as consideration for a new agreement, Pennsylvania courts have required that the dispute be "reasonable." Warren Tank Car Co., 330 Pa. at 285, 199 A. at 141. The reasonableness of the dispute is "to be judged as it appeared to the parties at the time." Restatement (Second) of Contracts § 74, Comment b. Because the evidence submitted by the parties is not such that this court could enter summary judgment or a directed verdict in Peoples' favor as to the issue of whether Peoples' termination was for cause, we conclude as a matter of law that Fannie Mae's stance was reasonable as well as honest. See Anderson, 477 U.S. at 250 (summary judgment inappropriate when "reasonable minds could differ as to the import of the evidence"). Any other conclusion would vitiate the purpose of this exception to the pre-existing duty rule by inviting litigation of the underlying dispute whenever a party to a settlement of that dispute is later unsatisfied with the terms of the settlement.
Peoples argues that even if the withdrawal of the termination in favor of a suspension constituted "new" consideration not already due to Peoples under the Contract, a failure of consideration ensued when Fannie Mae failed to perform on its promise. In essence, Peoples argues that Fannie Mae's suspension was "a suspension in name only," and that Fannie Mae "has continued to treat Peoples as a terminated lender since May 1991." Peoples Mem. at 70.
Peoples' argument is without merit for two reasons. First, as discussed above, Peoples has acknowledged that, because of the effect on its warehouse line of credit with CoreStates Bank, it did derive some benefit from its status as a suspended, rather than terminated, lender. Additionally, the Letter Agreement does not promise that Peoples would eventually be fully reinstated. Reinstatement is not even mentioned in the Letter Agreement. See FNMA Ex. E. Even the May 20 first draft of the agreement, made by Peoples' counsel, is open ended about the length of the suspension and does not contemplate a date of reinstatement. See FNMA Ex. H. Thus, Fannie Mae never promised to reinstate Peoples at some time in the future. According to the testimony of Fannie Mae's counsel and representatives, Fannie Mae discussed the possibility of reinstating Peoples many times after execution of the Letter Agreement, but each time decided not to reestablish a selling relationship with Peoples. Reich Dep., FNMA Ex. 8 at 53-54, 84-87; Logan Dep., FNMA Ex. 9 at 121-22.
Although the Letter Agreement does not contemplate a reinstatement, Peoples argues that eventual reinstatement of a suspended lender is required by Fannie Mae's Servicing Guide. According to Peoples, the Guides "clearly contemplated a suspension as a rehabilitative measure to be used in connection with improving, not ending, a lender's performance." Peoples Mem. at 35-37. The sections of the Guides relied upon by Peoples, however, do not support its argument.
We first note that the Letter Agreement, which states that it is the "full agreement" between Fannie Mae and Peoples, does not state that the duration of the suspension is to be controlled by the Guides. Moreover, the sections of the Guides relied upon by Peoples speak in terms of what Fannie Mae will "generally" or "usually" do when making a termination or suspension, not of what Fannie Mae is bound to do. See Servicing Guide § 209, Peoples Ex. 31; Servicing Guide § 206, Peoples Ex. 32. Finally, the Guides explicitly envision that a suspension may be for an "indefinite period." Id. Thus, the Guides provide no support for Peoples' position. See also Nichols Dep., Peoples Ex. 13 at 138-39 (suspension, as used by Fannie Mae, "usually" involves the possibility of reinstatement).
In summary, the Letter Agreement promised a suspension, and a suspension is what Peoples received. The withdrawal of the termination in favor of the suspension provided consideration for the Agreement. It is of no relevance that the suspension was not later withdrawn in favor of reinstatement.
b. The right to retain certain files
Even if we were to accept Peoples' argument that the withdrawal of the termination was not consideration for the Letter Agreement because it gave Peoples no more than that to which it was already legally entitled under the Contract, we find that another promise made by Fannie Mae in the Letter Agreement gave Peoples a benefit to which it was not already entitled under the Contract.
