. Rule 9(b) provides that “[i]n all averments of fraud ... the circumstances constituting the fraud ... shall be stated with particularity.” Fed.R.Civ.P. 9(b). Mere conclusory allegations that the defendants’ conduct was fraudulent are not enough. Decker v. Massey-Ferguson, Ltd., 681 F.2d 111, 114 (2d Cir.1982). Instead, the complaint must allege with some specificity the acts or statements constituting the fraud. Ross v. A.H. Robins Co., 607 F.2d 545, 557 (2d Cir.1979), cert. denied, 446 U.S. 946, 100 S.Ct. 2175, 65 L.Ed.2d 1140 (1980).

This is not the typical securities fraud in which “the pleader must state the time, place and content of the false misrepresentations, the fact misrepresented and what was obtained or given up as a consequence of the fraud.” 2A J. Moore & J. Lucas, Moore’s Federal Practice ¶ 9.03, at 9-20 through 9-24 (1984) (footnote omitted). Rather, the amended complaint alleges a scheme to defraud creditors. In such a case, the complaint must allege the time, place, and nature of the defendants’ conduct. In addition, since the plaintiffs have had an opportunity to discover considerable specific information, they should be required to plead those facts and events that give rise to an inference of scienter— knowledge of the improper aims of the fraudulent scheme. See Billard v. Rockwell International Corp., 683 F.2d 51, 57 (2d Cir.1982); Ross v. A.H. Robins Co., supra, 607 F.2d at 558.

The amended complaint pleads the fraud in exquisite detail and specifies the actions of each of the moving defendants in furtherance of the alleged scheme. As to Rubinroit, the amended complaint alleges that he was Carla’s principal spokesman, negotiator, and accountant at all of the Carla Meritum and Carla-Meritum-Brancorp meetings prior to Carla’s dissolution. Rubinroit then performed the same function for Maglia in its subsequent negotiation’s with Brancorp. Rubinroit thereby actively participated in the alleged fraud. Rubinroit’s alleged role in both sets of negotiations supports the inference that he knew of the fraud. Brancorp’s knowledge and participation is equally plain from the amended complaint. Through discussions regarding the possible factoring of Carla’s accounts, Brancorp allegedly learned of Carla’s precarious financial position. Bran-corp’s subsequent knowledge of Carla’s transformation into Maglia is detailed in paragraphs 20 and 21 of the amended complaint. Knowing of this improper transformation, it agreed to factor Maglia.

The amended complaint’s factual allegations of Brancorp’s and Rubinroit’s knowing participation in the alleged fraud also satisfy Rule 9(b)’s requirements for pleading aiding and abetting, liability for which “attaches only when one ‘has actual knowledge of another’s improper scheme plus an intent to further that scheme (i. e., scienter) and he has given substantial assistance to the primary wrongdoer____’ ” Ingenito v. Bermec Corp., 441 F.Supp. 525, 534 (S.D.N.Y.1977) (quoting Rosen v. Dick [1974-75] Fed.Sec.L.Rep. (CCH) 1194,786 at 96,604 (S.D.N.Y.1974)). The amended complaint also alleges facts from which the essential element of a civil conspiracy, an agreement involving each of the moving defendants, can be inferred. See Powell v. Kopman, 511 F.Supp. 700, 704 (S.D.N.Y.1981) (“A civil conspiracy is a combination of two or more persons to do an unlawful act by unlawful means or for an unlawful purpose.”).

C. The Motion to Strike or Disqualify Counsel

The defendants move pursuant to Fed.R. Civ.P. 12(f) to strike the allegations in the amended complaint concerning Carla’s wrongful bankruptcy filing, see supra pp. 1532-1533, as scandalous, immaterial, and impertinent. In the alternative, they move to disqualify the plaintiffs’ litigation counsel, Richard Ziegler and his firm, Cleary, Gottlieb, Hamilton & Steen (“Cleary”), pursuant to Disciplinary Rule 5-102(A) because Ziegler ought to testify about the disputed allegations.

