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Logan v. Salem Baptist Church of Jenkintown

United States District Court, Third Circuit

August 22, 2013

WALTER J. LOGAN, JR. and THE DELTA ALLIANCE, LLC, Plaintiffs,
v.
SALEM BAPTIST CHURCH OF JENKINTOWN, et al., Defendants

MEMORANDUM AND ORDER

J. CURTIS JOYNER, J.

Currently pending before the Court are the Motion for Summary Judgment of Mary Anders and Risa Freeman (ECF No. 73) and the Motion for Summary Judgment of Salem Baptist Church of Jenkintown (“Salem”) (ECF No. 74). For the reasons stated below, the Motion of Anders and Ferman is GRANTED with respect to the state law claims against DA Ferman and DENIED in all other respects, and the Motion of Salem is GRANTED with respect to all claims asserted by The Delta Alliance, LLC (“TDA LLC”) and DENIED in all other respects.

I. BACKGROUND

This action is one of three pending on our docket arising out of what was, and should have remained, a simple contractual dispute between one of the Plaintiffs, Walter J. Logan, and his company, The Delta Organization, Inc. (“Delta”), [1] and the Defendant Salem Baptist Church of Jenkintown (“Salem”). Unfortunately, in an attempt to gain the upper hand in the contractual dispute, Salem and its legal counsel pursued questionable criminal charges against Logan and the late Lester Mack, resulting in their arrests. After nearly a year, and more than six months after an arbitrator resolved the contractual dispute in Delta’s favor, the authorities dropped the criminal charges against both men.

The Plaintiffs subsequently initiated this suit for damages, [2] principally asserting that Salem, its legal counsel, and certain employees of the Montgomery County District Attorney’s Office instituted wrongful criminal proceedings without probable cause to do so. Salem, Montgomery County District Attorney Risa Ferman, and Montgomery County Detective Mary Anders now all move for summary judgment pursuant to Federal Rule of Civil Procedure 56 on the Plaintiffs’ remaining claims. The record discloses considerable disputed facts and triable issues, so we will permit the bulk of the Plaintiffs’ claims to proceed to trial.

A. The Construction Contract, the Project, and the Arbitration

In October 2003, Delta and Salem agreed to a guaranteed maximum price (“GMP”) construction contract. (Salem Mot. for Summ. J. Ex. N (the “October 2003 Contract”), § 2.2.) Delta therefore agreed to serve as an “at-risk” contractor and bore the risk that the cost of completing the construction would exceed the GMP. See Wyatt, Inc. v. Citizens Bank of Pa., 976 A.2d 557, 560 (Pa.Super. Ct. 2009).

The construction project involved alterations and renovations to vacant buildings adjacent to Salem’s premises in Jenkintown, Pennsylvania. (October 2003 Contract at 1.) After considerable delays, construction began in earnest late in 2006. (Arbitrator’s Award at 2-4, Pl.’s App. at 691-93.)[3] A dispute soon arose. Salem apparently believed that Delta misrepresented, in each Application and Certification for Payment (the “AIA Application”), that, as of the date of each AIA Application, payments to Delta’s subcontractors were current.[4] (Arbitrator’s Award at 4, Pl.’s App. at 693.) When subcontractors complained that Delta owed them for work completed months earlier, Salem concluded that Delta had converted the portion of payments from Salem properly due to the subcontractors to its own purposes, then lied about the conversion to Salem. Id. at 5. In Delta’s view, Salem typically forced Delta to revise the AIA Applications one or more times, delaying payment to Delta and the subsequent payments to the subcontractors, (Logan Dep. at 108:14-110:17, Pl.’s App. at 274-75), and Salem delayed in approving change orders for work not contemplated by the original contract and in excess of the GMP, id. at 127:12-134:10.

Delta and Salem devised a new payment system for AIA Application 14, which covered work completed between February 1, 2007 and March 31, 2007, as well as two change orders approved during that period. (AIA-14, Pl.’s App. at 151-153; Letter from Mack to Tur, May 11, 2007, Pl.’s App. at 452.) Delta, Salem, and Salem’s construction lender, Citizens Bank, agreed to have Citizens Bank pay each subcontractor directly through individual checks, rather than payment through Delta, for all amounts due each subcontractor through March 31, 2007.[5] (Arbitrator’s Award at 6-7, 9, Pl.’s App. at 695-96, 699; Logan Dep. at 123:1-23, 131:1-133:6, Pl.’s App. at 278, 280-81; see also Letter from Mack to Tur, May 11, 2007, Pl.’s App. at 452.) Citizens Bank made these “two-party” payments for work completed before March 31, 2007 on or about May 11, 2007. (Letter from Mack to Tur, May 11, 2007, Pl.’s App. at 452.)

