The opinion of the court was delivered by: WILLIAM STANDISH, Senior District Judge
Pending before the Court are a Motion to Dismiss filed by
Defendant Michael A. Goldstein, Esq. ("Mot. Dis.," Docket No. 8),
a Praecipe for Entry of Non Pros filed by Defendant Todd E.
Reidbord, Esq., and an untitled document filed by Mr. Goldstein,
directing the Clerk of Courts to enter a judgment of non pros in
his favor. (Docket Nos. 12 and 13, respectively.)*fn1 For
the reasons discussed below, the Motion to Dismiss is granted in
its entirety. The Praecipe for Entry of Non Pros is denied as
moot with regard to Mr. Goldstein and denied as to Mr. Reidbord.
A. Factual History*fn2 Walnut Capital Partners ("Walnut Capital"), not a party herein,
is a Pittsburgh real estate developer. Mr. Reidbord is president
and in-house counsel of Walnut Capital; Mr. Goldstein is an
attorney with an unidentified relationship to Walnut Capital
other than a shared street address in Pittsburgh, Pennsylvania.
In March 2000, Plaintiff KeyBank National Association ("KeyBank")
loaned $26.5 million to Walnut Capital ("the Loan.")
As a condition of the Loan, Walnut Capital was required to
enter into an interest rate hedging transaction through any
acceptable entity of its choice. KeyBank and Walnut Capital
entered into a "ten year forward starting interest rate swap"
("the Swap") in the amount of $13.5 million and a two-year
forward period. The Swap was intended to hedge against rising
interest rates during the lifetime of the Loan and to be settled
for cash when the Loan terminated. The direction of the Swap
payment was determined by interest rate movements: if those rates
increased, KeyBank would pay Walnut Capital; if interest rates
fell, Walnut Capital would pay KeyBank.
As a further condition of the Loan and the Swap, KeyBank
required Walnut Capital to provide a legal opinion letter ("the
Opinion Letter"), confirming, inter alia, "the validity and
complete legal enforceability of the documents and transactions
between the parties." (Complaint, "Compl.," ¶ 9.) On March 23, 2000, in a letter signed by Mr. Goldstein, he stated:
We have made such legal and factual examinations and
inquiries as are pertinent or necessary for the
purpose of rendering the opinions herein expressed.
We have examined and are familiar with the originals
or copies, certified or otherwise, identified to our
satisfaction, of such documents, records and other
instruments as are necessary for the furnishing of
this opinion letter.
The Loan Documents executed by the
Guarantors*fn3 . . . are legal, valid and
binding obligations enforceable with respect to each
of the Guarantors in accordance with their terms.
(Compl., ¶ 10; see also Opinion Letter,*fn4
Plaintiff claims that it did not know when it entered into the
Loan and the Swap that the Opinion Letter was written by Mr.
Reidbord, not Mr. Goldstein; further, it claims that had it known
of Defendants' "malfeasance" in this regard, it would not have
entered into the agreements.
In the two years following execution of the Loan, "interest
rates plummeted." (Compl., ¶ 14.) As a result, when Walnut Capital terminated the Swap in November 2002, it was required to
pay KeyBank some $3.6 million.
On February 23, 2003, Walnut Capital sued KeyBank, claiming
fraud and negligent misrepresentation in connection with the
Loan. See Walnut Capital Partners, et al. v. KeyBank
N.A., et al., CA 03-0284 (W.D. Pa. 2003) ("the Swap
Litigation.") Plaintiff claims that in opposition to a motion to
dismiss the amended complaint in the Swap Litigation, Walnut
Capital argued for the first time that the certain statements in
the Swap documents were general disclaimers and, as such, not
enforceable. KeyBank claims this position directly contradicts
the representations made in the Opinion Letter regarding the
validity and enforceability of the transactions and the Loan
Plaintiff filed suit in this Court on February 8, 2005. In
Count I of the Complaint, KeyBank seeks indemnification from Mr.