1. The Motion to Strike

Rule 12(f) authorizes a court, on motion, to “order stricken from any pleading ... any redundant, immaterial, impertinent, or scandalous matter.” Fed. R.Civ.P. 12(f). A motion to strike will be denied unless the alleged scandal or impertinency has “no possible relation” to the controversy, Gleason v. Chain Service Restaurant, 300 F.Supp. 1241, 1257 (1969), aff'd, 422 F.2d 342 (2d Cir.1970), or “has no bearing on the subject matter of the litigation____” Fra S.p.A. v. Surg-O-Flex of America, Inc., 415 F.Supp. 421, 427 (S.D.N.Y.1976). The circumstances surrounding Carla’s bankruptcy filing are both related to and have a bearing on this litigation. The statements in the amended complaint detailing the impropriety of that filing will not be stricken.

2. The Motion to Disqualify Counsel

Brancorp’s alternative motion to disqualify the plaintiffs’ litigation counsel must now be addressed. Such motions are often simply “ ‘common tools of the litigation process, ... used ... for purely strategic purposes.’ ” Allegaert v. Perot, 565 F.2d 246, 251 (2d Cir.1977) (quoting Van Graafeiland, Lawyer’s Conflict of Interest — A Judge’s View (Part II), N.Y.L.J., July 20, 1977, at 1, col. 2). “Consequently, in ruling on such motions, courts must be careful ‘to prevent literalism from possibly overcoming substantial justice to the parties.’ ” Rice v. Baron, 456 F.Supp. 1361, 1368 (S.D.N.Y.1978) (quoting J.P. Foley & Co. v. Vanderbilt, 523 F.2d 1357, 1360 (2d Cir.1975) (Gurfein, J., concurring).

Model Code of Professional Responsibility DR 5-102(A) (1975) (“DR 5-102(A)”), pursuant to which disqualification is sought, states,

If, after undertaking employment in contemplated or pending litigation, a lawyer learns or it is obvious that he or a lawyer in his firm ought to be called as a witness on behalf of his client, he shall withdraw from the conduct of the trial and his firm, if any, shall not continue representation in the trial, except that he may continue the representation and he or a lawyer in his firm may testify in the circumstances enumerated in DR 5-101(B)(1) through (4).

DR 5-102(A). Those circumstances are

(1) If the testimony will relate solely to an uncontested matter.
(2) If the testimony will relate solely to a matter of formality and there is no reason to believe that substantial evidence will be offered in opposition to the testimony.
(3) If the testimony will relate solely to the nature and value of legal services rendered in the case by the lawyer or his firm to the client.
(4) As to any matter, if refusal would work a substantial hardship on the client because of the distinctive value of the lawyer or his firm as counsel in the particular case.

DR 5-101(B).

In this case, the applicability of the exception in DR 5-101(B)(4) makes disqualification unnecessary. Disqualification would “work a substantial hardship” on the plaintiff trustees within the meaning of that rule. The plaintiffs’ counsel has worked closely with the Meritum Trustee since his appointment. Cleary served as the Meritum Trustee’s counsel during his year long investigation and supervised the substantial discovery that uncovered the evidence which formed the basis for the complaint in this action. It has since conducted substantial additional discovery. Indeed, the Court understands that discovery is' substantially complete, at least with respect to the claims in the amended complaint. Plaintiffs’ counsels’ knowledge of the facts underlying this suit is thus extensive and unique. See In re Carla Leather, Inc., 44 B.R. 457, 475 (S.D.N.Y.Bankr.1984), aff'd, 50 B.R. 764 (S.D.N.Y.1985). (“[The Carla Trustee] should avail himself of Cleary’s investigation and its resulting expertise so to avoid the cost and time of finding and educating new counsel as well as to obviate possibilities of unnecessary confusion in the prosecution of [this action].”). Cf. SMI Industries Canada Ltd. v. Caelter Industries, Inc., 586 F.Supp. 808, 817 (N.D.N.Y.1984) (“The Limbach firm’s representation of defendant in the present action involves a complex set of legal and factual issue which the firm has been familiar with for many years.”). Disqualification would work a severe hardship on any litigant in these circumstances. Here, where the plaintiffs are bankruptcy trustees, the hardship would be particularly acute. Disqualification would force two bankrupt estates, one with no resources, the other with finite resources, to sink deep into their pockets to pay new counsel to simply familiarize themselves with the litigation.