The Letter Agreement gives Peoples permission to retain certain files for that portion of the portfolio, the servicing of which Peoples was attempting to transfer to Landmark Savings Bank or Fidelity Bond and Mortgage Corporation. FNMA Ex. E, Letter Agreement at P 2. The Contract, on the other hand, specifically provided that those files belonged to Fannie Mae. Contract § V.C, FNMA Ex. 4;
see also Berger Dep., FNMA Ex. D at 122 (admitting that Fannie Mae owned the mortgage records and files). Thus, the Letter Agreement gave a benefit to Peoples, possession of the files, to which it was not already entitled under the Contract, and this benefit serves as consideration for the Agreement.
Peoples argues that this benefit was illusory. According to Peoples, "since the Landmark transaction had already collapsed prior to the execution of the Letter Agreement, Fannie Mae's 'permission' to Peoples to retain certain files in connection with that transaction was already moot by the time the Letter Agreement was executed." Peoples Mem. at 70. Peoples' assertion, however, is without merit.
Whatever the status of the Landmark transaction when the Letter Agreement was executed, there is no evidence that the prospective deal with Fidelity Bond and Mortgage Corporation was "moot" at the time that the Agreement was signed.
Indeed, Peoples' own evidentiary submission shows that Fidelity sent Peoples a Letter of Intent for purchase of the Portfolio on November 14, 1991, more than five months after the Letter Agreement was executed. Peoples Ex. 50; see also Peoples Mem. at 85-87 (describing ongoing relationship between Peoples and Fidelity for several months after the Letter Agreement was executed). We conclude that Fannie Mae's allowing Peoples to retain these files served as consideration for the Letter Agreement.
c. Termination without cause
Finally, although neither party has fully discussed the issue, we find mutual consideration stemming from the fact that Fannie Mae could have terminated Peoples without cause.
Fannie Mae's termination of Peoples without cause would have left Peoples in the same "terminated" situation, except it would have been entitled to a fee as calculated under the Contract. Peoples would not, however, have been entitled to any of the benefits of the Letter Agreement, including the withdrawal of the termination. Thus, the benefits conferred upon Peoples by the Letter Agreement, together with Peoples' relinquishment of any claim to the fee due upon a termination without cause, furnish mutual consideration for that agreement.
Peoples argues that the Letter Agreement is unenforceable because it is unconscionable. The court disagrees.
Although the concept of unconscionability "is not susceptible of precise definition," Stanley A. Klopp, Inc. v. John Deere Co., 510 F. Supp. 807, 810 (E.D. Pa. 1981), aff'd without opinion, 676 F.2d 688 (3d Cir. 1982); see also, Kennington Ltd., Inc. v. Wolgin, 1989 U.S. Dist. LEXIS 5728 *19, Civil Action No. 89-80, 1989 WL 55395 at * 7 (E.D. Pa. May 23, 1989) (precise definition of unconscionability is difficult to ascertain from Pennsylvania case law), Pennsylvania courts have repeatedly stated that:
Unconscionability has generally been recognized to include an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party.
Witmer v. Exxon Corp., 495 Pa. 540, 551, 434 A.2d 1222 (1981) (emphasis omitted) (quoting Williams v. Walker-Thomas Furniture Co., 121 U.S. App. D.C. 315, 350 F.2d 445, 449 (D.C. Cir. 1965)); accord, Denlinger, Inc. v. Dendler, 415 Pa. Super. 164, 608 A.2d 1061, 1068 (1992); Wagner v. Estate of Rummel, 391 Pa. Super. 555, 571 A.2d 1055, 1059 (1990), appeal denied, 527 Pa. 588, 588 A.2d 510 (1991); Kennington, 1989 WL at * 7; Melso v. Texaco, Inc., 532 F. Supp. 1280, 1295-96 (E.D. Pa.), aff'd without opinion, 696 F.2d 983 (3d Cir. 1982); Stanley A. Klopp, 510 F. Supp. at 810; 14 Williston on Contracts § 1632A (3d ed. 1972).