Delta subsequently submitted AIA Application 15, covering work completed through April 30, 2007, on May 18, 2007. (AIA-15, Pl.’s App. at 582.) Salem did not pay this application or any of the three subsequent applications for payment, notwithstanding that both Delta and the project architect, on behalf of Salem, had certified that work billed in the applications was complete. (Arbitrator’s Award at 14-15, Pl.’s App. at 704-705.) Instead, by letter dated June 27, 2007, Salem terminated its contract with Delta, citing non-payment to subcontractors and other perceived problems with the project. (Letter from Jonas to Logan, June 27, 2007 at 1057-58, Pl.’s App. at 137-38.)

As a result, Delta filed a claim with the American Arbitration Association (“AAA”) in July 2007 seeking damages for non-payment under the contract and for wrongful termination of the contract; Salem counterclaimed, alleging that Delta had committed fraud by misappropriating payments received from Salem. (Arbitrator’s Award at 13-14, Pl.’s App. at 703-704.) In March 2009, the arbitration began, and the arbitrator heard approximately two weeks of testimony. Delta Org., Inc. v. Salem Baptist Church of Jenkintown, No. 09-18740, Doc. No. 17, 10 Pa. D & C. 5th 85 (Pa. Com. Pl. Dec. 22, 2009).

Stephen Wouch, CPA, an accountant Salem engaged to prepare an analysis of the alleged overpayment, submitted a thorough expert report to the arbitrator and testified at the arbitration. (Arbitrator’s Award at 14, Pl.’s App. at 704.) This report ran to at least 23 pages and contained at least five appendices, and it concluded that Salem had overpaid Delta by $174, 071. Id. No party has submitted this report as part of the summary judgment record here; instead, we have a three-page report bearing the disclaimer “Preliminary Analysis - For Discussion Purposes Only -Subject to Change” and which, although it has no date and does not bear Wouch’s name or signature, appears to be his analysis upon which Delta and the initial criminal investigation relied.[6](See Summary of Theft/Accounting - Delta Overpayment, Anders & Ferman App. at 187-89; Anders Dep. at 43:7-44:14, Pl.’s App. at 59.) This “Preliminary Analysis” claims that Salem overpaid Delta by $395, 823.79, [7] derived by comparing the $1, 973, 468.79 Salem paid to Delta with the $1, 302, 801.50 which Delta paid to its subcontractors and $274, 844 to which Delta was entitled as general conditions or contractor’s fee. (Summary of Theft/Accounting - Delta Overpayment, Anders & Ferman App. at 187-89.) Wouch asserted that this overpayment resulted from Delta’s failure to pay $393, 515.38 properly due to its subcontractors, composed of $240, 661.10 which Salem paid to subcontractors directly through the two-party check system for invoices issued before February 1, 2007, [8] and $152, 854.28 in unpaid subcontractor invoices submitted before March 31, 2007.[9]See id.

In May 2009, the arbitrator issued a thorough and well-reasoned decision in which he concluded that Salem improperly terminated the October 2003 Contract, that Salem’s counterclaims lacked merit, and that Delta was entitled to over $150, 000 in damages. (See generally Arbitrator’s Award, Pl.’s App. at 690-707.) In particular, the arbitrator concluded that, as of May 2007, all the project’s subcontractors had been paid in full for work completed through March 31, 2007 and billed in AIA-14, id. at 9, and that Delta never incurred any obligation to pay any of the subcontractors for work completed and billed after March 31 because Delta never received the payment requested in AIA-15 and the subsequent applications, id. at 10. The arbitrator also expressly disagreed with Wouch’s accounting analysis. Id. at 14. As a result, the arbitrator concluded that Salem had no factual or legal basis to believe that Delta had breached either the October 2003 Contract or any of its subcontracts as of June 2007, id. at 5, and that Delta was entitled to payment in the amount certified by Delta and the architect as due, id. at 12 n.17.