We recognize that the financial hardship and delay typically associated with the retention of new counsel is not the “substantial hardship” that DR 5-101(B)(4) envisions. Grossman v. Commercial Capital Corp., 59 A.D.2d 850, 399 N.Y.S.2d 16, 17 (1st Dep’t 1977). See also MacArther v. Bank of New York, 524 F.Supp. 1205, 1210 (S.D.N.Y.1981) (“[I]f the expense and delay routinely incident to disqualification satisfied the substantial hardship exception, that exception would soon swallow the rule.”). Some hardship beyond that normally incident in changing counsel is necessary to invoke this exception. This case presents such a situation. The defendants’ motion to disqualify plaintiffs’ counsel is denied.

D. The Challenges to the Trustees’ Standing

Brancorp and Rubinroit offer conflicting challenges to the standing of each trustee to pursue this action. Brancorp asserts that the Meritum Trustee is not a proper party to this action. Rubinroit, on the other hand, contends that the Carla Trustee is not a proper plaintiff. Brancorp relies on In re MortgageAmerica Corp., 714 F.2d 1266, 1275 (5th Cir.1983), in which a Fifth Circuit panel stated that section 544 of the Bankruptcy Code, 11 U.S.C. § 544 (1982), the so-called “strong-arm provision,” authorizes a “bankruptcy trustee to step into the shoes of a creditor for the purpose of asserting causes of action under state fraudulent conveyance acts for the benefit of all creditors____” Id. at 1275. The Court also noted that “the automatic stay under Section 362(a) [of the Bankruptcy Code] ... prevents a creditor from continuing to pursue a cause of action ... for a fraudulent conveyance.” Id. at 1275. Brancorp asserts that the gravamen of the amended complaint is that the defendants fraudulently conveyed Carla’s assets. This claim belongs to Carla. Brancorp argues that Meritum, Carla’s creditor, is stayed from bringing this action.

Brancorp overlooks section 362(d) of the Bankruptcy Code, 11 U.S.C. § 362(d) (1982), which authorizes the bankruptcy court to “grant relief from the stay ... such as by terminating, annulling, modifying or conditioning such stay.” Id. Pursuant to this section, the bankruptcy court has expressly modified the stay to permit the Meritum Trustee to prosecute this claim jointly with the Carla Trustee. In re Carla Leather, Inc., No. 84-B-0700 (S.D. N.Y.Bankr. Nov. 20, 1984) (order). Any issue of the standing of the Meritum Trustee has thus been resolved.

Since the Carla Trustee appears on behalf of Carla’s creditors rather than on behalf of Carla, Rubinroit’s argument that the Carla Trustee is estopped from suing in Carla’s behalf because Carla’s principal stockholders ratified the fraud that underlies this action need not be addressed. It matters not whether Carla could have maintained a similar claim outside of bankruptcy.

Rubinroit also asserts that Caplin v. Marine Midland Grace Trust Co., 406 U.S. 416, 92 S.Ct. 1678, 32 L.Ed.2d 195 (1972) {“Caplin") precludes the Carla Trustee from suing those other than its immediate debtors on behalf of Carla’s creditors. In Caplin, the Supreme Court held that a reorganization trustee under Chapter 10 of the Bankruptcy Act, 52 Stat. 883, 11 U.S.C. § 501, lacked standing to assert its creditors’ claims against an indenture trustee. Brancorp contends that Caplin forecloses this action by a Chapter 7 trustee against itself and others not directly indebted to Carla. The Caplin Court’s reasoning belies this contention.

That Court explicitly rested its holding on Congress’ failure to authorize reorganization trustees to bring such actions. It noted,

[Wjhatever the decision, it is one that only Congress can make____ This does not mean that it would be unwise to confer such standing on trustees in reorganization. It simply signifies that Congress has not yet indicated even a scintilla of an intention to do so, and that such a policy decision must be left to Congress and not to the judiciary.
Congress might well decide that reorganizations have not fared badly in the 34 years since Chapter X was enacted and that the status quo is preferable to inviting new problems by making changes in the system. Or, Congress could determine that the trustee in a reorganization was so well situated for bringing suits against indenture trustees that he should be permitted to do so. In this event, Congress might also determine that the trustee’s action was exclusive, or that it should be brought as a class action on behalf of all debenture holders, or perhaps even that the debenture holders should have the option of suing on their own or having the trustee sue on their behalf. Any number of alternatives are available.

