United States District Court, E.D. Pennsylvania
EDUARDO C. ROBRENO, J.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY ................. 2
MOTION FOR JUDGMENT ON THE PLEADINGS ...................... 7
MOTION FOR SUMMARY JUDGMENT .............................. 11
Breach of Contract .................................. 13
Timeliness ..................................... 14
Merits ......................................... 18
Piercing the Corporate Veil ......................... 30
Fraud ............................................... 39
Tortious Interference ............................... 41
MOTION TO APPOINT RECEIVER ............................... 44
CONCLUSION ............................................... 48
two cases - consolidated for pretrial purposes - involve
several investments in a resort located in Costa Rica.
Following discovery, the parties have filed a number of
motions. For the reasons that follow, the Court will: (1)
deny the Motion for Judgment on the Pleadings; (2) grant in
part the Motion for Summary Judgment; and (3) deny the Motion
to Appoint a Receiver.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
Dulce Vida, S.A. (“PDV”) is a corporation
organized and existing under the laws of Costa Rica. David
Callan Decl. ¶ 2, Kreibich ECF No. 33-1. PDV owns and
operates the Arenas Del Mar Beachfront and Rainforest Resort
(“the Resort”) in Costa Rica. Id. ¶
2004, Plaintiff Richard Lieberman became aware of the
opportunity to invest in PDV by purchasing a condo-apartment,
or unit, at the Resort. Another investor, Glenn Jampol,
introduced Lieberman to Gary Haynes,  a real estate agent who
served as PDV's representative for the sale of units at
the Hotel. Second Am. Compl. ¶¶ 60-63, Lieberman
ECF No. 19. Haynes informed Lieberman that PDV was not
actually selling real estate, but instead was selling
“preferred shares” of stock in PDV. These shares
would vest a purchaser/shareholder with proprietary rights to
“the full use and enjoyment” of a designated unit
at the Resort - in other words, it was a timeshare agreement
of sorts. Id. ¶¶ 67-68. Haynes also said
that shareholders would earn income from their shares,
because when a unit was not in use by its shareholder owner,
it would be rented to the public by the Resort. Id.
in November 2004, Lieberman bought twenty-five preferred
shares, representing unit 603 (“the Lieberman
Unit”) at the Resort. Id. ¶¶ 65,
79-80. His purchase was memorialized by three stock
certificates (collectively, “the Stock
Certificates”). Id. ¶ 81. In the course
of his purchase of shares, Lieberman signed a set of
documents: a Reciprocal Promise of Purchase and Sale
(“the PSA”), a Rental Pool Agreement (“the
RPA”), the Regulations, and a Purchase/Sale Contract
for Shares (“the PSCFS”) (collectively,
“the Contract”). See Defs.' Mot. Summ. J. Ex.
D, Kreibich ECF No. 33-4.
following year, Plaintiffs Richard Kreibich and Susan
Kreibich (“the Kreibichs”) also learned about the
opportunity to invest in the Resort. Specifically, they were
introduced to Defendant David Callan, who informed the
Kreibichs that he was a licensed financial advisor, an
officer of PDV, a member of the PDV Board, and a member of
the PDV Executive Committee. First Am. Compl. ¶¶
54-60, Kreibich ECF No. 9. Callan explained that purchasing
preferred shares would give the Kreibichs usage rights to a
particular unit, as well as income from their unit's
placement in the Resort rental pool. Id.
result, in February 2006, the Kreibichs purchased fifteen
preferred shares, representing unit 501 (“the Kreibich
Unit”) at the Resort. Id. ¶¶ 80,
90-95. The Kreibichs, like Lieberman, signed the Contract
February 2011, several years after the Resort opened, the PDV
board of directors issued a letter to the preferred
shareholders (“the Preferred Shareholders Letter”
or “the Letter”). Second Am. Compl. Ex. J,
Lieberman ECF No. 19-3. The Letter explained that in order
for the Resort to be a financial success, the company was
undergoing an “important ownership
restructuring.” Id. at 1. As part of the
restructuring, the company offered to preferred shareholders
the option to convert their preferred shares - that is, their
contractual rights to their respective units at the Resort -
to common stock. Id. at 3. The Letter explained that
preferred shareholders who exercised that option would
“continue to receive usage rights[, ] but as common
shareholders.” Id. The usage rights for common
shareholders were set forth in the Letter, Id. at 5,
and, as the Letter noted, could “be modified by the
Board of Directors, ” Id. at 3. Thus, the
Letter cautioned preferred shareholders that “if usage
is a critical reason for ownership, then one needs to weigh
the cost/benefit analysis of giving up that usage
right.” Id. The Kreibichs opted to convert
their preferred shares into common shares. Kreibich First Am.
