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SHERMAN v. MEDICINE SHOPPE INTL.

February 24, 1984

WILLIAM SHERMAN, Plaintiff,
v.
MEDICINE SHOPPE INTERNATIONAL, INC., Defendant; MEDICINE SHOPPE INTERNATIONAL, INC., Plaintiff, v. WILLIAM SHERMAN, et al., Defendants



The opinion of the court was delivered by: TROUTMAN

 This matter is before the Court on Medicine Shoppe International, Inc.'s ("MSI"), Second Motion to Reopen and Enforce Settlement Agreement, and for Summary Judgment in Accordance with Settlement, and the Motion Requesting Equitable Recision of a Portion of Settlement Agreement filed by plaintiff in Cause No. 79-1351 and all defendants in Cause No. 83-1965 (such parties hereinafter being referred to collectively as "Sherman"). For the reasons set forth below, MSI's motion will be granted, and Sherman's motion will be denied. Because of the complexity of the situation, the facts and legal positions of the parties have been analyzed at some length.

 I.

 THE FIRST SETTLEMENT

 In 1979, William P. Sherman filed Civil Action 79-1351 in the state courts of Pennsylvania. The case was subsequently removed to this Court and a counterclaim was filed by MSI. Sherman alleged, inter alia, various breaches of two license agreements between himself and MSI, pursuant to which MSI licensed Sherman to utilize MSI's trademark, tradename and methods of doing business in the operation of two apothecary-type pharmacies (one in Reading, the other in Lancaster). MSI, in its counterclaim in Civil Action 79-1351 and its complaint in Civil Action No. 83-1965, sought enforcement of those license agreements and, in particular, the termination provisions contained in them.

 Civil Action No. 79-1351 was called for trial on the morning of June 21, 1983. Prior to the case actually commencing, the parties reached a settlement (the "First Settlement") resolving all issues in both cases. The First Settlement was reached after lengthy negotiations, at which all parties were represented by counsel. Its terms were read to the Court, but the Court's reporter was not in attendance. Despite several attempts by MSI to make a formal record of the agreement, that was impossible. In any event, all parties agreed that the essence of the first settlement was the payment of $110,000 by Sherman to MSI, and MSI's purchase of a pharmacy in Reading, PA, (the "Pharmacy") from Sherman, generally along the lines called for in the termination provisions of the License Agreements.

 On June 23, 1983, MSI's counsel ("Rovak") sent a letter (the "Letter") setting out the terms of the First Settlement to William Atlee, Jr., counsel for Sherman. The Letter correctly recorded the terms of the First Settlement, including a proviso that although the parties intended to execute a formal agreement, the First Settlement was a full settlement agreement in and of itself.

 On June 24, 1983, Atlee wrote Rovak, and although raising a procedural point, stated that the Letter "sets forth most of the essential terms" pertaining to the First Settlement. Rovak called Atlee to discuss the procedural point raised by Atlee, at which time Atlee confirmed that there were no essential terms of the First Settlement not accurately set out in the Letter. Rovak next sent Atlee an agreement, and related documents which were intended to be formalized documentation of the First Settlement (the "Rovak Agreement"). These documents did not vary any essential term of the agreement, and merely contained standard wording, so-called "boilerplate", of a contract to sell a small business.

 On August 9, 1983, an attorney in Atlee's firm notified Rovak that the Rovak Agreement had not been yet reviewed. Rovak became concerned and wrote Atlee stating that while changes in formal wording were of no consequence to MSI, MSI would not accept any substantive renegotiation of the First Settlement. Nonetheless, on August 26, 1983, Atlee sent a revised set of settlement documents to Rovak. Those documents were materially different from the First Settlement of June 21, 1983. Upon their receipt, Rovak contacted Atlee and again told him that while MSI would stand by the terms of the First Settlement it was not concerned about formal wording, and would even accept Atlee's version if the substantive terms conformed to the First Settlement.

