§ 7.5 Aiding and Abetting
As previously discussed, the phrase aid and abet is a well-known legal doublet in which synonyms have been coupled.2111
Aiding and abetting evolved from common-law cases holding that those who knowingly participate in fraud are jointly and severally liable.2112 Under the common-law cases, aiding or aiding and abetting were just two of many ways to knowingly participate.2113 Other ways included encouraging, advising, counseling, directing, or approving the fraud.2114 It was not until about 1966 that courts began distinguishing between primary liability and aiding and abetting as a secondary form of liability.2115
A variety of Arizona decisions recognize civil liability for aiding and abetting.2116 In Wells Fargo,2117 a 2002 decision presenting common-law fraud claims, the Supreme Court listed the elements as follows:
Commission of a tort by a person other than the aider and abetter;
? Knowledge by the aider and abetter that the primary tortfeasor's conduct is a breach of duty; and
? Conduct by the defendant that substantially assists or encourages the primary tortfeasor in achieving the breach.2118
Wells Fargo contains an elaborate discussion of these elements.2119 The decision explains that while knowledge of the tort is required, it may be proved circumstantially.2120 Complete knowledge of the details of the tort is unnecessary.2121 General awareness of the primary tortfeasor's fraud suffices.2122
Transactions that are atypical or lack business justification may permit an inference of knowledge.2123 Whether the defendant has an economic motive to assist the fraud may also be important.2124 Transactions that in isolation are unremarkable may collectively suggest an unusual pattern from which awareness of fraud can be inferred.2125
On the other hand, recklessness does not provide the scienter needed for aiding-and-abetting liability.2126 Suspicious circumstances and red flags that indicate only recklessness are not enough.2127 To establish the defendant's scienter, the plaintiff's evidence must support a reasonable inference that the defendant knew that fraud or another tort was occurring.2128
Substantial assistance "does not mean assistance that is necessary to commit the fraud."2129 Assistance is substantial when it "makes it 'easier' for the violation to occur"2130¾something "more than 'a little aid.'"2131 Assistance that occurs after the initial tort was committed may be substantial.2132
Common-law fraud must be proved by clear-and-convincing evidence.2133 In contrast, liability for aiding-and-abetting fraud requires only proof by a preponderance of the evidence.2134
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Notes:
[2111] See supra note 1726 and accompanying text.
[2112] See Prentice, Scheme Liability, supra note 1727, at 371-74; Prentice, Stoneridge, supra note 1551, at 623-30.
[2113] See Prentice, Stoneridge, supra note 1551, at 626.
[2114] Id. at 628; cf. Geiler v. Ariz. Bank, 24 Ariz. App. 266, 267-68, 271-72, 537 P.2d 994, 995-96, 999-1000 (1975) (referring interchangeably to a bank's potential liability for securities fraud as a party who provided "active aid," "apparent participation," and whose manager may have been "a full partner" in the efforts to defraud the plaintiff).
[2115] Prentice, Stoneridge, supra note 1551, at 625-26.
[2116] See, e.g., Sell v. Gama, 231 Ariz. 323, 329 ¶ 27, 295 P.3d 421, 427 ¶ 27 (2013) (refusing to recognize a cause of action for aiding and abetting securities fraud but noting that "as a matter of common law, our courts have recognized aiding and abetting liability in various tort-related contexts" (citations omitted)); Wells Fargo Bank v. Ariz. Laborers, Teamsters & Cement Masons Local No. 395 Pension Trust Fund, 201 Ariz. 474, 485-90 ¶¶ 31-58, 38 P.3d 12, 23-28 ¶¶ 31-58 (2002) (reversing dismissal of aiding-and-abetting claims against bank); Prince Dev. Corp. v. Beal, 85 Ariz. 74, 76-77, 331 P.2d 1091, 1092 (1958) (stating in dictum that a person could be held in contempt for aiding-and-abetting a violation of an injunction); Rodgers v. Bryan, 82 Ariz. 143, 148, 309 P.2d 773, 776...