Id. at 434-35, 92 S.Ct. at 1688. Congress has not chosen to overrule Caplin, which continues to state the law with regard to the standing of reorganization trustees under Chapter 10. 5 Collier on Bankruptcy § 1106.01 (5th Ed.1985). However, as noted above, Section 544, the “strong arm” provision, provides ample statutory authority for a Chapter 7 trustee’s assertion of creditors’ claims against third parties. Rubinroit’s objection to the Carla Trustee’s standing is groundless, as is Rubinroit’s.

III. Conclusion

The defendants’ motions are denied in their entirety.

SO ORDERED.

      . Additional information about the developments in this and related proceedings is contained in this Court’s opinion in In re Carla Leather, Inc., 50 B.R. 764, 766-69 (S.D.N.Y.1985).

      . In February 1983, Carla Maglia changed its name to Maglia, Inc.

      . Green has since been elected permanent trustee of the Carla estate. See In re Carla Leather, Inc., supra, 50 B.R. at 767-68.

      . The amended complaint asserts that when it became apparent that the Carla trustee had decided to cooperate with the Meritum trustee in prosecuting this action for the benefit of both estates, the defendants sought to unseat the Carla trustee and to thwart approval of the settlement agreement. This aspect of the continuing conspiracy has delayed the progress of this action and has required the Trustees to incur substantial additional expense in defending the settlement. The settlement has since been approved against Washington Druker’s challenge. In re Carla Leather, 44 B.R. 457 (S.D.N.Y.Bankr.), aff'd, 50 B.R. 764 (S.D.N.Y.1985).

      . In his moving memorandum, defendant Washington Druker asserted that the second, third, ninth, and tenth claims arise under RICO and should also be dismissed. In light of the recent developments in the law of RICO, we need not consider this somewhat bizarre assertion.

      . The defendants originally suggested that the Court voluntarily abstain from hearing this action pursuant to 28 U.S.C. § 1334(c)(1) (Supp. II 1984), which states that
      [njothing in this [jurisdictional] section prevents a district court in the interest of justice, or in the interest of comity with State courts or respect for State law, from abstaining from hearing a particular proceeding arising under title 11 or arising in or related to a case under title 11.

        Id. Since this Court has an independent basis of federal subject matter jurisdiction, and this proceeding does not arise only under Title 11, this abstention provision no longer applies.

      . The transfer of assets for inadequate consideration is sometimes cited as a fifth exception. J. Phillips, Product Line Continuity and Successor Corporation Liability, 58 N.Y.U.L.Rev. 908 n. 4 (1983) (and cases cited therein). The plaintiffs assert that the defendants are liable under this theory as well. The plaintiffs depict the continuation and merger theories as three theories. Thus, they maintain that Maglia is liable as "the alter ego of Carla,” "the continuation in business of Carla,” and “the surviving corporation of the de facto merger of Carla with Maglia.” Plaintiffs' Memorandum of Law in Opposition at 14. Together with the incorporation of the fifth exception, the transformation of two theories into three explains the plaintiffs' contention that their amended complaint "expressly asserts six of the various theories of successor liability as bases for holding Carla Maglia liable for Carla Leather’s debts____” Plaintiffs Memorandum in Opposition at 14.

      . Ladjevardian v. Laidlaw-Coggeshall, Inc., 431 F.Supp. 834 (S.D.N.Y.1977), attempts to draw the distinction. According to that decision, whereas a de facto merger contemplates a selling corporation and a purchasing corporation, "a continuation accomplishes ... something in the nature of a corporate reorganization, rather than a mere sale.” Id. at 839.

      . The defendants contend that Carla employees could legally accept employment with Maglia and that Maglia's purchase of leather goods and other inventory from Carla was proper. The propriety of this conduct is not in issue. Whether proper or improper, such conduct may support a claim for successor liability.

      . We note, however, that their argument regarding Carla’s viability, see supra p. 1536, constitutes an objection to each theory of successor liability.

      . The defendants do attack the fraudulent conveyance claims for failure to plead fraud with the requisite particularity. See supra pp. 1538-1539.

