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Litigation News

Litigation News | 2023

Aiding & Abetting Fraud: A Novel Common Law Cause of Action?

Steven Bennett Chaneles


  • The Marion v. Bryn Mawr Trust Co. case involved a broker operating a Ponzi scheme using a bank's accounts.
  • The Pennsylvania Supreme Court affirmed that aiding and abetting fraud is a cognizable claim under Pennsylvania law.
  • The court determined that actual knowledge, rather than intentional ignorance, is the required level of scienter for the cause of action.
Aiding & Abetting Fraud: A Novel Common Law Cause of Action?
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A state supreme court has recognized a common law cause of action against a bank for aiding and abetting fraud in connection with a Ponzi scheme perpetrated by a bank client. The court also articulated the requisite level of scienter for the cause of action. ABA Litigation Section leaders caution lawyers to advise clients about the scope and ramifications of potential common law aiding and abetting liability.

Marion v. Bryn Mawr Trust Co. involved a Ponzi scheme operated by a broker selling fraudulent certificates of deposit to new investors to pay off earlier investors. The broker perpetrated the scheme using new accounts he opened with the defendant bank. The U.S. Securities and Exchange Commission commenced a civil action against the broker, and a federal court appointed a receiver for two entities through which the broker operated. The receiver then sued the bank in Pennsylvania state court, asserting several claims, including common law aiding and abetting fraud.

The trial court granted summary judgment in favor of the bank on the aiding and abetting claim, noting that Pennsylvania courts had not recognized that cause of action. After a jury trial on the other claims, the receiver appealed to the intermediate court of appeals, which reversed and remanded. The court of appeals held that aiding and abetting fraud is a recognized cause of action under Pennsylvania law and “intentional ignorance” is the scienter standard. The Pennsylvania Supreme Court affirmed in part and reversed in part, holding that aiding and abetting fraud is a cognizable claim, but that actual knowledge is the required scienter standard. 

Aiding and Abetting Fraud Is Not Novel

The Marion court looked to the Restatement (Second) of Torts section 876(b) as the textual source for the cause of action. Citing other Pennsylvania Supreme Court cases, intermediate appellate court cases, and case law from other jurisdictions, the court observed that the cause of action is not novel. "We do not see today’s holding as a ‘change’ in the law so much as affirmation of existing jurisprudence,” the opinion stated. It also cited policy reasons favoring recognition of the cause of action.

The court rejected the defendant’s arguments that allowing the cause of action was unnecessary because it duplicated other causes of action such as fraud, civil conspiracy, negligence, breach of fiduciary duty, and other statutory remedies, and it would lead to confusion and abusive litigation. The court also reasoned that those other causes of action have elements distinct from aiding and abetting fraud.

Actual Knowledge Is Required

The court also held that actual knowledge, rather than a lesser standard of intentional ignorance (as urged by the plaintiff), is required, relying on the plain text of the Restatement, and other persuasive authority. Although the court rejected the plaintiff’s argument for a lesser standard, it noted that intentional ignorance might raise an inference of actual knowledge. The court concluded that actual knowledge as the standard “strikes the right balance between permitting redress for fraud victims on the one hand and protecting defendants from excessive costs and liability on the other.” 

Keeping a Lid on Pandora’s Box

The court concluded that the judicial system’s familiarity with the tort and requiring actual knowledge would mitigate any “doctrinal confusion” and “mischie[vous]” or “abusive” litigation practices. “Actual knowledge is a tough standard and suffices to disincentivize weak or contrived claims,” states Fabrice N. Vincent, San Francisco, CA, cochair of the Litigation Section’s Business Torts & Unfair Competition Committee.

Section leaders echo the court’s view that its holding is not novel. “Courts around the country have recognized aiding and abetting causes of action in the context of fraud and lender liability over many years,” notes Mitchell R. Edwards, Providence, RI, cochair of the Banking and Lender Liability Litigation Subcommittee of the Section’s Commercial & Business Litigation Committee. The tort may “logically carry over to other intentional torts,” Vincent suggests. “I could imagine aiding and abetting claims with other intentional torts such as tortious interference with contract or prospective business advantage,” agrees Edwards. 

A Wake-up Call for Unsuspecting Business Partners

This decision adds more incentive for parties to really know who they do business with. “While very thin claims can often be disposed of through early motion practice, even successful defendants are forced to incur meaningful fees, and plaintiffs may be able to allege sufficient facts to survive those motions and increase their ‘holdup’ leverage, including by causing ongoing litigation costs,” asserts Mark Cianci, Boston, MA cochair of the Fraud Subcommittee of the Section’s Business Torts and Unfair Competition Committee.  

“The decision will likely push parties and their counsel to conduct further diligence in order to gain comfort that their business partners are not a potential source of aiding and abetting liability,” Cianci predicts. “Good compliance programs and training of employees, officers, and directors of financial institutions are among the best ways to avoid getting into this situation in the first place,” advises Edwards.


  • Jeremy K. Beecher, “Advisors, Beware: Delaware Court Eases the Pleading Standard for Alleging a Claim of Aiding and Abetting Breach of Fiduciary Duty,” Bus. Torts & Unfair Competition (July 6, 2021).
  • Sarah Schiferl, “Aiding and Abetting Breach of Fiduciary Duty: Lawyer Beware,” Bus. Torts & Unfair Competition (May 23, 2017).
  • Andrew A. Kasper, “Aetna Kickback Suit Against Laboratory Marketing Company Allowed to Proceed,” Health L. (Jan. 06, 2016).
  • Gene R. Kohut, Scott A. Wolfson, and Adam L. Kochenderfer, “Banking on Liability: Claims Against Ponzi Scheme Professionals,” Com. & Bus. (Nov. 21, 2013).