Reidbord and Mr. Goldstein, contending that they are "primarily
liable" for the costs, legal fees, and expenses KeyBank has
incurred in the Swap Litigation. (Compl., ¶ 30.) In Count II,
KeyBank seeks contribution from Defendants, claiming that should
it be found liable in the Swap Litigation, any injury to Walnut
Capital resulted at least in part from Defendants' malfeasance.
(Compl., ¶¶ 34-36.) Plaintiff claims in Count III that Defendants
are liable for "direct legal malpractice" in connection with the Opinion Letter. (Id., ¶¶ 38-46.) In Count
IV, Plaintiff alleges that in order to induce KeyBank to enter
into the Loan and Swap, Defendants fraudulently represented that
Mr. Goldstein wrote the Opinion Letter, knowing that KeyBank
would not have accepted the letter had it known it was written by
Mr. Reidbord. (Id., ¶¶ 48-55.) Finally, in Count V, KeyBank
seeks a declaratory judgment that Defendants are jointly and
severally liable for all of KeyBank's future costs, legal fees
and expenses incurred in the Swap Litigation and for any future
adverse judgment entered against KeyBank. (Id., ¶¶ 57-62.)
Mr. Goldstein filed the pending Motion to Dismiss on March 14,
2005. On April 13, 2005, each Defendant filed a praecipe for
entry of judgment of non pros, seeking to dismiss the entire
Complaint inasmuch as Plaintiff had failed to timely file a
certificate of merit as required by Pa.R.Civ.P. 1042.3. In
response to the latter, Plaintiff filed a certificate of merit
for each Defendant on April 29, 2005, 80 days after the Complaint
was filed. (See Docket Nos. 17 and 18.)
While the motion to dismiss and praecipes were pending, the
Court granted summary judgment in favor of KeyBank on June 14,
2005, in the Swap Litigation, concluding that the parol evidence
rule and the existence of an integrated contract barred each of
Walnut Capital's claims in that suit. (Swap Litigation, Docket
No. 94.) Walnut Capital appealed that decision to the Third Circuit Court of Appeals (id., Docket No. 96) where, as of the
date of this Memorandum, it is still pending.
C. Jurisdiction and Venue
Jurisdiction is appropriate in this Court pursuant to
28 U.S.C. § 1332 inasmuch as KeyBank is a national banking association with
its principal place of business in Cleveland, Ohio, and both
Defendants are residents and citizens of Pennsylvania. The Court
has jurisdiction over Plaintiff's declaratory judgment claim by
virtue of 28 U.S.C. § 2201. Venue is appropriate pursuant to
28 U.S.C. § 1391 because both Defendants are residents of this
district and the claim is brought in diversity.
In deciding a motion to dismiss under Fed.R.Civ.P.
12(b)(6),*fn5 all factual allegations and all reasonable
inferences therefrom must be accepted as true and viewed in a
light most favorable to the plaintiff. Colburn v. Upper Darby
Twp., 838 F.2d. 663, 665-666 (3d Cir. 1988). In ruling on a
motion to dismiss, the court must decide whether there are
sufficient facts pled to determine that the complaint is not
frivolous, and to provide the defendants with adequate notice to
frame an answer. Id. at 666. A motion to dismiss will be granted only if it
appears that the plaintiff can prove no set of facts in support
of his claims which would entitle him to relief. Conley v.
Gibson, 355 U.S. 41, 45 (1957).
The claims brought by KeyBank are based in Pennsylvania, not
federal law, with the exception of the declaratory judgment claim
in Count V. As a federal court sitting in diversity, we will
apply Pennsylvania substantive law to those claims. See Erie
R.R. v. Tompkins, 304 U.S. 64, 78-80 (1938); State Farm Mut.
Auto. Ins. Co. v. Coviello, 233 F.3d 710, 713 (3d Cir. 2000).
The decisions of the Pennsylvania Supreme Court are the
authoritative source of Pennsylvania law, but if that court has
not yet decided a specific issue, this Court will be guided by
decisions of lower state courts and by federal courts
interpreting state law. Coviello, id.