A party claiming that an agreement is unconscionable may be found to have had an "absence of meaningful choice" when it executed the agreement in either of two circumstances. As Judge Joseph S. Lord, III, of this court has explained:
One variety of unconscionable contract is very much like contracts of adhesion . . . . It usually involves a party whose circumstances, perhaps his unworldliness or ignorance, when compared with the circumstances of the other party, make his knowing assent to the fine-print terms fictional. . . . Another species concerns what is basically economic duress. In the absence of a general mandate to review the adequacy of consideration, there has sometimes been a review of the economic positions of the parties and a finding that the position of one was so vulnerable as to make him the victim of a grossly unequal bargain.
In re Elkins-Dell Manufacturing Co., 253 F. Supp. 864, 871 (E.D. Pa. 1966) (citing 3 Corbin, Contracts § 559, at pp. 270-71 (1960)).
In neither of the above-described senses did Peoples suffer from an "absence of meaningful choice." The first of the above-described species of unconscionability arises in situations "where a sophisticated, knowing party was dictating terms to an unsophisticated party placing the latter in a perilous position without his knowledge." Kennington, 1989 WL at * 8 (citing Germantown Manufacturing Co. v. Rawlinson, 341 Pa. Super. 42, 491 A.2d 138, 145-148 (1985)). In contrast, Peoples is a sophisticated business and was represented by counsel at all stages of negotiation and execution of the letter agreement. See Kennington at * 8 (rejecting unconscionability claim made by "sophisticated businessperson, well accustomed to dealing in millions of dollars"). As to the second type of unconscionability, arising out of "economic duress," we have already determined as a matter of law that such duress was not present in the instant case. See supra Section IV.A.1.
We conclude that the Letter Agreement is not unconscionable. It may well be that Peoples "entered into a less than ideal business arrangement. Pennsylvania contract law, however, is not in place to act as an insurance policy for those who suffer some sort of loss as a result of a contractual relations. . . . The freedom to contract includes the freedom to enter into bad deals." Kennington Ltd., Inc. v. Wolgin, 1989 U.S. Dist. LEXIS 5728 *21, Civil Action No. 89-80, 1989 WL 55395 at * 8 (E.D. Pa. May 23, 1989).
B. Peoples' Claims Against Fannie Mae
Having determined that the Letter Agreement is enforceable, we proceed to consider each of Peoples' claims against Fannie Mae. Peoples complaint against Fannie Mae alleges: (1) breach of the Contract (Count I); (2) conversion of the servicing income from the Servicing Portfolio (Count II); (3) intentional interference with contractual agreement (Count III); (4) intentional interference with prospective advantage (Count IV); and (5) negligence (Count VI). Peoples asks the court to declare that the termination provisions of the Contract are unconscionable, void and unenforceable, and that the right to service the loans sold by Peoples to Fannie Mae belongs to Peoples (Count VII). Finally, Peoples asks the court to enjoin Fannie Mae from selling the Servicing Portfolio (Count VIII).
1. Breach of the Contract
In Count I of its complaint, Peoples alleges that Fannie Mae breached the Contract when it terminated the Contract's selling and servicing provisions on May 17, 1991. In particular, Peoples asserts that Fannie Mae breached the Contract by terminating Peoples for cause when in fact no cause existed. Peoples argument, however, cannot stand in light of the existence and enforceability of the Letter Agreement.
The Letter Agreement states that it is a "resolution of all disputed issues" between Fannie Mae and Peoples, and that it "represents the full agreement" reached by the parties. Fannie Mae Ex. E. Because the Letter Agreement, and not the Contract, defines Peoples' contractual rights against Fannie Mae, Peoples cannot maintain a claim for breach of the Contract. All claims for breach of the Contract were rendered moot when the Letter Agreement was executed. Indeed, the Letter Agreement states that the termination was "for cause," specifically negating Peoples' claim that the termination was actually without cause. Accordingly, Count I must be dismissed.
