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AGENCY SERVS. v. REITER

March 4, 1981

AGENCY SERVICES, INC.
v.
Bernard REITER et al.



The opinion of the court was delivered by: POLLAK

MEMORANDUM

Plaintiff, Agency Services, Inc., a Maryland corporation, is engaged in the business of financing automobile insurance policies: Defendants, citizens of Pennsylvania, are insurance agents. Plaintiff and defendants have an agreement whereby defendants refer customers who need financing for the purchase of insurance policies to plaintiff. If plaintiff agrees to make the loan, it forwards a portion of the loaned amount to defendants, who are required to send the forwarded amount, with additional amounts collected from the customer, directly to the insurance company issuing the financed policy. Plaintiff has instituted this suit to recover funds allegedly fraudulently retained by defendants. Defendants have filed a counterclaim alleging, in count I, that plaintiff is indebted to defendants; in count II, that defendants are entitled to punitive damages; in count III, an action for malicious prosecution; in count IV, an action for libel. Plaintiff has moved to dismiss counts II, III, and IV of the counterclaim for failure to state a claim upon which relief can be granted.

 COUNT II

 Plaintiff contends that count II of the counterclaim must be dismissed as it is denominated "Punitive Damages" a form of relief rather than a substantive cause of action. But in count II defendants incorporate the allegations made in count I, and in addition allege that plaintiff acted maliciously to harm the defendants. Thus, while defendants could have incorporated count II in count I, they are free to plead it as a separate claim for relief.

 COUNT III

 Defendants have not opposed the motion to dismiss insofar as it relates to count III.

 COUNT IV

 In count IV, defendants seek damages for an alleged libel contained in a letter *fn1" sent by plaintiff to several insurance companies which were involved in the business relationship described supra. Plaintiff seeks to dismiss this claim on the ground that the letter is not defamatory as a matter of law.

 Under the law of Pennsylvania, the court must determine, in the first instance, whether the communication complained of is susceptible of a defamatory meaning. Corabi v. Curtis Publishing Company, 441 Pa. 432, 273 A.2d 899 (1971). As the test for defamatory meaning, Pennsylvania has adopted the standard set forth in the Restatement, Torts § 559 (1938):

 
A communication is defamatory if it tends so to harm the reputation of another as to lower him in the estimation of the community or to deter third persons from associating or dealing with him.

 Cosgrove Studio and Camera Shop, Inc. v. Pane, 408 Pa. 314, 182 A.2d 751 (1962). In making its determination, a court must weigh both the language of the communication, and the context in which the communication is made. Pierce v. Capital Cities Communications, Inc., 576 F.2d 495, 502 (3d Cir. 1978).

 The letter complained of by defendants when read in the context of the business relationships described supra could be reasonably understood by the addressee insurance companies to indicate that defendants had retained funds which they were obliged to turn over to the insurance companies. Since such an imputation might well tend to deter the addressees from maintaining business relationships with the defendants, count IV states a cause of action.

 Conclusion

 In view of the foregoing, the motion to dismiss the counterclaim is, in an accompanying order, GRANTED as to count III and ...


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