IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
May 19, 2009
GENERAL MOTORS CORP., PLAINTIFF,
SABLE MOTOR CO., INC., ET AL. DEFENDANTS.
The opinion of the court was delivered by: Judge John E. Jones III
THE BACKGROUND OF THIS ORDER IS AS FOLLOWS:
Pending before this Court is the Plaintiff General Motors Corporation's ("GM") Motion for Summary Judgment on Defendants' counterclaim. (Rec. Doc. 50). For the reasons stated below, we will grant the Motion in its entirety.
On August 14, 2007, GM initiated this action by filing a Complaint. (See Rec. Doc. 1). The Complaint contains only one (1) count, which seeks "specific performance and enforcement" of an allegedly breached contract. (Id. at 6). On September 4, 2007, all Defendants*fn1 filed their initial Motion to Dismiss (Rec. Doc. 9), and on September 10, 2007, they filed a second Motion to Dismiss (Rec. Doc. 11). On January 31, 2008, we issued a Memorandum and Order denying the aforesaid Motions. (See Rec. Doc. 26).
As a result of our January 31, 2008 Memorandum and Order, on February 20, 2008 Defendants filed their Answer. (See Rec. Doc. 27). Notably, the Answer contains a section marked "Counterclaim," which enumerates four (4) Counts: Count 1 alleges breach of contract; Count 2 alleges bad faith; Count 3 alleges "promissory estoppel/detrimental reliance;" and Count 4 alleges "intentional and/or negligent misrepresentation." (Id. at 5, 12, 13) (emphasis omitted).
On March 11, 2008, Plaintiff filed a self-styled "Motion for Summary Judgment or to Dismiss Defendants' Counterclaim" (Rec. Doc. 28). In our Memorandum and Order of June 18, 2008, we granted that motion as it related to Count II of the counterclaim and denied it in all other respects. (Rec. Doc. 40). On December 30, 2008, Plaintiffs filed a second "Motion for Summary Judgment to Dismiss Defendants' Counterclaim" (Rec. Doc. 50) (the "Motion") as well as a Motion to Voluntarily Dismiss the Complaint pursuant to Federal Rule of Civil Procedure 41(a)(1)(A)(I) (Rec. Doc. 52).
On April 16, 2009, the parties entered into a stipulation wherein they agreed to the dismissal of the Complaint pursuant to Rule 41(a)(1)(A)(I), the granting of the Motion as it relates to the Sables and SMC, and the subsequent dismissal of the counterclaims asserted by the Sables and SMC against GM. (Rec. Doc. 70). That document effectively terminated the Sables and SMC as parties to this action, meaning that the only remaining claims to be litigated are the counterclaims of HERC and Horbal as asserted against GM. Accordingly, those counterclaims are the only claims to which the instant Motion has relevance.*fn2 Having been fully briefed, the instant Motion is ripe for disposition.
STANDARD OF REVIEW
Summary judgment is appropriate if the record establishes "that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). Initially, the moving party bears the burden of demonstrating the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The movant meets this burden by pointing to an absence of evidence supporting an essential element as to which the non-moving party will bear the burden of proof at trial. Id. at 325. Once the moving party meets its burden, the burden then shifts to the non-moving party to show that there is a genuine issue for trial. Fed. R. Civ. P. 56(e)(2). An issue is "genuine" only if there is a sufficient evidentiary basis for a reasonable jury to find for the non-moving party, and a factual dispute is "material" only if it might affect the outcome of the action under the governing law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49 (1986).
In opposing summary judgment, the non-moving party "may not rely merely on allegations of denials in its own pleadings; rather, its response must ... set out specific facts showing a genuine issue for trial." Fed. R. Civ. P. 56(e)(2). The non-moving party "cannot rely on unsupported allegations, but must go beyond pleadings and provide some evidence that would show that there exists a genuine issue for trial." Jones v. United Parcel Serv., 214 F.3d 402, 407 (3d Cir. 2000). Arguments made in briefs "are not evidence and cannot by themselves create a factual dispute sufficient to defeat a summary judgment motion." Jersey Cent. Power & Light Co. v. Twp. of Lacey, 772 F.2d 1103, 1109-10 (3d Cir. 1985). However, the facts and all reasonable inferences drawn therefrom must be viewed in the light most favorable to the non- moving party. P.N. v. Clementon Bd. of Educ., 442 F.3d 848, 852 (3d Cir. 2006).
Summary judgment should not be granted when there is a disagreement about the facts or the proper inferences that a fact finder could draw from them. Peterson v. Lehigh Valley Dist. Council, 676 F.2d 81, 84 (3d Cir. 1982). Still, "the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; there must be a genuine issue of material fact to preclude summary judgment." Anderson, 477 U.S. at 247-48.