      . Brancorp asserts that Meritum waived its security interest in Carla's assets when it filed and voted its claim against Carla in the election of the Carla Trustee as an unsecured creditor. See In re Carla Leather, Inc., 50 B.R. 764, 767 (S.D.N.Y.1985). In support of that contention, Brancorp cites a passage from In re Matter of Russo, 18 B.R. 257, 270 (S.D.N.Y.Bankr.1982), to the effect that
      [a]Ithough the mere filing of a secured debt as unsecured does not conclusively amount to a waiver of security against a bankrupt's property, see 2 Remington on Bankruptcy § 930, p. 407 (1956), a valid waiver will be found to have been made if, in addition for example. the secured claimant votes the claim for the full amount in the trustee election. Id. at 108.

        Id. However, any waiver is only with respect to the estate of the bankrupt and those interested therein. “[W]hatever rights the creditor may have against third persons, or their property, are not waived by filing an unsecured claim____” 2 Remington on Bankruptcy § 930 at 409 (1956). Meritum did not waive its security interest as against Brancorp when it filed its claim as unsecured for purposes of voting for the Carla trustee.

      . In that case, there was substantial disappearance of an old and substitution of a new business. Defendants converted the property of the new business to their own use. That property could not be distinguished or separated. The plaintiff was entitled to a lien on the entire stock of the new business to the extent of its damages.

      . We need not decide whether Rule 9(b)’s pleading requirements need be relaxed when the plaintiff is a trustee in bankruptcy. The amended complaint passes muster under the strictest standards of pleading.

      . "The Code has been adopted by the New York State Bar Association, and its canons are recognized by both Federal and State Courts as appropriate guidelines for the professional conduct of New York lawyers.” Cinema 5, Ltd. v. Cinerama, Inc., 528 F.2d 1384, 1386 (2d Cir.1976) (citation omitted).

      . A Rule 36 "request to admit” certain facts about which Richard Ziegler might otherwise be required to testify is the subject of an ongoing discovery dispute. Thus, it cannot now be said that Ziegler’s testimony is undisputed.
      We need not decide whether Richard Ziegler ought to be called as a witness. Moreover, such a determination cannot be made on the current record.

      . Section 544 reads,
      (a) The trustee shall have, as of the commencement of the case, and without regard to any knowledge of the trustee or of any creditor, the rights and powers of, or may avoid any transfer of property of the debtor or any obligation incurred by the debtor that is voidable by—
      (1) a creditor that extends credit to the debtor at the time of the commencement of the case, and that obtains, at such time and with respect to such credit, a judicial lien on all property on which a creditor on a simple contract could have obtained a judicial lien, whether or not such a creditor exists;
      (2) a creditor that extends credit to the debtor at the time of the commencement of the case, and obtains, at such time and with respect to such credit, an execution against the debtor that is returned unsatisfied at such time, whether or not such a creditor exists; and
      (3) a bona fide purchaser of real property from the debtor, against whom applicable law permits such transfer to be perfected, that obtains the status of a bona fide purchaser at the time of the commencement of the case, whether or not such a purchaser exists.
      (b) The trustee may avoid any transfer of an interest of the debtor in property or any obligation incurred by the debtor that is voidable under applicable law by a creditor holding an unsecured claim that is allowable under section 502 of this title or that is not allowable only under section 502(e) of this title.
      11 U.S.C. § 544 (1982).

      . The moving defendants assert that they have a right to know which claims are asserted by which plaintiff so that appropriate defenses may be interposed. As the Court understands this action, the Carla and Meritum estates are jointly pursuing all of the claims on both of their behalves and on behalf of all of Carla’s other creditors. If the Court’s understanding is incorrect, the plaintiffs should so inform it.


text:
    Eliot H. LUMBARD, as Trustee of the Estate of Meritum Corporation, and David M. Green, as Trustee of the Estate of Carla Leather, Inc. Plaintiffs, v. MAGLIA, INC. (a/k/a “Carla Maglia, Inc.”), Kalish, Rubinroit & Co., Brancorp Factors, Inc., Washington Druker, Aron Vaisman, Barnardo Druker, Hyman Rubinroit, Jack Lindner, Egidia Vaisman (a/k/a “Vivian Kopcow Vaisman”), Cristina Druker and James Vaisman, Defendants. Washington DRUKER, Third-Party Plaintiff, v. Chaim Herbert LESHKOWITZ (a/k/a Herbert Leshkowitz), Third-Party Defendant. BRANCORP FACTORS, INC. and Jack Lindner, Third-Party Plaintiffs, v. Chaim Herbert LESHKOWITZ (a/k/a Herbert Leshkowitz), Third-Party Defendant.
    No. 84 Civ. 0008 (GLG).
    United States District Court, S.D. New York.
    Nov. 12, 1985.