B. The Criminal Investigation and Arrest

In March 2008, after Delta filed the arbitration claim but before the beginning of the arbitration hearings, Salem’s legal counsel proposed using a “potential criminal claim as leverage for settlement” of the arbitration claims. (E-Mail from Caum to Leopold-Leventhal, Mar. 26, 2008, Pl.’s App. at 708.) One of Salem’s lawyers, Jane Leopold-Leventhal, presented this strategy to the members of Salem’s Steering Committee in early April 2008. (E-Mail from Leopold-Leventhal to Page et al., Apr. 11, 2008, Pl.’s App. at 709.) Following this meeting, Steering Committee Member Judge Garrett Page, [10] on behalf of the Steering Committee, gave Leopold-Leventhal “the green light to approach the DA about prosecution of Delta.” (E-Mail from Page to Leopold-Leventhal, May 8, 2008, Pl.’s App. at 710.)

On May 29, 2008, Judge Page and another of Salem’s attorneys, Marc Jonas, met with DA Ferman. (Ferman Dep. at 46:9-20, Anders & Ferman App. at 76; E-Mail from Page to Jonas and Leopold-Leventhal, May 14, 2008, Pl.’s App. at 711.) Following the meeting, DA Ferman directed Lieutenant Richard Peffall to assign a detective to investigate the matter. (E-Mail from Ferman to Peffall et al., May 30, 2008, Pl.’s App. at 232.) Oscar Vance, the Chief County Detective and a member of Salem, directed Lieutenant Peffal to keep him informed about the investigation because of his affiliation with Salem. (E-Mail from Vance to Peffall, May 30, 2008, Pl.’s App. at 233 (“Please keep me informed, [t]his is my church.”).)

Lieutenant Peffal assigned Detective Anders to investigate. After a meeting between Lieutenant Peffal, Detective Anders, and Leopold-Leventhal, Leopold-Leventhal reported on the conversation to Judge Page. (E-Mail from Leopold-Leventhal to Page, June 6, 2008, Pl.’s App. at 712.) Leopold-Leventhal deliberately excluded other members of the Steering Committee from this report, noting that “[she] did not want to copy everyone on this email, because [she] think[s] it’s better that way, for now.” Id. Leopold-Leventhal also recited her belief that Chief Detective Vance’s Salem affiliation “can’t hurt.” Id.

At the follow-up meeting on June 10, 2008, Leopold-Leventhal provided Lieutenant Peffal and Detective Anders with a binder of pre-prepared material about the dispute between Delta and Salem. (Anders Dep. at 36:13-40:21, Pl.’s App. at 57-58.) Leopold-Leventhal also reported on this meeting to Judge Page, specifically noting that the two detectives had informed her that they intended to seek certain of Delta’s bank records, as well as Logan’s personal bank records. (E-Mail from Leopold-Leventhal to Page et al., June 10, 2008, Pl.’s App. at 713.)

Using the material Leopold-Leventhal provided, Detective Anders began drafting a search warrant application seeking access to Delta’s and Logan’s bank records. (Anders Dep. at 48:21-49:5, Pl.’s App. at 60-61.) The search warrant application recited Wouch’s analysis as the basis for believing criminal activity had taken place. (Compare Search Warrant and Authorization at 11, Pl.’s App. at 129 with Summary of Theft/Accounting - Delta Overpayment, Anders & Ferman App. at 187-89.) While drafting the search warrant application, Detective Anders sought additional information from Leopold-Leventhal at least once. (E-Mail from Anders to Leopold-Leventhal, June 17, 2008, Pl.’s App. at 124.) Near the end of the drafting process, Leopold-Leventhal visited Detective Anders and the assistant district attorney responsible for reviewing the application, Robert Sander, in order, in Detective Anders’ terms, “to help [Sander] get a better understanding of why we believe this is criminal and not civil.” (E-Mail from Anders to Leopold-Leventhal, June 30, 2008, Pl.’s App. at 125.)

After the June 30, 2008 meeting and upon completing a draft of the application, Detective Anders sent an electronic copy to Leopold-Leventhal for her review. Id. Leopold-Leventhal sent a revised version back to Detective Anders with her alterations highlighted in track changes. (E-Mail from Leopold-Leventhal to Anders, July 1, 2008, Pl.’s App. at 714.) Leopold-Leventhal’s alterations included factually inaccurate assertions, such as that Salem had paid Delta timely and in full. (See Anders Search Warrant PC (1).doc at 2905, Pl.’s App. at 716.)

