Rieders Travis Law Firm Logo

ATTORNEYS AT LAW

CALL FOR A FREE CONSULT

(570) 323-8711

Contracts

July 23rd, 2019 by Rieders Travis in Contracts

CONTRACT-QUANTUM MERUIT

Artisan Builders, Inc. v. So Young Jang, 2022 Pa. Super. LEXIS 97 (February 28, 2022) (Stabile, J).  This is a contract renovation dispute.  To put ABI’s issues in context, we first address the difference between quantum meruit and unjust enrichment. In Angino & Rovner v. Jeffrey R. Lessin & Associates, 2016 PA Super 2, 131 A.3d 502 (Pa. Super. 2016), this Court explained that “[q]uantum meruit is an equitable remedy, which is defined as ‘as much as deserved’ and measures compensation under an implied contract to pay compensation as reasonable value of services rendered.” Id. at 508 (Pa. Super. 2016) (citation and alteration omitted). See also Commonwealth Dept. of Public Welfare v. UEC, Inc., 483 Pa. 503, 397 A.2d 779, 782 (Pa. 1979) (quantum meruit is “the reasonable value of the services performed”).

While the remedy of quantum meruit provides for restitution based on the reasonable value of services performed or provided, unjust enrichment “requires the defendant to pay to the plaintiff the value of the benefit conferred.” Durst v. Milroy General Contracting, Inc., 2012 PA Super 179, 52 A.3d 357, 360 (Pa. Super. 2012) (citation omitted). The elements necessary to prove unjust enrichment are:

(1) benefits conferred on defendant by plaintiff; (2) appreciation of such benefits by defendant; and (3) acceptance and retention of such benefits under such circumstances that it would be inequitable for defendant to retain the benefit without payment of value. (citations omitted). The application of the doctrine depends on the particular factual circumstances of the case at issue. In determining if the doctrine applies, our focus is not on the intention of the parties, but rather on whether the defendant has been unjustly enriched.

Id. (citation omitted). In Am. & Foreign Ins. Co. v. Jerry’s Sport Ctr., Inc., 606 Pa. 584, 2 A.3d 526 (Pa. 2010), our Supreme Court noted:

Unjust enrichment is the retention of a benefit conferred by another, without offering compensation, in circumstances where compensation is reasonably expected, for which the beneficiary must make restitution. Black’s Law Dictionary (8th ed. 2004). An action based on unjust enrichment is an action which sounds in quasi-contract or contract implied in law. Schott v. Westinghouse Electric Corp., 436 Pa. 279, 259 A.2d 443, 448 (Pa. 1969).

Jerry’s Sport Ctr., 2 A.3d at 531 n.7. We cite with approval the Supreme Court of Maine that aptly explained the difference between quantum meruit and unjust enrichment most concisely when it stated:

Quantum meruit involves recovery for services or materials provided under an implied contract. Unjust enrichment describes recovery for the value of the benefit retained when there is no contractual relationship, but when, on the grounds of fairness and justice, the law compels performance of a legal and moral duty to pay.

Bowden v. Grindle, 651 A.2d 347, 350 (Me. 1994) (citations omitted). Further:

Quantum meruit is the measure of recovery under the quasi-contract. It is equal to the reasonable value of the services provided. The recovery pursuant to a claim for unjust enrichment, on the other hand, is limited to the amount of the benefit realized and retained by the defendant. Although there may be a relationship between these two amounts, they are not necessarily the same.

Id. at 351 (Me. 1994) (citations omitted). Although we are clearly not bound by decisions from our sister states, they may provide persuasive authority. Century Indemnity Company v. OneBeacon Insurance Company, 2017 PA Super 328, 173 A.3d 784, 792 n. 14 (Pa. Super. 2017).

Instantly, the trial court held that the contract between the parties was not valid due to non-compliance with HICPA. Appellant correctly pursued a cause of action sounding in quantum meruit as illustrated by precedent.

Rather than analyze the evidence presented by ABI based on quantum meruit’s “reasonable value of service provided” standard, the court analyzed ABI’s evidence using “the benefit conferred” criteria appropriately employed to establish a claim of unjust enrichment.  In so doing, the court erred.  Because quantum meruit damages are determined based on services provided, we find the trial court committed an error of law when it concluded recovery must be measured by the benefit provided.  We remand to the trial court to determine the reasonable value of the services based on the evidence presented.

CONTRACTS-CONTRACT OF ADHESION-FITNESS BUSINESS

Milshteyn v. Fitness Int’l, 2022 Pa. Super. LEXIS 69 (February 18, 2022) (Panella, P.J.).  Peter Milshteyn and Maya Milshteyn appealed from an order granting motion for summary judgment filed by Fitness International. The Superior Court affirmed.  The complaint alleged that there was little or no lighting and therefore Mr. Milshteyn fell down.  The fitness club said the claims were barred by the terms of the membership agreement.

This membership agreement was upheld.  There was a release and waiver of liability and indemnity.  The court highlighted the language which was most important.  Member assumes liability for such risks.

