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Kenneth Segal; Adam Segal, As Trustee For v. Strausser Enterprises

August 12, 2011

KENNETH SEGAL; ADAM SEGAL, AS TRUSTEE FOR
AND ON BEHALF OF THE KAREN
AND KENNETH SEGAL DESCENDANTS
TRUST; AND SEGAL AND MOREL, INC., PLAINTIFFS
v.
STRAUSSER ENTERPRISES, INC.; GARY STRAUSSER; AND
LEONARD MELLON, DEFENDANTS



The opinion of the court was delivered by: James Knoll Gardner, United States District Judge

OPINION

This matter is before the court on Defendant Leonard Mellon, Esquire's Motion for Reconsideration of the Court's Opinion and Order on Motion to Dismiss or Stay, which motion for reconsideration was filed together with a memorandum in support on November 30, 2009. Plaintiffs' Opposition to the Motion of Defendant Leonard Mellon, Esquire for Reconsideration of the Court's Opinion and Order on Motion to Dismiss or Stay was filed December 11, 2009.

For the following reasons, I deny the motion for reconsideration.

JURISDICTION

This action is properly before this court based on diversity jurisdiction pursuant to 28 U.S.C. § 1332. All plaintiffs are citizens of the State of New Jersey, and all defendants are citizens of the Commonwealth of Pennsylvania. *fn1

VENUE

Venue is proper pursuant to 28 U.S.C. § 1391(a)(2) because the events giving rise to plaintiffs' claims allegedly occurred in Northampton County, Pennsylvania, which is within this judicial district.

PROCEDURAL HISTORY

Plaintiffs initiated this action on November 5, 2007 by filing a four-count civil Complaint against Strausser Enterprises, Inc. ("SEI"), Gary Strausser (collectively, "Strausser defendants"), and SEI's former attorney, Leonard Mellon. The Complaint alleges four Pennsylvania state-law claims: tortious interference with contract (Count I), tortious interference with prospective contractual relations (Count II), malicious prosecution under the Dragonetti Act, 42 Pa.C.S.A. §§ 8351-8354 (Count III), and abuse of process (Count IV). The action arises from purchase agreements whereby plaintiff Segal and Morel, Inc. ("S&M") contracted to purchase several parcels of land in Northampton County, Pennsylvania from defendant SEI.

On January 4, 2008, defendants filed a Joint Motion to Dismiss or Stay Litigation and Compel Arbitration ("motion to dismiss"), which sought to dismiss the Complaint in its entirety. According to the motion to dismiss, the lawsuit arises from a contract which contains a mandatory arbitration clause, and therefore the Complaint should be dismissed and the case remanded for arbitration.

By letter dated August 29, 2008, the Strausser defendants withdrew their support for the motion to dismiss. Therefore, the motion to dismiss remained operative on behalf of defendant Mellon only.

The matter was fully briefed. On September 2, 2008, I heard oral argument on the motion to dismiss and took the matter under advisement.

By Order dated September 26, 2008, pursuant to Rule 12(d) of the Federal Rules of Civil Procedure, I converted the motion to dismiss to a motion for summary judgment on the issue of arbitrability because evaluation of the motion to dismiss requires consideration of materials outside the pleadings. *fn2

Accordingly, although I continue to refer to the motion as a "motion to dismiss", the applicable standard of review for purposes of that motion is the summary judgment standard set forth in Rule 56 of the Federal Rules of Civil Procedure.

On November 19, 2009, I filed an Order and Opinion denying the motion to dismiss. In that Opinion, I concluded that defendant Mellon was equitably estopped from arguing that the arbitration clause required dismissal of plaintiffs' Complaint, because his client SEI had taken the opposite position in an earlier proceeding.

Specifically, I concluded that SEI, through its former counsel, had represented to Northampton County Court of Common Pleas Judge Paula A. Roscioli that it believed S&M's claim for attorneys' fees *fn3 could not be submitted to arbitration, but rather should be heard in court. SEI's attorneys also represented in an arbitration hearing, at which Attorney Mellon was present, that issues arising from the lis pendens, including plaintiffs' claim for attorneys' fees, should be heard in court and not in the arbitration proceeding.

In my November 19, 2009 Opinion, I concluded that although Attorney Mellon was not a party to the Northampton County action or the arbitration proceedings in his individual capacity, he is the same party as SEI for purposes of his motion to dismiss because he represented SEI at the time of those proceedings. *fn4 Moreover, I concluded that by withdrawing Count XIII from the arbitration complaint, plaintiffs had detrimentally relied on defendants' statements that defendants agreed that the issues raised in Count XIII of the arbitration complaint should be addressed in court, rather than arbitration.

Accordingly, I concluded that, for purposes of equitable estoppel, the elements of privity and detrimental reliance had been met. Montrose Medical Group Participting Savings Plan v. Bulger, 243 F.3d 773, 779 n.3 (3d Cir. 2001). *fn5

Therefore, I held that defendant Mellon was equitably estopped in this action from invoking any arbitration clause in the underlying purchase agreements. *fn6

On November 30, 2009, defendant Mellon filed a motion for reconsideration of my November 19, 2009 Order and Opinion. Plaintiffs responded in opposition on December 11, 2009.

I conducted oral argument on the motion for reconsideration on January 13, 2010 and took the motion under ...


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