At all relevant times, the Sables, through SMC, owned and operated a Chevrolet dealership in Pittsburgh, Pennsylvania pursuant to the terms of a Dealer Sales and Service Agreement (the "Sales Agreement") they had signed with GM. (See Rec. Doc. 59 Ex. A). The Sales Agreement required, inter alia, approval by GM in order to effect ownership change in the Chevrolet dealership. (See id.). The Sables entered into an Asset Purchase Agreement (the "Asset Agreement" or "initial application") to transfer to HERC*fn3 all the assets of SMC.*fn4 The Asset Agreement made the proposed transfer contingent upon GM's approval, as was required by the Sales Agreement.*fn5 On July 13, 2006, GM officially denied the proposed change in ownership ostensibly because Horbal lacked "automotive retail experience." (See id. Ex. B).*fn6
After this initial denial, Horbal claims that he had a telephone conversation with William Fleck ("Fleck"), a GM Zone Manager,*fn7 wherein Fleck instructed HERC to change the ownership structure. (See id. Ex. E).*fn8 Specifically, Fleck advised that Jack Sable become a 15% owner in HERC and that he be retained as the Dealer Owner/Operator of SMC after the proposed transfer. (See id.). Fleck allegedly assured Horbal that if these changes were made to the corporate structure of HERC, GM would approve a second Asset Agreement ("second application"), if one were consummated. Relying on these representations, Horbal and Jack Sable prepared a second Asset Agreement reflecting the afore-referenced changes. (See id. Ex. D, pp. 20-22, 31, 46-48, 51; Ex. E, pp. 56-61, 68-70). In her affidavit, Maida claims that she worked intimately with Fleck's subordinates in properly filling out the second application, which she was led to believe was merely a modification of the first application.*fn9 Madia Aff. 1.
Based on Fleck's representations, Horbal anticipated that the second application would be approved and accordingly advanced additional funds to SMC in order to keep it viable and solvent. (See Rec. Doc. E, pp. 58-60; Ex. H). The second application was submitted to GM on September 14, 2006. (Rec. Doc. 59 Ex. I). On December 15, 2006, GM notified Jack Sable that the second application had been rejected.*fn10 The Sables and GM responded by initiating a proceeding before the Pennsylvania State Board of Vehicle Manufacturers, Dealers, and Salesperson (the "Board").*fn11 Negotiations to settle that dispute ultimately failed, although GM was under the impression that it had reached an oral agreement that would have resolved the same. Consequently, on August 14, 2007, GM filed the instant action attempting to enforce that oral agreement. The proceeding before the Board was stayed pending resolution of this action. Horbal ceased advancing monies to SMC and the Sables in August 2008 in an attempt to mitigate damages.*fn12
During the course of the litigation, Horbal and HERC filed the counterclaims against GM that are the only remaining subjects of the instant Motion.
The only claims of any type currently pending before this Court are three counterclaims asserted by HERC and Horbal against the Sables and SMC. These counterclaims include the following causes of action: (I) breach of contract (Count I); (II) (II) promissory estoppel/detrimental reliance (Count III); and (III) intentional or negligent misrepresentation (Count IV).*fn13 We will address these counterclaims seriatim.
A. Count I--Breach of Contract
The basic elements of a contract are: offer, acceptance, and consideration.*fn14 See Koken v. Steinberg, 825 A.2d 723, 730 (Pa. Commonw. Ct. 2003) (citations omitted). To maintain their breach of contract counterclaim, HERC and Horbal must prove three elements: "(1) the existence of a contract, including its essential terms, (2) a breach of a duty imposed by the contract, and (3) resultant damages." Fallabel v. Brophy-Wolter, 2008 WL 5600748 (Carbon Co. Ct. Com. Pl. 2008) (citing Omicron Sys., Inc. v. Weiner, 860 A.2d 554, 564 (Pa. Super. Ct. 2004). "'It is elementary law that no person can be sued for breach of contract who has not contracted, either in person or by an agent; or in other words who was not a party to the contract.'" Samuels v. Hendricks, 18 Pa. D&C 3d 561, 562 (Bucks Co. Ct. Com. Pl. 1981) (quoting Roman Mosaic & Tile Co., Inc. v. Vollrath , 313 A.2d 305, 307 (Pa. Super. Ct. 1973).
In the instant case, the Defendants assert that an oral contract was formed between GM and HERC through the conduct of Fleck as directed towards Horbal and in reference to the submission of a second Asset Agreement for GM's approval. In lodging this allegation, the Defendants assert that Fleck was an authorized agent of GM having either the actual or apparent authority to act on behalf of GM. We therefore must proceed to analyze the validity of these contentions.
"Actual authority" can be either express or implied. "Express actual authority" exists when "a principal directly states that an agent has the authority to perform a particular act on the principal's behalf." Jones v. Van Norman, 513 Pa. 572, 587 (Pa. 1987). An agent has the implied actual authority to do all that is proper, necessary, and ordinary in exercising the express actual authority delegated to it.*fn15 See id. Apparent authority, on the other hand, flows from the conduct of the principal but focuses on the reasonable expectations of the party with whom the agent deals. See id. "If the agent has not been granted express authority and no authority can be implied from the principal's express statements, nevertheless, acts or omissions by the principal which lead a reasonably prudent person to believe such authority had been given to the agent, causes us to treat the matter as if authority had actually been granted." Id. at 588. Consequently, in determining whether Fleck was cloaked with the alleged agency power, we must analyze the conduct of his principal, GM.