Member hereby releases and holds L.A. Fitness, its directors, officers, employees, and agents harmless from all liability to Member … for any loss or damages, and forever gives up any claim or demands therefore, on account of injury to Member’s person or property, including injury leading to the death of Member, whether caused by active or passive negligence of L.A. Fitness or otherwise….

*  *  *

…accidental injuries occurring anywhere in Club dressing rooms, shower and other facilities.

The Milshteyns claimed that there was an issue as to whether the man who signed the agreement understood basic English. They said the agreement was therefore a contract of adhesion and unconscionable.  The court granted the motion for summary judgment.  It was not a contract of adhesion.  The Milshteyns could not raise a gross negligence claim for the first time in response to defendant’s summary judgment motion after the statute of limitations had run.  This was not a question just of amplification of the complaint, but was an entirely new cause of action.  Exculpatory provisions in contracts are generally enforceable if they are clear and meet three conditions: (1) the clause must not contravene public policy; (2) the contract must be between persons relating entirely to their own private affairs; and (3) each party must be a free bargaining agent to the agreement so that the contract is not one of adhesion.  In interpreting such contracts, the following standards apply: (1) the contract language must be strictly construed since exculpatory language is not favored by the law; (2) the contract must state the intention of the party with great particularity, beyond doubt, by express stipulation, and no inference from words of general import can establish the intent of the parties; (3) the language of the contract must be construed, in cases of ambiguity, against the party seeking immunity from liability; and (4) the burden of establishing the immunity is upon the party invoking protection under the clause.  That is citing to Chepkevich v. Hidden Valley Resort, LP, 2 A.3d 1174, 1189 (Pa. 2010).  The court found that here, the contract was not a contract of adhesion or unconscionable. The man who signed it acknowledged that he read and understood the agreement, including the exculpatory provision.  As indicated, the claim for gross negligence is a separate cause of action which needed to be pled in the complaint before the statute of limitations ran.

CONTRACTS-FRAUDULENT INDUCEMENT

SodexoMAGIC, LLC v. Drexel Univ., 2022 U.S. App. LEXIS 1617 (3rd Cir. January 20, 2022) (Phipps, C.J.).  For nearly twenty years, either directly or through one of its predecessor companies, SodexoMAGIC, LLC (‘SDM’) provided on-campus dining services at Drexel University, a private university in Philadelphia. But in early 2014 one of SDM’s rivals, Aramark Corporation, which has its global headquarters in Philadelphia, made an unsolicited offer to Drexel to take over campus dining services. SDM responded with its own unsolicited offer to continue providing food services. Rather than select one of those offers, Drexel announced a two-phase competitive bidding process for the on-campus dining contract.

In its original complaint, SDM pursued three causes of action. First, it alleged that Drexel fraudulently induced it to enter the Management Agreement, and it sought compensatory and punitive damages. Second, SDM alleged that Drexel breached its contractual duty to renegotiate in good faith. Third, as a claim in the alternative, SDM alleged that Drexel was unjustly enriched when SDM assumed certain liabilities and provided dining services at reduced rates.

Drexel also sought to vindicate its grievances against SDM. It counterclaimed that SDM breached the Management Agreement by failing to perform specific obligations, including filling key management positions, making financial contributions to certain Drexel initiatives, meeting certain performance standards, and securing campus appearances from Earvin “Magic” Johnson.

The parties both sued each other for fraudulent inducement. In its fraud claim against Drexel, SDM alleged that Drexel misrepresented and concealed its future student-enrollment projections, which led SDM to bid more favorably on the Management Agreement. Drexel countersued for fraudulent inducement on allegations that SDM’s BAFO included capital contributions that SDM never intended to make and that such deceit prompted Drexel to negotiate exclusively with SDM, not Aramark.

Under that formulation, the parol evidence rule is a substantive rule of contract law that prevents the use of extrinsic evidence to nullify, modify, or augment the terms of a contract. See id.; see also Rose v. Food Fair Stores, Inc., 437 Pa. 117, 262 A.2d 851, 854 (Pa. 1970) (holding that the parol evidence rule precludes proof of oral representations that would “directly contradict the clear meaning of the written contract”); Nicolella v. Palmer, 432 Pa. 502, 248 A.2d 20, 22-23 (Pa. 1968) (holding that for an integrated contract, the parol evidence rule prevents extrinsic evidence to establish an additional contract term). Importantly, the rule does not prevent the use of extrinsic evidence for other purposes. See, [*43] e.g., Berger v. Pittsburgh Auto Equip. Co., 387 Pa. 61, 127 A.2d 334, 335 (Pa. 1956) (allowing evidence of a misrepresentation “not to alter or vary” the terms of an integrated contract, but to rescind it). And for fraudulent inducement claims, the purpose of extrinsic evidence is to prove a precontractual misrepresentation or concealment — not to alter or vary the terms of the contract. See Blumenstock v. Gibson, 2002 PA Super 339, 811 A.2d 1029, 1036 (Pa. Super. Ct. 2002) (explaining that, for fraudulent inducement claims, the party seeks to offer extrinsic evidence to show not “that the representations were omitted from the written agreement, but, rather, . . . that the representations were fraudulently made”); 1726 Cherry St. P’Ship v. Bell Atl. Props., Inc., 653 A.2d 663, 666, 439 Pa. Super. 141 (Pa. Super. Ct. 1995) (same). Thus, the parol evidence rule acting alone does not prevent fraudulent inducement claims arising out of integrated contracts. See generally Sweet, Promissory Fraud, supra, at 877 (“It is generally agreed that the parol evidence rule does not prevent admission of evidence of fraud.”).