 In the meantime, MSI had relied upon the First Settlement by contracting to sell the Pharmacy to a Mr. Naglak, under a new license agreement.

 However, Sherman refused to conclude the First Settlement. When MSI sought to enforce that settlement, Sherman responded by pointing out differences between the Rovak Agreement and the version sent by Atlee, as proof that no binding agreement had ever been reached. The recitation was irrelevant, for the issue before the Court was not whether or not the documents sent by Rovak or Atlee signified an inability to reach an agreement, but whether the First Settlement was in and of itself binding upon the parties. This Court spent the 29th and 30th of September, 1983 hearing testimony on MSI's first motion, and Sherman's response, during which time Rovak, Atlee, William Sherman, and Ronald T. Hofmeister, an executive of MSI, all testified as to the terms of the First Settlement. After the evidence had been closed, but before the Court reached any decision, the parties announced that they had once again reached a settlement. It is this second settlement that MSI seeks to enforce, and which Sherman seeks to partially rescind.

 II.

 THE SECOND SETTLEMENT

 The First Settlement contained inter alia, a provision whereby Sherman would lease the real estate upon which the Pharmacy sits to MSI. At the hearing of the 29th and 30th of September, it was obvious that most of Sherman's unhappiness over the First Settlement revolved around the fact that the lease called for in that agreement was unsatisfactory both to William T. Sherman and a business associate, Mr. Thomas Frontz. In particular, Mr. Sherman felt that the terms of the lease described in the First Settlement were such as to make a subsequent sale of the real estate difficult. Mr. Sherman also thought that under the First Settlement, the leasing of the property in question could be accomplished on the terms called for in the lease between Royer Pharmacy, Inc. (a corporation controlled by Sherman) and Madeline Lipman, pursuant to which Royer Pharmacy, Inc. leased certain property from Madeline Lipman beginning in 1974 (the "Lipman Lease"). Sherman also objected to other terms in the First Settlement.

 Late on September 30th, Atlee approached Rovak and asked if MSI would agree to alter the First Settlement in accordance with Sherman's wishes, which Atlee listed, and if so, what the cost to Sherman would be. Atlee and Rovak then negotiated over this cost, and over changes Sherman wanted to make in the First Settlement. As a way to structure the proposed settlement, Atlee began by utilizing still another form of agreement. This one was a document he had sent to Rovak in an effort to settle the matters raised in MSI's first motion. This form had been prepared by Dennis Ward, another attorney for Sherman and has been referred to as the "Ward Agreement".

 Yet of greater significance is terminology from the Ward Agreement not incorporated into the Rovak Agreement.

 During the negotiations on the 30th, Atlee removed two pages from a copy of the Ward Agreement, and placed brackets around certain language which made a detailed statement to the effect that while the lease to be executed was substantially similar to the Lipman Lease, under the lease to be executed by the parties, the monthly rental was to be "net" to Sherman. This was further detailed by stating that MSI would be responsible for all taxes, maintenance and insurance, as well as certain other expenses, with respect to the leased premises. The language further stated that if there was any discrepancy between the Lipman Lease and the language Atlee sought to include in the Rovak Agreement, the cited language would control over that contained in the Lipman Lease.

 Rovak took these two pages, along with certain other wording from the Ward Agreement, and discussed them with his client. Upon returning, Rovak told Atlee that while most of the portions of the Ward Agreement which Atlee wanted to include in the Rovak Agreement were acceptable to MSI, the terminology with respect to the lease was not. Rovak told Atlee that the description of the rent as "net" was unacceptable, and that MSI would not utilize any definition of "net" to describe which party was responsible for what expense. Instead, Rovak stated that in view of Sherman's insistence, both on and off the stand, upon the acceptability of the Lipman Lease, MSI would be willing to accept the Lipman Lease with its terms unchanged, such that the lease to be executed by the parties would be the Lipman Lease changed only as to the period of the lease, the rental itself, the description of the property, an escalation clause and the identity of the lessee and the lessor. Rovak insisted that, other than those changes, the lease between the parties ...


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