      Cleary, Gottlieb, Steen & Hamilton, New York City, for plaintiffs; Richard F. Ziegler, Robert J. Stillman, of counsel.
    Wiener, Zuckerbrot, Weiss & Brecher, New York City, for defendants and third-party plaintiffs Brancorp Factors, Inc. and Jack Lindner; Irvin Rothfarb, Dennis M. Rothman, of counsel.
    Philip E. Silberberg, New York City, for defendant and third-party plaintiff Washington Druker.
    Arnoff & Merin, P.C., New York City, for third-party defendant Herbert Leshkowitz; Norman B. Arnoff, Linda K. Bernstein, of counsel.
   OPINION

GOETTEL, District Judge:

Two identical third-party complaints have been filed in this action, one by Washington Druker (“Druker”) and the other by Bran-corp Factors, Inc. and Jack Lindner (collectively “Brancorp”). Each third-party complaint purports to state two causes of action against Chaim Herbert Leshkowitz (“Leshkowitz”), Carla Leather, Inc.’s (“Carla”) former accountant. Leshkowitz now moves pursuant to Rules 9(b), 14(a), 12(b)(2), and 12(b)(6) of the Federal Rules of Civil Procedure for an order dismissing both third-party complaints. He also moves pursuant to Fed.R.Civ.P. 11 for sanctions against the third-party plaintiffs. For the reasons stated below, the third-party complaints are dismissed and the motions for sanctions are denied.

I. Background

In March 1985, Druker and Brancorp applied to and received this Court’s permission to file third-party complaints against Leshkowitz. The third-party plaintiffs have yet to answer the amended complaint in the main action. The details of the amended complaint are spelled out in a separate opinion issued today in this case, familiarity with which is assumed.' The two third-party complaints and the affidavits and memoranda that accompany them add the following allegations, which, together with the allegations in the main complaint, we deem true for purposes of evaluating the motions before us: Leshkowitz prepared certain financial statements and reports and performed other unspecified services for Carla prior to its dissolution. Those statements overstated Carla’s inventory and assets and allegedly caused Carla’s debt to Meritum Corporation (“Meritum”) to be greatly inflated. The third-party plaintiffs assert that any liability that they accrue in the main action will be reduced as a result of Leshkowitz’s conduct.

Each third-party complaint states the same two claims. The first claim alleges that Leshkowitz negligently and recklessly prepared financial statements and related documents that Meritum, Carla, and others later relied on. Leshkowitz is thereby alleged to be liable to the third-party plaintiffs for any judgment accruing against them in the main action. The second claim alleges that Leshkowitz aided and abetted Meritum in some unspecified, presumably improper conduct.

II. Discussion

A. Motions to Dismiss

The third-party defendant moves to dismiss the first claim in both complaints for failure to comply with the requirements of Fed.R.Civ.P. 14(a). Rule 14(a) provides, in pertinent part:

At any time after commencement of the action a defending party, as a third-party plaintiff, may cause a summons and complaint to be served upon a person not a party to the action who is or may be liable to him for all or part of the plaintiff’s claim against him.

Fed.R.Civ.P. 14(a). “Rule 14 requires that a defendant have a substantive basis for a claim against the third party and that the claim of liability to the defendant and third-party plaintiff accrue only upon a finding of defendant’s liability to the plaintiff on the main claim.” Index Fund, Inc. v. Hagopian, 417 F.Supp. 738, 744 (S.D.N.Y.1976). Because there is no substantive basis for the first or second claims in either third-party complaint, both complaints must be dismissed pursuant to Rule 14(a) and pursuant to Fed.R.Civ.P. 12(b)(6) for failure to state a claim on which relief can be granted.

1. The First Claims

The first claims of the two third-party complaints seek to hold Leshkowitz liable for the negligent preparation of financial statements upon which parties with whom he was not in privity relied. The New York Court of Appeals recently delineated the circumstances in which “accountants may be held liable in negligence to noncontractual parties who rely to their detriment on inaccurate financial reports.” Credit Alliance Corp. v. Arthur Anderson & Co., N.Y.L.J., July 12, 1985, at 20, col. 5, (N.Y. July 5, 1985) [hereinafter “Credit Alliance ”]. Before such liability may accrue,

certain prerequisites must be satisfied: (1) the accountants must have been aware that the financial reports were to be used for a particular purpose or purposes; (2) in the furtherance of which a known party or parties was intended to rely; and (3) some conduct on the part of the accountants linking them to that party or parties, which evinces the accountants’ understanding of that party or parties’ reliance.

