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Leaman v. Wolfe

United States District Court, E.D. Pennsylvania

February 9, 2017

JANICE M. LEAMAN, Plaintiff,
v.
GREGG B. WOLFE, Defendant.

          MEMORANDUM OPINION

          Joy Flowers Conti Chief Judge, U.S. District Court

         I. INTRODUCTION

         This case arises from the breach of a settlement agreement between two former business partners. The case has a lengthy procedural history in the United States District Court for the Eastern District of Pennsylvania and the United States Court of Appeals for the Third Circuit. In a nonprecedential opinion dated October 6, 2015, the court of appeals remanded the case to the district court to calculate the damages and reasonable attorneys' fees to which plaintiff Janice M. Leaman (“Plaintiff” or “Leaman”) is entitled. On January 4, 2017, the case was reassigned to the undersigned judge pursuant to 28 U.S.C. § 292(b). (ECF No. 80).[1]

         Cross-motions for summary judgment were filed after the remand (ECF Nos. 75, 76). The parties fully briefed the issues and submitted numerous documents in support of their respective positions, including a joint appendix (“J.A., ” ECF Nos. 75-4 to 75-11).[2] After thorough consideration, the court will grant Plaintiff's motion in part and will deny the motion filed by Defendant Gregg B. Wolfe (“Defendant” or “Wolfe”), for the following reasons.

         II. MOTIONS FOR SUMMARY JUDGMENT

         The Federal Rules of Civil Procedure provide that summary judgment shall be granted “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). Summary judgment may be granted against a party who fails to adduce facts sufficient to establish the existence of any element essential to that party's case, and for which that party will bear the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).

         The moving party bears the initial burden of identifying evidence that demonstrates the absence of a genuine issue of material fact. Id. at 323; Aman v. Cort Furniture Rental Corp., 85 F.3d 1074, 1080 (3d Cir. 1996). Once that burden has been met, the nonmoving party must identify “specific facts showing that there is a genuine issue for trial, ” or the factual record will be taken as presented by the moving party, and judgment will be entered as a matter of law. Matsushita Elec. Indus. Corp. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). An issue is “genuine” only if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251 (1986). In assessing the record, a court must view all facts in the light most favorable to the nonmoving party, and must draw all reasonable inferences and resolve all doubts in that party's favor. Hugh v. Butler County Family YMCA, 418 F.3d 265, 266 (3d Cir. 2005). The parties agree that the relevant, material facts of this litigation are undisputed.

         III. FACTUAL AND PROCEDURAL HISTORY

         Leaman and Wolfe were long-time business partners and operated a court reporting agency, Kaplan Leaman & Wolfe (“KLW”). In 2010, Leaman filed a state court action against Wolfe arising out of the breakup of that business. On January 11, 2012, after mediation, the parties entered into a settlement agreement (J A. at 9-15) and judgment note (J.A. at 16) to resolve their disputes.

         Wolfe agreed to make a series of thirty-one installment payments amounting to $475, 000 over four years. (Settlement Agreement ¶ 1, J.A. at 9-10). If Wolfe missed a payment, he had a ten-day cure period. The agreement provided: “Any failure to cure such failure to pay shall constitute a default of this Agreement and render null and void all of its terms, agreements and conditions, except for the Confession of and Consent to Judgment by Wolfe, set forth below.” (Settlement Agreement ¶ 1, J.A. at 10). The confession of judgment clause stated that in the event of an uncured default, Lehman was authorized to file a judgment note for $100, 000 in liquidated damages, “plus the entirety of the then unpaid balance of the Settlement Amount and Leaman's attorneys' fees and costs for the filing and enforcement of the Judgment Note.” (Settlement Agreement ¶ 4, J.A. at 11). The clause further provided that “if either Party is in default and litigation is filed, the defaulting party shall be liable for the reasonable attorneys' fees and costs of the non-defaulting party.” Id. In exchange, Leaman promised “not to perform any stenographic services competitive with KLW” during the payment period. (Settlement Agreement ¶ 6, J.A. at 13). The agreement provided that if any default occurred, Leaman's noncompete provision “shall become immediately null, void and of no force and effect.” Id. The agreement contained a severability clause, which provided that if any provision shall be declared void or invalid, the remaining provisions “shall remain and in all other respects be deemed valid and enforceable.” (Settlement Agreement ¶ 9, J.A. at 13).[3]

         From the first payment in April 2012, the parties fell into a predictable pattern: Wolfe would fail to make a timely payment; Leaman would send notice of default; and Wolfe would cure the default by paying on the last possible day. In December 2012 and February 2013, Wolfe failed to cure his defaults within the ten-day cure period.[4] Leaman agreed to accept the December 2012 payment out-of-time.