Two weeks later, Leopold-Leventhal inquired about the status of the search warrant. (E-Mail from Leopold-Leventhal to Anders, July 14, 2008, Pl.’s App. at 719.) When Detective Anders responded, Leopold-Leventhal forwarded the e-mail exchange to Judge Page, advising him to keep the information confidential. (E-Mail from Leopold-Leventhal to Page, July 14, 2008, Pl.’s App. at 719 (“Let’s keep this mum until it’s served. I just wanted to let you know of the good progress.”).) Detective Anders submitted the search warrant application on July 17, 2008, and a magistrate issued the warrant the same day. (Search Warrant and Authorization at 8-11, Pl.’s App. at 126-29.)

Following the issuance of the warrant and the acquisition of the bank records, Gerald McCormick, an attorney representing Delta, contacted Detective Anders. (Letter from McCormick to Anders, July 24, 2008 at 1039-40, Pl.’s App. at 130-31.) McCormick requested that Detective Anders provide him with a copy of her affidavit of probable cause submitted as part of the search warrant application. Id. McCormick also offered to provide a copy of the “complete accounting of all funds that [Delta] had received from Salem” which Delta prepared and provided to Salem in connection with the arbitration proceedings.[11] Id. McCormick also enclosed a document which he described as a “copy of a Request For Disbursement that the Chairman of Salem’s Finance Committee submitted to its construction lender, Citizens Bank, on June 8, 2007, wherein he expressly certified that (1) Delta had fully performed all of its obligations under its contract; (2) all of Delta’s subcontractors and suppliers had been paid in full from the proceeds of the previous disbursements; and (3) the proceeds of the requested disbursement would be paid to Delta.”[12] Id. Finally, McCormick noted that Delta had never received the payment which Salem requested in the June 8, 2007 letter, notwithstanding that Salem certified Delta’s entitlement to the payment. Id. Although Detective Anders testified that she forwarded this letter to Sander, nothing in the record indicates whether Sander or Detective Anders formally replied to this letter.[13]

After finally receiving the affidavit of probable cause, McCormick wrote Detective Anders a lengthy letter in which he identified several factual inaccuracies and material omissions. (Letter from McCormick to Anders, Sept. 11, 2008 at 1054-56, Pl.’s App. at 134-36.) Specifically, McCormick informed Detective Anders that, contrary to the affidavit of probable cause, (1) Salem had terminated the construction contract with Delta, instead of Delta stopping work on the project, (2) Salem had not made “timely and full” payments to Delta, and (3) Salem, its architect, and Citizens Bank each inspected Delta’s work and certified that Delta had completed the work billed and had paid the appropriate parties out of previously billed and paid amounts. Id. McCormick also provided Detective Anders with the June 27, 2007 letter from Jonas to Logan terminating Salem’s contract with Delta. (Letter from Jonas to Logan, June 27, 2007 at 1057-58, Pl.’s App. at 137-38.)

During August and September 2008, Detective Anders also interviewed and corresponded with a former Delta employee who left Delta’s employ in April 2007, Frank O’Donnell. O’Donnell speculated that Delta could have over-billed using various techniques, but he provided no evidence that Delta had ever actually done so. (Aug. 14, 2008 Interview Report at 4-6, Pl.’s App. at 142-44; E-Mail from O’Donnell to Anders, Aug. 25, 2008, Pl.’s App. at 169-70; E-Mail from O’Donnell to Anders, Sept. 16, 2008, Pl.’s App. at 150.) Detective Anders forwarded one of the e-mails from O’Donnell to Leopold-Leventhal suggesting that “[her] accounting should look at this too, ” and noting “[i]t sounds a bit confusing to the ‘lay’ person/detective!” (E-Mail from Anders to Leopold-Leventhal, Sept. 16, 2008, Pl.’s App. at 150.) It does not appear that O’Donnell ever consulted with Salem’s accounting personnel or that Detective Anders involved O’Donnell any further during the remainder of the investigation.

