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Boston Culinary Group, Inc. v. JDK Catering

July 20, 2009

BOSTON CULINARY GROUP, INC., PLAINTIFF
v.
JDK CATERING, INC., DEFENDANT AND PENNSYLVANIA CULINARY GROUP, LLC, NOMINAL DEFENDANT



The opinion of the court was delivered by: Sylvia H. Rambo United States District Judge

JUDGE SYLVIA H. RAMBO

MEMORANDUM

The instant case arises out of a contract dispute between Boston Culinary Group, Inc. and JDK Catering, Inc. concerning their partnership in Pennsylvania Culinary Group, LLC. Before the court are cross motions for partial summary judgment. (Docs. 25 and 28.) The parties have briefed the issues, and the motions are ripe for disposition.

I. Background

A. Facts

The following facts are undisputed except where noted.

Boston Culinary Group ("BCG") is a national firm providing food and beverage contractor services throughout the United States. (Doc. 34-3, Joseph Armstrong Dep. at 9.) Joseph H. Armstrong is the president of BCG. JDK Catering, Inc. ("JDK") is a catering and concession services provider located in Harrisburg, Pennsylvania. (Doc. 26-2, Jennifer Delaye Dep. at 21-27.) JDK is owned by Jennifer Delaye. (Id. at 9-11.) In July 2004, BCG and JDK contracted to form Pennsylvania Culinary Group, LLC ("Pennsylvania Culinary") for the sole purpose of operating food concession and catering services at the Pennsylvania Farm Show Complex ("Farm Show"). (Compl. ¶ 6; Answer ¶ 6.) At all relevant times, the only two owners of Pennsylvania Culinary have been BCG and JDK. (Compl. ¶ 3; Answer ¶ 3.) On July 26, 2004, Pennsylvania Culinary contracted with the Commonwealth of Pennsylvania to provide food and beverage service at the Farm Show from July 1, 2004 to June 30, 2007. (Compl. ¶ 10; Answer ¶ 10.)

Until July 1, 2006, BCG and JDK shared the obligation to manage Pennsylvania Culinary's Farm Show operations. However, effective July 1, 2006, Pennsylvania Culinary and JDK entered into a written agreement ("Management Agreement"), whereby JDK agreed to act as the sole manager of Pennsylvania Culinary's Farm Show operations through June 30, 2007. (Compl. ¶ 12; Answer ¶ 12; Delaye Dep. 185.) The effect of this agreement was that JDK would assume both the food service and concession arrangements for the Farm Show, as well as the catering arrangements.

The Management Agreement contains a provision that the parties refer to as a performance guarantee:

JDK agrees to guarantee that [Pennsylvania Culinary] will maintain an annual operating cash flow defined as net income plus depreciation and amortization ("Operating Cash Flow") at a minimum level of ninety (90%) percent of the average of the immediately preceding two (2) twelve (12) month periods ("Minimum Level"). After each year during the term of this Agreement, if the Operating Cash Flow is below the Minimum Level, JDK hereby agrees to pay [Pennsylvania Culinary] within thirty (30) days from the date of written notification an amount equal to the difference between the Minimum Level and the Operating Cash Flow as a performance guarantee. . . . (Doc. 30-2, Ex. 3, Management Agreement.) The Management Agreement was drafted by BCG and its attorneys. (Armstrong Dep. 35.)

In early December 2006, JDK informed BCG that it would no longer continue to manage the Farm Show operations for Pennsylvania Culinary. (Delaye Dep. 194.) JDK managed Pennsylvania Culinary's Farm Show operations from July 1, 2006 to December 24, 2006. (Id.) From December 24, 2006 through June 30, 2007 the parties resumed their prior arrangement whereby BCG managed the operations and provided the concession and food service for the Farm Show, and JDK provided catering services to the Farm Show. (Id.; Armstrong Dep. 74-48.)

On January 23, 2007, BCG sent JDK a letter seeking to confirm the then-existing state of affairs. (Doc. 30-2, Ex. 4, Jan. 23, 2007 Ltr. from Joseph Armstrong to Jennifer Delaye.) This letter contained the following clause:

Effective as of December 24, 2006, the agreement set forth in a letter between JDK and BCG [sic] dated July 1, 2006 regarding management (hereinafter "Management Agreement") is terminated and that JDK acknowledges and agrees that effective as of December 24, 2006 BCG will undertake management responsibilities and duties on behalf of [Pennsylvania Culinary] for the performance of the Concession Agreement at the [Farm Show]. The term of the Management Agreement shall continue for so long as the Concession Agreement continues to be in effect including any extension of same. (Id.) The January 23, 2007 letter was signed by Joseph Armstrong on behalf of BCG, but never countersigned by Jennifer Delaye or anyone else from JDK. (Id.) Delaye admits that she did not read the letter, and did nothing to act on it. (Delaye Dep. 195-97.) At some point after BCG resumed the concession operations at the Farm Show, it sent JDK a letter seeking to invoke the performance guarantee for the period between July 1, 2006 and December 24, 2006. (Armstrong Dep. 52, 76-78.) BCG measured the performance guarantee on a month-to-month basis comparing it only to the same months-July through December- from the two previous years and calculated the amount due from JDK to Pennsylvania Culinary to be $142,106.80.