Compl. ¶ 140. Lieberman did not. Lieberman Second Am.
Compl. ¶ 128.
Lieberman nor the Kreibichs have received any income
distributions from their respective investments in the
Resort. Id. ¶ 117; Pls.' Mem. Law Opp'n
at 5, Kreibich ECF No. 35. They also contend that Defendants
have, in violation of the Contract, failed to provide audited
financial statements for certain fiscal years. Lieberman
Second Am. Compl. ¶¶ 110-12; Kreibich First Am.
Compl. ¶¶ 110-14. Moreover, Lieberman claims that
Defendants have breached the Contract by declining to accept
or honor his attempts to reserve his Unit at particular
times. Lieberman Second Am. Compl. ¶¶ 144-200.
filed a Complaint against PDV, Hawk Management L.P.
(“Hawk Management”), and HWC, LLC
(“HWC”), on June 10, 2014. Lieberman ECF No.
1. He later filed a First Amended Complaint, Lieberman ECF
No. 8 - which added Hawk Opportunity Fund, L.P.
(“HOF”) as a defendant - and a Second Amended
Complaint,  Lieberman ECF No. 19, which was dismissed
in part, Lieberman ECF No. 31. The following claims remain in
that case: (1) alter ego liability/piercing the corporate
veil; (2) breach of contract; (3) conversion; (4) tortious
interference with contract; (5) private nuisance; and (6)
Kreibichs filed a Complaint against PDV, HOF, Hawk
Management, HWC, and David Callan on September 5, 2014.
Kreibich ECF No. 1. They later filed a First Amended
Complaint, Kreibich ECF No. 9, which was dismissed in part,
Kreibich ECF No. 18. The following claims remain in that
case: (1) alter ego liability/piercing the corporate veil;
(2) breach of contract; (3) fraud/misrepresentation; (4)
tortious interference with contract; and (5) fraud in the
Court consolidated these two cases for pretrial
purposes. Kreibich ECF No. 18. After
discovery, several motions are now ripe for disposition: (1)
a Motion to Appoint Receiver, filed by Lieberman and the
Kreibichs, Lieberman ECF No. 45; (2) a Motion for
Judgment on the Pleadings, filed by Defendants,
Lieberman ECF No. 57; and (3) a Motion for Summary
Judgment, filed by Defendants, Kreibich ECF No.
MOTION FOR JUDGMENT ON THE PLEADINGS
Defendants' motion for judgment on the pleadings was
filed after their motion for summary judgment, the Court must
address it first because it challenges the Court's
subject matter jurisdiction.
Rule of Civil Procedure 12(c) provides that, "[a]fter
the pleadings are closed - but early enough not to delay
trial - a party may move for judgment on the
pleadings."Judgment on the pleadings is appropriate
only if the moving party "clearly establishes that no
material issue of fact remains to be resolved and that he is
entitled to judgment as a matter of law." Society
Hill Civic Ass'n v. Harris, 632 F.2d 1045, 1054 (3d
Cir. 1980) (citation omitted). In reviewing a Rule 12(c)
motion, a court "must view the facts presented in the
pleadings and the inferences to be drawn therefrom in the
light most favorable to the nonmoving party."
Rosenau v. Unifund Corp., 539 F.3d 218, 221 (3d Cir.
2008) (quoting Jablonski v. Pan Am. World Airways,
Inc., 863 F.2d 289, 290-91 (3d Cir. 1988)).
their motion for judgment on the pleadings, Defendants argue
that the Court lacks subject matter jurisdiction over this
case because Plaintiffs lack standing to bring it.
