United States District Court, E.D. Pennsylvania
July 14, 2004.
JOHN JOSEPH EDWARDS, Plaintiff,
AARON WESLEY WYATT, Defendant.
The opinion of the court was delivered by: JAMES KELLY, Senior District Judge
MEMORANDUM AND ORDER
After a non-jury retrial in the above captioned matter, and
review of the pleadings filed by the parties, the Court makes the
following Findings of Fact, Conclusions of Law and decision.
I. FINDINGS OF FACT
1. Plaintiff John Joseph Edwards ("Edwards") is a citizen of
the State of South Carolina.
2. Defendant A. Wesley Wyatt ("Wyatt") is a citizen of the
Commonwealth of Pennsylvania.
3. The amount in controversy between Edwards and Wyatt in this
case is alleged to exceed $75,000.
4. In 1993, Edwards was the President of Pilot Air Freight
Corporation ("Pilot"), a privately owned air freight forwarding business which was headquartered in Lima, Pennsylvania.
5. In 1993, Edwards owned one-third of the stock 33 and 1/3
shares out of 100 total issued shares in Pilot. The remaining
two-thirds of the company was owned by Edwards' cousins, Tom and
Bill Edwards ("the Edwards cousins"), in equal amounts.
6. In 1993, Edwards was introduced to Wyatt by Richard G.
Phillips ("Phillips"), a local Philadelphia attorney who was
counsel for Pilot, Edwards and Wyatt at the time. Phillips
thought that Wyatt might be able to help Pilot by investing in
7. In January of 1994, Wyatt became an investor in Pilot and
secured an option to purchase 45 shares in the company from the
Edwards cousins. Wyatt was also given the right to appoint
individuals to fill two seats on Pilot's five person Board of
8. In January of 1994, through the same transaction in which
Wyatt became an investor in Pilot, Phillips was made the Chairman
of Pilot and acquired 10 shares in the company from the Edwards
cousins. Phillips also became the Voting Trustee over the
remaining 11 and 2/3 shares of the company owned by the Edwards
cousins. Phillips was also given a seat on Pilot's Board of Directors.
9. In January of 1994, through the same transaction in which
Wyatt and Phillips became involved in Pilot, Edwards was given a
three-year Employment Agreement with Pilot, which provided that
he would be paid $200,000 in salary per year and be eligible to
receive annual bonuses up to the same amount from the company.
Edwards fully retained, however, his one-third ownership interest
in Pilot. Edwards was also given the right to appoint individuals
to fill the remaining two seats on Pilot's Board of Directors.
10. In May of 1994, Edwards decided to adopt an exit strategy
from Pilot because of Phillips' approach to running it, and hired
attorney Don Auten to help him with that strategy.
11. At a dinner meeting in March or April, 1995, Wyatt and
Edwards agreed to take some corporate governance action to
"eradicate Mr. Phillips from the Company."
12. Wyatt and Edwards decided to join forces to exercise the
combined power of the seats they controlled on Pilot's Board of
Directors to vote to remove Phillips as Chairman of the company.
Wyatt and Edwards also decided to terminate Pilot's retainer
agreement paying $7,000 per week to Phillips' law firm.
13. Shortly thereafter, Edwards' attorney gave him Plaintiff's Exhibit 9, an April 13, 1995 press release from Pilot
announcing that Edwards was out and Phillips was back in at
Pilot, because Wyatt had realigned himself with Phillips.
14. Wyatt never called Edwards to discuss the franchisees'
concerns that led to his decision to change sides and realign
15. Plaintiff's Exhibit 12 is a transcript of the April 20,
1995 Pilot Board Meeting where Wyatt aligned himself with
Phillips to vote Edwards out of Pilot and put Phillips back in
charge of the company. At that meeting, Wyatt and Phillips gave
employment agreements to each other. Wyatt's agreement was for
eight years at $200,000 a year, plus bonuses and other benefits.
16. Sometime shortly after the April 20th board meeting, Wyatt
had a discussion with Phillips about Edwards. Phillips told Wyatt
that he was going to cut off Edwards' money and litigate him into
the ground, which stunned Wyatt.
17. On August 20, 1996, Edwards commenced a bankruptcy
proceeding under Chapter 11 of the United States Bankruptcy Code
in the United States Bankruptcy Court for the Eastern District of
Pennsylvania. In re: John Joseph Edwards, Bankruptcy No.
18. The assets of Edwards' bankruptcy estate consisted of his one-third interest in Pilot, a one-third interest in a real
estate partnership which owned land upon which Pilot's businesses
were situated, and certain claims Edwards had against third
parties including Wyatt, Pilot and Phillips ("Edwards' Assets").
19. In February, 1997, Edwards' voluntarily converted his
Chapter 11 bankruptcy reorganization to a Chapter 7 dissolution.
20. A Chapter 7 Trustee, Christine Schubert, was appointed and
proceeded to employ a valuation expert to value Edwards' Assets.
21. The Trustee's valuation expert, Steven Scherf, CPA, fixed a
value of $2,745,000 for Edwards' Assets: $2,600,000 for the
interest in the Pilot stock and $145,000 for the interest in the
22. In the fall of 1997, Wyatt owned forty-five percent of the
issued and outstanding stock of Pilot, Edwards' Chapter 7 Trustee
controlled his thirty-three and one-third percent of Pilot's
stock, and the balance of Pilot's stock was owned or controlled
by Phillips, who also served as Pilot's President and Chief
23. Around the time of the bankruptcy proceeding, Wyatt was
sued in the United States District Court in Camden, New Jersey in
an action seeking to invalidate his purchase of his option to purchase forty-five shares of Pilot stock.
