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Gutteridge v. J3 Energy Group, Inc.

Superior Court of Pennsylvania

May 17, 2017

CHRISTOPHER GUTTERIDGE AND APPLIED ENERGY PARTNERS, LLC Appellee
v.
J3 ENERGY GROUP, INC., T/D/B/A J3 ENERGY GROUP AND STEPHEN RUSSIAL Appellants

         Appeal from the Judgment Entered November 25, 2013 In the Court of Common Pleas of Chester County Civil Division at No(s): 2009-09160-CA

          BEFORE: GANTMAN, P.J., FORD ELLIOTT, P.J.E., BENDER, P.J.E., BOWES, J., PANELLA, J., SHOGAN, J., LAZARUS, J., OLSON, J., and OTT, J.

          OPINION

          LAZARUS, J.

         J3 Energy Group, Inc. (J3) and Stephen Russial (Russial) (collectively Appellants/Defendants) appeal from the judgment entered in the Court of Common Pleas of Chester County in favor of Christopher Gutteridge (Gutteridge) and Applied Energy Partners, LLC (AEP) (collectively Appellees/Plaintiffs), in the amount of $343, 887.00. After careful review, we affirm.[1]

         The underlying facts of the case are as follows. In 2004, Gutteridge formed AEP, which sold electronic motor controls and energy saving lighting products to commercial and industrial customers. AEP conducted its business through approximately fifteen sales agents known as channel partners. Channel partners who had their own businesses would buy products from AEP at discounted prices and sell them to their customers at higher prices. Channel partners who did not have their own businesses were paid a commission by AEP for the sales they generated.

         The case before us arises out of business dealings between AEP and J3. Gutteridge formed AEP in 2004, and Russial founded J3, a corporation, in 2002. J3 provides energy procurement[2] and demand response services[3]to commercial and industrial clients.

         Gutteridge and Russial met in 2007; in March 2008, they developed a plan whereby AEP would use its channel partners to provide J3's services to its customers. They discussed forming a joint venture called the Energy Buyers Group (the Group); the Group's members would benefit from lower electric supply costs that the Group would negotiate for them. Gutteridge, through AEP, had a sales network that called upon manufacturers, which Russial did not have, and Russial had technical knowledge and expertise within the energy procurement industry, which Gutteridge did not have. See N.T. Trial, 6/12/12, at 36, 44.

         Gutteridge and Russial agreed that they would divide the revenue generated by the Group as follows: 60% to J3 and 40% to AEP. However, in the beginning, the revenue would be divided 65% to J3 and 35% to AEP because J3 would be heavily involved in closing the sales, while the AEP channel partners were learning about energy procurement and demand response services. Additionally, AEP would pay the channel partners 20% of the total revenue, and retain a net commission of 15%.

         At an AEP meeting in January 2008, Gutteridge introduced the channel partners to Russial and J3. At training sessions in January and May 2008, the Group concept was discussed, and Russial explained how J3's services worked and how to sell them. Only two of the channel partners, Lori Porreca (owner of A1 Restoration, Inc., and A1 Energy, Inc.) and Herb Keaton (owner of Plastic Machinery Sales), sold the Group's services; they were the sole channel partners with customers in the PPL[4] utility area, which was scheduled to become deregulated in January 2010.[5]

         At the initial meetings in 2008, Russial told the channel partners that it was important for the Group to reach 50 megawatts of purchasing volume because that was the amount needed to secure optimum pricing from energy suppliers. On February 25, 2009, Russial sent an email confirming that the Group had reached this threshold.

         Although Gutteridge maintained that he and AEP made significant efforts to market the Group, Russial became dissatisfied with AEP's performance with respect to AEP's efforts to develop and train a sales force to market J3's energy services. On March 9, 2009, Russial sent Gutteridge an email setting forth a proposal that J3 compensate A1 Restoration, Plastic Machinery Sales and AEP channel partner Mark Burton directly for any sales they close. Under the new proposal, J3 would pay AEP a 10% or 20% referral fee for any sales generated by channel partners other than Porreca, Keaton or Burton, depending on the extent of Appellants'/Defendants' involvement. This referral fee was less than the share being paid to AEP under the existing arrangement. The proposal also included a requirement that AEP sign a non-compete agreement for any existing or new clients of the Group.

         On April 21, 2009, Russial sent an email to Gutteridge informing him that Russial would not make any payments to AEP from J3 unless Appellees/Plaintiffs agreed to sign a document prepared by Russial that would include a non-compete clause for any customers secured by Porreca, Keaton or Burton. AEP never signed a new agreement with J3, and J3 never paid AEP for any of the revenues generated from the Group joint venture.

         Appellants/Defendants voluntarily paid channel partners Porreca and Keaton directly for their services, rather than Appellees/Plaintiffs. They also had Porreca and Keaton sign non-compete agreements, which caused Appellees/Plaintiffs to lose two key channel partners, and resulted in the customers Porreca and Keaton had obtained for the Group becoming direct customers of J3. Despite the fact that the parties manifested intentions to ultimately reach an agreement to form Energy Buyers Group and then market that entity to prospective clients for the sale of energy procurement and demand response services, Russial unilaterally transformed the relationship in order to develop a direct association with the most committed AEP channel partners, Porreca and Keaton.

