The opinion of the court was delivered by: James Knoll Gardner, United States District Judge
This matter is before the court on Defendant Barley Snyder, LLC's Motion for Summary Judgment Pursuant to Fed.R.Civ.P. 56, which motion was filed together with the Memorandum of Law in Support of Defendant Barley Snyder, LLC's Motion for Summary Judgment Pursuant to Fed.R.Civ.P. 56 on January 30, 2012. *fn1 Plaintiffs' Memorandum of Law in Opposition to Defendant's Motion for Summary Judgment was filed March 19, 2012. *fn2
After oral argument on defendant's motion for summary judgment conducted before me on May 9, 2012, I took the matter under advisement. Hence, this Opinion.
For the reasons expressed below, I grant defendant's motion for summary judgment. Specifically, I grant defendant's motion on that remaining portion of Count I of plaintiffs' Amended Complaint alleging a claim for breach of fiduciary duty on behalf of plaintiffs Michael Reis, Sr. and Lawrence J. Katz, individually. Summary judgment on this claim was granted because plaintiffs did not and cannot establish either that defendant was required to fulfill any fiduciary duties to plaintiffs, or that plaintiffs suffered any injury. Accordingly, plaintiffs did not and cannot establish that any failure to act was a real factor in causing any injuries to plaintiffs.
In addition, I grant defendant's motion for summary judgment on the remaining portion of Count IV of the Amended Complaint brought by plaintiffs individually alleging tortious interference with contractual relations by defendant. Summary judgment on this claim was granted because plaintiffs did not and cannot establish either the absence of privilege or justification on the part of defendant, or actual legal damage as a result of defendant's conduct.
This action is before the court on diversity jurisdiction. Plaintiff Michael Reis, Sr. is a resident of the State of Illinois and plaintiff Lawrence J. Katz is a resident of the State of New Jersey. Defendant Barley, Snyder, Senft & Cohen, LLC is a Pennsylvania limited liability company. The amount in controversy is in excess of $75,000. See 28 U.S.C. § 1332.
Venue is proper because plaintiffs allege that the facts and circumstances giving rise to the cause of action occurred in Lancaster County, Pennsylvania, which is in this judicial district. 28 U.S.C. §§ 118, 1391.
On April 10, 2005 plaintiffs Reis and Katz, on their own behalf and as assignees of Weaver Nut Company, Inc., filed their initial Complaint in this matter. The original Complaint alleged five causes of action: breach of fiduciary duty (Count I); professional negligence (Count II); abuse of process (Count III); interference with a contractual relationship (Count IV); and conversion (Count V).
On June 23, 2005 defendant filed its initial motion to dismiss. Plaintiffs July 7, 2005 response included a request to amend the Complaint. My Order dated March 17, 2006 and filed March 20, 2006 granted plaintiffs' request to amend.
On April 12, 2006 plaintiffs filed their Amended Complaint. The Amended Complaint contains the original five causes of action and an additional cause of action for breach of contract (Count VI). On May 2, 2006 defendant filed its second motion to dismiss. On May 19, 2006 plaintiffs responded.
By my Order and Opinion dated March 30, 2007 I granted in part and denied in part defendant's motion to dismiss plaintiffs' Amended Complaint.
I granted defendant's motion to dismiss that portion of Count I of plaintiffs' Amended Complaint brought by plaintiffs Michael Reis, Sr. and Lawrence J. Katz, in their individual capacities, alleging a breach of fiduciary duty by defendant law firm, Barley, Snyder, Senft & Cohen, LLC ("Barley Snyder").
I granted defendant's motion to dismiss that portion of Count II alleging a claim of professional negligence against defendant Barley Snyder, brought by plaintiffs Reis and Katz, individually.
I granted defendant's motion to dismiss Count III of plaintiffs' Amended Complaint alleging a cause of action against defendant for abuse of process brought by plaintiffs Reis and Katz in their individual capacities.
Moreover, I granted defendant's motion and dismissed from Count IV of the Amended Complaint the claims of Reis and Katz, individually, alleging interference with an advantageous relationship by defendant.
Finally, I granted defendant's motion to dismiss Count V of plaintiffs' Amended Complaint alleging a cause of action against Barley Snyder for conversion brought by plaintiffs Reis and Katz in their individual capacities.
