Def. v. Iron Mountain Information Management, Inc.

660 F.Supp.2d 608

DIGITAL ENCODING FACTORY, LLC, Media Holdings, LLC and EDA Acquisition, LLC, Plaintiffs, v. IRON MOUNTAIN INFORMATION MANAGEMENT, INC., Defendant.

Civil Action No. 06-1449.

United States District Court, W.D. Pennsylvania.

September 18, 2009.

COPYRIGHT MATERIAL OMITTED

Christopher R. Opalinski, Daniel B. McLane, Jacob C. McCrea, Eckert, Seamans, Cherin & Mellott, Pittsburgh, PA, Daniel P. Lynch, Lynch Weis, Cranberry Township, PA, Michael R. Pontrelli, Stephen D. Riden, Foley & Lardner, Boston, MA, for Plaintiffs.

C. Shawn Dryer, Kevin K. Douglass, Christopher M. Buell, Babst, Calland, Clements & Zomnir, Pittsburgh, PA, for Defendant.

OPINION ON MOTION FOR SUMMARY JUDGMENT

LISA P. LENIHAN, United States Magistrate Judge.

I. Conclusion

The Motion for Summary Judgment filed by Defendant Iron Mountain Information Management, Inc., (hereafter "Iron Mountain") will be granted as to Count I, Breach of Joint Venture Agreement, and Count III, Breach of Fiduciary Duty, and denied as to the remaining claims, as more fully set forth below.

II. Factual and Procedural History

As discussed in this Court's July 5, 2007 Report and Recommendation, Plaintiffs (hereafter "the Imagers") allege that Iron Mountain breached oral agreements relating to their exclusive provision of document imaging/digitization services to Iron Mountain's storage facility customers. More particularly, they allege that Plaintiff Digital Encoding Factory, LLC ("DEF") entered into a lease agreement (the "Lease") for space in Iron Mountain's expansive underground document storage facility in Boyers, Pennsylvania (the "Boyers facility") (1) as part of an undertaking, with Iron Mountain, to expand Iron Mountain's customer services to include imaging/digitization (i.e., electronic conversion of documents and, subsequently, additional media); and (2) under criteria dictated by Iron Mountain and pursuant to Iron Mountain's representations of significant pre-existing customer need/available business and promises of exclusivity and marketing.¹ Plaintiffs allege an oral contract with Thomas Roth ("Roth"), Iron Mountain's General Manager of the Boyers facility and later Vice President, under which the Imagers would establish a new imaging/digitization operation within the Boyers facility, and build it to Iron Mountain's specifications (by acquiring multi-million dollar investments/funding, personnel, technology/equipment, expertise and, relatedly, additional business entities);² the Imagers would have no direct contract with Iron Mountain's customers; Iron Mountain would both (a) exclusively refer its storage facility customers' imaging business to Plaintiffs and (b) use its best efforts to market the imaging services; and Iron Mountain would profit by adding a 15% markup/surcharge to Plaintiffs' fees when Iron Mountain billed its customers. They further allege that, while Plaintiffs invested approximately $7.5 Million in the project,³ Iron Mountain (a) failed to deliver, or to even market, the business repeatedly promised; (b) marked-up Plaintiffs' prices by significantly more than 15%; and (c) ultimately established its own competing imaging/digitization business inside the facility, driving Plaintiffs "to the brink of financial ruin."⁴

The Second Amended Complaint asserts claims for (1) breach of joint venture agreement; (2) breach of contract; (3) breach of fiduciary duty; (4) negligent misrepresentation; and (5) promissory estoppel.

Defendant, in a Motion for Summary Judgment that was commendably briefed by both parties, asserts that Plaintiffs' claims fail, as a matter of law, for the following reasons: (1) all claims for lack of authority; (2) all claims but negligent misrepresentation because the parole evidence rule bars evidence of any oral agreement that would alter the terms of the Lease; (3) breach of joint venture agreement because the Imagers cannot establish the requisite elements of a joint venture; (4) breach of fiduciary duty because, in the absence of a joint venture, Iron Mountain owed no such duty; (5) negligent misrepresentation because it is barred by Pennsylvania's gist of the action doctrine and by (6) the applicable statute of limitations; and (7) negligent misrepresentation and promissory estoppel for lack of reasonable reliance.