Specifically, Defendants believe that Plaintiffs' claims
are derivative, not direct, and thus that they cannot be
brought in Plaintiffs' personal capacities.
Pennsylvania, a shareholder lacks standing "to institute
a direct suit for 'a harm [that is] peculiar to the
corporation and [that is] only  indirectly injurious to
[the] shareholder.'" Hill v. Ofalt, 85 A.3d
540, 548 (Pa. Super. Ct. 2014) (alterations in original)
(quoting Reifsnyder v. Pittsburgh Outdoor Advertising
Co., 173 A.2d 319, 321 (1961)). Instead, "such a
claim belongs to, and is an asset of, the corporation."
Id. This type of claim - one belonging to the
corporation, rather than the shareholder - is called a
order to have standing to bring a direct suit -that is, to
sue individually, rather than on behalf of the corporation -
a shareholder "must allege a direct, personal injury -
that is independent of any injury to the corporation -and the
shareholder must be entitled to receive the benefit of any
recovery." Id. "If the injury is one to
the plaintiff as a stockholder and to him individually, and
not to the corporation, it is an individual action."
Fishkin v. Hi-Acres, Inc., 341 A.2d 95, 98 n.4 (Pa.
1975) (quoting 13 Fletcher Cyclopedia Corporations §
5911 (Perm. Ed.)).
a court facing the question of whether an action is direct or
derivative must approach the inquiry as follows:
. . . Whether a cause of action is individual or derivative
must be determined from the nature of the wrong alleged and
the relief, if any, that could result if the plaintiff were
In determining the nature of the wrong alleged, the court
must look to the body of the complaint, not to the
plaintiff's designation or stated intention. The action
is derivative if the gravamen of the complaint is injury to
the corporation, or to the whole body of its stock or
property without any severance or distribution among
individual holders, or if it seeks to recover assets for the
corporation or to prevent dissipation of its assets .... If
damages to a shareholder result indirectly, as the result of
any injury to the corporation, and not directly, the
shareholder cannot sue as an individual.
Hill, 85 A.3d at 549 (quoting 12B Fletcher
Cyclopedia of the Law of Corporations § 5911 (2013).
"If the court determines that a claim is actually
derivative in nature, the plaintiff is precluded from
proceeding directly." Resh v. Bortner, No.
16-02437, 2016 WL 6834104, at *5 (E.D. Pa. Nov. 21, 2016).
to the bodies of Plaintiffs' complaints, as well as the
relief they seek, it is evident that Plaintiffs allege
direct, rather than derivative, claims.
Plaintiffs are not alleging any injury to PDV. In many
derivative suits, for example, shareholders argue that they
have been injured by the devaluing of their investments due
to poor decisions that have harmed the corporation - that is,
that others have injured the corporation and the shareholders
have suffered as a result. See Kauffman v. Dreyfus Fund,
Inc., 434 F.2d 727, 732 (3d Cir. 1970) ("A
stockholder of a corporation does not acquire standing to
maintain an action in his own right, as a shareholder, when
the alleged injury is inflicted upon the corporation and the
only injury to the shareholder is the indirect harm which
consists in the diminution in value of his corporate shares
resulting from the impairment of corporate assets.");
Resh, 2016 WL 6834104, at *6. Here, in contrast, the
injuries alleged by Plaintiffs were inflicted directly on the
shareholders, by the corporation. Indeed, Plaintiffs could
not even conceivably bring these claims on behalf of PDV
because they implicitly claim that PDV benefited
from - and was not harmed by - the actions at issue. In
short, then, Plaintiffs' claims are "independent of
any injury to the corporation." Hill, 85 A.3d
Plaintiffs would be "entitled to receive the benefit of
any recovery." Id. The requested recovery would
not go to PDV, where it would trickle down to Plaintiffs in
the form of increased stock value, but instead would go
directly to Plaintiffs.
Plaintiffs' claims are direct, rather than derivative,
and Plaintiffs have standing to pursue them.
