The opinion of the court was delivered by: District Judge McLaughlin
This matter is before the Court upon Defendants' First Motion for Partial Summary Judgment (Dkt. #19), Defendants' Second Motion for Summary Judgment (Dkt. #28), and Plaintiff's Cross-Motion for Partial Summary Judgment (Dkt. #23).
This action arises out of a contract entered into between Plaintiff, Heritage Realty Management, Inc. ("Heritage"), and Snow Management Group, a snow removal company owned and operated as a sole proprietorship by John Allin ("Allin"). (Complaint, ¶ 6). Heritage is a publicly traded company that owns and manages commercial real estate throughout the United States. (Zicht Depo., Heritage's Exhibit A, p. 4). Snow Management Group operated on a national scale by hiring subcontractors to perform snow removal and salting for property owners, such as shopping plazas, that contracted with Allin for those services. (Allin Depo. 1/23/06, Heritage's Exhibit D, pp. 23-28).
Heritage and Allin, acting on behalf of Snow Management Group, negotiated and executed a written contract dated October 12, 2004 (the "Snow Removal Contract") whereby Allin agreed to provide snow removal, plowing, shoveling, salting, and other snow management services at various properties owned or managed by Heritage. (Snow Removal Contract, Heritage's Exhibit B). On October 13, 2004, in anticipation of the services that Snow Management Group was to perform under the Snow Removal Contract, Heritage paid an initial deposit to Allin in the amount of $340,482.90. (Complaint, ¶ 8; Allin Depo. 1/23/06, p. 37).
At the time of the contract, Allin also operated a landscaping business and was in the process of developing a snow melting business. Snow Management Group had grown so rapidly in the years preceding the Snow Removal Contract that Allin had begun to experience cash flow and cash management problems. (Id. at pp. 30-31). During the months preceding the execution of the Snow Removal Contract, Allin had been unable to pay many of his debts as they had come due, and owed his snow removal subcontractors debts totaling approximately $3,600,000. (Id. at 33-34).
In 2004, Allin engaged Centrus Group to help him find and attract investors and additional funding. (Id. at pp. 33-34; Allin Depo. 1/22/07, Symbiot Exhibit 7, pp. 50-51). Centrus Group reviewed the assets of Allin's businesses and concluded that they had positive value. (Allin Depo. 1/22/07, p. 51).
On November 3, 2004, allegedly in response to rumors of Allin's financial difficulties, Heritage terminated the Snow Removal Contract and demanded that Allin return its deposit. In an action filed in this Court, Heritage v. John Allin d/b/a Allin Companies and Snow Management Group, No. 04-333E (W.D. Pa.), this Court held that Heritage was entitled to reimbursement of the deposit, less actual expenses incurred by Allin "for all work or services performed and equipment and materials supplied to the date of termination." (Transcript of Proceedings 6/21/06, Heritage's Exhibit H, pp. 4-5).
In or about October, 2004, Allin commenced negotiations with Defendant Symbiot Business Group, Inc. (the "Corporation") relative to the potential purchase of the assets of Snow Management Group. As a result of these negotiations, Allin, as seller, and the Corporation and Symbiot Snow Management Network, LLC (the "LLC"), as buyers, entered into a formal Asset Purchase Agreement ("APA") pursuant to which Allin sold his snow removal and management business to the Symbiot entities. (APA, Heritage's Exhibit G; Allin Depo. 1/23/06, pp. 79). In exchange for the transfer of assets, Allin received the following:
(a) The assumption, by the LLC, of specified trade payables up to a maximum amount of $4,000,000, as shown on Section 3(p)(ii) of the disclosure schedules. (APA, p. S13).
(b) The assumption, by the LLC, of up to $2,000,000, of amounts Allin owned to National City Bank on a promissory note.
(c) The assumption, by the LLC, of Allin's liability under contacts which became "Acquired Contracts" under the APA.
(d) $10,000 payment toward Allin's legal expenses..
(e) $50,000 cash, paid to Allin' counsel. (APA, p. S15).
(f) 500,000 share of stock in the Corporation. (APA, p. S15).
(g) The ability to earn up to $1,500,000 in additional cash payments if certain revenue targets were met. (Id.).
(h) $250,000 cash, paid over five years, for Allin's agreement not to compete. (Id.).
(i) An employment contract under which Allin would receive a base salary of $139,800 per year during his first year of employment, plus benefits and bonus opportunities.
(APA, pp. S321-34; Allin Depo. 1/23/06, pp. 35-36; Allin Depo. 1/22/07, pp. 66-76). The APA referred to the Heritage litigation in a disclosure schedule in § 3(s):
For all litigation claims below, [Symbiot] has assumed the Accounts Payable as an Assumed Liability but not the cost of litigation on behalf of the claimant or plaintiff.
Champlain Valley Property Services, Inc. v. Snow Management Group in Vermont State Court in the amount of $95,000. Christine McConnell, dba C.C. Landscape and Design v. Greg Yandow and Allin Compaies, dba Snow Management Group, Chittenden County Vermont in the amount of $11,300. Meadowlands Cleaning Services, Inc. v. John A. Allin d/b/a Snow Management Group, et al. Docket No. BBRL- 1289-04, Superior Court of New Jersey, Bergen County in the amount of $18,045.75.
Heritage Realty Management Group, Inc. v. John Allin d/b/a Allin Companies and Snow Management Group, In the United States District Court for the Western District of Pennsylvania in the amount of $340,482.90. (APA, Disclosure Schedule, §3(s) (emphasis added)). Section 3(p)(ii) of the APA purports to contain a listing of all accounts payable that the LLC agreed to assume as part of the asset purchase. Heritage is not listed in Section 3(p)(ii). (APA, pp. S28, S196-206).
The closing on the APA occurred on November 3, 2004. On November 22, 2004, Allin and Symbiot entered into a "Letter Agreement" modifying some of the terms of the APA. (APA, pp. S388-91). In that Agreement, the LLC agreed to "assume all obligations of Seller, up to $170,000 in the aggregate," with respect to the Heritage litigation pending in this Court. (APA, p. S389). The Letter Agreement further provided that, "[i]n the event of a conflict between this Letter Agreement and the Purchase Agreement, this Letter Agreement shall prevail." (Id.)
Following the closing, Symbiot assumed the business operations of Allin's snow removal business, maintaining those operations from the same premises and facilities previously utilized by Allin. Symbiot retained all of the key staff and management personnel, including Allin and his wife, Peggy Allin, and used the same equipment that Allin had previously used in his snow removal operations. (Allin Depo. 1/23/06, pp. 35-36).
On February 23, 2006, Heritage filed the instant complaint asserting, inter alia, claims based upon actual fraud (Count One), constructive fraud (Count 2), and successor liability (Count 6).*fn1 On December 15, 2006, Symbiot filed a First Motion for Partial Summary Judgment, moving for judgment on Heritage's successor liability claim. On January 16, 2007, Heritage responded by filing a Cross-Motion for Partial Summary Judgment on the successor liability claim. On February 6, 2007, Symbiot filed a Second Motion for Summary Judgment seeking dismissal of all claims. These motions are ripe for review.
Summary judgment is proper "if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). In order to withstand a motion for summary judgment, the non-moving party must "make a showing sufficient to establish the existence of [each] element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). In evaluating whether the non-moving party has established each necessary element, the Court must grant all reasonable inferences from the evidence to the non-moving party. Knabe v. Boury Corp., 114 F.3d 407, 410, n.4 (3d Cir. 1997) (citingMatsushita Elec. Indus. Co. v. Zenith Radio ...