         It is the February 2013 payment that precipitated this litigation. The February 2013 payment of $12, 500 was due on February 11, 2013. Leaman notified Wolfe of the default by letter dated the same day, which was received by Wolfe on February 13, 2013. (J.A. at 18-19). UPS lost the February 2013 payment, which Wolfe had sent within the cure period. On February 25, 2013, when payment was not received, Leaman initiated this lawsuit by filing a Complaint in Confession of Judgment for Money Damages in the United States District Court for the Eastern District of Pennsylvania. In the complaint, Leaman sought judgment in the amount of $390, 350.00 (which consisted of the unpaid principal balance, $100, 000 in liquidated damages, a 20% attorneys' fee of $65, 000 and the $350 court filing fee), plus costs and interest. The court promptly entered judgment in favor of Leaman.

         Upon learning of the judgment and undelivered check, Wolfe promptly delivered a new check to Leaman by hand. Wolfe filed a motion to strike or to reopen the confessed judgment, which the court granted to permit a trial on the pertinent issues. (ECF No. 9). Wolfe filed an answer, affirmative defenses and a counterclaim against Leaman for breach of the settlement agreement. The parties stipulated that Plaintiff's complaint stated two independent claims: (1) confession of judgment; and (2) breach of contract. After apparently contentious discovery, the parties filed cross-motions for summary judgment.

         On July 10, 2014, the district court issued a memorandum opinion and order. The court granted summary judgment in favor of Wolfe on the complaint, and to Leaman on the counterclaim. (ECF Nos. 51, 52). The court reasoned that although Wolfe had technically defaulted, his default was excused by the equitable doctrine of substantial performance. The court observed that both parties had acted with ill will toward each other: Wolfe by delaying his installment payments until the last possible moment and Leaman by seizing on the opportunity to confess judgment and refusing to withdraw it after learning about the mistake made by UPS. The court concluded that the most equitable resolution was to reopen the confession of judgment, dismiss all claims, and leave the parties to perform the remainder of their settlement agreement.

         Leaman appealed. Throughout the time period of the litigation, Wolfe made monthly payments on the unpaid principal balance. (J.A. at 31). Wolfe paid the entire principal balance prior to resolution of the appeal. (J.A. at 31). On October 6, 2015, the United States Court of Appeals for the Third Circuit vacated the district court's decision in a nonprecedential opinion. (J.A. 24-30, also filed at ECF No. 56). The court of appeals held that the doctrine of “substantial performance is not a valid defense in a suit against a party for damages.” (J.A. at 27). The court of appeals concluded that the $100, 000 liquidated damages provision was a penalty and unenforceable, but recognized that Leaman is entitled to damages. (J.A. at 29). The court stated: “Leaman is entitled to those damages that will put her in the position she would have been in but for the breach.” (J.A. at 30). On remand, the district court was instructed to “calculate a reasonable estimate of damages based on the applicable interest rate.” Id. The court of appeals also held that, as contemplated by the settlement agreement, “Leaman is also entitled to what the District Court deems to be a reasonable attorneys' fee.” Id. The case was remanded for the district court to consider the appropriate measure of damages.

         IV. LEGAL ANALYSIS

         Leaman contends that judgment for $81, 029.89 should be entered in her favor. This amount consists of: (1) interest of $10, 523.97; and (2) attorney fees and costs of $70, 505.92. Leaman also seeks the opportunity to prove at trial “lost opportunity” damages of $230, 000 and to recover the additional attorneys' fees she will incur in that endeavor. The joint appendix contains an interest calculation (J.A. at 31-32), attorney time records (J.A. 33-93), and declarations from Leaman and attorneys William Einhorn and Benjamin Anderson (J.A. 94-100).

         Defendant presents a vastly different proposal -- that judgment for $641.78 be entered in favor of Leaman. This amount consists of: (1) interest of $26.65; (2) attorney fees of $265.13; and (3) the $350 court filing fee. Defendant argues that: (1) during the time period of the litigation Leaman received and accepted all remaining installment payments due under the settlement agreement within each month's cure period; (2) Leaman's attempt to recover $100, 000 in liquidated damages was rejected by the courts; (3) Leaman's first attorney, William Einhorn, was also her husband, and his itemization (J.A. at 33-35) does not include an hourly rate or actual charges; and (4) Leaman never previously claimed accelerated interest ...


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