Wyatt and Edwards discuss a potential alignment
24. In December 1997, one of Wyatt's lawyers, Jay Ochroch,
Esquire ("Ochroch"), and Edwards' lawyer, Stephen L. Braga,
Esquire ("Braga"), met to discuss a potential alignment between
Edwards and Wyatt and the possibility of trying to effect a sale
25. During December, 1997, Braga also met with Phillips to
discuss a possible alignment between Edwards and Phillips.
Edwards and his counsel later decided to pursue their
negotiations with Wyatt.
26. During the months of December 1997 and January and February
1998, Wyatt and Edwards' representatives met to outline and
finalize the contents of a written settlement agreement
specifying what Wyatt and Edwards would try to accomplish by
their collaborative efforts.
February 1998 Settlement Agreement
27. Plaintiff's Exhibit 30 is a written settlement agreement
that was executed by Edwards and Wyatt on February 18, 1998 in
furtherance of their mutual ambition to sell either the assets or the stock of Pilot ("the Settlement Agreement").
28. The Settlement Agreement contains an integration clause
that specifically and expressly provides that the Settlement
Agreement "and the documents delivered pursuant hereto constitute
the entire agreement and understanding between the Parties hereto
as to the matters set forth herein and supersede and revoke all
prior agreements and understandings, oral and written, between
the parties hereto or otherwise with respect to the subject
29. The Settlement Agreement integration clause commits the
parties to change the Settlement Agreement only in writing: "[n]o
change, amendment, termination or attempted waiver of any of the
provisions hereof shall be binding upon any party unless set
forth in an instrument in writing signed by the parties."
30. Edwards was represented by Braga during the negotiations of
the Settlement Agreement. Braga was aware of the existence and
effect of the integration clause.
31. It is undisputed that Edwards' pre-petition claims for
money from Pilot are property of Edwards' bankruptcy estate for
the benefit of Edwards' creditors, and do not belong to Edwards. Obligations under the Settlement Agreement
32. The Settlement Agreement contemplated, inter alia, a
consulting agreement between Edwards and one of Wyatt's companies
(the "Consulting Agreement").
33. Pursuant to the Consulting Agreement, Wyatt agreed and
caused Edwards to be paid a fee of $6,731 per week for 26 weeks.
Wyatt also paid $150,000 to Braga's law firm towards Edwards'
legal bills and also provided Edwards with the use of a 1998
34. Pursuant to Paragraph 5 of the Settlement Agreement Wyatt
loaned Edwards $500,000, which was later repaid.
35. The operative provision of the Settlement Agreement
regarding the sale of Pilot's assets or stock is Paragraph 6.
This provision of the Settlement Agreement is titled, Sale of
Stock. It required both parties, inter alia, to "use their
best efforts to cause Pilot, its shareholders and directors to
sell either all or substantially all of the assets of Pilot, the
stock of Pilot or cause an initial public offering of the Pilot
stock at a price mutually acceptable to the Parties."
36. In furtherance of this sale, Wyatt and Edwards also agreed
to assure that each had equal power to appoint two board members
and they agreed to petition the Bankruptcy Court to join them in
appointing a financial advisor for the purpose of seeking a sale or IPO of Pilot, or, alternatively, to convert Edwards'
Chapter 7 to a Chapter 11 case so that Edwards could, as a debtor
in possession, pursue a sale of Pilot's assets or stock.
37. On February 18, 1998, Wyatt had no other commitments to
Edwards outside the written Settlement Agreement.
38. The parties agree that Wyatt fulfilled each and every
obligation contained in the Settlement Agreement.
Initial Public Offering of Pilot
39. Wyatt arranged for various professionals to attend a
meeting with Edwards' Chapter 7 Trustee and assist him and
Edwards in their effort to persuade Edwards' Chapter 7 Trustee to
permit an Initial Public Offering ("IPO") of Pilot.
40. Edwards attended the meeting with the Trustee where a
presentation was made to try to convince her to support a joint
motion to make an IPO of Pilot. There were a number of
professionals at the meeting. None of the IPO professionals were
retained by Wyatt. They were there primarily to demonstrate to
the Trustee the valuation that they had put on Pilot.
41. At the Trustee meeting, the brokerage firm of A.G. Edwards
showed its valuation for Pilot ranging 14 to 24 times earnings,
and Penn Merchant Group Limited made a similar statement. At the
meeting, Edwards recalled that Wyatt spoke of similar numbers that the others had estimated the valuation to be
worth roughly $60 to $120 million.
42. Braga believed that the IPO was "speculative" because
Phillips would be an impediment to an IPO, Wyatt's control over
his shares were in question due to the litigation in Camden
between Wyatt and the Edwards Cousins, and furthermore, that
Edwards' Trustee, rather than Edwards himself, had control over
his shares of Pilot.
43. The Trustee rejected the IPO proposal.
44. Wyatt and Edwards filed a joint motion to have the
bankruptcy court approve the IPO proposal. The bankruptcy judge
denied the joint motion in a short order.
45. On March 12, 1998, the Trustee filed her Motion of the
Chapter 7 Trustee to Sell Assets (the "Sale Motion").
