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EAGLE TRAFFIC CONTROL, INC. v. UNITED RENTALS

February 4, 2004.

EAGLE TRAFFIC CONTROL, INC. and KEYSTONE SIGN SUPPLY, INC., Plaintiffs
v.
UNITED RENTALS, INC., Defendant



The opinion of the court was delivered by: WILLIAM YOHN, JR., District Judge

MEMORANDUM and ORDER

Eagle Traffic Control, Inc. and Keystone Sign Supply, Inc. (collectively, "Eagle Traffic") bring this action against United Rentals, Inc. ("United"), seeking equitable relief and damages allegedly resulting from a breach of contract (count I), conversion of money and goods (count II) and contractual bad faith (count III). Defendant asserts various affirmative defenses, as well as a counterclaim for rescission of the contract. Currently pending before the court are (1) defendant's motion for summary judgment on all counts of plaintiffs' complaint, and (2) plaintiffs' motion for summary judgment on defendant's counterclaim for rescission. For the reasons set forth below, both motions for summary judgment will be denied.

BACKGROUND

  United is in the business of renting and selling equipment of various types, including traffic control devices for construction projects. Eagle Traffic Control and Keystone Sign Supply were in the traffic control device business. Both of these companies were owned by Stacy Chatley. In July 2000, United sent Chatley a letter of intent "to acquire substantially all of the Page 2 assets (the "Assets") of [Eagle Traffic], including the rental inventory, accounts receivable and other current assets, inventory of parts, supplies and equipment held for resale and any business-related equipment and assets owned by [Eagle Traffic]." Def. Ex. E. On July 24, 2000, Chatley executed the letter of intent. Def. Ex. E. On November 10, 2000, United and Eagle Traffic entered into an Asset Purchase Agreement ("the Agreement") and the transaction was completed.

  The main point of disagreement around which this litigation revolves is whether or not the Agreement includes sale and disposition of what the parties call "unbooked inventory." Although the parties do not agree on one clear and concise definition of "unbooked inventory," both United and Eagle Traffic describe it in the following vague terms: material that was costed to a job (or "fully expensed"), not placed on a depreciation schedule, and although returned to Eagle Traffic, not listed as an asset of the company. Compl. ¶ 25; Def. Mot. for Summ. J. 5. Plaintiffs contend the Agreement does not include unbooked inventory, and that United's possession of such items post-closing requires further compensation to Eagle Traffic. United argues in rebuttal that the Agreement does include unbooked inventory and that the monies paid to Eagle Traffic under the Agreement include compensation for such items. The Agreement does not specifically mention "unbooked inventory." The Agreement does clearly state that it "shall be governed by the laws of the Commonwealth of Pennsylvania." Agreement § 10.13.

  STANDARD OF REVIEW

  Either party to a lawsuit may file a motion for summary judgment, and the court will grant it "if the pleadings, depositions, answers to interrogatories, and admissions 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 a judgment as a matter of law." FED. R. CIV. P. 56(c). "Facts that Page 3 could alter the outcome are `material,' and disputes are `genuine' if evidence exists from which a rational person could conclude that the position of the person with the burden of proof on the disputed issue is correct." Ideal Dairy Farms, Inc. v. John Lebatt, LTD., 90 F.3d 737, 743 (3d Cir. 1996) (citation omitted). When a court evaluates a motion for summary judgment, "[t]he evidence of the non-movant is to be believed," Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986), and "all justifiable inferences are to be drawn in [the non-movant's] favor." Id. Additionally, "[s]ummary judgment may not be granted . . . if there is a disagreement over what inferences can be reasonably drawn from the facts even if the facts are undisputed." Ideal Dairy, 90 F.3d at 744 (citation omitted). However, "an inference based upon a speculation or conjecture does not create a material factual dispute sufficient to defeat entry of summary judgment." Robertson v. Allied Signal, Inc., 914 F.2d 360, 382 n.12 (3d Cir. 1990).