Id.; see also Westpac Banking Corp. v. Deschamps, N.Y.L.J., Oct. 17, 1985, at 26, col. 1 (N.Y. Oct. 15, 1985) (quoting this language) [hereinafter “Westpac Banking Corp.”]. The recent cases strictly interpret these guidelines. In order to survive a motion to dismiss, the complaint or accompanying affidavits must contain some allegation “to demonstrate the existence of a relationship between the parties sufficiently approaching privity.” Credit Alliance, supra, at 20, col. 6. Allegations supporting the inference that a particular party was likely to rely on the statements of another party will not suffice. There must be “knowledge of ‘the identity of the specific nonprivy party who would be relying on the audit reports.’ ” Westpac Banking Corp., supra, at 26, col. 2 (quoting Credit Alliance, supra, at 21, col. 1).

Neither Brancorp nor Druker have provided allegations that satisfy the requirements set out in Credit Alliance. In its papers, Brancorp states, “the financial statement prepared by Leshkowitz could have no practical purpose other than ... to assist Meritum to solicit Brancorp in order to finance Carla.” Post-Argument Joint Memorandum at 4. This inferential support for the hypothesis that Leshkowitz knew Brancorp would rely on Meritum’s financial statement is plainly insufficient. To echo the Court of Appeals in Westpac Banking Corp.,

there is no allegation that [Leshkowitz] had any dealings with [Brancorp], had specifically agreed with [Meritum] to prepare the report for [Brancorp’s] use or ... had agreed with [Meritum] to provide [Brancorp] with a copy, or actually did so. Indeed there is simply no allegation of any word or action on the part of [Leshkowitz] directed to [Brancorp], or anything ... which provided the necessary link between them.

Westpac Banking Corp., supra, at 26, col. 2. The above-quoted statement applies with equal force to invalidate Druker’s first claim. Druker’s assertion that, because he personally guaranteed Carla’s debt to Meritum, he is “within the group of persons who necessarily would be dependent upon the financial statements Leshkowitz prepared for Carla,” Post-Argument Joint Memorandum at 5, cannot alone satisfy the stringent requirements of Credit Alliance. Because the third-party complaints fall far short of establishing the requirements set forth in Credit Alliance, the first causes of action in both third-party complaints must be dismissed.

White v. Guarante, 43 N.Y.2d 356, 372 N.E.2d 315, 401 N.Y.S.2d 474 (1977) [hereinafter “White”], is of no assistance to Druker on his first claim. In White, the Court of Appeals held that a relationship between accountants and a third-party sufficiently approached privity.

[T]he accountants had contracted with a limited partnership to perform an audit and prepare the partnership’s tax returns. The nature and purpose of the contract, to satisfy the requirement in the partnership agreement for an audit, made it clear that the accountants’ services were obtained to benefit the members of the partnership who, like plaintiff, a limited partner, were necessarily dependent upon the audit to prepare their own tax returns.

Credit Alliance, supra, at 20, col. 5 (commenting on White). The third-party complaint provides no indication that Druker was necessarily dependent on Meritum’s financial statements. Indeed, there is no indication that Leshkowitz knew Druker was a guarantor of Meritum’s loans to Carla, or that he knew of the nature and extent of those guarantees. White is, therefore, inapposite.

2. The Second Claims

The second claims of both third-party complaints charge Leshkowitz with aiding and abetting Meritum in some unspecified wrongdoing, presumably fraud. These claims, asserted against a party for aiding and abetting an unspecified and unknown wrong, are most bizarre. Absent some specification as to the primary wrong alleged, there is no substantive basis upon which to assert these aiding and abetting claims. These claims fail both to comply with Rule 14(a) and to state a claim for relief. In addition, they do not plead a claim of aiding and abetting a fraud with the particularity that Fed.R.Civ.P. 9(b) demands, Reingold v. Deloitte, Haskins & Sells, supra, 599 F.Supp. at 1265-66, 1270, nor do they provide “a short and plain statement of the claim” as required by Fed.R.Civ.P. 8(a).