In sum, Pennsylvania’s parol evidence rule does not prevent fraudulent inducement claims for all integrated contracts, but the rule may preclude such claims based on misrepresentations for ‘integration-plus’ contracts — integrated contracts with fraud-insulating provisions. See Youndt, 868 A.2d at 546 (explaining that “parol evidence is inadmissible where the contract contains terms that deny the existence of representations regarding the subject matter of the alleged fraud,” but “when the contract contains no such term denying the existence of such representations, parol evidence is admissible to show fraud in the inducement”).

A precontractual duty not to deceive through misrepresentation or concealment exists independently of a later-created contract. See Moser, 589 A.2d at 682 (explaining that parties are under a duty to avoid “intentional false statement[s]” or “concealment[s] of material fact[s]” (citing Commonwealth v. Monumental Props., Inc., 459 Pa. 450, 329 A.2d 812, 829 (Pa. 1974))). And even if such a duty could be retroactively incorporated into a contract, that would still not foreclose a tort action. When a contractual duty duplicates an obligation generally owed to another in society, the gist of the action doctrine does not bar a tort claim; it prevents only the contractual duty from serving as a basis for a tort claim. See Bruno, 106 A.3d at 62-65; see also, e.g., Reitmeyer, 243 A.2d at 398; Krum, 8 A. at 600. Because SDM’s tort-based fraud claim would exist with or without a later-in-time contract, the gist of the action doctrine does not bar such a claim here.

The only prohibited category potentially implicated by a promise to renegotiate in good faith is the rule against indeterminate promises. But as a general matter, promises to renegotiate are not too indefinite to be enforceable. Indeed, the Pennsylvania Supreme Court long ago relied on a right-to-renegotiatein-good-faith clause as a basis for its decision. See Cosgrove v. Kappel, 403 Pa. 108, 168 A.2d 319, 320 (Pa. 1961). More recently, three Justices of the Pennsylvania Supreme Court favored resolving a dispute through the enforceability of a similar agreement to negotiate in good faith. See Dep’t of Gen. Servs. v. On-Point Tech. Sys., 582 Pa. 291, 870 A.2d 873, 874 (Pa. 2005) (Saylor, J., joined by Nigro and Baer, JJ., concurring in part and dissenting in part) (“I would also specifically confirm the Third Circuit’s prediction that this Court would cognize a contract-based cause of action for breach of an agreement to negotiate in good faith.”). And several intermediate Pennsylvania courts, along with this Court, have concluded that the Pennsylvania Supreme Court would recognize a contract-based cause of action for breach of a promise to negotiate in good faith. See GMH Assocs. Inc. v. Prudential Realty Grp., 2000 PA Super 59, 752 A.2d 889, 903-04 (Pa. Super. Ct. 2000); Jenkins v. Cnty. of Schuylkill, 441 Pa. Super. 642, 658 A.2d 380, 385 (Pa. Super. Ct. 1995); see also Flight Sys., Inc. v. Elec. Data Sys. Corp., 112 F.3d 124, 130 (3d Cir. 1997); Channel Home Ctrs. v. Grossman, 795 F.2d 291, 299 (3d Cir. 1986). Thus, under Pennsylvania law, a promise to renegotiate in good faith is likely not — as a category — too indeterminate to be enforceable. See Flight Sys., 112 F.3d at 130; Channel Home Ctrs., 795 F.2d at 299.

No one disputes that the duty to renegotiate in good faith was in fact triggered.

In sum, it is inconsequential which formulation of good faith the Pennsylvania Supreme Court would apply to a contractual duty to renegotiate because, under either, SDM’s prima facie evidence of fraudulent inducement carries its good-faith renegotiation claim past summary judgment.

Under Pennsylvania law, post-offer performance provides strong evidence of acceptance. See Selig v. Phila. Title Ins. Co., 380 Pa. 264, 111 A.2d 147, 151 (Pa. 1955); Hartman, 766 A.2d at 351; Accu-Weather, Inc. v. Thomas Broad. Co., 425 Pa. Super. 335, 625 A.2d 75, 78-80 (Pa. Super. Ct. 1993).