46. Pursuant to the Sale Motion, the Trustee sought the sale of
Edwards' Pilot stock to Phillips for $3.4 million and mutual
releases by the estate and Pilot for various claims pending
between the estate and Pilot.
47. Wyatt and Edwards discussed the "option" of Wyatt buying
the Pilot stock from Edwards' bankruptcy estate and then
returning the stock to Edwards for the money, however, Wyatt was
later advised by counsel that this act would be illegal. The April 30, 1998 "Handshake Agreement"
48. On April 30, 1998, when it became apparent that Wyatt and
Phillips were now involved in a bidding contest for Edwards'
stock to avoid being in a minority position, Wyatt and Edwards
agreed that neither would enter into any agreement with Phillips
to settle the bankruptcy sale proceeding without the
participation of the other party (the "Handshake Agreement").
49. Phillips "always has been" Wyatt's arch enemy.
50. The participation requirement of the Handshake Agreement
only required the parties include the other in an agreement with
Phillips to settle the bankruptcy sale proceeding. The Handshake
Agreement did not require the parties to include the other in any
negotiations with Phillips regarding settlement of the bankruptcy
51. There was no requirement under the Handshake Agreement that
Wyatt and Edwards would receive the same amount of consideration
if there was a settlement with Phillips.
52. Under the Handshake Agreement, if either Wyatt or Edwards
took an unreasonable position, the other party would no longer be
bound by the Handshake Agreement.
53. The Handshake Agreement was never reduced to writing.
54. The Handshake Agreement was totally different from the February 18th written settlement agreement. We find that, just as
Braga testified at the first trial, "By the time of the handshake
agreement, it was clear the two options in the written agreement,
the IPO motion and the Chapter 7 to 11 conversion motion, were
not going to work, so the written agreement . . . was fulfilled
by that point in time. The handshake agreement was an additional
agreement made in light of the changed circumstances that those
two things didn't work."
55. The mutual consideration underlying the Handshake Agreement
was that, Wyatt did not want Edwards to reach an independent
agreement with Phillips any more than Edwards wanted Wyatt to
reach an independent agreement with Phillips. By standing
together, they were each stronger.
56. There was no relationship between the Handshake Agreement
and Wyatt's ability to bid for the stock, the estate assets in
57. On or about May 7, 1998, Wyatt tendered a bid of $3.6
million for Edwards' Assets.
58. On May 11 and June 17, 1998, the Trustee put on her
evidence in support of a sale based on the Phillips bid.
59. Edwards objected to this sale as being undervalued and
moved the Bankruptcy Court to deny the Trustee's motion and to allow him to return to a Chapter 11 to reorganize his stock
interests in some form of private offering. The Bankruptcy Court
overruled this request, adjourned the hearing at the request of
Wyatt and subsequently, on July 16, 1998, entered an order
establishing certain procedures for concluding the sale.
60. Pursuant to the Bankruptcy Court's July 16, 1998 Order,
Wyatt, on July 20, 1998, submitted a bid of $5 million in cash
supplemented by a bond of up to $3 million to secure payment of
the Pilot claims against the estate when liquidated.
Expiration of the Consulting Agreement
61. Although Edwards wanted to renew the Consulting Agreement,
Wyatt decided not to renew the Consulting Agreement, which was
set to expire on August 7, 1998.
July 29, 1998 Continuance Hearing
62. Braga knew that Phillips and Wyatt, the only two bidders at
the July 29, 1998 continuance hearing for the bankruptcy sale of
Edwards' Assets, were "arch rivals."
63. On July 29, 1998, Phillips, in collaboration with Pilot's
franchisees, many of whom supported his bid in filed pleadings,
proffered the sum of $5.1 million along with an offer to settle Pilot's claims against Edwards' bankruptcy estate by a
64. At the request of counsel for the Pilot franchisees, and
without objection, the hearing to confirm the bankruptcy sale was
adjourned until October 30, 1998, at which time the Bankruptcy
Court ordered a final auction to take place.
65. Wyatt was "flabbergasted" upon hearing of the continuance
to adjourn the hearing until October 30, 1998.
66. Braga admitted that at the time of the continuance Edwards
would not have been prejudiced so long as the bids in place at
the time were made irrevocable, which they were.
67. Wyatt had authorized Ochroch to bid up to $10 million for
the Pilot stock.
68. On the day of the July 29, 1998 continuance, Wyatt had
lunch with his attorney Phillip Fisher and discussed an
overbidding scenario whereby Wyatt would overbid for Edwards'
stock in whatever amount was necessary to outbid Phillips and
then return the stock to Edwards in exchange for a refund of some
of the money Wyatt used for the bid. Phillip Fisher advised Wyatt
not to discuss the overbidding scenario with Edwards due to its
illegal nature. Wyatt remembers that meeting because "[t]hat's
the first time I [Wyatt] was shook by a lawyer, physically."
69. On or before July 29, 1998, partially due to the suggestion
of the overbidding scenario, Silverstein advised Braga that he
did not want Wyatt and Edwards talking alone, instead, he wanted
counsel to handle any discussions between Wyatt and Edwards.
70. On July 29, 1998, after both the continuance of the
bankruptcy sale and lunch with Phillip Fisher that day, Wyatt met
with Edwards at the Tuscany Coffee Shop and expressed his belief
that the continuance was a result of lawyers "posturing" and that
despite his annoyance about the continuance his intentions were
to proceed with his bid for Edwards' shares of Pilot stock held
by the Bankruptcy Court. Wyatt also informed Edwards that he
would not proceed with any overbidding strategy for Edwards'
stock, but, instead, offered to go to Washington D.C. in order to
see if there was something else they could do.