I dismissed all claims contested in the motion to dismiss on the grounds of a release. These claims were brought by plaintiffs Michael Reis, Sr. and Lawrence J. Katz acting in their individual capacity. They included breach of fiduciary duty (Count I), professional negligence (Count II), abuse of process (Count III), tortious interference with contractual relations (Count IV), and conversion (Count V).
I dismissed those counts because plaintiffs Reis and Katz entered into a release between themselves and Weaver Nut Company, Inc. ("the Company") and the other shareholders of the Company (E. Paul Weaver, III and his wife Miriam J. Weaver). The release document released the Weavers, the Company, and its officers, directors and employees from all liability.
Although the release specified that it did not release defendant law firm from any claims, I concluded in this diversity action that, if confronted with the issue, the Supreme Court of Pennsylvania would recognize and rule that the release of the principals (the Company and the Weavers) would act as a release of the agent (defendant law firm Barley Snyder).
Specifically, I relied on the decisions of the Supreme Court of Pennsylvania in Mamalis v. Atlas Van Lines, 522 Pa. 214, 560 A.2d 1380 (Pa. 1989) and the Superior Court of Pennsylvania in Pallante v. Harcourt Brace Jovanovich, Inc., 427 Pa.Super. 371, 629 A.2d 146 (Pa.Super. 1993) for the proposition that, as a matter of law, the release of the principals serves to release claims of any person or entity acting as an agent, servants or employees of the principals.
As a result of my rulings on defendant's motion to dismiss, the following six claims against defendant Barley Snyder remained in this lawsuit: Count I: (1) breach of fiduciary duty brought by plaintiffs as assignees of the Company; (2) aiding and abetting breach of a fiduciary duty brought by plaintiffs individually; (3) aiding and abetting breach of a fiduciary duty brought by plaintiffs as assignees of the Company. Count II: (4) professional negligence brought by plaintiffs as assignees of the Company. Count IV: (5) tortious interference with contractual relations brought by plaintiffs as assignees of the Company. Count VI: (6) breach of contract brought by plaintiffs as assignees of the Company.
By Memorandum and Order dated March 28, 2008, and for the reasons expressed in that Memorandum, I granted the Motion of Defendant, Barley Snyder, LLC, to Strike Plaintiffs' Demand for a Jury Trial, denied plaintiffs' Countermotion Pursuant to Federal Rule of Civil Procedure 39 and struck plaintiffs' Demand for Jury Trial filed June 29, 2007. Thus, this matter was tried before me without a jury.
I presided over a 35-day non-jury trial in this matter on July 7-9, 11, 16-18, 21-23, 25, 28-29, August 6-8, 11-15, September 9-12, 18, 23-26, November 14, 2008, January 13-15 and 27, 2009.
By Verdict and Adjudication filed September 30, 2009, I found in favor of defendant Barley, Snyder, Senft & Cohen, LLC and against plaintiffs Michael Reis, Sr. and Lawrence J. Katz on all six claims.
Regarding Count I of plaintiffs' Amended Complaint, I found in favor of defendant on plaintiffs' claim for breach of fiduciary duty brought by plaintiffs Reis and Katz as assignees of the rights of the Company. Specifically, I concluded that Barley Snyder did have a fiduciary duty to its client Weaver Nut Company which demanded undivided loyalty and prohibited Barley Snyder from engaging in conflicts of interest. A breach of such duty is actionable. However, I concluded that Barley Snyder neither breached its duty of loyalty to Weaver Nut Company nor engaged in any other conflict of interest.
In addition, regarding the two other claims contained in Count I, aiding and abetting breach of a fiduciary duty brought by Reis and Katz individually, and aiding and abetting breach of a fiduciary duty brought by Reis and Katz as assignees of the Company, I concluded that E. Paul Weaver, III, as President of Weaver Nut Company owed fiduciary duties to Mr. Reis and Mr. Katz as shareholders of the Company, and to the Company, which he breached.
However, I concluded that plaintiffs failed to prove by a preponderance of the evidence that Barley Snyder either had knowledge of the breach by Mr. Weaver, or provided substantial assistance or encouragement to Mr. Weaver. Rather, I concluded that based upon the information provided to Barley Snyder, the firm acted both legally, ethically, and in good faith, concerning both of its clients (the Weavers and the Company).