The third-party plaintiffs admit that they filed their aiding and abetting claims in order to toll the statute of limitations. This concern, although legitimate, may be unfounded, for as soon as the defendants answer, they will most likely name Meritum as a defendant on compulsory counterclaims. See Fed.R.Civ.P. 13(a). The statute of limitations will not bar that counterclaim, since no question has been raised as to the timeliness of the original action. 3 J. Moore, Moore’s Federal Practice § 13.11, at 13-47 (2d ed. 1985). Nor will the statute of limitations bar the defendants from joining Leshkowitz as an additional defendant on counterclaims pursuant to Fed.R.Civ.P. 20(a). See Post Argument Joint Memorandum at 5. Nevertheless, in order to assuage the third-party defendant’s fears, the Court will dismiss these third-party complaints with leave to replead the second claims therein as counterclaims in the main action.

B. Motion for Sanctions

The third-party defendant also moves for sanctions pursuant to Rule 11 of the Federal Rules of Civil Procedure. Rule 11 provides that an attorney’s signature on a pleading “constitutes a certificate by him” that the “pleading is well grounded in fact and warranted by existing law.” Fed. R.Civ.P. 11. “[WJhere it is patently clear that a claim has absolutely no chance of success under the existing precedents, and where no reasonable argument can be advanced to extend, modify or reverse the law as it stands, Rule 11 has been violated.” Eastway Construction Corp. v. City of New York, 762 F.2d 243, 254 (2d Cir.1985). If a pleading is signed in violation of the rule, the court must impose sanctions including attorneys’ fees. Id. at 254 n. 7.

The first claims in each third-party complaint in this action were not filed in violation of Rule 11. Those claims were filed prior to the Court of Appeal’s recent decisions limiting the scope of an accountant’s liability for negligent conduct. The law on that subject was in disarray. When filed, the negligence claims thus had a reasonable chance of stating a viable cause of action.

The allegations in the second claims of the third-party complaints are so sketchy as to defy analysis under Rule 11. The motion for sanctions on those claims will be denied without prejudice to its renewal, should those claims, when again asserted, lack any foundation in law or fact.

III. Conclusion

The motions to dismiss the third-party complaints are granted. The third-party plaintiffs are granted leave to replead the second cause of action in their third-party complaints as counterclaims in the original action. The motion for sanctions is denied without prejudice to its renewal.

SO ORDERED.

      . The third-party plaintiffs also assert that Leshkowitz received commissions or fees from Meritum during the time that he performed services for Carla. Such conduct allegedly violates both Rule 503 of the American Institute of Certified Public Accountants and Rule 503 of the Code of Professional Conduct of the New York State Society of Certified Public Accountants. These two identical rules state,
      A member shall not pay a commission to obtain a client, nor shall he accept a commission for a referral to a client of products or services of others. This rule shall not prohibit payments for the purchase of an accounting practice or retirement payments to individuals formerly engaged in the practice of public accounting or payments to their heirs or estates.
      The third-party plaintiffs do not indicate how any violation of that section would translate into liability separate from that arising out of Leshkowitz’s negligence.

      . The Court’s order permitting the filing of the third-party complaints does not, in itself, necessitate the denial of this branch of the motions. That order waives any procedural barriers that might have prohibited the filing of third-party complaints prior to the filing of an answer. It does not bear on the substantive viability of the actions.

      . The Court does not reach the question of whether either defendant's liability would accrue only upon a finding of the defendants’ liability on the main claim.

      . Although the first claims in both third-party complaints sound only in negligence and recklessness, there are intimations elsewhere in the third-party plaintiffs’ papers that the first claims are also for fraud. See, e.g., Joint Memorandum at 29, 35. To the extent that the first claims are deemed to plead fraud, they must be dismissed pursuant to Fed.R.Civ.P. 9(b) for failure to plead fraud with particularity. See Reingold v. Deloitte, Haskins & Sells, 599 F.Supp. 1241, 1265-66 (S.D.N.Y.1984).

      . Leshkowitz’s motion papers originally stated an intention to move, pursuant to Fed.R.Civ.P. 12(b)(2), to dismiss for lack of subject matter jurisdiction. No argument was ever made in support of such a motion. The Court deems any such motion withdrawn.