71. The parties later scheduled a meeting in Washington, D.C.
for September 1, 1998.
Braga's July 30, 1998 Letter
72. Plaintiff's exhibit 95 is a July 30, 1998 letter that Braga
wrote and addressed to Ochroch and Silverstein at the law firm of
Fox Rothschild O'Brien & Frankel. 73. On July 30, 1998, Braga wrote to Ochroch and Silverstein
expressing his concern about the relationship between Wyatt and
Edwards because, "as a result of the July 29th hearing . . . Mr.
Silverstein had instructed Mr. Wyatt not to talk to Mr. Edwards
anymore and it's hard for two people to have an alignment going
forward if you're not talking to each other."
74. Braga indicated in his July 30, 1998 letter that Edwards
was upset that, within the past twenty-four hours, Wyatt had
declined to renew the Consulting Agreement.
75. Braga also wrote in his July 30, 1998 letter to Ochroch and
Silverstein that "[t]he reality of the events over the past
twenty-four hours only heightens John's belief (and, mine as
well) that something fundamental has changed. In fact, those
events confirm that there really is no ongoing relationship
between John and Wes at this point in time. . . . I would suggest
that you make negotiating an endgame result with John your first
and immediate priority. Otherwise the game may be over as far as
he is concerned; if it is not already."
76. The "game" meant Wyatt's relationship with Edwards. The
"game" would necessarily be over if either party planned on
negotiating his own deal with Phillips without including the
77. Wyatt understood the July 30, 1998 letter to mean that the cooperating agreement between himself and Edwards was over.
78. The Settlement Agreement was fulfilled and the decision not
to renew the Consulting Agreement was made prior to Braga's July
30, 1998 letter.
79. Phillips was a mutual enemy to both Wyatt and Edwards.
80. On July 30, 1998, prior to receipt of Braga's letter on
this date, the Handshake Agreement was the only explicit
cooperating agreement between Wyatt and Edwards that was
potentially useful to settlement of the bankruptcy sale
81. Ochroch believed that "the letter of the 30th meant that
Mr. Edwards had determined that there was no more relationship
between Mr. Wyatt and Mr. Edwards." Ochroch further believed that
because Braga was always "straightforward" in his communications,
he took Braga's statement in the July 30th letter that "John has
gone over the edge" very seriously.
Braga's July 31, 1998 letter
82. Plaintiff's exhibit 96 is a July 31, 1998 letter in which
Braga again wrote to Ochroch and Silverstein and informed them
that: ". . . [Edwards] has asked me to endeavor to negotiate his
own independent settlement in this matter. I have been authorized
to give you (and, thus Wes [Wyatt]), a one-week period within which to conclude a settlement agreement with John
[Edwards]. If such an agreement has not been concluded within
that time, then I have been directed to provide the same
opportunity to Mr. Phillips, which I will initiate on Friday,
August 7th, if necessary."
83. Braga wrote the July 31, 1998 letter "very stridently, very
much from the heart" and with no drafts. Braga expected Ochroch
and Silverstein to "take [the letter] seriously."
84. Just as Ochroch testified, the July 31, 1998 letter meant
that, "Mr. Edwards had determined that there was no more
relationship between Mr. Wyatt and Mr. Edwards," that a
"gauntlet" was thrown down reaffirming that there was no more
relationship, and that "all bets were off."
85. The July 31, 1998 letter meant that, absent a new
settlement agreement with Wyatt, Edwards was going to both
negotiate and conclude a deal with Phillips to the exclusion of
86. Wyatt understood the July 31, 1998 letter to mean that the
"Handshake Agreement" was terminated and that Edwards was "going
to go independent of us."
87. Silverstein understood the July 31, 1998 letter to mean
that the Handshake Agreement was "terminated."
88. Braga did not write a letter confirming that he was withdrawing his July 30 and 31, 1998 letters, nor did Braga
confirm that the Handshake Agreement was still in effect.
Ochroch's telephone call to Braga
89. In response to Braga's July 31, 1998 letter, Ochroch
contacted Braga on August 6, 1998 in order to set up a meeting to
discuss the July 31, 1998 letter.
90. Ochroch, as a result of the letters, "wanted to look Mr.
Braga in the eye and sit down at a meeting and make sure everyone
understood there was no more relationship because Mr. Wyatt was
not going to continue or renew the consulting contract. So we had
The August 10, 1998 meeting
91. Braga met with Ochroch, Phillip Fisher, and Lane Fisher
(another one of Wyatt's lawyers) and Wyatt on August 10, 1998 to
discuss the July 31, 1998 letter. Silverstein was not at the
92. After the August 10, 1998 meeting, for pragmatic reasons,
Wyatt and counsel allowed Edwards to finish a preexisting term of
both the automobile's lease and the medical insurance's policy.
Just as Ochroch, Wyatt, Phillip Fisher and Lane Fisher's
testified, a compromise was not struck between the parties.
93. Wyatt and Edwards did not enter into a new agreement with
regard to the Handshake Agreement or the July 30 or 31, 1998
letters as a result of the August 10 meeting.