Regarding Count II alleging professional negligence against Barley Snyder, brought by Reis and Katz as assignees of the Company, I concluded that plaintiffs failed to establish by a preponderance of the evidence that Barley Snyder failed to exercise the ordinary skill and knowledge which attorneys are required to utilize or that there were any damages owing to the Company as a result of the actions of Barley Snyder.
Regarding Count IV alleging tortious interference with contractual relations against Barley Snyder, brought by Reis and Katz as assignees of the Company, I concluded that a contract existed, but that defendant did not take purposeful action specifically intended to harm the existing relation because the law firm was the agent of the Company. Moreover, I concluded that there was either privilege, legal justification, or both, for the actions taken by defendant. Also, I concluded that plaintiffs failed to establish damages on Count IV by a preponderance of the evidence.
Finally, Count VI alleged breach of contract for the professional services rendered to Weaver Nut Company, brought by plaintiffs Reis and Katz in their capacity as assignees of the rights of the Company. I concluded that there was a contract between the Company and Barley Snyder for legal services, but that the contract was not breached by Barley Snyder. Moreover, plaintiffs failed to establish by a preponderance of the evidence that the Company suffered any damages under the contract.
Plaintiffs appealed from the final judgment entered September 30, 2009 to the United States Court of Appeals for the Third Circuit. During the pendency of the appeal, the Supreme Court of Pennsylvania overruled the decision of the Superior Court of Pennsylvania in Pallante, supra, and determined that the release of a principal does not bar claims against the principal's agent, where the release expressly preserves potential claims against the agent. See Maloney v. Valley Medical Facilities, Inc., 603 Pa. 399, 984 A.2d 478 (Pa. 2009).
As a result of the Maloney decision of the Supreme Court of Pennsylvania, the Third Circuit in this case reinstated plaintiffs' dismissed individual claims for breach of fiduciary duty (Count I) and tortious interference with contractual relations (Count IV).
The Third Circuit Court of Appeals upheld my dismissal of all the remaining claims which I dismissed either pretrial (at the motion-to-dismiss stage), or at the conclusion of trial. See Reis v. Barley Snyder, Snyder, Senft & Cohen, LLC, 426 Fed.Appx. 79 (3d Cir. 2011).
Finally, the Third Circuit reversed and remanded this matter. In its Opinion filed February 11, 2011, the Third Circuit stated:
Neither side addresses the question of whether the District Court's factual findings as to Weaver Nut's claims should bind Reis and Katz and preclude them from pursuing their individual claims. Even a non-party may be "bound by the determination of issues" if he or she "controls or substantially participates in the control of the presentation on behalf of a party." This is a factual inquiry, and the [District] Court is in a better position than we are to address it in the first instance. We will therefore reverse the dismissal of the individual claims for breach of fiduciary duty and tortious interference, and will remand this case for an analysis of the preclusion issues and, if necessary, further proceedings on these two individual claims.
Reis, 426 Fed.Appx. at 83-84 (citations omitted).
The gist of defendant's within motion for summary judgment is that my Findings of Fact and Conclusions of Law at the non-jury trial do preclude plaintiffs from moving forward on these remaining two reinstated and remanded claims.
In considering a motion for summary judgment, the court must determine whether "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Federal Home Loan Mortgage Corporation v. Scottsdale Insurance Company, 316 F.3d 431, 433 (3d Cir. 2003). Only facts that may affect the outcome of a case are "material". Moreover, all reasonable inferences from the record are drawn in favor of the non-movant. Anderson, supra.
Although the movant has the initial burden of demonstrating the absence of genuine issues of material fact, the non-movant must then establish the existence of each element on which it bears the burden of proof. See Watson v. Eastman Kodak Company, 235 F.3d 851, 857-858 (3d Cir. 2000).
Plaintiff cannot avert summary judgment with speculation or by resting on the allegations in his pleadings, but rather must present competent evidence from which a jury could reasonably find in his favor. Ridgewood Board of Education v. N.E. for M.E., 172 F.3d 238, 252 ...