United States District Court, W.D. Pennsylvania
JOY FLOWERS CONTI, Chief District Judge.
Pending before the court is a motion to dismiss (ECF No. 91) filed by defendants David Shapira and Daniel Shapira (together, the "Shapira defendants"). On February 1, 2013, plaintiff Excentus Corporation ("Excentus" or "plaintiff") filed a complaint against defendant Giant Eagle, Inc. ("Giant Eagle") and the Shapira defendants. In the complaint, Excentus:
alleges the Shapira defendants, who sit as members of Excentus' board of directors, violated the duty of loyalty and utmost good faith;
seeks a declaratory judgment that the Software License and General Services Agreement and Addendum (the "Agreement") executed in February 2010 between Excentus and Giant Eagle does not provide Giant Eagle a license to three of Excentus' patents;
alleges Giant Eagle infringed three of Excentus' patents; and
alleges Giant Eagle engaged in unfair competition.
(ECF No. 1.)
On May 9, 2013, the Shapira defendants filed a motion to dismiss and a brief in support of the motion arguing Excentus failed to state a claim for breach of the duty of loyalty and utmost good faith. (ECF Nos. 20, 21.) On the same day, the Shapira defendants filed counterclaims against Excentus. (ECF No. 22.) The Shapira defendants asserted the following counterclaims against Excentus:
Counterclaim I - Mandatory Advancement of Defense Costs
Counterclaim II - Mandatory Indemnification for the Texas Action (which was transferred to this court)
Counterclaim III - Breach of Forum Selection Clause
Counterclaim IV - Award of Attorney's Fees Under Section 38.001 of the Texas Civil Code
(ECF No. 22.)
On May 31, 2013, Excentus filed a motion to dismiss the Shapira defendants' counterclaims arguing the counterclaims were procedurally improper because the Shapira defendants did not file them along with an answer to the complaint. (ECF No. 36 at 1.) On June 11, 2013, the Shapira defendants filed an answer and counterclaims. (ECF No. 41.) At a hearing held on June 18, 2013, the court granted Excentus' motion to dismiss the counterclaims filed on May 9, 2013 without prejudice because the answer and same counterclaims were filed on June 11, 2013.
On June 24, 2013, Excentus filed an answer to the Shapira defendants' counterclaims. (ECF No. 45.) On June 25, 2013, the Shapira defendants filed a motion for judgment on the pleadings with respect to Excentus' claim for breach of the duty of loyalty and utmost good faith. (ECF Nos. 51 and 52.) On July 9, 2013, Excentus filed a response to the Shapira defendants' motion for judgment on the pleadings with respect to the claims for breach of duty of loyalty and utmost good faith and a brief in support of the response. (ECF Nos. 63, 64.)
At a hearing on July 15, 2013, the court granted without prejudice the Shapira defendants' motion for judgment on the pleadings with respect to Excentus' claim for breach of the duty of loyalty and utmost good faith.
On August 7, 2013, Excentus filed a first amended complaint. (ECF No. 84.) On August 29, 2013, the Shapira defendants filed a motion to dismiss Excentus' claim for breach of the duty of loyalty and utmost good faith and a brief in support of the motion. (ECF Nos. 91, 92.) On September 19, 2013, Excentus filed a brief in opposition to the Shapira defendants' motion to dismiss with respect to its claim for breach of duty of loyalty and utmost good faith. (ECF No. 99.) On October 9, 2013, the Shapira defendants with leave of court filed a reply brief in support of their motion to dismiss. (ECF No. 101.)
On November 25, 2013, the court held a hearing with respect to the Shapira defendants' motion to dismiss and other motions filed by the parties. At the conclusion of the hearing, the court continued the hearing until December 12, 2012. At the end of the hearing on December 12, 2012, the court took the matter with respect to the motion to dismiss under advisement.
The Shapira defendants' motion to dismiss the breach of the duty of loyalty and utmost good faith claim having been fully briefed and argued before the court is now ripe to be decided by the court.
II. Factual Allegations in the Amended Complaint Accepted as True Solely for the Purpose of Resolving the Motion to Dismiss
Between 1998 and 2011, Excentus became a leader in providing fuel site automation and integration to grocery point of sale systems and in using that technology to develop fuel cross-marketing programs. (ECF No. 84 ¶ 8.)
Giant Eagle is a privately-held, family-owned company that, among other things, owns and operates a chain of grocery and convenience stores. (Id. ¶ 10.) Many Giant Eagle locations sell gasoline and other fuel products at a fuel station located in the parking lot of the grocery store. (Id.) Giant Eagle offers fuel discounts to its customers based upon their in-store purchases as part of a fuel cross-marketing program to increase sales and profits. (Id.)
In 2001, Giant Eagle contacted Excentus to discuss Excentus "providing Giant Eagle with systems and services in support of Giant Eagle's efforts to design and test a fuel cross-marketing program using fuel discounts as consumer loyalty awards to increase sales and profits." (ECF No. 84 ¶ 14.) According to Excentus, David Shapira "was so pleased that Excentus was able to provide its systems and services in support of Giant Eagle's fuelperks! program and impressed with Excentus' vision for the Excentus Coalition that he caused Giant Eagle to invest in Excentus twice (in 2004 and 2005), and Giant Eagle became one of the largest Excentus shareholders." (Id. ¶ 15.) As a result of Giant Eagle's investment in Excentus, Giant Eagle obtained seats on the Excentus Board, and the Shapira defendants joined the Excentus board of directors. (Id. ¶ 16.)
David Shapira is a director of Excentus and Giant Eagle. (Id. ¶ 11.) David Shapira served as the chief executive officer and president of Giant Eagle for thirty-one years. (Id.) In January 2012, David Shapira passed the title of chief executive officer of Giant Eagle to his daughter, but retained the title of chairman of the board of directors of Giant Eagle, which he has held since 1992. (Id.) According to Excentus:
"As the only CEO, President, and Chairman of the Board that most Giant Eagle employees have ever known, David Shapira exerted extraordinary influence within Giant Eagle." (ECF No. 84 ¶ 11.)
"David Shapira, individually and through trusts or entities he created or controls, owns stock in Giant Eagle." (Id.)
"[T]he Giant Eagle Board of Directors and Bylaws delegated to David Shapira as Chief Executive Officer authority to operate the company, to negotiate contracts on behalf of Giant Eagle, and to decide whether it would be in Giant Eagle's ...