94. Just as Wyatt testified, the relationship was not repaired
at the August 10 meeting and was not repaired at any point after
95. Just as Ochroch testified, no deal was made, everything was
not patched up, and at the end of the meeting everybody went
their separate ways. When the August 10 meeting concluded,
Braga's demands, contained within his July 30 and 31, 1998
letters, were not met, and, as Ochroch testified, "whatever was
going on between the parties, whatever relationship or alignment
there was, was over, and Edwards was going to do what Braga
threatened in his July 31, 1998 letter, negotiate a deal with
96. Braga and Edwards sought to have Edwards' Consulting
Agreement continued and also sought additional funds for payment
of legal fees, but, as Phillip Fisher testified, "they didn't get
anything that they asked for." The Consulting Agreement was not
extended and Wyatt advanced no additional funds. With regard to
the relationship between Edwards and Wyatt, Phillip Fisher
"didn't even view there was one after the meeting," and believed that "the parties were going their own ways."
97. Lane Fisher believed that after the August 10 meeting, "the
consulting agreement was not renewed and expired pursuant to its
98. After the July 30 and 31, 1998 letters, Braga alleges that
the relationship between Edwards and Wyatt was "patched up" at
the August 10, 1998 meeting, but did not write a letter to
confirm the allegedly re-established relationship, withdraw his
July 30 and 31, 1998 letters, or confirm that the Handshake
Agreement was still in effect.
99. Between July 30 and October 30, 1998, Wyatt and Phillips
met on numerous occasions to fashion a compromise. Edwards did
not participate in any of these meetings, but was aware that
Wyatt and Phillips were negotiating.
100. Braga was communicating with Ochroch in August of 1998
because Wyatt and Edwards were working to achieve a result,
"[t]hat result being that Mr. Phillips not wind up with Mr.
101. No documentation exists confirming that Braga wrote to
either Wyatt or Wyatt's counsel in regards to a number that
Edwards would find acceptable in any settlement of the estate. The September 1 Meeting in Washington, D.C.
102. On September 1, 1998, Wyatt, accompanied by his attorney
Phillip Fisher, met with Edwards and Braga in Washington, D.C.
103. At the meeting, a general discussion ensued concerning
Edwards Bankruptcy proceeding.
104. At the September 1 meeting, Wyatt stated that if a global
settlement with the franchisees was possible, then the settlement
would have to include Edwards because the franchisees "wanted
assurance that Edwards would in no way participate in the
management of the company." However, no global settlement was
ever reached with the franchisees.
105. No new agreements were reached between Wyatt and Edwards
and no old promises or agreements were revived as a result of the
September 1, 1998 meeting in Washington, D.C.
Braga's September 2, 1998 letter
106. Following the September 1, 1998 meeting in Washington,
D.C., Braga wrote to Wyatt, in which he stated, "[b]eyond the
foregoing, I do not see any clear coordinated strategy that we
might be able to engage in toward your and John's mutual benefit
until you fist decide. . . ."
107. The September 2, 1998 letter makes no mention of any new or existing contracts, agreements or alignments being entered
into at the September 1 meeting in Washington, nor does it
mention that any contract or agreement of alignment exists
between the parties.
The October 30, 1998 Settlement Agreement
108. On October 30, 1998, Wyatt and Phillips jointly offered a
cash bid of $5.2 million, plus the claims settlement (the "Joint
Bid") pursuant to a Settlement Agreement entered into between
Wyatt, Phillips, Pilot, one other individual and the Estate of
Edwards (the "Wyatt/Phillips Settlement"). Additionally, Pilot
agreed to reimburse the Trustee for any federal tax liability she
may incur as owner of the shares as a result of undistributed
profits of Pilot, which is a S corporation.
109. The Wyatt/Phillips Settlement was initiated on October 29,
1998, and was not concluded until the "eleventh hour" and well
"after midnight" that night, which was sometime in the early
morning hours of the October 30, 1998 hearing before Bankruptcy
110. Edwards' pre-petition claims for salary and bonuses due
from Pilot were property of Edwards' bankruptcy estate which were
released by the Trustee in connection with the Joint Bid. Wyatt's October 30, 1998 settlement offer
111. Silverstein told Braga that, if a global settlement was
possible, then it would be his preference to have the global
settlement include Edwards as the inclusion of Edwards would
112. It is undisputed that, at the October 30, 1998 hearing,
Silverstein, on Wyatt's behalf, offered Braga $200,000 in
addition to the $5.2 million to be paid to Edwards' estate.
113. Edwards was not informed of the $200,000 settlement offer.
114. On November 2, 1998, Edwards made a $15 million settlement
proposal to Wyatt ($9.8 million in addition to the $5.2 million
to be paid pursuant to the bid).
115. According to Braga, the offer represented a "bottom line
number that [was] not negotiable." Wyatt rejected Edwards'
offer and did not propose another offer because the $15 million
offer was "not negotiable."
Edwards appeals Bankruptcy Judge Sigmund's Order and then
dismisses his appeal with prejudice
116. Edwards objected to the Joint Bid submitted by Wyatt and
117. On December 15, 1998, Bankruptcy Judge Sigmund issued an order granting the Trustee's Sale Motion to sell Edwards'
Assets pursuant to the Joint Bid submitted by Wyatt and Phillips.
118. On December 28, 1998, Edwards filed a notice of appeal of
Judge Sigmund's December 15, 1998 order.
