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Sands v. Wagner

April 25, 2006


The opinion of the court was delivered by: Malcolm Muir Muir, U.S. District Judge

Complaint Filed 08/03/2001

ORDER #1 of April 25, 2006 THE BACKGROUND OF THIS ORDER IS AS FOLLOWS: A significant portion of this order's background is set forth in our order of December 20, 2005, in which we discussed the procedural posture of this case and established a deadline of February 1, 2006, for the parties to file motions for summary judgment. In summary, this case is to be retried as a result of our granting the Defendants' motions for a new trial in our order #1 of March 29, 2004. Plaintiff Cynthia Sands appealed that order and on September 15, 2005, the Court of Appeals for the Third Circuit remanded the case to us after concluding that it lacked jurisdiction over the appeal.

In our order of December 20, 2005, we expressed the view that some of the pending issues ... may be addressed by way of summary judgment motions. For instance, unless there is new evidence which was not presented to the jury during the original trial, it is possible that Wagner may be entitled to summary judgment with respect to Sands's breach of contract claim and Wagner's breach of contract counterclaim. The consequences of Sands's breach could also conceivably affect her claims against Kline and the companies associated with him. (Order of December 20, 2005, p. 2)

On January 31, 2006, Defendants Donald W. Kline, II, Stat Health Services, Inc. (Now known as Guardian Health Services, Inc.), GHS Healthcare, Inc. (Now known as Guardian Nursing Services, Inc.), TIR Partners, and Nordic Investments, Inc. (hereinafter collectively "the Kline Defendants") filed a motion for summary judgment. Defendant Sherry Wagner filed such a motion on February 2, 2006. Supporting and opposition briefs were timely filed in connection with both summary judgment motions. The dispositive motion filed by the Kline Defendants became ripe for disposition upon the filing of their reply brief on March 10, 2006. Wagner's summary judgment motion ripened when she filed her reply brief on April 17, 2006.

Summary judgment is appropriate only when there is no genuine issue of material fact which is unresolved and the moving party is entitled to a judgment as a matter of law. Fed. R. Civ. P. 56(c). Summary judgment should not be granted when there is a disagreement about the facts or the proper inferences which a fact finder could draw from them. Peterson v. Lehigh Valley Dist.

Council, 676 F.2d 81, 84 (3d Cir. 1982). "When a motion for summary judgment is made and supported as provided in ...[Rule 56], an adverse party may not rest upon mere allegations or denials of the adverse party's pleading...." Fed. R. Civ. P. 56(e).

Before reviewing the undisputed and disputed material facts, we will highlight the specific legal issues raised in this case. The parties agree that Pennsylvania law controls our consideration of those issues.

Sands's second amended complaint, filed on December 21, 2005, contains the following claims: 1) a breach of contract claim against Wagner; 2) a civil conspiracy and fraud claim against all of the defendants; 3) an unjust enrichment claim against all of the defendants; and 4) a promissory estoppel claim against Wagner. Wagner has filed a counterclaim against Sands in which Wagner alleges that Sands breached the Stock Purchase Agreement by not providing Wagner with all of the items which the agreement required Sands to transfer to Wagner.*fn1

In our order #1 of March 29, 2004, we stated the following: ... While Wagner focused primarily on physical objects [in asserting her counterclaim], such as a new computer she alleges she did not receive, the scope of her argument extends to intangible items such as bank accounts.

Based on the governing law and the undisputed evidence, Sands was contractually obligated to provide Wagner with the Stat Nurse checking account set up at The First National Bank of Berwick. Sand's [sic] failure to do so adversely affected the business of Stat Nurse and constitutes a complete breach of the Stock Purchase Agreement.

We emphasize, however, that in this order we do not rely on any speculation as to what the potential consequences may have been if access to the corporate bank account had been provided to Wagner. Our analysis ends with the conclusions that 1) the jury's answer to special verdict question twenty-one was against the weight of the evidence because by operation of law Sands had breached the stock purchase agreement; and 2) a new jury trial should be held to evaluate the circumstances surrounding, the significance of, and the consequences of Sands's breach. (Order #1 of March 29, 2004, pp. 7, 11-12)

In our view the pivotal issue underlying all of the causes of action presented in this case, including Wagner's counterclaim, relates to the circumstances surrounding, the significance of, and the consequences flowing from Sands's breach of the Stock Purchase Agreement. Those factors bear directly on whether Sands's breach of the Stock Purchase Agreement may be characterized as a material breach.

Pennsylvania courts have consistently held that "[w]hen performance of a duty under a contract is due, any nonperformance is a breach." Restatement (Second) of Contracts § 235(2) (1981). See Barnes v. McKellar, 434 Pa.Super. 597, 644 A.2d 770 (1994); Camenisch v. Allen, 158 Pa.Super. 174, 44 A.2d 309 (1945). If a breach constitutes a material failure of performance, then the non-breaching party is discharged from all liability under the contract. Oak Ridge Const. Co. v. Tolley, 351 Pa.Super. 32, 504 A.2d 1343 (1985). If, however, the breach is an immaterial failure of performance, and the contract was substantially performed, the contract remains effective. Cimina v. Bronich, 517 Pa. 378, 537 A.2d 1355 (1988); Borough of Greentree to Use of Castelli Const. Co. v. Tortorete, 205 Pa.Super. 532, 211 A.2d 76 (1965); Schlein v. Gross, 186 Pa.Super. 618, 142 A.2d 329 (1958). Accord John D. Calamari & Joseph M. Perillo, The Law of Contracts § 11-22 (2d ed.1977). In other words, the non-breaching party does not have a right to suspend performance [if the breach is not material]. Whether a breach is so substantial as to justify an injured party's regarding the whole transaction as at an end "is a question of degree; and must be answered by weighing the consequences in the actual custom of men in the performance of contracts similar to the one that is involved in the specific case." Gray v. Gray, 448 Pa.Super. 456, 468, 671 A.2d 1166, 1172 (1996) (citing 2401 Pennsylvania Ave. Corp. v. Federation of Jewish Agencies, 319 Pa.Super. 228, 242-43, 466 A.2d 132, 139 (1983) (citations omitted)). Widmer Engineering, Inc. v. Duvalla, 837 A.2d 459, 467-468 (Pa. Super. 2003). Based on that authority, despite the conclusion that Sands has breached the Stock Purchase Agreement, Sands may still proceed with a breach of contract claim against Wagner (and her derivative claims against the Kline Defendants) if Sands's conduct does not constitute a material breach of the Stock Purchase Agreement.

In this case we further emphasize that "... the question whether there has been a material breach is ordinarily for the jury." Resource America, Inc. v. Certain Underwriting Members of Lloyd's Subscribing to Policy Number 501/FT98AAAF, 2004 WL 2580554, *3, 69 Pa. D. & C.4th 496 (2004)(quoting Cameron v. Berger, 336 Pa. 229, 235, 7 A.2d 293, 296 (1939)). Although Resource America and Cameron involved insurance contracts, Pennsylvania courts have applied the principle in other types of contract actions. See Ott v. Buehler Lumber Co., 373 ...

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