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FORT WASHINGTON RESOURCES v. TANNEN

June 27, 1994

FORT WASHINGTON RESOURCES, INC., Plaintiff,
v.
ROBERT H. TANNEN, PH.D., Defendant/counterclaimant, v. KIRK PENDLETON, Counterclaim defendant, and FORT WASHINGTON RESOURCES, INC., Plaintiff/counterclaim defendant.



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

 Joyner, J.

 Before the Court is plaintiff's renewed motion for partial summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. Plaintiff, Fort Washington Resources, Inc., commenced this action in May 1993 against defendant, Dr. Tannen, seeking damages for breach of contract, negligent performance of professional services, intentional interference with prospective business advantage, and conversion. Defendant filed a counterclaim against plaintiff and Kirk Pendleton, plaintiff's chief executive officer, seeking damages for breach of contract, libel and slander, and fraudulent and negligent misrepresentation.

 In our opinion of March 9, 1994, this Court decided earlier cross-motions for summary judgment made by both parties. See Fort Washington Resources, Inc. v. Tannen, 846 F. Supp. 354 (E.D. Pa. 1994). One part of plaintiff's earlier motion was denied as moot because it concerned the misrepresentation aspects of defendant's counterclaim, on which we had granted defendant leave to amend. Id. at 366. Defendant has since amended his counterclaim. Pursuant to our opinion, id., plaintiff and Kirk Pendleton have renewed their motion for summary judgment on the fraudulent and negligent misrepresentation counterclaims. For the reasons that follow, this additional motion is denied.

 Facts

 The pertinent facts of this case are summarized briefly here and are presented in more detail in our earlier opinion. See id. at 356-57. Plaintiff, a Pennsylvania firm engaged in the funding and development of a new drug known as Fluasterone, hired defendant as a consultant to aid in the preparation and filing of a regulatory document known as an Investigational New Drug application, or "IND." An IND is required by the United States Food and Drug Administration during the early stages of new drug development.

 In his amended counterclaim alleging fraudulent and negligent misrepresentation, defendant alleges that plaintiff and Kirk Pendleton misrepresented to defendant that $ 2.5 million had been invested in the Fluasterone IND project when they knew or should have known that such funding was not and would not be available. Defendant further contends that Kirk Pendleton failed to inform him that a license agreement between plaintiff and Research Corporate Technologies required the IND to be filed by April 15, 1993, and that this failure constituted an additional misrepresentation made with the intent of inducing defendant to join the project. Defendant argues this alleged false information was communicated to him fraudulently and negligently, and that he justifiably relied on the information and suffered damages as a proximate result. Plaintiff contends to the contrary that no false information was communicated by the plaintiff to the defendant and that, even if it had been, defendant did not justifiably rely on such information. Furthermore, plaintiff argues defendant suffered no damages even assuming defendant's allegations are true.

 Standard for Summary Judgment Decisions

 In reviewing 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 judgment as a matter of law. Fed. R. Civ. P. 56(c). To determine whether there is a genuine issue of material fact, the Court must ask whether 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). The court must draw all reasonable inferences in favor of the nonmovant. Id. at 256, 106 S. Ct. at 2512. Where, as here, the nonmoving party bears the burden of proof at trial, the moving party bears the initial burden of showing an absence of factual issues; but once this burden is satisfied the nonmoving party must then establish sufficient evidence for 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)).

 Fraudulent Misrepresentation

 The elements of a common-law claim for fraudulent misrepresentation in Pennsylvania are (1) a misrepresentation, (2) the fraudulent utterance thereof, (3) an intention by the maker that the recipient will be induced to act, (4) justifiable reliance by the recipient on the misrepresentation, and (5) damage to the recipient as a proximate result of the reliance. Browne v. Maxfield, 663 F. Supp. 1193, 1202 (E.D. Pa. 1987) (citing Scaife Co. v. Rockwell-Standard Corp., 446 Pa. 280, 285 A.2d 451, 454 (1971)). Referring to the mental state of the person alleged to have communicated the false information, however, courts have held that fraud can take many forms. For example, "it is well settled that fraud is proved when it is shown that the false representation was made knowingly, or in conscious ignorance of the truth, or recklessly without caring whether it be true or false." Delahanty v. First Pennsylvania Bank, N.A., 318 Pa. Super. 90, 464 A.2d 1243, 1252 (1983) (citing Warren Balderston Co. v. Integrity Trust Co., 314 Pa. 58, 170 A. 282 (1934)).

 Furthermore, fraud must be proved by a higher evidentiary standard; the party alleging fraud has the burden of proving it by clear, precise and convincing evidence. Browne, 663 F. Supp. at 1202; Moser v. DeSetta, 527 Pa. 157, 589 A.2d 679, 682 (1991). Under Anderson v. Liberty Lobby, 477 U.S. at 252, 106 S. Ct. at 2512, a summary judgment determination must be made in light of the evidentiary standard to be applied at trial. Browne, 663 F. Supp. at 1206. Therefore, to withstand plaintiff and Kirk Pendleton's motion for summary judgment, there must be sufficient evidence for a reasonable jury to find for the defendant, by a clear, precise and convincing standard, on each of the elements of fraudulent misrepresentation.

 Misrepresentation. False information may be communicated directly, or indirectly by the nondisclosure of material facts. Delahanty, 318 Pa. Super. 90, 464 A.2d at 1252. The deliberate non-disclosure of a material fact is the equivalent of the affirmation of a falsity, and an innocent misrepresentation is actionable if it pertains to a matter material to the transaction involved. Id. (citing Neuman v. Corn Exchange National Bank & Trust Co., 356 Pa. 442, 51 A.2d 759, 764 (1947)).

 With respect to the alleged misrepresentation about funding, plaintiff and Kirk Pendleton contend there is no evidence to support defendant's allegation that plaintiff or Kirk Pendleton uttered the alleged false information. Defendant points to his own testimony to the contrary, and argues that testimony of Arthur Schwartz and Abraham Bavley supports the ...


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