Similarly, the Pennsylvania Supreme Court has rejected a claim of unjust enrichment when a benefit that a party confers upon another also protects its own interest. See Am. & Foreign Ins. Co. v. Jerry’s Sport Ctr., Inc., 606 Pa. 584, 2 A.3d 526, 546 (Pa. 2010). Here, by continuing to provide dining services, SDM served its own interest by maintaining its professed commitment to not leave students without dining services midterm. Accordingly, it would not be unjust or inequitable if SDM does not receive enhanced compensation for the dining services it provided for the Fall 2016 Semester.

We will affirm summary judgment in Drexel’s favor on SDM’s unjust enrichment and punitive damages claims as well as summary judgment in SDM’s favor on Drexel’s fraudulent inducement claim. Likewise, we will affirm the District Court’s clarifying order and its decision to deny Drexel’s motion to strike declarations by SDM witnesses under the sham affidavit rule. We will vacate the District Court’s order granting summary judgment to Drexel on SDM’s claims for fraudulent inducement, breach of contract for failure to renegotiate in good faith, and breach of a supplemental agreement for the Fall 2016 Semester. Those surviving claims will be remanded to the District Court.

CONTRACT-ASSIGNMENT-ANTI-ASSIGNMENT CLAUSE

Gito, Inc. v. Axis Architecture, P.C., 2021 Pa. Super. LEXIS 715 (December 10, 2021) Colins, J.  Nell Construction, as assignee of the claims of Greater Latrobe School District, brought a case against Axis Architect.  There was an anti-assignment clause in the contract between the school district and the architect.  However, what had been assigned here was a claim for damages, not performance under the contract.  The assignment was permitted.

CONTRACTS-FIDUCIARY DUTY

Slomowitz v. Kessler, 2021 Pa. Super. LEXIS 697 (November 29, 2021) Stabile, J.  The court dismissed the case, dismissing Kessler’s fiduciary duty claims and granting judgment in Slomowitz’s favor.  The court focused on Section 7.1 of the partnership agreement granting a general partner the authority to make all partnership decisions, execute all documents and instruments to implement those decisions and to control the business.  This was error, since the performance of any actions by a general partner under the partnership agreements is to be performed in a “fiduciary capacity,” and, in particular, with a goal to maximize tax advantages. Acting in a fiduciary capacity required Slomowitz to act, inter alia, loyally, with care, with good faith and fair dealing, and to disclose material information to co-partners. Not honesty alone was satisfactory; Slomowitz had the duty to act with the punctilio of an honor the most sensitive as the standard of behavior. Clement v. Clement, 260 A.2d 728, 436 Pa. 466 (Pa. 1970) (citing Meinhard v. Salmon, 249 N.Y. 458, 164 N.E. 545 (N.Y. 1928)). The court’s finding that Slomowitz acted in an unbusinesslike and offensive manner, and that he ignored and did not communicate with Kessler on the sale of the properties cannot be reconciled with the fiduciary duties Slomowitz owed Kessler as a co-general partner under the partnership agreements.

Accepting the trial court’s findings of fact supported by competent evidence and considering the evidence in a light most favorable to the verdict winner Slomowitz, we nonetheless conclude that Slomowitz breached the fiduciary duties he owed to Kessler as a co-partner in each of the three limited partnerships.

In summary, construed in the light most favorable to Slomowitz, the evidence nonetheless makes clear that he breached his contractual fiduciary duties to Kessler in multiple respects. When Kessler called Slomowitz and recommended refinancing, Slomowitz breached his fiduciary duties to Kessler by replying, “I’ll get back to you,” thereby concealing the fact that he already obtained an agreement to sell the Hershey building. See eToll, Inc. v. Elias/Savion Advertising, Inc., 2002 PA Super 347, 811 A.2d 10 (Pa. Super. 2002) (agent has duty to disclose all relevant information to a principal). Slomowitz breached his fiduciary duties to Kozol and the partnership in the course of obtaining the consent of the Kozols, two of Hershey’s three limited partners, to the sale of the Hershey property. Through his attorney, Slomowitz deceived the Kozols into agreeing to sell the Hershey building by misrepresenting to Lee Kozol that Rosenthal’s widow approved the sale, a detail that the Kozols considered material. By employing deceit in his dealings with the Kozols, Slomowitz breached his fiduciary duties to the partnership. The same deceitful conduct violated Slomowitz’s fiduciary duties to Kessler because it facilitated the very act that Slomowitz knew Kessler opposed, the sale of the Hershey building. Finally, Slomowitz breached his fiduciary duty to Kessler under Section 7.1(c) without considering the tax effects of selling the Hershey building instead of maximizing tax advantages through refinancing. This is not to say that a sale by Slomowitz always would violate his fiduciary duty to maximize tax advantages. We hold only that under the circumstances here that Slomowitz breached his fiduciary duties to Kessler where Slomowitz did not even engage in any discussion with Kessler or obtain other necessary information to assess the effect a sale would have on Kessler or the partnership.