  To defeat summary judgment, the non-moving party cannot rest on the pleadings, but rather that party must go beyond the pleadings and present "specific facts showing that there is a genuine issue for trial." FED. R. CIV. P. 56(e). Similarly, the non-moving party cannot rely on unsupported assertions, conclusory allegations, or mere suspicions in attempting to survive a summary judgment motion. Williams v. Borough of W. Chester, 891 F.2d 458, 460 (3d Cir. 1989) (citing Celotex v. Catrett, 477 U.S. 317, 325 (1986)). Further, the non-moving party has the burden of producing evidence to establish prima facie each element of his claim. Celotex, 477 U.S. at 322-23. The non-movant must show more than "[t]he mere existence of a scintilla of evidence" for elements on which he bears the burden of production. Anderson, 477 U.S. at 252. Thus, "[w]here the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no `genuine issue for trial.'" Matsushita Elec. Indus. Co., Ltd. v. Page 4 Zenith Radio Corp., 475 U.S. 574, 587 (1986) (citations omitted).

  DISCUSSION

  Th Asset Purchase Agreement executed by the parties, which resulted in the sale of the assets of Eagle Traffic to United, does not mention "unbooked inventory." Although Eagle Traffic and United reach different conclusions regarding whether or not unbooked inventory is included in the sale, each party contends that the Agreement unambiguously supports its respective position. This is of significant importance while considering a motion for summary judgment since "[u]nder Pennsylvania law, ambiguous writings are interpreted by the fact finder and unambiguous writings are interpreted by the court as a question of law." Mellon Bank, N.A. v. Aetna Business Credit, Inc., 619 F.2d 1001, 1011 n.10 (3d Cir. 1980) (applying Pennsylvania law) (citing Brokers Title Co. v. St. Paul Fire and Marine Ins. Co., 610 F.2d 1174 (3d Cir. 1979)). And whether a contract is clear or ambiguous is a matter of law for the court to decide. Id. at 1011. The Supreme Court of Pennsylvania has explained, "A contract is ambiguous if it is reasonably susceptible of different constructions and capable of being understood in more than one sense." Hutchison v. Sunbeam Coal Corp., 519 A.2d 385, 390 (Pa. 1986) (citations omitted). Hence, the court must look at the words of the Agreement and the alternative interpretations offered by the parties to determine if both are reasonable in light of the circumstances surrounding the formation and completion of the Agreement. If only one suggested meaning is reasonable, then this court will interpret the Agreement as a matter of law. Otherwise, interpretation will be left for a fact finder, making summary judgment inappropriate.

 I. Defendant's Motion for Summary Judgment

 A. Defendant's Initial Position Page 5

  United argues that the $4.75 million it paid Eagle Traffic was in exchange for all of Eagle Traffic's assets, except those explicitly excluded in section 2.5 of the Agreement. Since "unbooked inventory" is not listed in the section delineating "excluded assets," it is impliedly included as an asset purchased under the Agreement. United further supports its position by highlighting certain language actually included in the Agreement. First, United points to the definition of "acquired assets," which includes inter alia "(a) Equipment; (b) Rental Inventory; (c) Sale Inventory; [and] (d) accounts receivable, cash and other current assets whose benefit survives Closing. . . ." Agreement § 1. United then points to the definition of "Equipment" in the Agreement: "[A]ll tangible personal property used in the Business that is not (i) Rental Inventory, (ii) Sale Inventory, (iii) supplies consumed in the Ordinary Course of Business, (iv) office furniture or furnishings, or (v) records of the Business on paper." Agreement § 1. Next, United looks at the definitions of "Rental Inventory" and "Sale Inventory," both of which include as a necessary criterion that the inventory in question be listed on the relevant schedule attached to the Agreement. Agreement § 1. In other words, the Agreement makes clear that something could not be considered Rental Inventory or Sale Inventory for the purposes of the Agreement if it is not listed on the attached schedule specifically delineating such items, even though it might otherwise meet the definition of rental or sale inventory. United is quick to ...


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