119. On August 8, 1999 Edwards withdrew his appeal with
II. CONCLUSIONS OF LAW
1. The Handshake Agreement represented an enforceable promise.
Wyatt and Edwards, with Phillips as their common enemy, each
mutually agreed not to enter into any agreement with Phillips
without the participation of the other party. See Channel Home
Centers v. Grossman, 795 F.2d 291, 298-299 (3d Cir. 1986)
(stating test for enforceable agreement under Pennsylvania law).
2. The facts at trial and retrial established that Wyatt's
agreement with Phillips, without the participation of Edwards,
would have been a breach of the Handshake Agreement. Similarly,
Edwards' agreement with Phillips, without the participation of
Wyatt, would have been a breach of the Handshake Agreement.
Fulfillment of the Handshake Agreement would be a settlement
agreement that included Wyatt, Edwards, and Phillips. An
additional settlement agreement between only Wyatt and Edwards was beyond the scope of the Handshake Agreement. A global
settlement with Pilot's franchisees was beyond the scope of the
3. Under Pennsylvania law, a notice of termination of a
contract that is clear and unambiguous is effective to end a
contractual relationship. See Maloney v. Madrid Motor Corp.,
385 Pa. 224, 228 (1956) (stating the general test for contract
termination in Pennsylvania). Here, the letters of July 30 and
31, 1998, from Braga to Ochroch and Silverstein at the law firm
of Fox Rothschild O'Brien & Frankel, unequivocally stated
Edwards' intention to terminate or repudiate the Handshake
Agreement effective immediately.
4. Moreover, Braga's July 31, 1998 letter on behalf of Edwards,
standing alone, clearly and objectively manifested Edwards'
refusal to perform under the terms of the Handshake Agreement and
constituted an anticipatory repudiation that terminated this
agreement. A repudiation occurs before the time to perform has
arrived. United Corp. v. Reed, Wible and Brown, Inc.,
626 F. Supp. 1255, 1257 (D.C.V.I. 1986). Under Pennsylvania law, an
anticipatory breach of contract requires "an absolute and
unequivocal refusal to perform or a distinct and positive
statement of an inability to do so." Pennsylvania Avenue
Corporation v. Federation of Jewish Agencies, 489 A.2d 733, 737 (Pa. 1985) (citing McClelland v. New Amsterdam Casualty Co.,
185 A. 198, 200 (Pa. 1936)). "A statement by a party that he will
not or cannot perform in accordance with agreement creates such a
breach." Oak Ridge Construction Co. v. Tolley,
351 Pa. Super. 32, 38 (1985) (citing 4 Corbin on Contracts § 959, at 852-56
(1951)); Jonnet Development Corp. v. Dietrich Industries, Inc.,
316 Pa. Super. 533, 543 (1983) (same).
In Braga's July 31, 1998 letter, Braga wrote that Wyatt had "a
one-week period within which to conclude a settlement agreement
with John [Edwards]," otherwise Edwards would then violate the
Handshake Agreement by concluding an independent settlement
agreement with Phillips. Not only did Braga's July 31, 1998
letter on behalf of Edwards affix the additional requirement of a
new settlement agreement between Edwards and Wyatt to the
Handshake Agreement, but it also required that this agreement be
formed within a one week time frame. By affixing these additional
requirements as conditions to Edwards' performance under the
Handshake Agreement, Edwards expressed an "absolute and
unequivocal" refusal to perform in accordance with the original
terms of the Handshake Agreement, and that refusal repudiated the
Handshake Agreement. See Oak Ridge Construction Co.
351 Pa. Super. 39 (analyzing whether defendant's letter was "a statement
of intention not to perform except on conditions which go beyond the contract" and, therefore, "a definite and
unconditional repudiation" of the contract); accord REA
Express v. Interway Corp., 538 F.2d 953 (2d Cir. 1976) (finding
that "insistence on terms which are not contained in a contract
constitutes an anticipatory repudiation thereof"); PAMI-LEMB I
Inc. v. EMB-NHC, L.L.C., 2004 Del. Ch. LEXIS 81 (Del. Ch. June
21, 2004) (holding "statement of intent not to perform unless
terms different from the original contract are met constitutes a
repudiation"); Chamberlin v. Puckett Construction,
921 P.2d 1237 (Mont. 1996) (same).
5. Collectively, Braga's July 30 and 31, 1998 letters were an
absolute and unequivocal termination of not only the Handshake
Agreement, but also the entire cooperating relationship between
Edwards and Wyatt, which at that point in time was an alliance
between Edwards and Wyatt against Phillips.
6. Braga's July 30, 1998 letter on behalf of Edwards gave clear
and unambiguous notice of intent to terminate or repudiate the
Handshake Agreement and the cooperating relationship by stating
that "something fundamental has changed," that "John [Edwards]
has gone over the edge," and that as a result of this change it
is confirmed that, "there really is no ongoing relationship"
between Edwards and Wyatt.
7. Braga's July 31, 1998 letter reaffirms Edwards' intent to terminate or repudiate the Handshake Agreement and the
cooperating relationship by informing Wyatt that "it is clear
that there is no turning back from what John [Edwards] views as
the breach of his relationship with Wes [Wesley]," and that
negotiating new settlement agreement between Edwards and Wyatt is
the only means by which Wyatt could prevent an independent
settlement agreement between Edwards and Wyatt's "arch enemy,"
Phillips, which, prior to the July 30, 1998 termination or the
July 31, 1998 repudiation, would have been a breach of the
8. The intent to terminate or repudiate expressed in Braga's
July 30 and 31, 1998 letters, was also objectively apparent as
both of Wyatt's attorneys, acting in their professional capacity,
understood the July 31, 1998 letter as terminating any and all
relationships between Edwards and Wyatt existing at that time.