In light of our conclusions that Slomowitz breached his fiduciary duties to Kessler with respect to the sale of the three properties, we reverse the trial court’s conclusions in this regard. We find we also must order a remand for the trial court to make additional findings of fact, whether by admitting additional evidence or by reliance upon the existing record, as to Slomowitz’s additional breaches, if any, with respect to his disregard to consider maximizing tax advantages to the partnerships when he made the decision to sell the properties. The court did not address this particular fiduciary duty in its findings. A remand also is necessary to the extent the parties or the court determine that additional findings are necessary to address the effect of Section 7.5 of the agreements. If the conclusion remains that Slomowitz is liable to Kessler for breach of fiduciary duties on any one or all of the properties after consideration of Section 7.5, then the court must proceed to consider Kessler’s claims for damages which it did not do in the first instance, proof of which Kessler bears the burden of proof. See Snyder v. Crusader Serving Corporation, 2020 PA Super 67, 231 A.3d 20, 31 (Pa. Super. 2020).

Kessler therefore possessed both statutory and contractual rights to partnership information.  We accordingly reverse the trial court’s order denying Kessler’s claim for an accounting and for related partnership information and remand for further proceedings.

We find that we are in agreement with Slomowitz that to the extent Kessler seeks reimbursement of attorneys’ fees not incurred in connection with his activities as a general partner, but for fees related to litigation, Kessler is not entitled to indemnification under Section 7.4. The clear and unambiguous language of that section limits indemnification for any losses, costs, or damages by reason of acts performed by a general partner within the scope of their authority conferred on them by the agreement. We interpret this to only apply to the performance of partnership duties. To be sure, the agreements separately provide for recovery of litigation fees and court costs under Section 17.9. Recovery of those monies is conditioned upon a party prevailing in legal proceedings. Because Section 17.9 of the partnership agreements specifically addresses recovery of monies related to prevailing-party litigation, we cannot infer that the more general provisions of Section 7.4, relating to performance of a partner’s duties, also would provide reimbursement for these litigation expenses untethered to being a “prevailing” party as argued by Kessler.  A “‘clear’ provision controls a doubtful one, and a general provision must give way to a specific provision covering the same subject matter.” Cusamano v. Anthony M. DiLucia, Inc, 281 Pa. Super. 8, 421 A.2d 1120, 1123-24 (Pa. Super. 1980).

Applying these authorities to the instant matter, we find we must reverse the trial court’s conclusion that Kessler is not entitled to recovery of his litigation expenses. Since we have reversed and are remanding on a number of Kessler’s counterclaims, the court will have to assess entitlement to recovery of litigation expenses upon its re-examination of Kessler’s claims. A judgment in Kessler’s favor on some or all of his counterclaims also may affect the litigation expenses that Slomowitz might be entitled to depending upon a reexamination of prevailing-party status.

CONTRACTS-LEASES-EXCULPATORY CLAUSE

Keystone Specialty Servs. Co. v. Ebaugh, 2021 Pa. Super. LEXIS 685 (November 22, 2021) Colins, J.  Exculpatory clauses in a commercial lease that provide landlord is not liable for any damage to tenant’s personal property on the leased premises are valid and enforceable and bar contract and negligence claims for such property damage.  The language in this lease is similar to others which the court has upheld.  An indemnification clause does not cover claims arising out of the indemnitee’s negligence unless it expressly refers to indemnification for the indemnitee’s negligence.  None of these cases, however, cited by the plaintiff, support the contention that the absence of the word “negligence” prevents the exculpatory clause from barring plaintiff’s property damage claims.  Almost all of the cases relied upon by the plaintiff involve indemnification, not exculpatory clauses.

CONTRACTS-DAMAGES-DECREASE IN MARKET VALUE OF HOME

Woullard v. Sanner Concrete, 2020 Pa. Super. LEXIS 897 (October 30, 2020) Olson, J.  The court finds that in determining decrease in market value of home the party claiming the decrease in market value of the home has the burden to demonstrate that the decrease is attributable to each defect caused individually.  Having determined that appellants failed to present such evidence, the question is whether the court abused its discretion for failing to afford appellants the opportunity to present diminution-in-value evidence.  The court found no abuse of discretion on the part of the court in denying appellants’ request for new trial limited to damages.  Throughout the trial, appellants had that opportunity and they elected not to present such evidence.  They get no second bite at the apple.

CONTRACTS-EMPLOYMENT

Estate of Accurso v. Infra-Red Services, 2020 U.S. App. LEXIS 5223 (3rd Cir. February 20, 2020) Greenaway, Jr., C.J.  Third Circuit affirmed district court in part reversed and remanded for determination of Plaintiff’s attorneys’ fees under the Pennsylvania Wage Payment and Collection Law.  At issue was employment status.  A jury determined that Plaintiff was entitled to damages.  At issue were a number of things including attorneys’ fees.  The court went through the standard analysis for whether employment existed.  The district court’s determination on Summary Judgment that Plaintiff was an employee was affirmed. The court also ruled district court would be affirmed on denial of attorneys’ fees and punitive damages for prevailing on the PUTSA claim.

