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Creditron Financial Services, Inc. v. K2 Financial

May 14, 2008

CREDITRON FINANCIAL SERVICES, INC., ET AL., PLAINTIFFS,
v.
K2 FINANCIAL, LLC., DEFENDANT.



The opinion of the court was delivered by: McLAUGHLIN, Sean J., J.

MEMORANDUM OPINION

This matter is before the Court upon Defendant's Motion for Summary Judgment. For the reasons that follow, the motion is granted.

I. BACKGROUND

Plaintiff Creditron Financial Services, Inc. and Plaintiff Creditron Financial Corporation (collectively referred to herein as "Telatron") are Pennsylvania corporations in the business of marketing and funding consolidation loans. Defendant K2 Financial, LLC ("K2") is a Delaware company that also competes in the consolidation loan market. In February, 2003, Telatron entered into an agreement entitled "Student Loan Origination and Marketing Agreement" ("Agreement") with Delaware Marketing Partners, LLC ("DMP"), a Delaware corporation. Its stated purpose was that Telatron and DMP desired "to implement one or more Student Loan Acquisition Programs for the marketing and funding of consolidation loans." (Agreement, ¶ 1). Pursuant to the Agreement, Telatron was responsible for marketing the consolidation loans and DMP was responsible for providing lists of potential borrowers to Telatron. (Agreement, ¶2). The Agreement contained a payment structure, a confidentiality provision, and a non-compete clause. (Agreement, ¶¶ 3-4, 17). The Agreement required Telatron to pay to DMP 28.57% of the gross revenues generated by the issuance of the consolidation loans, less $142,850.00. (Agreement, ¶4).

On or about October, 2003, several of the founders and owners of DMP formed Defendant K2 Financial. It is undisputed that K2 and DMP share several common owners and operators, and that the business purpose behind the formation of K2 was to provide the same services as Telatron.

On January 16, 2004, DMP filed a breach of contract suit against Telatron, contending that Telatron had not paid approximately $3,700,000.00 owed to DMP under the contract. The case was assigned to this Court under the caption Delaware Marketing Partners, LLC v. Telatron Financial Services, Inc., C.A. No. 04-263-Erie (the "DMP Litigation"). On September 22, 2006, Telatron filed a counterclaim alleging that DMP had breached the Agreement by supplying solicitation lists of decreased quality (Count I). Teletron further alleged that DMP had "secretly conspired, planned, and assisted others to develop and operate a business to compete directly with the Defendants," had "utilized, disclosed and/or revealed confidential and proprietary information of the Defendants," and "had failed to supply to the Defendants the nature and quality of the lists and services which the Plaintiff had promised and agreed to supply." (Count IV)*fn1 (Telatron Counterclaim, ¶¶ 13-15, 20, 26-27).*fn2

On June 25, 2007, United States Magistrate Judge Susan Paradise Baxter recommended that Telatron's counterclaim be dismissed in its entirety. The Magistrate Judge concluded that DMP had not breached the Agreement by providing lists of inferior quality because she found no language in the Agreement requiring DMP to provide lists of a certain length or "usability," or to provide them at a particular frequency. (Report and Recommendation, CA No. 04-263, Dkt. #89). On July 20, 2007, this Court adopted that recommendation during an oral hearing:

[T]he clear agreement, on its face, makes no provision for payment depending upon either the quality or the quantity of the lists that were produced. In short, then, I find that the Plaintiff is entitled to Summary Judgment, as a matter of law, on its contract claim. (Transcript CA No. 04-263, July 20, 2007, Oral Hearing, p. 50).

The Magistrate Judge also recommended that this Court grant summary judgment as to Telatron's breach of contract claims relative to the disclosure of proprietary information and the purported conspiracy by DMP ownership to develop a competing business.*fn3 The Magistrate Judge concluded that there was no evidence in the record supporting either of those allegations and recommended that the counterclaim be dismissed in its entirety. (Report and Recommendation, CA No. 04-263, Dkt. #89). This Court adopted that recommendation at the July 20, 2007 hearing. (Transcript CA No. 04-263, July 20, 2007, Oral Hearing; Dkt. #96, Minute Entry).

On November 13, 2006, Telatron filed an action in the Court of Common Pleas of Erie County against K2. On December 13, 2006, K2 removed the action to this court. In the present action, Telatron asserts that K2: "intentionally and wrongfully interfered with the Plaintiffs' existing contractual relationship with DMP," (Count I); "conspired with, facilitated and assisted in DMP's breach of its contractual obligations and duties under the contract with the Plaintiffs," (Count II); and that "Defendant is the alter ego of DMP and, in that capacity, it is liable and responsible for DMP's violations and breaches of it's contract with the Plaintiffs." (Count III). On October 26, 2007, K2 filed a motion for summary judgment contending, inter alia, that each of Telatron's claims are barred by the doctrine of collateral estoppel. (Dkt. #23). This matter is ripe for review.

II. STANDARD 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 Corp., 475 U.S. 574 (1986)). "Where the record taken as a whole could not lead a reasonable trier of fact to find for the non-moving party, there is no 'genuine issue for trial.'" Id. (quoting Matsushita, 475 U.S. at 587).

III. ANALYSIS

K2 argues that each of Telatron's claims are precluded by the doctrine of collateral estoppel because each was asserted and adjudicated in the DMP litigation. Collateral estoppel, also referred to as issue preclusion, "prevents parties from litigating again the same issues when a court of competent jurisdiction has already adjudicated the issue on its merits." Witkowski v. Welch, 173 F.3d 192, 198 (3rd Cir. 1999). Application of the doctrine of collateral estoppel requires that: "(1) the issue decided in the prior adjudication must be identical with the one presented in the later action; (2) there must have been a final judgment on the merits; (3) the party against whom collateral estoppel is asserted must have been a party or in privity with the party to the prior adjudication; and (4) the party against whom collateral estoppel is asserted must have had a full and fair opportunity to litigate the issue in question in the prior adjudication." ...


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