9. Edwards' demand for a new settlement agreement within
one-week's time, in order to prevent his independent settlement
with Phillips, at most, constituted a new offer to ally with
Edwards for some undefined amount of consideration. This offer
was materially different than the Handshake Agreement, was never
accepted by Wyatt, and the parties did not form a new settlement
agreement as a result of this demand
10. This dispute has been marked by a "game" involving shifting alliances and agreements between Edwards, Wyatt, and
Phillips. Edwards' July 30 and 31, 1998 letters terminated or
repudiated the Handshake Agreement and the cooperating
relationship, and, at most, constituted an offer to negotiate a
realignment with Edwards against Phillips, but did not invoke the
Handshake Agreement in offering to realign.
11. There is no evidence from which a nullification or a
retraction of the repudiation or termination notice could be
inferred. Braga admitted that he wrote a substantial amount of
letters, which meticulously documented seemingly each and every
event. Braga testified that he did not write a letter confirming
that the relationship was "fixed," even after the relationship
between Edwards and Wyatt appeared over. Braga did not write a
letter confirming that he was withdrawing his July 30 and 31,
1998 letters, nor did Braga confirm that the Handshake Agreement
was still in effect. The absence of any letter reaffirming the
relationship between Edwards and Wyatt indicates that the
termination or repudiation was final. See Bruce
Lincoln-Mercury, Inc. v. Universal C.I.T. Credit Corporation,
325 F.2d 2, 22 n. 44 (3d Cir. 1963) (stating that the fact finder
may use "a `measure of speculation' in arriving at its
12. After receipt of the July 31, 1998 letter from Braga,
Ochroch telephoned Braga to set up a meeting for August 10, 1998 to formally conclude the cooperating relationship between Edwards
and Wyatt. The August 10 meeting absolutely and unequivocally
confirmed that the Handshake Agreement was terminated or
repudiated. At this meeting, the Handshake Agreement was not
reformed, and a new settlement agreement between Edwards and
Wyatt was not reached. At the conclusion of the August 10
meeting, the testimony of Wyatt, Ochroch, Phillip Fisher and Lane
Fisher supports our finding that all relationships or alignments
between Edwards and Wyatt were over and that Edwards was going
independent of Wyatt.
13. The Handshake Agreement was not renewed or reformed, and a
new agreement between Edwards and Wyatt was not reached after the
July 31, 1998 letter. After Edwards' letters that terminated or
repudiated the Handshake Agreement, Edwards and Wyatt continued
to communicate in hopes of effectuating their shared interest in
preventing Phillips from buying Edwards' shares of stock, which
was also the underlying goal of both the Settlement Agreement and
the Handshake Agreement. Despite the actions taken
post-termination by Edwards and Wyatt toward this common goal
that resembled actions taken in furtherance of their
pre-termination alliances, "post-termination behavior identical
with pre-termination behavior is an insufficient basis to support
an automatic renewal of a contract." See EFCO Importers v. Halsobrunn, 500 F. Supp. 152, 156 (E.D. Pa. 1980) (construing
Maloney v. Madrid Motor Corp., 385 Pa. 224 (1956)).
14. Wyatt did not waive his defense of repudiation. Wyatt was
not required to raise repudiation as an affirmative defense in
pre-trial pleadings. See Fiberlink Communications Corp. v.
Digital Island, Inc., No. 01-2666, 2002 U.S. Dist. LEXIS 13202,
at *1 n. 6 (E.D. Pa. July 18, 2002) (citing 13 Richard A. Lord,
Williston on Contracts § 39:37 (4th ed. 2000) that, "when an
action is brought by the repudiating party, anticipatory
repudiation is not an affirmative defense that is required to be
specifically pleaded in response").
15. While not dispositive of this matter, there is a serious
question as to whether Edwards has proven he suffered damages as
a result of Wyatt's alleged breach. A plaintiff is entitled to
damages if: (1) they were such as would naturally and ordinarily
result from the breach; (2) they were reasonably foreseeable and
within the contemplation of the parties at the time they made the
contract; and (3) they can be proved with reasonable certainty.
Ferrer v. Trustees of the University of Pennsylvania,
825 A.2d 591, 610 (Pa. 2003). The plaintiff bears the burden of proof as
to damages. Judge Technical Services v. Clancy, 813 A.2d 879,
885 (Pa. Super. 2002) (citing Penn Elec. Supply Co., Inc. v.
Billows Elec. Supply Co., Inc., 364 Pa. Super. 544 (1987)). While not requiring the plaintiff to prove damages to a
mathematical certainty, Pennsylvania law requires the plaintiff
to introduce sufficient facts so the finder of fact may determine
damages with reasonable certainty. ATACS Corporation v. Trans
World Communications, Inc., 155 F.3d 659, 669 (3d Cir. 1998).