CONTRACTS-INDEPENDENT CONTRACTOR-UBER BLACK DRIVERS

Razak v. Uber Techs., Inc., 2020 U.S. App. LEXIS 6674 (3d Cir. March 3, 2020) Greenaway, Jr., C.J.  This case says that a finding of fact has to make the decision as to whether drivers for Uber Black are employees or independent contractors within the meaning of the Fair Labor Standards Act and similar Pennsylvania state laws.  The District Court opinion granting summary judgment was therefore vacated and the matter sent back for factual development.  Even though both sides said that there was no factual dispute, the court saw it otherwise and believed that there were questions about control issues.  The degree of permanence of the working relationship is a disputed material fact.  Uber can take drivers offline and plaintiffs can drive whenever they choose on the driver app, with no minimum amount of driving time required.  Driving is not a special skill.  This fourth factor weighs in favor of finding plaintiffs are employees.  Disputes of material fact remain.  The court does not say whether the dispute should be resolved by a jury or the district court through a Rule 52 proceeding, as was the case in DialAmerica, 757 F.2d at 1382.

CONTRACTS-EXCULPATORY WAIVER-PRE-INJURY 

Valentino v. Philadelphia Triathlon, LLC., J-14-2018 (June 18, 2019).  OPINION IN SUPPORT OF REVERSAL  Justice Dougherty Decided June 18, 2019

The question before the Court is whether the Superior Court erred when it determined a pre-injury exculpatory waiver signed by a triathlon participant provides a complete defense to claims brought by the participant’s non-signatory heirs pursuant to the Wrongful Death Acct, 42 Pa.C.S. §8301.  We would find the waiver is unenforceable against the heirs and does not preclude their wrongful death action.  We would therefore reverse the Superior Court’s decision and remand to the trial court for further proceedings.

In determining whether the Waiver provides a defense to appellant’s wrongful death action, we must liberally apply the remedial Act while we simultaneously construe the Waiver strictly against appellee as the party seeking protection from the contract.

Allowing the Waiver to have a broad exculpatory effect with respect to non-signatory wrongful death claimants would essentially make the right the General Assembly created for certain heirs through the Act an illusory one.  Abrogation of an express statutory right to recovery in this way violates public policy, and a pre-injury exculpatory waiver that contravenes public policy is invalid and unenforceable.

Accordingly, we would hold the Waiver is void and unenforceable with respect to appellant’s wrongful death claims and, as such, the Waiver should not be available to appellee as a defense in the underlying wrongful death litigation.  We would hold the Superior Court erred in affirming summary judgment in favor of appellee on that basis, and reverse and remand to the trial court for further proceedings on appellant’s wrongful death claim.

ARBITRATION-FEDERAL ARBITRATION ACT-CONTRACTS OF EMPLOYMENT

New Prime, Inc. v. Oliveira, 2019, U.S. LEXIS 724 (January 15, 2019) Gorsuch, J.-The Federal Arbitration Act requires courts to enforce private arbitration agreements. But like most laws, this one bears its qualifications. Among other things, §1 says that “nothing herein” may be used to compel arbitration in disputes involving the “contracts of employment” of certain transportation workers. 9 U.S.C. §1. And that qualification has sparked these questions: When a contract delegates questions of arbitrability to an arbitrator, must a court leave disputes over the application of §1’s exception for the arbitrator to resolve? And does the term “contracts of employment” refer only to contracts between employers and employees, or does it also reach contracts with independent contractors? Because courts across the country have disagreed on the answers to these questions, we took this case to resolve them. 

New Prime is an interstate trucking company and Dominic Oliveira works as one of its drivers. But, at least on paper, Mr. Oliveira isn’t an employee; the parties’ contracts label him an independent contractor. Those agreements also instruct that any disputes arising out of the parties’ relationship should be resolved by an arbitrator—even disputes over the scope of the arbitrator’s authority. Eventually, of course, a dispute did arise. In a class action lawsuit in federal court, Mr. Oliveira argued that New Prime denies its drivers lawful wages. The company may call its drivers independent contractors. But, Mr. Oliveira alleged, in reality New Prime treats them as employees and fails to pay the statutorily due minimum wage. In response to Mr. Oliveira’s complaint, New Prime asked the court to invoke its statutory authority under the Act and compel arbitration according to the terms found in the parties’ agreements. Given the statute’s terms and sequencing, we agree with the First Circuit that a court should decide for itself whether §1’s “contracts of employment” exclusion applies before ordering arbitration. After all, to invoke its statutory powers under §§3 and 4 to stay litigation and compel arbitration according to a contract’s terms, a court must first know whether the contract itself falls within or beyond the boundaries of §§1 and 2. The parties’ private agreement may be crystal clear and require arbitration of every question under the sun, but that does not necessarily mean the Act authorizes a court to stay  litigation and send the parties to an arbitral forum. When Congress enacted the Arbitration Act in 1925, the term “contracts of employment” referred to agreements to perform work. No less than those who came before him, Mr. Oliveira is entitled to the benefit of that same understanding today. Accordingly, his agreement with New Prime falls within §1’s exception, the court of appeals was correct that it lacked authority under the Act to order arbitration, and the judgment is affirmed.

