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Nominees v. Benett

January 25, 2010

CLARET CAPITAL NOMINEES, ET AL., PLAINTIFFS,
v.
JOHN BENETT, ET AL., DEFENDANTS.



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

MEMORANDUM AND ORDER

This case is now before the Court on Plaintiffs' Motion for Summary Judgment (Doc. No. 8). For the reasons set forth below, Plaintiffs' Motion for Summary Judgment is GRANTED, and judgment is entered in favor of Plaintiffs in the amount of $3,449,000.

Factual Background

The factual background of this case has been set forth in detail in this Court's Memorandum of November 30, 2009 (Doc. No. 12), denying Defendants' Motion to Dismiss. We will, therefore, only provide a brief overview that will include any additional facts provided by the parties in their summary judgment filings.

In the summer of 2008 the parties were involved in litigation before this Court. The parties settled the case and signed a Settlement Agreement, which gives rise to their present dispute. Pursuant to the Settlement Agreement and a Promissory Note, both signed on December 15, 2008, Defendants were to pay Plaintiffs $5 million in $1 million installments. On December 23, 2008, the parties also executed an Intercreditor and Subordination Agreement ("ISA") between themselves and the Wilmington Savings Fund Society ("WSFS"). The ISA made all of the settlement loan documents subordinate to loans made by WSFS to Defendants. The ISA also stated that Plaintiff Claret Nominees "shall not exercise any of its enforcement remedies against [Devon IT] . . . for a period of sixty (60) days following written notice to [WSFS] of the event of default under the Settlement Loan Documents." (Ex. A to Defs.' Mem. Law Opp'n to Pls.' Mot. Summ. J. ¶3(c).)

In addition to these written documents, Defendants allege that the parties had an understanding that Defendants' payments to Plaintiffs were to come from royalty payments that IBM owed to Defendants pursuant to a July 2008 agreement between Defendants and IBM. In support of this assertion, Defendants note that IBM's royalty payments were scheduled to coincide with Defendants' payments to Plaintiffs, and that these royalty payments are explicitly referenced in the Settlement Agreement. (Id. ¶¶6, 12.)

Due to IBM's overestimation of its sales projections, however, Defendants did not receive the anticipated amount of royalties from IBM and were not able to pay Plaintiffs pursuant to the Settlement Agreement. Although Defendants did make their first payment on time and in full, Plaintiffs and Defendants entered into an Amended Settlement Agreement on March 31, 2009, the date on which the second payment was due. Pursuant to this Agreement, Defendants were allowed to pay $562,000 on March 31, and were required to pay $1,438,000 along with $10,950 in interest the following month. After this, Defendants were to return to paying $1 million per month. Defendants, however, argue that the fact that Plaintiffs accepted $562,000 as payment in March is significant, as this is the exact amount that Defendants received from IBM in royalty payments for that month. Given this fact, Defendants assert that the course of conduct also demonstrates that Defendants' payments to Plaintiffs were predicated on IBM's payments to Defendants.

Defendants were unable to make the full payment required by the Amended Settlement Agreement in June. When Defendants tendered the amount that they had received from IBM in royalties, Plaintiffs rejected the deficient payment and initiated the instant suit. Due to an acceleration clause in the Amended Settlement Agreement, Plaintiffs seek damages in the amount of $3,449,000, which includes the balance remaining from the settlement as well as interest on the overdue amount. Defendants have admitted that this is the amount due in their Answer.

Standard

When a party files for Summary Judgment, "[t]he judgment sought should be rendered if the pleadings, the discovery and disclosure materials on file, and any affidavits show 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). In making a summary judgment determination, all inferences must be viewed in the light most favorable to the non-moving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). In order to survive a motion for summary judgment, the non-moving party cannot rely solely on the unsupported allegations found in the pleadings. Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986). Instead, the non-moving party must raise more than "some metaphysical doubt" as to a material fact. Matsushita, 475 U.S. at 586. In making a decision as to whether there is a "genuine" issue of fact, the court must determine "whether a fair-minded jury could return a verdict for the plaintiff on the evidence presented." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986). When looking specifically at breach of contract cases, summary judgment cannot be granted unless the language of the contract is unambiguous. Arnold M. Diamond, Inc. v. Gulf Coast Trailing Co., 180 F.3d 518, 521 (3d Cir. 1999).

Discussion

As discussed in this Court's Memorandum denying Defendants' Motion to Dismiss, Pennsylvania law will apply to this breach of contract dispute. To establish breach of contract under Pennsylvania law, the plaintiff must demonstrate the existence of a contract, a breach of that contract, and damages resulting from the alleged breach. Galko v. Harleysville Pennland Ins. Co., 71 Pa. D. & C.4th 236, 253 (Pa. C.P. Lackawanna County 2005). An enforceable contract requires a mutual agreement between the parties, the exchange of consideration, and that the agreement's terms are delineated with a sufficient degree of clarity. Weavertown Transp. Leasing, Inc. v. Moran, 834 A.2d 1169, 1172 (Pa. Super. Ct. 2003).

The parties in this case do not dispute the existence of the contract, nor do they dispute that Plaintiffs have been harmed. Defendants, however, contest both the existence of a breach, as they allege that there is an implied term in the contract that excuses their failure to pay, and Plaintiffs' ability to bring suit, as they allege that the ISA created a ...


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