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PHOENIX TECHS. v. TRW

March 9, 1994

PHOENIX TECHNOLOGIES, INC. Plaintiff,
v.
TRW, INC., Defendant



The opinion of the court was delivered by: J. CURTIS JOYNER

 Joyner, J.

 The matter before the Court is the motion of plaintiff, Phoenix Technologies, Inc., for summary judgment on defendant TRW's amended counterclaim pursuant to Rule 56 of the Federal Rules of Civil Procedure. We recently granted summary judgment in favor of defendant on all counts of plaintiff's complaint. See Phoenix Technologies, Inc. v. TRW, Inc., 840 F. Supp. 1055, 1994 U.S. Dist. LEXIS 73, 1994 WL 4481 (E.D. Pa. 1994).

 Briefly stated, this matter arose when the parties entered into an Agreement of Purchase and Sale ("Agreement") whereby defendant was to sell and plaintiff was to buy one of defendant's divisions, the Customer Service Division ("CSD") for forty million dollars. Although the original closing date was set for November 30, 1990, the closing date was extended four times in order for plaintiff to obtain financing for the deal. Ultimately, plaintiff was unable to obtain financing, and on June 14, 1991, defendant terminated the Agreement pursuant to a termination clause contained in the Fourth Amendment to the Agreement.

 Defendant's amended counterclaim states claims for both fraud and breach of contract, and seeks compensatory damages in the amount of $ 38.8 million dollars, punitive damages, as well as costs, prejudgment interest, and attorneys' fees. Plaintiff now seeks summary judgment based on the following arguments: 1) that defendant has failed to establish a cause of action for fraud, 2) that defendant has waived its claim for fraud, 3) that defendant's claim of fraud is barred by the provisions of the Agreement as amended, 4) that defendant had failed to establish a cause of action for breach of contract, and 5) that defendant is not entitled to recover punitive damages in this action.

 Standard

 In considering a motion for summary judgment, the court must consider whether the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, show there is no genuine issue as to any material fact, and whether the moving party is entitled to a judgment as a matter of law. Fed.R.Civ.P. 56(c). The court is required to determine whether the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 2510, 91 L. Ed. 2d 202 (1986). In making this determination, all reasonable inferences must be drawn in favor of the nonmoving party. Anderson, 477 U.S. at 256, 106 S. Ct. at 2512. While the movant bears the initial burden of demonstrating an absence of genuine issues of material fact, the nonmovant must then establish the existence of each element of its case. J.F. Feeser, Inc., v. Serv-A-Portion, Inc., 909 F.2d 1524, 1531 (3rd Cir. 1990), cert. denied, 499 U.S. 921, 111 S. Ct. 1313, 113 L. Ed. 2d 246 (1991) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 2553, 91 L. Ed. 2d 265 (1986)).

 Discussion

 A. Fraud

 Plaintiff makes several arguments to support its claim that summary judgment on defendant's counterclaim for fraud is warranted. First, plaintiff argues that there can be no cause of action for fraud in this case because defendant bases its allegations of fraud on promises by plaintiff of future performance, and not on representations of past or existing facts. Second, plaintiff states that defendant cannot show that any of plaintiff's representations are false. Third, plaintiff states that there is no evidence of justifiable reliance by defendant on plaintiff's representations. Fourth, plaintiff argues that the conduct of defendant in executing the Agreement and the amendments constitutes a waiver of any alleged fraud by plaintiff. Finally, plaintiff argues that the provisions of the Agreement as amended bar any claim by defendant for fraud. For the reasons set forth more fully below, we find that there is no genuine issue of material fact with respect to the claim for fraud, and therefore, plaintiff is entitled to summary judgment.

 In order to state a claim for fraud in Ohio, *fn1" a party must show:

 
a) a representation or, where there is a duty to disclose, concealment of a fact, b) which is material to the transaction at hand, c) made falsely, with knowledge of its falsity, or with such utter disregard and recklessness as to whether it is true or false that knowledge may be inferred, d) with the intent of misleading another into relying upon it, e) justifiable reliance upon the representation or concealment, and f) a resulting injury proximately caused by the reliance.

 Gaines v. Preterm-Cleveland, Inc., 33 Ohio St. 3d 54, 55, 514 N.E.2d 709, 712 (1987). Further, a promise to perform in the future cannot constitute a representation that is the basis for fraud unless it can be shown that at the time the promise was made, the promisor intended not to perform the promise. Link v. Leadworks Corp., 79 Ohio App. 3d 735, 742-43, 607 N.E.2d 1140, 1145 (1992); Freeman v. Westland Builders, Inc., 2 Ohio App. 3d 212, 217, 441 N.E.2d 283, 289 (1981).

 The basis of defendant's fraud claim is that plaintiff fraudulently induced defendant to enter into the Agreement and amendments to the Agreement based on oral and written representations about financing which plaintiff knew were untrue, or which plaintiff made in reckless disregard of the truth. Central to defendant's claim are two specific representations made by plaintiff. The first is contained in a letter sent by plaintiff to defendant dated September 21, 1990, where plaintiff proposed to buy the CSD for forty million dollars subject to a number of conditions. The relevant portion of the letter for defendant's fraud claim states: "Our financing of this proposed acquisition is currently being finalized, and we expect to have written confirmation within two to three days." The letter further indicates that financing is to be acquired from Metropolitan Life Insurance Co., Meridian Bank and Creditanstalt, along with the sums expected from each lender. Finally, the letter states "as we receive written confirmation from our lenders and investors during the next few days, we will fax copies to you." The second representation is contained in a letter sent by plaintiff to defendant ...


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