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LONGVIEW DEVELOPMENT LP v. GREAT ATLANTIC & PACIFIC TEA CO.

July 19, 2004.

LONGVIEW DEVELOPMENT LP,
v.
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.



The opinion of the court was delivered by: HERBERT HUTTON, District Judge

MEMORANDUM AND ORDER

Currently before the Court are Defendants's Motion for Partial Judgment on the Pleadings (Docket No. 13) and Plaintiff's Answer thereto (Docket Nos. 14 & 15).

I. BACKGROUND

  On February 22, 2001, Plaintiff Longview Development LP ("Longview") and Defendant The Great Atlantic and Pacific Tea Company, Inc. ("A&P") entered into a contract in which A&P agreed to sell to Longview property located at Baltimore Pike and Union Avenue in Upper Darby, Pennsylvania. A&P operated a supermarket there and Longview planned to either sell or lease the property to another supermarket operator.

  Before the contract was signed, Longview alleges that A&P represented that the sale of the property would not conflict with any other agreement to which A&P was a party. A&P's representation was memorialized in the contract.*fn1 Nonetheless, on July 13, 2001, Longview learned that the United Food and Commercial Workers Union ("Union") had a right of first refusal to purchase the property under a collective bargaining agreement with A&P. On July 18, 2001, the Union filed a grievance regarding the sale of the property as a result of A&P's failure to honor the Union's right of first refusal. Longview and A&P thereafter amended their agreement to extend the due diligence period to allow A&P to resolve the Union's grievance. A&P never conveyed the property to Longview.

  Longview alleges that A&P's pre-contractual representation that A&P's right to sell the property was unencumbered constitutes fraud. Longview further alleges that at the time A&P made the representation, A&P knew that the Union had a right of first refusal. Longview believes that A&P intentionally concealed the existence of the Union's collective bargaining agreement to induce Longview to enter into the contract.

  Longview filed the Complaint on September 6, 2002, in the Delaware County Court of Common Pleas alleging fraud and breach of contract and seeking specific performance. The case was removed to this Court on September 23, 2002. After 11 months in civil suspension, the case was returned to the active docket on October 7, 2003. In the instant motion, A&P asserts that Longview's fraud claim must be dismissed because Pennsylvania's "gist of the action" doctrine bars tort claims when a cause of action is based on a breach of contract. Longview opposes.

  II. LEGAL STANDARDS

  Federal Rule of Civil Procedure 12(c) allows any party to move for judgment on the pleadings "after the pleadings are closed but within such time as not to delay the trial. . . ." Fed.R. Civ. P. 12(c). When only the pleadings have been presented to the Court for consideration, a Rule 12(c) motion receives the same standard as a motion to dismiss under Rule 12(b)(6). See Inst. for Scientific Info., Inc. v. Gordon & Breach, Sci. Publ'ers, Inc., 931 F.2d 1002, 1005 (3d Cir. 1991); Bowman v. Am. Med. Sys., No. 96-7871, 1998 U.S. Dist. LEXIS 16082, at *4 (E.D. Pa. Oct. 9, 1998). Thus, the Court's role is to evaluate the legal sufficiency of the complaint. See Holder v. City of Allentown, 987 F.2d 188, 194 (3d Cir. 1993); Harvey v. Pilgrim's Pride Corp., No. 03-3500, 2003 U.S. Dist. LEXIS 23274, at *3 (E.D. Pa. Dec. 1, 2003). The Court must accept as true all facts alleged in the complaint and any reasonable inferences that can be drawn from them. See, e.g., H.J. Inc. v. Nw. Bell Tel. Co., 492 U.S. 229, 249-50 (1989); Doe v. Delie, 257 F.3d 309, 313 (3d Cir. 2001); Fairfax v. Sch. Dist. of Phila., No. 03-4777, 2004 U.S. Dist. LEXIS 7750, at *5-6 (E.D. Pa. Apr. 26, 2004).