2. Conversion of servicing income from the Servicing Portfolio
Count II of Peoples' complaint attempts to state a claim for conversion of the servicing income from the Servicing Portfolio. Under Pennsylvania law, conversion is defined as "the deprivation of another's right of property in, or use or possession of, a chattel, or other interference therewith, without the owner's consent and without lawful justification." Stevenson v. Economy Bank of Ambridge, 413 Pa. 442, 451, 197 A.2d 721, 726 (1964); accord, Bank of Landisburg v. Burruss, 362 Pa. Super. 317, 524 A.2d 896, 898 (1987). The party claiming conversion must have had an immediate right to possession of the property at the time it was allegedly converted. Bank of Landisburg, 524 A.2d at 898 (citing Potts Run Coal Co. v. Benjamin Coal Co., 285 Pa. Super. 128, 135, 426 A.2d 1175, 1178 (1981)). Money may be the subject of a conversion. Shonberger v. Oswell, 365 Pa. Super. 481, 530 A.2d 112, 114 (1987) (citing Pearl Assurance Co. v. National Ins. Agency, 151 Pa. Super. 146, 156, 30 A.2d 333, 337 (1943)).
In order to understand Peoples' conversion claim, it is necessary to appreciate the way in which Peoples allegedly garnered servicing income under the terms of the Contract. When Fannie Mae purchased loans from Peoples pursuant to the Contract, it contracted to receive a fixed "pass-through" rate or "required net yield" of return from each loan payment made to Peoples by the borrower. This "pass-through" or "net yield" payment was made to Fannie Mae by Peoples, the servicer of the loan. Complaint P 101. The "pass-through" rate is less than the full amount of principal and interest due each month from the borrower, Complaint P 102, and the difference between the principal and interest paid by the borrower to Peoples, and the "pass-through" rate paid by Peoples to Fannie Mae represented the servicing fee to which Peoples was entitled under the Contract, Complaint P 103.
The Complaint alleges that the "servicing fee for each loan serviced by Peoples belongs to Peoples, not Fannie Mae." Complaint P 105. Because Peoples has not received any servicing income from the Portfolio since it was seized by Fannie Mae in May 1991, Peoples concludes that Fannie Mae has "converted the servicing income from the Peoples servicing portfolio to their own use and benefit." Complaint P 106. In short, Peoples contends that it owns the income acquired by servicing the Portfolio, and that Fannie Mae has converted that income by taking it away from Peoples.
Peoples' argument is belied by the undisputed facts and the plain language of the Letter Agreement. The Complaint's allegation that the "servicing fee for each loan serviced by Peoples belongs to Peoples, not Fannie Mae," Complaint P 105, is beside the point, since none of the loans in the Portfolio are "serviced by Peoples," nor have they been serviced by Peoples since May 1991, having instead been "subserviced" for Fannie Mae by Meridian Mortgage Corporation.
If Peoples means to claim that it owns the servicing fee for each loan in the Portfolio, irrespective of who actually does the servicing, this claim must fall in light of the plain language of the Letter Agreement, which states: "Except as specifically provided in this letter, Fannie Mae has all rights to the Servicing Portfolio." FNMA Ex. E. Thus, when Peoples executed the Letter Agreement, it gave up all rights to the servicing income, except insofar as such rights may be specifically provided by that agreement.
Because any rights Peoples might have to servicing income are defined by the terms of the Letter Agreement, which we have determined to be an enforceable contract, Peoples cannot sue in tort for conversion of that income. Instead, any rights to servicing income granted to Peoples by the Letter Agreement would properly be protected by a contract action seeking enforcement of the Letter Agreement or damages for its breach. As Judge Pollak of this court has explained:
While it is true that the mere existence of a contract between parties does not foreclose the possibility of a tort action arising between them, it does not follow that a plaintiff should be allowed to sue in tort for damages arising out of a breach of contract. To hold otherwise would be to blur one reasonably bright line between contract and tort, and hence introduce needless confusion into the judicial process, a step that Pennsylvania's state and federal courts alike have refused to take.