CONTRACTS-IMPOSSIBILITY OF PERFORMANCE-MOLD

Davis v Borough of Montrose, 2018 Superior Ct of PA, LEXIS 896 (2018) Nichols J.  This case involves landlord/tenant action between a Borough and an individual where there was a mold problem discovered. A bench trial was held at the court below. The trial court did not abuse its discretion in finding the presence of mold did not entitle the Borough to terminate the lease. It has a calculation of damages. The matter will be remanded due to trial court error in its calculation of damages when it presumptively decreased the amount of damages. The landlord was entitled to relet the premises. The court also set as a prejudgment interest, the contract provided for a specified amount. Because the Borough breached the lease agreement to pay a definite sum of money, the landlord was entitled to prejudgment interest as a matter of law. 

CONTRACTS-UNENFORCEABILITY-ILLEGALITY-FEDERAL HEALTHCARE PROGRAM

340B Management, LLC v. RX Blue Star Solutions, 2017 Pa. Super. LEXIS 1068 (December 19, 2017) Musmanno, J. 340B Management, LLC appealed from a judgment against it and in favor of Blue Star Solutions and others. The court affirmed the judgment. The court was not required to grant a new trial on a breach of contract claim. The court did not err in granting partial summary judgment to defendants with respect to 340B Management’s claim of breach of contract because the agreement was unenforceable based upon its violation of federal law. The plain language of 42 U.S.C.A. § 320a-7b(b)(1)(B) would bar 340B Management to receive remuneration in return for arranging for purchasing the products of Blue Star. This would be payment made in whole or in part under a Federal healthcare program. The trial court was correct to conclude that the agreement is unenforceable in that it contemplates a business arrangement that is prohibited by the law.

CONTRACTS-DAMAGES

Gutteridge v. J3 Energy Group, Inc., 2017 Pa. Super. LEXIS 363 (May 17, 2017) Lazarus, J.  Gutteridge and AEP commenced an action against Russial and J3, claiming promissory estoppel, breach of contract, unjust enrichment, breach of implied duty of good faith in tortious interference with contractual rights.  The court issued a verdict in favor of appellee Gutteridge and Applied Energy Partners in the amount of $343,887 on the counts of unjust enrichment and promissory estoppel.  The Superior Court affirmed the verdict.

The court’s conclusion that Gutteridge was dealing with Russial individually, and that Gutteridge and Russial were parties to a failed business dealing supported by evidence that the trial court deemed credible.  Therefore there was individual liability.  It was next asserted that the trial court abused its discretion or committed an error of law by finding liability against Russial under the theory of unjust enrichment.  Again the court found no error or abuse of discretion.  Here, the trial court found credible evidence that Russial committed wrongful acts by breaking its promises after performing services and reliance on those promises.  As a result, Russial kept all the revenues and secured exclusive relationships with AEP’s most productive partners.  Russiel has been enriched, unjustly, and the measure of damages is the value of the benefits conferred.  That is, Russiel must make restitution in quantum meruit.  The trial court found evidence that there were promises made to plaintiffs that were expected to induce action by the plaintiffs.  The court found credible the testimony that Russiel personally promised the revenue-sharing arrangement to Gutteridge; that their personal business relationship continued while they attempted to formalize the arrangement; and that J3 promised AEP in exchange for marketing business, it would pay a percentage of revenues generated from AEP so that AEP could pay commissions to its existing sales force.  The argument was made that damages could only be recovered for the reliance.  The trial court heard sufficient evidence regarding sales and marketing activities.  The court concluded that the damages which were necessary to prevent injustice for the benefit of the bargain. The Superior Court agreed this was appropriate.  The verdict was not improperly calculated.

CONTRACTS-EMPLOYMENT-AT-WILL

Wakeley v. M.J. Brunner, Inc., 147 A.3d 1 (Pa. Super. 2016).  Appellant, whose case had been thrown out below, filed an appeal.  The Superior Court affirmed.  Appellant accepted an offer of employment and relocated her family from Dallas to Pittsburgh.  Little training was received, and eventually appellant was fired.  The application does not clearly establish the at-will nature of the employment.  However, the confirmation signed by appellant just prior to commencing her employment is clear and dispositive.  It specifically says that her employment was at-will.  This effectively terminates any claim.

