The opinion of the court was delivered by: WILLIAM YOHN, JR., District Judge
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.
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
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.
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
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
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.
Zenith Radio Corp., 475 U.S. 574, 587 (1986) (citations
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
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 ...