  When pleading a claim for fraud or mistake, Rule 9(b) requires that "the circumstances constituting fraud or mistake shall be stated with particularity." Fed.R.Civ.P. 9(b). Rule 9(b) is satisfied when a plaintiff pleads the "date, place, or time" of the fraud, but the plaintiffs may also satisfy the rule "by injecting precision and some measure of substantiation into their allegations of fraud." Seville Indus. Mach. Corp. v. Southmost Mach. Corp., 742 F.2d 786, 791 (3d Cir. 1984).

  In applying Rule 9(b) the United States Court of Appeals for the Third Circuit has cautioned that district courts must take into account the "general simplicity and flexibility contemplated by the rules" and "be sensitive to the fact that [the Rule] . . . may permit sophisticated defrauders to successfully conceal the details of their fraud. Christidis v. First Penn. Mortgage Trust, 717 F.2d 96, 99-100 (3d Cir. 1983). Thus, application of Rule 9(b) is relaxed when the factual information regarding the fraud is peculiarly within the defendant's control. Weiner v. Quaker Oats Co., 129 F.3d 310, 319 (3d Cir. 1997). Even in situations where a relaxed application applies, a plaintiff must at least outline "the nature and scope of [the] effort to obtain . . . the information needed to plead with particularity. . . ." Shapiro v. UJB Fin. Corp., 964 F.2d 272, 285 (3d Cir. 1992).

  III. DISCUSSION

  A&P argues that Longview's fraud claim, Count I of the Complaint, must be dismissed under Pennsylvania's "gist of the action" doctrine. The gist of the action doctrine bars an aggrieved party to a contract from bringing a tort claim against the other party where the essential nature of the claim, the "gist" of the claim, is contractual. See Owen J. Roberts Sch. Dist. v. HTE, Inc., No. 02-7830, 2003 U.S. Dist. LEXIS 2997, at *2 (E.D. Pa. Feb. 28, 2003). In eToll, Inc. v. Elias/Savion Adver., Inc., the Pennsylvania Superior Court explained the distinction between tort claims and contract claims: "Tort actions lie for breaches of duties imposed by law as a matter of social policy, while contract actions lie only for breaches of duties imposed by mutual consensus agreements between particular individuals." 811 A.2d 10, 14 (Pa. Super. 2002) (citing Bash v. Bell Tel. Co., 601 A.2d 825, 829 (Pa. Super. 1992)). The legal distinction is important because "[t]o permit a promisee to sue his promisor in tort for breaches of contract inter se would erode the usual rules of contractual recovery and inject confusion into our well-settled forms of actions." Id.

  The doctrine does not provide for an absolute prohibition of tort claims when a breach of contract is alleged. "[A]lthough mere non-performance of a contract does not constitute fraud[,] it is possible that a breach of contract also gives rise to an actionable tort[.] To be construed as in tort, however, the wrong ascribed to defendant must be the gist of the action, the contract being collateral." Id. In other words, a party to a contract should be limited to a contract claim only when "`the parties' obligations are defined by the terms of the contracts, and not by the larger social policies embodied by the law of torts.'" Id. (quoting Bohler-Uddeholm Am., Inc. v. Ellwood Group, Inc., 247 F.3d 79, 104 (3d Cir. 2001)). This distinction is illustrated in Bohler-Uddeholm. There, the minority shareholder of a corporation brought suit against the majority shareholder alleging a contract claim for breach of the shareholder agreement, a tort claim for breach of the majority shareholder's fiduciary duty, and a tort claim for misappropriation of trade secrets. See Bohler-Uddeholm, 247 F.3d at 87. The Third Circuit held that when a majority shareholder breaches his fiduciary duty to minority shareholders, the gist of the action doctrine does not apply, even if the duty was expressly part of a shareholder agreement, because the fiduciary duty has grown out of social policy defining the relationships among shareholders. See ...


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