MOTION FOR SUMMARY JUDGMENT
judgment is appropriate if there is no genuine dispute as to
any material fact and the moving party is entitled to
judgment as a matter of law. Fed.R.Civ.P. 56(a). "A
motion for summary judgment will not be defeated by 'the
mere existence' of some disputed facts, but will be
denied when there is a genuine issue of material fact."
Am. Eagle Outfitters v. Lyle & Scott Ltd., 584
F.3d 575, 581 (3d Cir. 2009) (quoting Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 247 (1986)). A fact is
"material" if proof of its existence or
nonexistence might affect the outcome of the litigation, and
a dispute is "genuine" if "the evidence is
such that a reasonable jury could return a verdict for the
nonmoving party." Anderson, 477 U.S. at 248.
Court will view the facts in the light most favorable to the
nonmoving party. "After making all reasonable inferences
in the nonmoving party's favor, there is a genuine issue
of material fact if a reasonable jury could find for the
nonmoving party." Pignataro v. Port Auth., 593
F.3d 265, 268 (3d Cir. 2010). In short, the essential
question is "whether the evidence presents a sufficient
disagreement to require submission to a jury or whether it is
so one-sided that one party must prevail as a matter of
law." Anderson, 477 U.S. at 251-52.
move to dismiss some, but not all, of the claims in these two
cases. Each of Defendants' arguments is
analyzed in turn below.
Breach of Contract
Lieberman and the Kreibichs bring breach of contract claims.
Lieberman contends that Defendants breached the Contract by:
(1) failing to provide audited financial statements for
fiscal years 2004 to 2006 and 2011 until at least 2014,
Lieberman Second Am. Compl. ¶¶ 221-23; (2)
using improper accounting methodologies to arrive at a net
income that allows Defendants to avoid paying income
distributions to Lieberman, id. ¶¶ 224-28;
and (3) "unilaterally and secretly modifying the terms
of" the Contract in order to refuse Lieberman access to
his Unit, id. ¶¶ 230-31. The Kreibichs
contend that Defendants breached the Contract by: (1) failing
to provide audited financial statements for fiscal years
2011, 2012, and 2013, Kreibich First Am. Compl.
¶¶ 170-71; and (2) using improper accounting
methodologies to arrive at a net income that allows
Defendants to avoid paying income distributions to the
Kreibichs, id. ¶¶ 172-75.
move for summary judgment on only a portion of these breach
of contract claims: the claim that Defendants breached the
Contract by manipulating PDV s accounting in such a way that
allowed PDV to avoid paying distributions to its preferred
shareholders, including Lieberman and the Kreibichs.
Defendants argue that this claim is (1) barred by the statute
of limitations, and (2) foreclosed by the language of the
Defendants argue that this breach of contract claim is
parties agree that Pennsylvania's four-year statute of
limitations applies to this claim. See 42 Pa.
Const. Stat. Ann. § 5525(a). But they appear to disagree
about when the claim accrued, such that the statute of
limitations began to run. See Gleason v. Borough of
Moosic, 15 A.3d 479, 484 (Pa. 2011) ("Generally, a
statute of limitations period begins to run when a cause of
action accrues; i.e., when an injury is inflicted
and the corresponding right to institute a suit for damages
Defendants do not actually state a specific date on which
they believe this claim accrued. They suggest that it may
have accrued sometime in 2008, because "there is no
question that Plaintiffs were aware that PDV had financial
issues in 2008" but "did nothing for seven years
until filing these actions." Defs.' Mem. Law at 13,
Kreibich ECF No. 32. But this is not a coherent
argument concerning the accrual of the breach of contract
claim; the claim is not about PDV s "financial
issues" generally, but PDVs specific failure to pay
distributions from the rental pool. To that end, Defendants
do state that distributions, if any, should have been paid on
November 2 9, 2008; November 2 9, 2009; and November 2 9,
2010. Id. Again, though, they do not explain how
any or all of these dates impact the statute of limitations -
an important omission, because those dates have different
obviously, any claim for distributions that should have been
paid on November 29, 2010, is not time-barred, because
Plaintiffs filed their claims on June 10, 2014 (Lieberman),
and September 5, 2014 (the Kreibichs) - within the ...