Stout v. Peugeot Motors of America, 662 F. Supp. 1016, 1018 (E.D. Pa. 1986) (citing, Standard Pipeline Coating Co. v. Solomon & Teslovich, Inc., 344 Pa. Super. 367, 496 A.2d 840, 843-44 (1985); Glazer v. Chandler, 414 Pa. 304, 308 & n. 1, 200 A.2d 416 (1964); Iron Mountain Security Storage Corp. v. American Specialty Foods, Inc., 457 F. Supp. 1158, 1165-66 (E.D.Pa.1978)); accord, Montgomery v. Federal Insurance Co., 836 F. Supp. 292, 301-302 (E.D. Pa. 1993) (dismissing conversion claim because of, inter alia, the "firmly accepted . . . doctrine that an action for conversion will not lie where damages asserted are essentially damages for breach of contract"); Neyer, Tiseo & Hindo, Ltd. v. Russel, 1993 U.S. Dist. LEXIS 2738 *5, Civil Action No. 92-2983, 1993 WL 53579 at * 3-4 (E.D. Pa. March 3, 1993) (dismissing conversion claim); Browne v. Maxfield, 663 F. Supp. 1193, 1201 (E.D. Pa. 1987) ("Pennsylvania courts, state and federal, have consistently rejected tort remedies for conduct that is remediable as a breach of contract."); see also Northcraft v. Edward C. Michener Associates, Inc., 319 Pa. Super. 432, 447, 466 A.2d 620, 628 (1983) (action for conversion must be limited to chattels of existing nature, i.e., those whose existence is ascertainable by some concrete proof; in absence of such proof, circumstances are more amenable to cause of action for breach of contract).
We would be particularly loathe to blur the line between contract and tort actions in the instant case, where the Complaint's conversion claim does not even mention the Letter Agreement upon which any rights of Peoples to servicing income must rest. Thus, Count II of the Complaint must be dismissed.
3. Intentional interference with contractual relations
Count III of Peoples' complaint alleges that Fannie Mae intentionally interfered with a contractual agreement between Peoples and Landmark Savings Bank ("Landmark") for the purchase by Landmark of a portion of the servicing rights for the Servicing Portfolio. Under the undisputed evidence, Count III must be dismissed.
The record reveals that Landmark and Peoples entered into a transaction in April 1991, to be completed by the end of May 1991, whereby Landmark would purchase from Peoples the servicing rights to approximately 320 loans. Bollman Dep., Peoples Ex. 51 at 14-15, 21-23; Peoples Ex. 52 (Landmark letter of intent). The Letter Agreement granted Peoples the right to attempt this sale to Landmark, FNMA Ex. E at PP 2, 4, and Fannie Mae's approval of the transaction had been obtained, Berger Dep., Peoples Ex. 14 at 299-300; Loan Servicing Purchase and Sale Agreement, Peoples Ex. 53 at 29. Shortly after Landmark learned that Fannie Mae had removed the Servicing Portfolio from Peoples, Landmark notified Peoples that it was withdrawing its letter of intent to purchase. Bollman Dep., Peoples Ex. 51 at 29.
Peoples alleges that Fannie Mae intentionally interfered with the Landmark contract, and caused Landmark to back out of the deal. According to Peoples, this interference took two forms: (1) Fannie Mae allegedly made excessive demands that Peoples repurchase loans previously sold by Peoples to Fannie Mae;
and (2) Fannie Mae allegedly terminated the Servicing Contract for cause when there was actually no cause for termination.