The investigation apparently did not progress between September 2008 and December 2008. In early December, Leopold-Leventhal reported to Judge Page that she had invoked his name in a conversation with Detective Anders. (E-Mail from Leopold-Leventhal to Page, Dec. 4, 2008, Pl.’s App. at 720 (“I only used your name in the softest way possible with Detective Anders. It was effective, let’s leave it at that.”).) The investigation subsequently began to advance again. In less than three weeks, Detective Anders had drafted an affidavit of probable cause seeking Logan and Mack’s arrest and asked Leopold-Leventhal for help revising it. (E-Mail from Anders to Leopold-Leventhal, Dec. 22, 2008, Pl.’s App. at 171.) Detective Anders noted that seeking input from legal counsel for a victim on such a document was unusual. Id. (“I don’t usually ask victims (or their attorneys) help me with the PC!” [sic]).

Detective Anders also interviewed ten subcontractors who had worked on the project. (Sub-Contractors Dec. 2008 at 819-822, Pl.’s App. at 154-57.) In her summary of these interviews, Detective Anders noted that all had complained about untimely payments and that Delta had never fully paid several of them. Id. Detective Anders’ summary did not identify whether the unpaid invoices the subcontractors mentioned covered work completed between March 31, 2007 and Salem’s termination of the October 2003 Contract in June 2007 and for which Salem had never paid Delta.[14] See id.

Detective Anders finished the affidavit of probable cause and submitted it for review by two assistant district attorneys, Sander and Steven Latzer. (Anders Dep. at 149:22-150:12, Pl.’s App. at 86.) The record does not disclose whether Sander or Latzer recommended any substantive changes to the affidavit, nor does it contain any evidence that Sander or Latzer had any information about the investigation other than what Detective Anders chose to present in the affidavit. See id. at 146:18-150:12, 190:20-198:25.

The final version of the affidavit of probable cause, like the search warrant application before it, relied on Wouch’s analysis both with respect to the claimed overpayment and the non-payment to the subcontractors. (Compare Logan Aff. of Probable Cause at 3-4, Pl.’s App. at 165-66 with Summary of Theft/Accounting - Delta Overpayment, Anders & Ferman App. at 187-89.) It also invoked Delta’s submission of AIA Applications 15, 16, and 17 for work completed between March 31, 2007 and June 22, 2007[15] as well as the reallocation of certain never-billed construction budget items from the category “multi-purpose building” to other line items in the construction budget. (See Logan Aff. of Probable Cause at 3-4, Pl.’s App. at 165-66.) Detective Anders signed the affidavit under oath on January 13, 2009. (Logan Aff. of Probable Cause at 6, Pl.’s App. at 168.)[16]

At some point on or before January 13, the decision was made to arrest Logan and Mack on January 14. Leopold-Leventhal apparently knew on January 12 that the arrests would take place during that week. (E-Mail from Leopold-Leventhal to Spare et al., Jan. 12, 2009, Pl.’s App. at 721.) The same day, she also sent a lengthy e-mail to Judge Page and others, “confirm[ing] [that] all the papers, warrants [are] signed and ready to go” and noting that the arrests would likely benefit Salem’s case in the arbitration. (E-Mail from Leopold-Leventhal to Page et al., Jan. 12, 2009, Pl.’s App. at 722.) Leopold-Leventhal also wrote, of the arrests, “I would expect to see something in the paper in the next few days, ” id., and referred to a private, ex parte conversation between her and DA Ferman in which DA Ferman shared, among other information, non-public details about her conversation with Delta’s legal counsel, [17] id.

According to Sander, the arrest date was chosen because “[Sander] found out [on January 13] that the Salem Baptist Church would have to put up $30, 000 for arbitration unless we made arrests against the princip[al]s of the Delta Organization before Thursday [January 15, 2009] so we decided to do it tomorrow.” (E-Mail from Sander to Ferman, Jan. 13, 2009, Pl.’s App. at 236.) Nothing in the record suggests who else participated in this decision, but Detective Anders signed and submitted the criminal complaint against Logan before a magisterial district judge that day. (Criminal Complaint at 726-29, Pl.’s App. at 159-62; Logan Aff. of Probable Cause at 1-6, Pl.’s App. at 163-68.)

Sander also prepared a draft press release, (E-Mail from Sander to Ferman, Jan. 13, 2009, Pl.’s App. at 236), and coordinated with at least one reporter about covering the arrest and interviewing DA Ferman about the case, (E-Mail from Sander to Durante, Jan. 13, 2009, Pl.’s App. at 237). Immediately after Sander corresponded with the reporter, he wrote to DA Ferman to inform her that Logan and ...


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