         Gutteridge and AEP commenced this action against Russial and J3 by filing a writ of summons on August 14, 2009. They filed a complaint on May 10, 2010, raising several counts against Appellees/Defendants, including promissory estoppel, breach of contract, unjust enrichment, breach of implied duty of good faith and tortious interference with contractual rights. Following a four-day non-jury trial before the Honorable William P. Mahon, the court issued a verdict on June 30, 2013, in favor of Appellees for $343, 887.00 on the counts of unjust enrichment and promissory estoppel.[6]

         All parties filed motions for post-trial relief. The trial court did not rule on the post-trial motions within 120 days, and on November 25, 2013, Appellants filed a praecipe for entry of judgment on the verdict. Judgment was entered, and this timely appeal followed.[7]

         Appellant Stephen Russial has filed a substituted brief on appeal before this Court en banc. He raises the following issues for our review:

1. Did the trial court abuse its discretion and/or commit an error of law in holding Appellant, Stephen Russial, who was the shareholder and corporate officer of J3[], personally liable for any amount under the theories of unjust enrichment/promissory estoppel or any other basis?
2. Did the trial court abuse its discretion and/or commit an error of law in finding liability against Appellant, Stephen Russial, under the theory of unjust enrichment?
3. In the event Appellant, Stephen Russial, or both Appellants, did in fact have liability to the Appellees under the legal theory of unjust enrichment, did the trial court abuse its discretion and/or commit error an of law and apply the wrong measure of damages?
4. Did the trial court abuse its discretion and/or commit an error of law in finding liability against Appellant, Stephen Russial, or both of the Appellants, under the theory of promissory estoppel?
5. In the event Appellant, Stephen Russial, or both of the Appellants, did in fact have liability to the Appellees under the legal theory of promissory estoppel, did the trial court abuse its discretion and/or commit an error of law and apply the wrong measure of damages?
6. In the event the Superior Court affirms liability of Appellant, Stephen Russial, or both the Appellants, under unjust enrichment and/or promissory estoppel and affirms that the Appellees were entitled to damages based on lost commissions as opposed to reliance damages, was the amount of the trial court's verdict excessive and an abuse of discretion and/or an error of law?

         Substituted Brief of Appellant Stephen Russial, at 4-6.

Our standard of review in non-jury cases is limited to:
a determination of whether the findings of the trial court are supported by competent evidence and whether the trial court committed error in the application of law. Findings of the trial judge in a non-jury case must be given the same weight and effect on appeal as a verdict of a jury and will not be disturbed on appeal absent error of law or abuse of discretion. When this Court reviews the findings of the trial judge, the evidence is viewed in the light most favorable to the victorious party below and all evidence and proper inferences favorable to that party must be taken as true and all unfavorable inferences rejected.

Company Image Knitwear, Ltd. v. Mothers Work, Inc., 909 A.2d 324, 330 (Pa. Super. 2006) (citation omitted). Additionally, this Court has stated that we will respect a trial court's findings with regard to the credibility and weight of the evidence "unless the appellant can show that the court's determination was manifestly erroneous, arbitrary and capricious or flagrantly contrary to the evidence." J.J. DeLuca Co. v. Toll Naval Associates, 56 A.3d 402, 410 (Pa. Super. 2012), quoting Ecksel v. Orleans Const. Co., 519 A.2d 1021, 1028 (Pa. Super. 1987).

         Russial first asserts that the trial court abused its discretion and committed an error of law by holding Russial personally liable for the judgment entered against J3. For the following reasons, we find no error.

         At trial, Gutteridge testified that he and Russial had done business together in the first half of 2007, and that during a road trip to Pittsburgh in the fourth quarter of 2007, they discussed forming the Group. See N.T. Trial, 6/12/12, at 160.

Q: At your deposition I remember asking you[, ] when you met Steve Russial[, ] were you aware of his company, J3 Energy Group, Inc., were you aware of that company?
A: Yes.
Q: And were you aware that the company was a corporation?
A: No, not specifically, but I assumed so.
. . .
Q: Mr. Gutteridge, I'm handing you your deposition on January 6, 2012 of this year. I'm bringing your attention to page 26, lines 14 through 21. Would you read those and let me know when you're finished?
A: "Let's talk about that. One of my clients is J3 Energy
Group[, ] Inc. Were you aware of J3 Energy Group, Inc. when you started dealing with Mr. Russial?"
"Yes."
"Were you aware that that was a corporation?"
"Yes."
. . .
Q: I also asked you if, when you were dealing with Mr. Russial, were you dealing with him in his capacity as president of this corporation - of his corporation. You don't remember what your answer was?
A: I don't remember what my answer was, but when I first met Mr. Russial, I was dealing with him personally. At the point that we started setting up the Energy Buyers Group, it was Applied Energy Partners[-] J3 venture.
Q: I'm going to approach you one more time.
If I show you, again, page 26, the last three lines, and then your answer on the top of your deposition testimony?
A: Yes. You asked me in my dealings with Mr. Russial was he always dealing as president of J3 ...

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