United States District Court, E.D. Pennsylvania
Frenkel sued Defendants Bruce Klein and Victory Partners LLC
(“VPLLC”) for breach of contract arising from two
promissory notes, each secured by a pledge agreement. After a
protracted procedural battle, Defendants filed a Motion for
Partial Summary Judgment on Counts I and II, which allege
breach of a May 2010 promissory note and its pledge
agreement, respectively. Pursuant to Federal Rule of Civil
Procedure 56(f), the Court notified the parties of its intent
to grant summary judgment on Count I in favor of Frenkel.
Because it is undisputed that VPLLC has failed to repay the
money borrowed in the promissory note, the Court grants
Frenkel summary judgment on Count I as against VPLLC. But
because there remains a factual dispute about whether VPLLC
is the alter ego of Klein, the Court denies summary judgment
on Count I as against Klein.
parties do not dispute the existence of the four contracts at
the heart of this case: two promissory notes, each secured by
a pledge agreement.
7, 2010, VPLLC executed a promissory note in favor of Frenkel
for a principal amount of $153, 000 (the “VPLLC
Note”). (Def.'s Mot. Partial Summ. J. Ex. A, ECF
No. 57.) Klein signed the note on behalf of VPLLC,
identifying himself as “Manager.” (Id.)
The promissory note was payable on demand and listed a
fifteen percent annual interest rate in the event of default.
(Id.) The note also provided that VPLLC would pay
all costs of collection, including reasonable attorney's
fees. (Id.) That same day, as collateral security
for the VPLLC Note, VPLLC pledged “400, 000 shares of
unrestricted and freely tradable common stock of New Media
Plus, Inc.” (the “VPLLC Pledge Agreement”).
(Id. Ex. B.) Klein signed the pledge agreement
twice, once on behalf of VPLLC as the pledgor, again
identifying himself as “Manager, ” and once on
behalf of himself as guarantor. (Id.) The VPLLC Note
and the VPLLC Pledge Agreement each contained an integration
clause, which stated that the contract formed the entire
agreement between the parties. (Id.; id.
Ex. A.) One month later, New Media issued Frenkel 450, 000
shares of its common stock. (Id. Exs. E-G.)
later, Klein executed a promissory note in favor of Frenkel
for a principal amount of $25, 000, due on October 17, 2011
(the “Klein Note”). (Compl. Ex. D, ECF No. 1.)
Klein pledged an additional “100, 000 shares of common
stock of New Media Plus, Inc.” as collateral security
for the second note (the “Klein Pledge
Agreement”). (Id. Ex. E.) Each contract also
contained an integration clause. (Id.; id.
attorney, JBF,  first followed up with Klein by email
about repayment of the VPLLC Note on August 30, 2011.
(Pl.'s Resp. Opp'n Ex. E [“Frankel Aff.”]
at Ex. 1, ECF No. 58.) JBF followed up with Klein repeatedly
over the next two years about both notes, but Frenkel never
received repayment on either. (Id.; Answer
¶¶ 10, 27, ECF No. 52; Def.'s Mot. Partial
Summ. J. Ex. I ¶¶ 23-24; Pl.'s Resp. Opp'n
2.) Frenkel also claimed that he never received the pledged
collateral for either promissory note. (Pl.'s Resp.
Opp'n 9; Compl. ¶¶ 34-35.)
April 2014, Frenkel filed a complaint alleging four counts of
breach of contract: Counts I and II for the VPLLC Note and
Pledge Agreement, and Counts III and IV for the Klein Note
and Pledge Agreement, respectively. Four months later, the
Court entered default judgment against Klein and VPLLC under
Rule 55(b)(2). A year passed before Defendants entered an
appearance and moved to set aside the default. (Def.'s
Mot. Set Aside Default, ECF No. 28.) After thorough briefing
and an evidentiary hearing, the Court set aside the default
judgment in March 2016.
motion for partial summary judgment on Counts I and II,
Defendants argued that Frenkel had received the 450, 000
shares of New Media stock in satisfaction of the VPLLC Pledge
Agreement, and ultimately in satisfaction of the VPLLC Note.
(Def.'s Mot. Partial Summ. J. 1-2, 4.) Frenkel countered
that the 450, 000 shares were not “unrestricted and
freely tradable, ” as required by the VPLLC Pledge
Agreement. (Pl.'s Resp. Opp'n 13.) Neither party
alleged that VPLLC had in any other way repaid the $153, 000
required by the VPLLC Note.
Court denied summary judgment on Count II. The Court
clarified that “unrestricted and freely tradable”
means shares that “can be sold freely in public or
private sale under registration with the Securities Act or
pursuant to an exemption in the Securities Act, and [that]
are not subject to any external condition.” The Court
decided that a genuine issue of material fact remains as to
whether the 450, 000 shares of New Media stock are
“unrestricted and freely tradable.” The Court
also notified the parties, pursuant to Rule 56(f), of its
intention to grant partial summary judgment on Count I to
STANDARD OF REVIEW
judgment is appropriate when the admissible evidence fails to
demonstrate a genuine dispute of material fact and the moving
party is entitled to judgment as a matter of law.
Fed.R.Civ.P. 56(a); Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 247-48 (1986). In reviewing the record, a court
“must view the facts in the light most favorable to the
nonmoving party and draw all inferences in that party's
favor.” Prowel v. Wise Bus. Forms, Inc., 579
F.3d 285, 286 (3d Cir. 2009). The court may not, however,
make credibility determinations or weigh the evidence in
considering motions ...