It is clear from the Submission Acknowledgments signed by Jack Sable and Horbal, and from the Application for Financial Investor signed by Horbal, that GM did not in any way vest any of its representatives or agents with the actual authority to approve a change in or modification to the terms of an application. Both Jack Sable and Horbal were successful and sophisticated businessmen, which leads us to the inference, which Defendants do not contradict, that they read and understood the terms of the documents in question. Consequently, we do not believe that they can credibly assert that Fleck had express or implied actual authority to approve their second application. Consequently, we believe that the only medium through which Defendants can possibly argue agency is via the concepts of apparent authority or agency by estoppel. However, a close examination of the record evidence reveals that these theories also fail.
As afore-stated, apparent agency vests when "acts or omissions by the principal . . . lead a reasonably prudent person to believe . . . authority had been given to the agent . . . ." Van Norman, 513 Pa. at 588. Defendants have not brought to our attention any evidence that GM knew of the alleged assurances Fleck gave to Defendants or that GM was aware of the assistance Fleck provided to Defendants in completing the second application.*fn16 Further, Defendants have brought to our attention no evidence indicating that GM was negligent in supervising Fleck, meaning that GM cannot be bound by the concept of agency by estoppel.*fn17 Since "[j]udges are not like pigs, hunting for truffles buried in briefs," U.S. v. Hoffecker, 530 F.3d 137, 162 (3d Cir. 2008) (quotations and citations omitted), we will not wade through the voluminous evidentiary record in search of disputed facts to which the Defendants have failed to alert us. Accordingly, we conclude that GM cannot be bound by any contract consummated between Fleck and the Defendants through the concepts of apparent agency or agency by estoppel. Since we perceive no other theories under which Defendants can bind Plaintiff to the alleged contract brokered by Fleck, it is our determination that GM was not a party to the alleged oral contract at issue. Accordingly, GM cannot be held liable for breaching that contract. We will therefore grant the instant Motion insofar as it is related to Defendants' breach of contract counterclaim.
B. Count III--Promissory Estoppel/Detrimental Reliance
To recover on a theory of promissory estoppel, Defendants must show: "(1) [GM] made a promise that [it] should have reasonably expected would induce action or forbearance on the part of [Defendants]; (2) the [Defendants] actually took action or refrained from taking action in reliance on the promise; and (3) injustice can be avoided only by enforcing the promise." Sullivan v. Charter Inv. Partners, LLP, 873 A.2d 710, 717-18 (Pa. Super Ct. 2005) (citations and quotations omitted). As we have already discussed, Fleck's alleged conduct cannot be attributed to GM, as GM neither directly authorized it or impliedly ratified it. Accordingly, GM could not reasonably expect that the Defendants would rely on the representation of one of its employees to the contrary. Defendants therefore cannot satisfy the first prong of the promissory estoppel inquiry. Consequently, the instant Motion will be granted to the extent it seeks dismissal of the promissory estoppel counterclaim.
C. Count IV--Intentional//Negligent Misrepresentation
To sustain a counterclaim for intentional misrepresentation, Defendants must prove the following elements: "(1) representation; (2) which is material to the transaction at hand; (3) made falsely, with knowledge of its falsity or recklessness as to whether it is true or false; (4) with intent of misleading another into relying on it; (5) justifiable reliance on the misrepresentation; and (6) the resulting injury was proximately caused by the reliance." Presbyterian Med. Ctr. v. Budd, 832 A.2d 1066, 1072 (Pa. Super. Ct. 2003). As to their negligent misrepresentation counterclaim, Defendants must show: "(1) a misrepresentation of a material fact; (2) the representor must either know of the misrepresentation, must make the misrepresentation without knowledge as to its truth or falsity or must make the representation under circumstances in which he ought to have known of its falsity; (3) the representor must intend the representation to induce another to act on it; and (4) injury must result to the party acting in justifiable reliance on the misrepresentation." Halper v. Jewish Family & Children's Servs. of Greater Philadelphia, 963 A.2d 1282, 1286 (2009).
As we have already stated, Fleck's conduct was ultra vires and cannot therefore be attributed to GM. Consequently, it cannot be said that GM made a knowingly false representation, as required by the intentional misrepresentation framework, or a "misrepresentation of material fact," as required by the negligent misrepresentation framework. Since Defendants cannot satisfy the elements of this cause of action, we will grant the instant Motion to the extent it addresses the same.
Since the Defendants have failed to adduce evidence that indicates GM cloaked Fleck with the authority to unilaterally approve modifications to previously rejected franchise transfer applications, they will be estopped from attributing Fleck's alleged conduct to GM. Accordingly, we will grant the instant Motion in its entirety. An appropriate Order will enter.