Pennsylvania courts analyze claims for intentional interference with contract under Section 766 of the Restatement (Second) of Torts. Windsor Securities, Inc. v. Hartford Life Ins. Co., 986 F.2d 655, 659 (3d Cir. 1993) (citing, Adler, Barish, Daniels, Levin & Creskoff v. Epstein, 482 Pa. 416, 429-31, 393 A.2d 1175, 1181-83 (1978), cert. denied, 442 U.S. 907, 61 L. Ed. 2d 272, 99 S. Ct. 2817 (1979); Nathanson v. Medical College of Pennsylvania, 926 F.2d 1368, 1386 (3d Cir. 1991)); Geofreeze Corp. v. C. Hannah Constr. Co., 588 F. Supp. 1341, 1344 (E.D. Pa. 1984). Section 766 provides:
One who intentionally and improperly interferes with the performance of a contract (except a contract to marry) between another and a third person by inducing or otherwise causing the third person not to perform the contact, is subject to liability to the other for the pecuniary loss resulting to the other from the failure of the third person to perform the contract.
Section 766 "addresses disruptions caused by an act directed not at the plaintiff [Peoples], but at a third person [Landmark]: the defendant causes the promisor [Landmark] to breach its contract with the plaintiff [Peoples]." Windsor Securities, 986 F.2d at 660. It is undisputed that all of Fannie Mae's acts allegedly disrupting Peoples' deal with Landmark, the allegedly unlawful termination of the Contract and the allegedly excessive loan repurchase requests, were directed at Peoples, not at Landmark. Therefore, Peoples cannot make out a claim against Fannie Mae under § 766, even if Fannie Mae's conduct was intended to and did cause Landmark's failure to perform. Windsor Securities, 986 F.2d at 659-60.
Section 766A of the Restatement (Second) of Torts covers situations where, as here, the defendant's alleged tortious interference is directed toward the plaintiff, rather than toward a third person with whom the plaintiff has a contractual relation. Section 766A provides:
One who intentionally and improperly interferes with the performance of a contract (except a contract to marry) between another and a third person, by preventing the other from performing the contract or causing his performance to be more expensive or burdensome, is subject to liability to the other for the pecuniary loss resulting to him.
The Pennsylvania Supreme Court has not adopted § 766A. See Windsor Securities, 986 F.2d at 659-60.
The third circuit has stated that it "is far from clear" that the Pennsylvania Supreme Court would adopt § 766A, id., 986 F.2d at 661, has criticized that section, id., 986 F.2d at 659-63, and has "counseled some caution in expanding tortious interference liability" to include the behavior that section describes, id. at 662-63. The third circuit did not finally reach the issue of whether § 766A would be adopted by the Pennsylvania Supreme Court, however, because it found that even if that section were adopted the plaintiff had not made out a claim. Id., 986 F.2d at 663-65; see also Stepanuk v. State Farm Mutual Automobile Insurance Co., 1993 U.S. Dist. LEXIS 4674 *33, Civil Action No. 92-6095, 1993 WL 114036 at * 10-11 (E.D. Pa. April 14, 1993) (describing the Windsor Securities court's criticism of § 766A and finding that the plaintiff could not prevail under that section even if it was the law of Pennsylvania); Stepanuk v. State Farm Mutual Automobile Insurance Co., 1993 U.S. Dist. LEXIS 16715 *3, Civil Action No. 92-6095, 1993 WL 166748 at * 1 (E.D. Pa. May 14, 1993) (same, on motion for reconsideration).
Given the third circuit's negative appraisal of § 766A, this court would be hesitant to adopt it as an expression of Pennsylvania law. Like the Windsor Securities court, however, we need not decide if § 766A would be adopted by the Pennsylvania Supreme Court. Even if Pennsylvania were to adopt § 766A, Fannie Mae is not liable under that section. Its conduct either did not cause Landmark to withdraw from the deal, or was not "improper" within the meaning of § 766A.
The undisputed evidence shows that Fannie Mae's allegedly excessive loan repurchase requests had nothing to do with Landmark's withdrawal from the deal. Deposition testimony of Jay Berger and of John Bollman, head of Landmark's secondary marketing and servicing operation, shows that Landmark decided to withdraw from the deal when it was notified by Peoples, during the week of May 20, 1991, that Fannie Mae was removing the servicing from Peoples. Bollman Dep., Peoples Ex. 51 at 24, 29-30, 53; Berger Dep., FNMA Ex. D at 222. All of the allegedly excessive loan repurchase requests were made after May 30, 1991. Complaint P 40. Thus, it is clear that the loan repurchase requests had nothing to do with Landmark's withdrawal, since they all came after the decision to withdraw had been made.