CONTRACTS-LAW FIRMS-FEE DISPUTE

Meyer, Darragh v. Malone Middleman, P.C., 137 A.3d 1247 (Pa. 2016) Baer, J.  This case presents a dispute between two law firms over attorney’s fees earned in a wrongful death civil litigation settlement. We granted allocator to examine the propriety of the Superior Court’s holding that a law firm, which had formerly provided representation in the wrongful death action, was entitled to breach of contract damages against a successor law firm that ultimately obtained a settlement in the case when no contract existed between the two law firms.  “For the reasons that follow, we reverse.”  Consistent with this jurisprudence, we hold that under the specific facts presented, any recovery that may have been due to Meyer Darragh would lie in quantum meruit, and not breach of contract.

CONTRACTS-PUBLIC POLICY-CUSTODY AND SUPPORT AGREEMENT-SANCTION CLAUSE

Huss v. Weaver, 134 A.3d 449 (Pa. Super. 2016).  The parties had agreed that if they had a child, Huss would have primary physical custody and Weaver would have specified visitation rights.  If Weaver sought modification of these terms he would pay Huss $10,000 for each attempt.  The lower court had found this to be a violation of public policy.  The Superior Court en banc reversed.  The court discussed what public policy is.  No language in the agreement provides either that the $10,000 clause is intended to discourage Weaver from seeking court intervention, or evidence that the payment would act as an impediment to his ability to do so.  Each of the parties clearly understood what they were signing.  The Superior Court concluded that the trial court erred in ruling that the $10,000 clause in the agreement is unenforceable as against public policy.  The record does not reflect that this provision constitutes any limitation on Weaver’s ability to seek court intervention to modify the custody and/or visitation provisions in the agreement between these parties in the best interests of the child.

STATUTE OF LIMITATIONS-CONTRACTS

This case deals with a limited partnership where supposedly one of the partners, the general partner, sold some property for below its proper value.  The court found that the statute of limitations barred a tort claim.  The other members of the partnership had notice of the sale.  Due diligence is ascertained by an objective standard.  The party seeking application of the discovery doctrine bears the burden of proof.  The discovery rule will only operate to toll the running of the statute of limitations where, in spite of due diligence, one is unaware that he has been injured and has a cause of action.  Here, the shareholders had enough notice.  There was no fraudulent concealment to toll the statute of limitations.  The two-year statute has run.  The court was wrong to say a laches defense did not apply but the issue was not raised in post-trial relief.  The court did err in dismissing breach of contract claim.  There is an implied covenant of good faith and fair dealing.  There may be discretion upon the general partner to sell property but he still has to operate in good faith and with fair dealing.  The court cites to the Restatement (Second) of Contracts § 205 imposing this duty of good faith and fair dealing.  Footnote 4 deals with Pennsylvania case law on the subject.  A breach of the covenant of good faith and fair dealing is a breach of contract action not an independent breach for a duty of good faith.  It does not add contractual duties.  The behavior of the partner must be looked at through the lens of good faith and fair dealing.  Pennsylvania will impute the same duty of good faith and fair dealing in a performance of contractual duties in a limited partnership and in other contracts.  Pennsylvania is not adopting Delaware law, per se.  There simply is no reason to treat a limited partnership differently than any other.  There may have been discretion on the part of the general partner to sell property but the implied covenant of good faith and fair dealing imposed a duty to exercise that contractual obligation in good faith.  Hanaway v. Parkesburg Group, LP, 132 A.3d 461 (Pa. Super. 2015).

CONTRACTS-MINERAL LEASE-AMBIGUITY

Attorney Cliff Rieders

Attorney Cliff RiedersCliff Rieders is a Nationally Board Certified Trial Lawyer practicing personal injury law. A large part of his practice involves multi-district litigation, including cases related to pharmaceuticals, vitamin supplements and medical devices. He is admitted in several state and federal courts, as well as the Supreme Court of the United States. Rieders is the past regional president of the Federal Bar Association and is a life member of the distinguished American Law Institute, which promulgates proposed rules adopted by many state courts. He is a past president of the Pennsylvania Association for Justice, formerly Pennsylvania Trial Lawyers Association. As a founder of the Pennsylvania Patient Safety Authority, he served on the Board for 15 years.

Not only has Rieders held many highly esteemed, leadership positions, he authored legislation related to the Patient Safety Authority and the Mcare Act, which governs medical and hospital liability actions in Pennsylvania. He authored texts upon which both practitioners and judges rely, including Pennsylvania Malpractice Laws and Forms, and Financial Responsibility Law Issues in Pennsylvania, the latter governing auto and truck collisions in Pennsylvania. In addition, he wrote several books on the practice of law in Pennsylvania regarding wrongful death and survivor actions, insurance bad faith, legal malpractice claims and worker rights, among others. Rieders also serves as a resource to practitioners as a regular speaker for Celesq, an arm of the world’s largest legal publisher, Thomson Reuters West Publishing.

As recognition of his wide range of contribution to his profession and of his dedication to protecting the rights of his clients, he received numerous awards, among them the George F. Douglas Amicus Curiae Award, the Milton D. Rosenberg Award, the B’nai B’rith Justice Award, and awards of recognition from the Pennsylvania Trial Lawyers. [ Attorney Bio ]

RECENT ARTICLES

 

Article Categories