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KILLIAN v. MCCULLOCH

January 17, 1995

CATHERINE J. KILLIAN and RICHARD E. GROSSBERG, individually and on behalf of all others similarly situated, Plaintiffs,
v.
A. DONALD McCULLOCH, JR., REEF C. IVEY II, ALBERT J. DiMARCO and JOHN E. SYLVESTER Defendants.



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

 Joyner, J.

 This Memorandum and Order addresses two outstanding motions in this dispute. The first is a motion filed by the defendants, who seek an award of summary judgment against Plaintiff Catherine J. Killian as to Counts I through V and Count VII of Plaintiffs' Second Amended Class Action Complaint, as well as a summary judgment award against Plaintiff Richard E. Grossberg as to Counts I, VI and VII of Plaintiffs' Second Amended Class Action Complaint. The second motion, filed by the plaintiffs, seeks an order certifying the instant action as a class action and designating the named plaintiffs as class representatives. For the reasons stated below, the defendants' motion for partial summary judgment will be granted in part and denied in part. In view of our disposition of the summary judgment motion, we must deny the plaintiffs' motion for class certification as submitted, but we will allow the plaintiffs thirty days to submit an amended request for class certification.

 I. HISTORY OF THE CASE

 A. Background

 This dispute arises out of the collapse of Nutri/System, Inc., (Nutri/System) a private company headquartered and incorporated in Pennsylvania that had occupied a position at the forefront of the weight loss industry before it was placed in involuntary bankruptcy in May of 1993. We have previously set forth the factual background in this case in a prior Memorandum and Order. See Killian v. McCulloch, 850 F. Supp. 1239 (E.D. Pa. 1994). Because the Court's present task involves a fairly detailed factual analysis, however, we will delineate the salient facts again here before proceeding.

 Catherine Killian and Richard Grossberg are former Nutri/System employees. Ms. Killian was based in California for the bulk of her time of employment, while Mr. Grossberg was based in New York and New Jersey during the course of his employment. The defendants, A. Donald McCulloch, Reef C. Ivey, Albert J. DiMarco and John E. Sylvester, were the highest ranking officers at Nutri/System. In 1986, after reorganizing Nutri/System and improving its financial condition, the defendants purchased the company in a management buy-out. Three years later, in March of 1989, Nutri/System's board of directors adopted the Partnership Profit Sharing Plan (the Plan). The Plan represented an effort by management to provide a percentage of the company's profits to key employees who had helped Nutri/System achieve some degree of financial success. At the end of each fiscal year, the company would calculate the number of shares that each Plan participant would receive, and then allocate a percentage of the profits to each participant accordingly. The participants became vested in their shares three and a half years after the company announced the value of the shares, as long as they remained continuously employed during the entire period. *fn1" Plan participants would be entitled to payment thirty days after the end of each three and a half year period.

 Nutri/System's financial difficulties prevented it from fulfilling the Plan's obligations, however. In both 1992 and 1993, the company announced that it could not honor its obligations under the Plan. Nutri/System's board of directors offered to eligible employees a lump sum payment of fifteen percent of the amount originally due in exchange for a release to any claim to further pay-outs. Of the 193 eligible employees, 111 accepted this offer, including Plaintiff Killian. By May of 1993, a petition for involuntary bankruptcy had been filed against Nutri/System.

 B. The Second Amended Class Action Complaint

 The plaintiffs filed their original complaint on June 9, 1993. Their second amended class action complaint (the complaint), filed on May 11, 1994, asserts an entitlement to relief under seven counts. The first count alleges a violation of Pennsylvania's Wage Payment and Collection Law, 43 Pa. Cons. Stat. Ann. §§ 260.1--260.12 (1992) (WPCL), in that the defendants failed to provide payment of promised wages in breach of the statute. The second and third counts allege a breach of contract and a breach of the implied covenant of good faith, respectively. The fourth and fifth counts allege fraudulent and negligent misrepresentation, respectively. The sixth maintains that the defendants violated ERISA in that they failed to reimburse medical expenses to which the named plaintiffs were entitled, while the seventh count alleges an additional violation of the WPCL in that the defendants failed to authorize the reimbursement of business related expenses and other benefits. By a prior order, Counts VI and VII have been dismissed without prejudice as to Defendant Sylvester.

 II. DEFENDANTS' MOTION FOR PARTIAL SUMMARY JUDGMENT

 A. Summary Judgment Standard

 This Court is authorized to award summary judgment "if the pleadings, depositions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). Thus, the Court's responsibility is not to resolve disputed issues of fact, but to determine whether there exist any factual issues to be tried. Anderson v. Liberty Lobby, 477 U.S. 242, 247-49, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). The non-moving party must raise "more than a mere scintilla of evidence in its favor" in order to overcome a summary judgment motion. Williams v. Borough of W. Chester, 891 F.2d 458, 460 (3d Cir. 1989) (citing Liberty Lobby, 477 U.S. at 249). Further, the non-moving party cannot rely on unsupported assertions, conclusory allegations, or mere suspicions in attempting to survive a summary judgment motion. Id. (citing Celotex Corp. v. Catrett, 477 U.S. 317, 325, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986)). Boiled to its essence, the summary judgment standard requires the non-moving party to create a "sufficient disagreement to require submission [of the evidence] to a jury." Liberty Lobby, 477 U.S. at 251-52. With these principles in mind, the Court turns to the substance of the defendants' motion.

 B. Counts I and VII: The WPCL Claims

 The defendants' motion for judgment with respect to the WPCL claims is based on their contention that the WPCL applies only to employment occurring within Pennsylvania. Since Ms. Killian and Mr. Grossberg were never based in Pennsylvania and are not Pennsylvania residents, the argument goes, they cannot bring a claim under the statute. The facts surrounding this argument are not in dispute: both parties agree that the plaintiffs were never based in ...


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