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Edward J. O'kinsky v. William A. Perone

April 20, 2012


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



Plaintiff brings this action under Pennsylvania law for legal malpractice against defendants William A. Perrone, Esq., and Wiggin and Dana, LLP ("Wiggin"), the law firm employing Perrone, and for fraud and breach of contract against William Luby and Alasdair Ritchie ("moving defendants").*fn1 Plaintiff alleges that moving defendants deceived him into signing a written contract by omitting terms from-and adding terms to-a prior verbal agreement and by hiring Perrone to advise him to sign the contract.

Presently before the Court is the Motion of Defendants William Luby and Alasdair Ritchie to Dismiss Counts V and VI of Plaintiff's Amended Complaint. For the reasons stated below, the Court denies the motion with respect to Count VI, the breach-of-contract count, and grants the motion in part and denies it in part with respect to Count V, the fraud count.


A.Contractual Negotiations

Plaintiff, a firefighter by profession, formed Waterway, Inc. (Southern Division) ("Waterway"), in 1989 to do business in firefighting-equipment testing and maintenance. (Am. Compl. ¶¶ 6, 15.) In September 2006, Ritchie approached plaintiff to discuss moving defendants' interest in franchising his technology and system. (Id. ¶ 7.) In November 2006, plaintiff and moving defendants reached the following verbal agreement: moving defendants obtained the right to license plaintiff's fire-hose-and-ladder-testing technology and system, sell franchises through a "franchise sales corporation," and earn an as-yet-unstated percentage of the franchise sales corporation's profits; in return, plaintiff was to be paid a $100,000 annual salary by the franchise sales corporation and $10,000 from each initial franchisee payment. (Id. ¶ 9.) Plaintiff also promised to provide technical support to the franchise sales corporation. (Id.) The verbal agreement provided that plaintiff would retain sole control of Waterway. (Id.)

Thereafter, moving defendants told plaintiff that they had retained an attorney, Perrone, to advise both plaintiff and themselves with respect to drafting and executing a written contract with terms identical to the verbal agreement the parties had already reached. (Id. ¶¶ 11, 14, 50.) Moving defendants and Perrone told plaintiff that using one attorney to represent both parties was proper. (Id. ¶ 11, 50.) However, Perrone and Wiggin now contend that they were retained to represent only moving defendants. (Id. ¶ 51.)

Perrone advised plaintiff to enter into the written agreement and led him to believe that it included the terms of the verbal agreement. (Id. ¶ 13.) There was no formal closing, but on May 15, 2007, plaintiff signed "some documents which were faxed to him and one document which Luby asked him to sign after the contractual documents were allegedly executed." (Id. ¶ 14.) Perrone led plaintiff to believe that the written contract contained the terms of the verbal agreement. (Id. ¶ 13.) Plaintiff did not receive a complete copy of the contract documents until March 2009. (Id. ¶ 17.)

B.Later Developments and the Terms of the Written Contract

The written contract that plaintiff signed in May 2007 did not contain the same terms as the verbal agreement into which he entered in November 2006. (Id. ¶ 66.) However, because plaintiff never read the written contract, he did not suspect that it differed from the verbal agreement until November 2008, when he stopped receiving his $100,000 salary.*fn3 (Id. ¶ 17.) On March 9, 2009, Perrone sent plaintiff a letter enclosing the complete written contract that plaintiff signed on May 15, 2007. (Id. Ex. A, at 2).

Among other provisions, the written contract increased the number of shares in Waterway from 100 to 300 and provided for the sale of 200 newly-created shares to moving defendants for $500,000.*fn4 (Id. Ex. A, Written Consent Sole Dir. Waterway, Luby Subscription Agreement Shares, Ritchie Subscription Agreement Shares.) Thus, under the written contract, moving defendants owned two-thirds of Waterway. (Id. Ex. A, at 2.) Further, under the written contract, moving defendants, not plaintiff, were elected to serve as Waterway's directors. (Id., Ex. A, Unanimous Written Consent Stockholders Waterway.) The written contract does not provide plaintiff with a $100,000 salary or $10,000 franchisee payments, although it does require plaintiff to work at least forty hours per week for Waterway. (Id. Ex. A, Waterway Stockholder's Agreement 10-11.) Finally, the contract contains an integration clause stating that the "[a]greement constitutes the entire agreement among the parties and supersedes any prior agreements among the parties, whether written or oral, relating to the subject matter hereof." (Id. at 13.)


Rule 12(b)(6) of the Federal Rules of Civil Procedure provides that, in response to a pleading, a defense of "failure to state a claim upon which relief can be granted" may be raised by motion to dismiss. To survive a motion to dismiss under Rule 12(b)(6), a civil plaintiff must allege facts that "raise a right to relief above the speculative level." Victaulic Co. v. Tieman, 499 F.3d 227, 234 (3d Cir. 2007) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). A complaint must contain "sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662 (2009) (quoting Twombly, 550 U.S. at 570). To satisfy the plausibility standard, a plaintiff's allegations must show that defendant's liability is more than "a sheer possibility." Id. "Where a ...

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