III. Summary Judgment Standard

Summary judgment is to be granted only when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). A fact is "material" if proof of its existence or nonexistence might affect the outcome of the suit under applicable law. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). And a dispute is "genuine" if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Id.

All doubts as to the existence of a genuine issue of material fact are resolved against the moving party, and the entire record is examined in the light most favorable to the nonmoving party. Continental Ins. Co. v. Bodie, 682 F.2d 436, 438 (3d Cir.1982). However, the nonmoving party may be subject to summary judgment under Rule 56 if, after adequate time for discovery, it "fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).⁵

IV. Analysis

A. Roth's Authority

Plaintiffs allege, and have proffered evidence, that:

In Fall, 2000, DEF entered discussions with Roth, as General Manager for the Boyers facility, concerning a "partnering arrangement." Second Amended Complaint at 4. Both George Medved, a DEF principal, and Roth believed that there was great potential in imaging/digitization, and Roth indicated that numerous Iron Mountain customers were planning to convert their analog data for preservation, and were in need of digitization services. Roth indicated that it was critical, given the valuable/sensitive nature of much of the archived material, that the digitizing service be set up in the Boyers facility (i.e., that it not require any document transportation). Roth further indicated that Iron Mountain did not wish to expand its own operations but preferred to (1) partner with an imaging/digitization provider-which would be located in the facility, the exclusive provider, but essentially "invisible" to Iron Mountain's customers; (2) market and sell the services as an additional component of its own client offerings; and (3) make its profit via a 15% mark-up of Plaintiffs' price quotes.⁶

Subsequent to the written Lease, and between 2001 and 2006, Roth gave eight or more presentations and extensive Boyers facility tours to Plaintiffs' prospective investors, during which he repeatedly represented that Iron Mountain "had millions of dollars in [imaging] business" that it would refer to Plaintiffs as the exclusive provider. Second Amended Complaint at 9.⁷ He also organized an imaging/digitization training/marketing program for Iron Mountain's sales and account management personnel in Pennsylvania, Ohio and New York.⁸ During this time, Plaintiffs were induced to continue to make lease payments to Iron Mountain (and/or to make several further payments on lease amounts assertedly in arrears), and to make additional investments in, e.g., capabilities, on Roth's repeated assurances that more imaging/digitization business would then be forthcoming. See id. at 11-15. In addition, Roth continued to issue ongoing directions and further business requirements to Plaintiffs as they responsively developed the in-facility capabilities to meet Iron Mountain's customer service specifications.

A jury may conclude that an agency relationship exists, and the principal is therefore bound, on the basis of express authority, implied authority, apparent authority, and authority that the principal is estopped to deny. See, e.g., Bolus v. United Penn Bank, 363 Pa.Super. 247, 525 A.2d 1215, 1221 (1987) (cited in Brief in Opposition at 3). Iron Mountain, in moving for summary judgment on all counts, asserts that the Imagers had no evidence of Roth's actual authority nor any reasonable basis to believe that Roth had apparent authority to enter into the alleged agreement/undertakings. See Memorandum of Law in Support at 6-12.⁹ To the contrary, Plaintiffs have proffered evidence which is sufficient to proceed to trial. They have also correctly presented the basis for estoppel.

More particularly, Iron Mountain's assertion that it is entitled to summary judgment because the Imagers did not require confirmation/documentation of specific authority, inquire in Boston as to Iron Mountain's corporate hierarchy/organizational policies/job descriptions, or otherwise investigate Roth's authority to enter into business contracts for the provision of services within the storage facility he oversaw as General Manager¹⁰ mistakes the applicable law. Absent any indication from Iron Mountain to the contrary, a reasonable jury could certainly conclude that the Imagers properly believed that Roth's (a) repeated representations regarding Boyers facility clients and their needs, (b) contracting for in-facility services to meet those needs, (c) ongoing digitizing-service investor-solicitation tours and presentations regarding the Boyers facility, (d) ongoing identification of the parameters/requirements for supplemental Boyers client services, and (e) creating/administering Boyers digitization marketing meeting(s) for multi-state Iron Mountain personnel were well within his bailiwick as General Manager and later Vice President.¹¹ Cf generally Great Northern Ins. Co. v. ADT Sec. Services, Inc., 517 F.Supp.2d 723, 746 (W.D.Pa.2007) (noting that...