Under both the Management Agreement and the general operating agreement that governed the day-to-day operations of Pennsylvania Culinary, JDK was obligated to pay over to Pennsylvania Culinary all collected receivables attributed to Pennsylvania Culinary. (Delaye Dep. 223.) JDK is withholding the payment of certain receivables, although the parties disagree about the amount being withheld and the legal effect of doing so. (Id.) In her deposition, Delaye testified that she is withholding $80,000-$85,000 in receivables. (Id.) However, in its response to JDK's interrogatory responses, JDK admitted to withholding $100,598.78. (Doc. 26-3 at 2.) BCG believes that the amount being withheld is higher: $101,451.11. (Doc. 27-4, ¶ 7.) The parties agree that JDK is owed a liquidating distribution from Pennsylvania Culinary of approximately $106,000. (Doc. 31, Ex. A at 2.)

B. Procedural History

On May 18, 2009, BCG filed its motion for partial summary judgment, statement of material facts, and supporting brief. (Docs. 25-27.) That same day, JDK filed its motion for summary judgment, statement of material facts, and supporting brief. (Docs. 28-30.) The parties filed their respective briefs in opposition on June 1, 2009. (Docs. 32 & 33.) On June 12, 2009, the parties filed their respective reply briefs. (Docs. 36 & 37.) The motions are now ripe for disposition.

II. Legal Standard

Summary judgment is proper when "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 a judgment as a matter of law." Fed. R. Civ. P. 56(c); accord Saldana v. Kmart Corp., 260 F.3d 228, 231-32 (3d Cir. 2001). A factual dispute is "material" if it might affect the outcome of the suit under the applicable law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A factual dispute is "genuine" only if there is a sufficient evidentiary basis that would allow a reasonable fact-finder to return a verdict for the non-moving party. Id. at 248. The court must resolve all doubts as to the existence of a genuine issue of material fact in favor of the non-moving party. Saldana, 260 F.3d at 232; see also Reeder v. Sybron Transition Corp., 142 F.R.D. 607, 609 (M.D. Pa. 1992).

Once the moving party has shown that there is an absence of evidence to support the claims of the non-moving party, the non-moving party may not simply sit back and rest on the allegations in its complaint. See Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986). Instead, it must "go beyond the pleadings and by [its] own affidavits, or by the depositions, answers to interrogatories, and admissions on file, designate specific facts showing that there is a genuine issue for trial." Id. (internal quotations omitted); see also Saldana, 260 F.3d at 232 (citations omitted). Summary judgment should be granted where a party "fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden at trial." Celotex, 477 U.S. at 322-23. "'Such affirmative evidence -- regardless of whether it is direct or circumstantial -- must amount to more than a scintilla, but may amount to less (in the evaluation of the court) than a preponderance.'" Saldana, 260 F.3d at 232 (quoting Williams v. Borough of West Chester, 891 F.2d 458, 460-61 (3d Cir. 1989)).

The court is permitted to resolve cross-motions for summary judgment concurrently. InterBusiness Bank, N.A. v. First Nat'l Bank of Mifflintown, 318 F. Supp. 2d 230, 235 (M.D. Pa. 2004) (describing concurrent resolution of cross-motions for summary judgment as "a formidable task"); 10A Charles Alan Wright et al., Federal Practice and Procedure § 2720 (3d ed. 1998). When doing so, the court is bound to view the evidence in the light most favorable to the non-moving party with respect to each motion. Fed. R. Civ. P. 56; Raymond Profit Found. v. U.S. Envtl. Prot. Agency, 930 F. Supp. 1088, 1096 (E.D. Pa. 1996).

III. Discussion

The core of the dispute in this case is whether the the performance guarantee contained in the Management Agreement is enforceable, and, if so, against whom. If the performance guarantee is enforceable against JDK, then BCG argues that the net amount owed to it in order to terminate the business operations of Pennsylvania Culinary is $137,118.74. In its motion for partial summary judgment, BCG requests summary judgment only with respect to: (1) that portion of BCG's breach of contract claim that seeks damages for JDK's withholding of receivable from Pennsylvania Culinary; and (2) that portion of JDK's counterclaim that is premised on a "reverse" performance guarantee running from BCG to Pennsylvania Culinary.*fn1 JDK seeks summary judgment on the performance guarantee. It argues that no reasonable interpretation of the parties' agreements allows BCG to enforce ...


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