On the other hand, it is undisputed that Fannie Mae's termination of the Contract with Peoples was a factor in Landmark's decision to withdraw. Bollman Dep., Peoples Ex. 51 at 29-30, 53. However, Fannie Mae's termination of the Contract cannot be considered "improper" in the sense required for liability under § 766A, for in the Letter Agreement Peoples acknowledges that the termination of the Contract was "for cause." FNMA Ex. E. Thus, Peoples cannot now claim that the termination was an "improper" action subjecting Fannie Mae to liability under § 766A.
Even in the absence of the Letter Agreement, Fannie Mae's termination of the contract "for cause" when there allegedly was none is not the kind of action envisioned as "improper" under § 766A. Windsor Securities, 986 F.2d at 663-665 (breach of contract does not constitute the type of "improper" conduct required to make out a claim under § 766A). Where "the allegations and evidence only disclose that defendant breached his contracts with plaintiff and that as an incidental consequence thereof plaintiff's business relationships with third parties have been affected, an action lies only in contract for defendant's breaches, and the consequential damages recoverable, if any, may be adjudicated only in that action." Glazer v. Chandler, 414 Pa. 304, 308, 200 A.2d 416, 418 (1964); accord, Adler, Barish, 482 Pa. at 430 n.13, 393 A.2d at 1182 n.13; Windsor Securities, 986 F.2d at 663-665; Prosser & Keaton, The Law of Torts § 129, at 990 (5th ed. 1984). Accordingly, Count III will be dismissed.
4. Intentional interference with prospective contractual relation
Count IV of Peoples' complaint alleges that Fannie Mae intentionally interfered with a prospective contractual relation by causing Fidelity Bond and Mortgage Corporation ("Fidelity") to withdraw from negotiations with Peoples for the purchase of the servicing.
Peoples avers that Fannie Mae's "initiating excessive and unreasonable loan repurchase demands" caused Fidelity "not to enter into an agreement with Peoples to purchase the Peoples Servicing Portfolio." Complaint P 134.
Under Pennsylvania law, a plaintiff asserting intentional interference with prospective contractual relations must prove the following elements: "(1) a prospective contractual relationship; (2) the purpose or intent to harm plaintiff by preventing the relationship from occurring; (3) the absence of privilege or justification on the part of the defendant; and (4) occurrence of actual damage." Advent Systems Ltd. v. Unisys Corp., 925 F.2d 670, 673 (3d Cir. 1991); accord, Silver v. Mendel, 894 F.2d 598, 601-02 (3d Cir.) (citing Thompson Coal Co. v. Pike Coal Co., 488 Pa. 198, 412 A.2d 466, 471 (1979)), cert. denied, 496 U.S. 926 (1990). Peoples must also establish that there is a reasonable likelihood that the transaction would have been completed but for Fannie Mae's interference. Thompson Coal Co., 488 Pa. at 209-10, 412 A.2d at 471; Tose v. First Pennsylvania Bank, N.A., 648 F.2d 879, 898 (3d Cir.), cert. denied, 454 U.S. 893, 70 L. Ed. 2d 208, 102 S. Ct. 390 (1981); Posner v. Lankenau Hospital, 645 F. Supp. 1102, 1111 (E.D. Pa. 1986).
Deposition testimony of Fidelity's President, James Dougherty, explicitly addresses the role Fannie Mae played in Fidelity's decision to withdraw from negotiations with Peoples:
Q: Did Fannie Mae have any impact on your decision not to go through with the deal?
. . .
A: I don't think Fannie Mae -- Fannie Mae had no --you know, obviously in the back of your mind you are thinking here's our major customer and our main customer and you take that into consideration, obviously, when you are doing these types of deals. But they [Fannie Mae] put no pressure on us either way to do or not to do this deal.