The courts have defined reasonable certainty as "a rough
calculation that is not `too speculative, vague or contingent'
upon some unknown factor." ATACS, 155 F.3d 669-70 (citing
Sprang & Co. v. United States Steel Corp., 545 A.2d 861, 866
Edwards' damages calculations, which at various times have been
placed between $11 million and $120 million, are "speculative,
vague and contingent on unknown factors." First Edwards' damages
calculations are speculative in that there is a $110 million
swing between his low estimate and his high estimate. Thus,
Edwards has failed to prove his damages with "reasonable
certainty." In addition, Edwards failed to offer expert testimony
at trial to support this figure. Edwards relies on figures put
forth by consultants whom were not employed by Wyatt, but rather
attended the IPO meeting in hopes of receiving gainful employment
in connection with the proposed IPO. On this evidence, the Court
would be speculating by formulating a damages award in this
matter. Braga described the IPO scenario as "speculative," and
because the IPO never occurred, these values cannot be offered to sustain a damages award.
Reliance on Wyatt's opinion as to the value of Pilot's stock at
one point in time, for the purposes of calculating Edwards'
damages, is misplaced. At trial, Wyatt testified that he has no
formal training in evaluating companies, nor has he ever taken a
company public. Thus, Wyatt's opinion as to the value of Pilot's
stock in 1998 is pure speculation.
In addition, any information contained in Pilot's K-1 reports
is inadmissible as hearsay. Edwards failed to produce any witness
at trial who could corroborate the figures or be available for
cross-examination regarding the values listed on the K-1 reports.
Thus, the K-1s may not be relied upon in calculating Edwards'
Furthermore, Edwards contends that he is entitled to a "pro
rata" share of the benefits that Wyatt received as a result of
the settlement with Phillips. There is no evidence that the
parties agreed to this "formula." Additionally, the notion that
Edwards is entitled to a "pro rata" share of the benefits based
upon his percentage of ownership of Pilot fails to account for
Edwards' status as a Chapter 7 debtor. As a Chapter 7 debtor, the
shares became property of Edwards' Bankruptcy estate and were
subject to sale by the Bankruptcy Trustee. Pursuant to the
Bankruptcy Code, Edwards did not maintain ownership of the shares nor could he control their disposition. See In re Cult
Awareness Network, Inc., 151 F.3d 605, 609 (7th Cir. 1998).
Edwards' damages testimony is primarily the opinion testimony
of Edwards and Braga. A plaintiff's opinion as to the existence
and value of damages may not be enough to sustain a damages
award. Ware v. Rodale Press Inc., 322 F.3d 218, 220-21 (3d Cir.
2003). In Ware, the plaintiff brought a breach of contract
action stemming from the termination of a publishing contract.
The Third Circuit upheld the district court's dismissal of the
claim. In its opinion, the Third Circuit found persuasive the
following findings of the district court concerning damages:
Plaintiff failed to provide any supporting
documentation or expert reports or analysis to
support its damages calculations. Plaintiff produced
no evidence or documentation concerning costs and
expenses Plaintiff avoided by not having to perform
its sales duties under the contract. Nor had
Plaintiff provided the basis for itemized advertised
commissions. In fact, the damages calculations, as
presented, evince little more than the opinion of
Id. at 226.
Edwards' last day of employment at Pilot was April 20, 1995.
Edwards' opinion as to the value of Pilot in 1998 is irrelevant,
since he was not involved in the day-to-day operations of Pilot
and was not made aware of internal financial operations of Pilot. In his testimony, Braga indicated that $15 million would be a
suitable number to achieve a complete settlement between the
parties. Braga indicated that he "was trying to come up with
creative ways" to arrive at that number, which "seems like a fair
number." Again, a damages award cannot be sustained on such
conjecture and opinion.
16. Edwards has failed to prove he relied to his detriment on
any promises of Wyatt. The elements of promissory estoppel under
Pennsylvania law are: "(1) the promisor makes a promise that he
reasonably expects to induce action or forbearance by the
promisee; (2) the promise does induce action or forbearance by
the promisee; and (3) injustice can only be avoided by enforcing
the promise." Edwards v. Wyatt, 335 F.3d 261, 277 (3d Cir.
2003); Carlson v. Agnot-Ogden Memorial Hosp., 918 F.2d 411, 416
(3d Cir. 1990). As the Tuscany Coffee Shop meeting occurred
before Edwards' termination or repudiation of his cooperating
relationship with Wyatt and the Handshake Agreement, any promises
made at that meeting were no longer enforceable after Edwards'
July 30 and 31, 1998 letters. Regardless of the July 30 and 31,
1998 letters, no promises were made or renewed at the coffee shop
meeting. At that meeting, Wyatt did not promise that he would
maintain an alliance with Edwards and against Phillips until the
end of the bankruptcy sale. Further, as a result of the September 1, 1998 meeting in D.C., no new agreements were reached
between Wyatt and Edwards and no old promises were revived.
17. After the July 30 and 31, 1998 letters, Wyatt and Edwards
maintained a mutual desire to preclude their common enemy,
Phillips, from buying Edwards' shares. This mutual desire led to
future discussions between the parties about how to implement
that desire at the bankruptcy sale, but these discussions did not
result in an agreement, nor did they revive the Handshake
Agreement, or create any enforceable promises from Wyatt that he
would work for a set amount of time in concert with Edwards and
against Phillips. ORDER
AND NOW, this day of July, 2004, in consideration of the
foregoing Findings of Fact and Conclusions of Law, it is
ORDERED that judgment is entered in favor of Defendant, Aaron
Wesley Wyatt, and against Plaintiff, John Joseph Edwards. This
case is CLOSED for statistical purposes.
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