Alleco, Inc. v. HARRY & JEANETTE WEINBERG FOUNDATION, INC.

WIENER, Chief Judge. Alleco, Inc. and Morton Lapides filed an amended complaint in the Circuit Court for Prince George’s County against The Harry and Jeanette Weinberg Foundation, Inc., Bernard Siegel, Nathan Weinberg, William Weinberg, Stanley Marks, and Kalb, Voorhis & Co. This appeal, by Alleco and Lapides, is from an order dismissing the amended complaint for failure to state a claim upon which relief could be granted. The amended complaint, which we shall refer to hereafter as the complaint, arises ultimately from the alleged misconduct of Lawrence Weisman who, from September, 1986 to July, 1988, served as counsel for appellants. Weisman died before the complaint was filed and his estate was not sued.

He is alleged to have entered into an agreement with Harry Weinberg and the appellees to breach his fiduciary obligations to appellants by disclosing to them certain confidential information that he obtained from appellants while serving as their attorney, concerning their business affairs and intentions. Pursuant to that agreement, according to appellants, the Weinbergs and Siegel, individually and on behalf of the Weinberg Foundation, and Marks, individually and on behalf of Kalb, Voorhis, (1) used that information to trade in Alleco securities, and (2) further assisted Weisman in breaching his fiduciary obligations to appellants by instituting or continuing certain litigation against appellants and thwarting appellants’ efforts to settle other litigation. Weisman was alleged to have communicated information concerning appellants to the SEC, the FBI, and the Justice Department, and, at his request, Marks was alleged to have written to the SEC. Like Weisman, Harry Weinberg died before the complaint was filed and his estate was not sued.

The other appellees were charged with aiding and abetting Weisman in committing a breach of his fiduciary duties to appellants (Count I), civil conspiracy with Weisman to breach his fiduciary duties (Count II), aiding and abetting Weisman in committing fraud on ⁷⁰⁰ appellants (Count III), and civil conspiracy with Weisman to commit fraud (Count IV).' In an opinion filed June 8, 1993, the circuit court examined each of the allegations made in the 86-paragraph, 34-page complaint against each of the appellees and concluded from that examination that none of the four counts sufficed to state a cause of action. In essence, it found a mismatch between the allegations of wrongful conduct and the averments as to harm—that, to the extent appellants sufficiently alleged tortious conduct on the part of appellees, they failed to allege how that conduct caused appellants any harm, and to the extent they alleged harm arising from appellees’ conduct, the conduct causing that harm was not tortious. Appellants, of course, take issue with those conclusions. Essentially, they complain that the court failed to consider the various averments in context with one another but instead improperly parsed the complaint and looked at each allegation in isolation.

Although we think the court went astray in some of its subordinate legal conclusions, we believe that it ultimately reached the right result, and so we shall affirm. DISCUSSION A. Aiding and Abetting In Count I, appellees were charged with aiding and abetting Weisman in the breach of his fiduciary duty of loyalty to appellants. In Count III, they were charged with aiding and abetting Weisman in perpetrating fraud on appellants. The court observed, and we agree, that Maryland has yet to recognize an independent tort of aiding and abetting a tortfeasor.

A person, under appropriate circumstances, might be criminally liable for aiding and abetting a fraud; he or she may be liable under Federal or State securities laws or regulations for using confidential information gained from an insider; he or she may be civilly liable as a joint tortfeasor for participating in tortious conduct or, as we shall shortly explain, as a participant in a civil conspiracy; but no separate ⁷⁰¹ tort liability exists in this State for simply aiding and abetting someone else in committing a tort. That, really, is the end of Counts I and III. Appellants have not charged appellees in those Counts with being joint tortfeasors with Weisman but only with assisting him in committing his own torts. If that is to be recognized as a new, independent tort, either the Legislature by statute or the Court of Appeals by extending the common law will have to do it.

We shall not do it. The circuit court, having reached that same conclusion, nonetheless noted that the Federal courts and some State courts have imposed civil liability for aiding and abetting a tortfeasor, at least with respect to the violation of Federal securities laws and regulations, and proceeded to examine the various averments made by appellants in light of how that tort has been defined in those cases. Indeed, that examination comprises most of the court’s opinion and most of appellants’ brief in this Court. It is, however, irrelevant.

Until either the Legislature or the Court of Appeals creates the tort in Maryland, it would serve no purpose to expound upon how the elements of the tort should be defined. Counts I and III were properly dismissed because they fail to state a claim upon which, under current Maryland law, relief can be granted. B„ Conspiracy (1) Allegations of the Complaint In Count II, appellants charge that Weisman, in violation of his fiduciary duty to appellants, entered into an agreement with Harry Weinberg and appellees “to wrongfully breach his fiduciary duty owed to [appellants].” In furtherance of that conspiracy, appellees used confidential information communicated to them by Weisman, either directly or through Harry Weinberg, to trade in Alleco securities, “coordinated” their trades with Weisman, and, in concert with Weisman and in violation of his fiduciary duty, instituted litigation against appellants and thwarted appellants’ attempts to settle other litigation. ⁷⁰² Among a myriad of allegations scattered in earlier parts of the complaint are accusations that (1) Weisman profited on his inside information by buying Alleco securities through Marks and Kalb, Voorhis, (2) Weisman and Harry Weinberg agreed to coordinate their interests and keep each other informed, (3) when apprised of Alleco’s plan to have a subsidiary assume Alleco’s obligation on certain debentures, Weisman or Harry Weinberg contacted a large holder of those debentures in an effort to force Alleco to remain liable on its bonds, (4) Weisman joined in an existing action against Alleco (the exact nature of which is not revealed in the complaint but which apparently involved the Alleco debentures) and, when Weisman was forced by a court to withdraw from that suit, Harry Weinberg agreed to join or continue the action, (5) Weisman met -with personnel from the SEC and communicated information concerning appellants to that agency, (6) at Weisman’s direction, Marks sent a letter to the SEC accusing Alleco and Lapides of securities fraud, (7) these communications caused the SEC to commence or expand an investigation of appellants, and (8) Weisman also conveyed information concerning appellants, the nature of which is not revealed, to the FBI and the Justice Department. (2) Analysis by the Circuit Court Citing Green v. Wash.

