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Weaver v. Mobile Diagnostech

June 25, 2007


The opinion of the court was delivered by: Judge Terrence F. McVerry

Magistrate Judge Lisa Pupo Lenihan


This case was previously referred to United States Magistrate Judge Lisa Lenihan for pretrial proceedings in accordance with the Magistrate Judges Act, 28 U.S.C. § 636(b)(1), and Rules 72.1.3 and 72.1.4 of the Local Rules for Magistrate Judges.

The Magistrate Judge's Report and Recommendation filed on May 22, 2007, recommended that Plaintiff Salvatore's Motion for Partial Summary Judgment on his claim for breach of fiduciary duty be denied. Second, it recommended that the Defendants' Motion for Partial Summary Judgment be denied as moot with respect to its assertions of both (a) absence of standing and/or (b) time bar against Plaintiff Angela Weaver ("Weaver"), and denied with respect to Plaintiffs' claims under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C.A. § 1962 et seq. (hereinafter "RICO"). Finally, it recommended that Plaintiffs be given leave to amend their pleading to allege a § 1962(c) "enterprise" within the parameters of the Third Circuit's holding in Jaguar Cars, Inc. v. Royal Oaks Motor Car Co., Inc., 46 F.3d 258 (3d Cir. 1995). Service was made on all counsel of record, and Objections and Responses to the Objections were filed by the parties during the month of June.

Plaintiff Salvatore objects to denial of his Motion for Summary Judgment on breach of fiduciary duty, asserting in essence that the Report erred in concluding that "whether a partner breached such distinct fiduciary duties as e.g., loyalty, care, and honesty encompass[es], necessarily, both (1) the knowledge, understanding and/or intent of the partner, and (2) the particular circumstances of the acts alleged" and such questions are, therefore, "within the purview of the factfinder." Report at 12-13; Plaintiff's Objections at 2-3 (citing Pinnacle Express, Inc. v. Trout, 2002 WL 1547540, *3 (Mich. Cir. Ct. June 26, 2002) for the proposition that "intent and knowledge are not elements of a breach of a fiduciary duty claim").*fn1

The Court understands the statutory and common law underlying Plaintiff's breach of fiduciary duty claim to require the partners to have performed their partnership obligations in a manner they honestly believed to be in the best interests of the partnership, consistent with duties of care and loyalty, and to have disclosed all material and relevant information regarding partnership management/assets. Defendants have proffered, however, assertedly legitimate business reasons for, e.g., the MDI loans, and have made other assertions that relate to factual questions of the loyalty/honesty/good faith of their conduct and their reasonable beliefs as to the materiality/relevancy of information withheld from the limited partners. It is not for this Court to weigh on summary judgment the merits of those assertions.*fn2 To the contrary, it is appropriate to deny summary judgment on the basis of material questions of fact present when the evidence is viewed in the light most favorable to the non-moving party.*fn3

Defendants, for their part, raise multiple objections, including an objection to the Report's recommendation that Plaintiff be permitted to amend his pleadings to allege a separate § 1962(c) enterprise, in accordance with this Court's revised interpretation of Jaguar Cars, Inc. v. Royal Oaks Motor Car, Inc., 46 F.3d 258 (3d Cir. 1995). Defendants assertion that Plaintiff should not be permitted to amend is without merit where, as fully discussed in the Report,*fn4 this Court previously concluded that the RICO claim was maintainable as pled. Plaintiff requested leave to amend contemporaneous with this Court's original consideration in August, 2003, and again when the matter was revisited during oral argument in January, 2007. Were Plaintiff now to file a Motion to Amend, it would be granted.*fn5 But the record in this case reflects no need for such Motion; rather, it is appropriate that this Court sua sponte and on the basis of Plaintiff's prior requests, grant leave to amend as recommended in - and for the reasons set forth in - the Report. Barring Defendants' establishment of a need for specifically-identified additional discovery, the Court's review of the hundreds of pleadings and volumes of documents in this case leads it to anticipate little, if any, additional-discovery-related delay.

Defendants also object to what they characterize as the Report's improper findings of fact as to both (a) the loan-prohibit provisions of the written Partnership Agreement and (b) Defendants' control of AMD and/or MDI. That Defendants dispute the Report's conclusions, however "vigorously", is in itself insufficient to establish a material question of fact; and here the evidence of record is clearly, unambiguously to the contrary. More particularly, where the specific provisions of the Partnership Agreement are unambiguous, as the Report properly concludes (as a question of law), Defendants' assertions as to the meaning and/or intent of those or other more general provisions do not create an ambiguity. See Report and Recommendation at 10. Similarly, Defendants assertions as to Gerald Weaver's influence on their decision-making do not alter the clear record regarding Defendants' ownership interests in, and control and management of, the entities at issue. Id. at 9-10; see also Plaintiff's Brief in Opposition to Objections at 5-6 (documenting Defendants' related admissions). Cf. In Re Estate of Gerald W. Weaver, Court of Common Pleas of Allegheny County, No. 2136 of 2000, May 24, 2007 Order of Court (concluding that decedent's financial interests in the AMD partnership and other entitites were the subject of a valid inter vivos transfer by decedent to tenancy-by-the-entireties with his surviving spouse; that certain evidence was precluded under the Pennsylvania Dead Man's Act; and that the Estate be re-closed).*fn6

Finally, Defendants' objections raised under Holmes v. Securities Investor Protection Corp., 503 U.S. 258 (1992) appear to largely ignore the Report's conclusion that all claims before this Court are derivative. See Defendants' Objections at 15-17. They are therefore misplaced. See Report at 17-18.

Accordingly, after review of the pleadings and documents in the case, together with the Report and Recommendation, and the Objections and Responses thereto, the following Order is entered:

AND NOW, this 25th day of June, 2007:

IT IS HEREBY ORDERED that Plaintiff's Motion for Partial Summary Judgment is DENIED;

IT IS FURTHER ORDERED that Defendants' Motion for Partial Summary Judgment is DENIED and that their January 15, 2007 Motion, to the extent not previously denied by the Court's text-only Order of February 5, 2007, is DENIED as moot;*fn7

IT IS FURTHER ORDERED that Plaintiffs file, within twenty (20) days from the date hereof, amended pleading(s) to properly allege ...

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