Sub. San. Comm’n, 259 Md. 206 , 269 A.2d 815 (1970), the circuit court defined a civil conspiracy as the combination of two or more persons by an agreement to accomplish an unlawful act or to use unlawful means to accomplish an act not in itself unlawful that results in harm to the plaintiff. Citing GAI Audio of N.Y. v. C.B.S., 27 Md.App. 172 , 340 A.2d 736 (1974), Carr v. Watkins, 227 Md. 578 , 177 A.2d 841 (1961), and Yousef v. Trustbank Savings, F.S.B., 81 Md.App. 527 , 568 A.2d 1134 (1990), the court then concluded that, in order to hold a person liable as a member of a conspiracy, the plaintiff must show that that person committed some unláwful overt act in furtherance of the conspiracy.

The court then examined the allegations of the complaint to see what unlawful and harmful overt act each appellee was ⁷⁰³ alleged to have performed in furtherance of a conspiracy to have Weisman violate his duty of fidelity, and it essentially found none. In considering Count II, the court concluded that: “[T]he only actionable breach of fiduciary duty committed by Weisman was Weisman’s sharing of confidential information with the SEC and the FBI during his representation of Alleco and Lapides. Therefore, only a conspiracy to commit this act would be actionable. No defendant can be held liable for trading stock, receiving confidential information, or participating in lawsuits under the circumstances alleged in the amended complaint.” (Emphasis added).

The court’s conclusion that no liability would exist for the trading in Alleco securities rested on its earlier determination that, absent an allegation that appellees purchased any securities from appellants or that appellants were also trading in those securities at the same time, appellants had failed to allege any harm to them from that conduct. The conclusion that no liability ensued from the lawsuits stemmed from the determination that appellees had a right to file or continue such suits, which were aimed at requiring Alleco to live up to its commitment under the debentures, and that such conduct was not, therefore, unlawful. The court’s disinclination to find liability arising from Weisman’s letters to the Government agencies arose from its determination that nothing appellees did had any bearing on Weisman’s sending those letters and therefore could not have been in furtherance of any conspiracy emanating from the improper disclosure of confidential information. (3) Our Analysis We think that the court erred in its subsidiary conclusions that (1) a member of a conspiracy cannot be held civilly liable unless he or she personally committed an unlawful act in furtherance of the conspiracy that itself caused harm to appellants, and (2) no harm can result to a corporation from using ⁷⁰⁴ improperly obtained confidential information to trade in its securities unless those securities were purchased from or sold to the corporation or unless the corporation was itself trading in its securities at the same time.

We also believe, however, that this complaint fails to allege, sufficiently, the unlawful conduct and harm necessary to state a cause of action for civil conspiracy. To develop this, we need to start with the nature of a civil conspiracy. The Court of Appeals has often used the term “civil conspiracy” and has recognized it as though it were an independent tort. It is, however, a term that is more confusing than descriptive.

The confusion stems, in part, from the fact that the word “conspiracy” is also used to characterize certain criminal conduct, but the elements necessary to give rise to criminal liability are quite different than those required for civil liability. It is confusing as well because, as defined in the civil context, it has more to do with the nature and extent of joint tortfeasor liability than with defining as tortious an area of conduct that would not otherwise be regarded as tortious. The gist of a criminal conspiracy is an agreement between two or more persons to commit another crime. The crime of conspiracy is complete when the unlawful agreement is reached; no overt act in furtherance of the agreement is necessary.

Williams v. State, 329 Md. 1 , 7 n. 1, 616 A.2d 1275 (1992), citing Apostoledes v. State, 323 Md. 456, 461-62 , 593 A.2d 1117 (1991). That is not the case with a civil conspiracy; indeed, a converse rule applies. The gist of a civil conspiracy is not the agreement but rather the overt conduct committed pursuant to it and the harm that flows from that conduct. It is a very different kind of animal, but one that borrows from its criminal cousin the notion of mutual agency and joint liability.

The Court of Appeals first discussed and essentially defined the tort in Kimball v. Harman, 34 Md. 407 (1871). It was then regarded as an action on the case, which lay solely for consequential damages. At 409, the Court stated: ⁷⁰⁵ “There is no doubt of the right of a plaintiff to maintain an action on the case against several for conspiring to do, and actually doing, some unlawful act to his damage. But it is equally well-established, that no such action can be maintained unless the plaintiff can show that he has in fact been aggrieved, or has sustained actual legal damage by some overt act, done in pursuance and execution of the conspiracy....

It is not, therefore, for