Meyer v. Del. Valley Lift Truck, Inc.

392 F.Supp.3d 483

James E. MEYER, Plaintiffs,

v.DELAWARE VALLEY LIFT TRUCK, INC., John W. Meyer, Barbara A. Meyer, and Law Offices of Barry F. Penn, P.C., Defendants.

CIVIL ACTION NO. 18-1118

United States District Court, E.D. Pennsylvania.

Signed June 7, 2019

Filed June 10, 2019

Gary Green, Larry M. Keller, Sidkoff Pincus & Green PC, Philadelphia, PA, for Plaintiff.

Barry F. Penn, Penn & Robinson, Daniel S. Bernheim, III, Katherine Ann Hopkins, Wilentz Goldman & Spitzer, P.A., Jeffrey B. McCarron, Candidus K. Dougherty, Swartz Campbell LLC, Stephen Thomas O'Hanlon, The O'Hanlon Law Firm PC, Philadelphia, PA, for Defendants.

MEMORANDUM OPINION

WENDY BEETLESTONE, District Judge

This family dispute turns on one principal question: Was one brother, John W. Meyer ("Jack"), within his rights to push another brother, Jim Meyer, out of the family business? Jim has sued Jack, Barbara Meyer (Jack's wife), the Law Offices of Barry F. Penn (Jack's lawyer, hereinafter "Penn"), and the business itself, Delaware Valley Lift Truck, Inc. ("DVLT"), complaining that his ouster was improper.

Out of this basic controversy, Plaintiff asserts various counts under state law. Pending now are two motions to dismiss the Complaint, one filed by Jack, Barbara and DVLT, and another filed by Penn. For the reasons that follow, both motions will be granted in part and denied in part.

I. LEGAL STANDARD

To overcome a motion to dismiss, "a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. In determining whether a complaint satisfies this standard, a court must First outline the required elements, then "peel away" legal conclusions from the complaint, and finally decide whether the well-pled factual allegations plausibly entitle the plaintiff to relief. Bistrian v. Levi , 696 F.3d 352, 365 (3d Cir. 2012).

When interpreting Pennsylvania law, this Court must follow the Pennsylvania Supreme Court. In re Energy Future Holdings Corp. , 842 F.3d 247, 253-54 (3d Cir. 2016). If the law is unclear and there is no controlling precedent issued by Pennsylvania's highest court, this Court must "predict" how it would rule, giving "due regard, but not conclusive effect, to the decisional law of lower state courts." Nationwide Mut. Ins. Co. v. Buffetta , 230 F.3d 634, 637 (3d Cir. 2000).¹

II. FACTS

Although the Complaint makes for a lengthy document replete with far-reaching conclusory legal assertions, "peel[ing] away" these legal conclusions from the Complaint leaves the following spare set of factual allegations.²

DVLT is a closely held corporation that sells, rents, and services forklifts and material handling equipment. At least initially, the company was jointly owned by Jim and Jack. On February 1, 2008, Jim and Jack executed a "Shareholders' Agreement" (the "Agreement") that defined each party's rights and responsibilities with respect to the company. The Agreement contained two provisions that are relevant to the pending motions:

Section 3(a).

Termination of Employment, (a) If the employment of any Shareholder [that is, Jim or Jack] now or hereafter employed by Corporation terminates for any reason, other than by Disability, death or Retirement, such termination, whether voluntary or involuntary, shall be treated as an offer (made on the date of termination of employment) to sell all of his Shares and any Shares previously transferred by Shareholder to a trust as permitted by Paragraph 2(c) at the Purchase Price, as determined under Paragraph 9(c), first to the Corporation and then, if required, to the Other Shareholders under the offering procedures set forth in Paragraphs 6 and 7 hereof. The terms of payment of the Purchase Price for such Shares shall be as set forth in Paragraph 10 hereof

Section 26(c).

The Shareholders acknowledge that major decisions of the Corporation shall require unanimous consent of the Shareholders. In the event of a disagreement between the Shareholders that cannot be resolved, the Shareholders agree that John C. Meyer, Sr., who may consult with Don Fork, shall resolve such disagreement. In the event John C. Meyer is unavailable in the event of disagreement, Don Fork shall resolve such disagreement; otherwise, arbitration under Paragraph 23 hereof shall control.

In late June 2017, Jack represented to Jim that Jack had hired Penn as DVLT's attorney. Jack began paying Penn attorneys' fees with DVLT's funds. Jim asserts that Penn's representation of DVLT was a "falsehood"—that in fact Penn represented and had undivided loyalty "to its real client, Jack," rather than to DVLT. Jim also asserts that Penn accepted employment "with full knowledge" of this falsehood.

According to the Complaint, Jack and Penn fired Jim (as well as Jim's wife and daughter) from DVLT by "expel[ling], freez[ing]-out and exclud[ing]" him (and his wife and daughter) from the company. Upon effectuating the firing, Jack changed DVLT's physical locks and electronic passwords to prevent Jim's entry, and told Jim that if he tried to enter the building then he—Jack—would call the police. Jack also paid certain bonuses and benefits to himself and his family. After these events took place, Jack and Penn represented to employees, vendors, and industry members that they "had the good cause as well as the power and authority" to fire Jim.³ The Complaint states that the company is "either insolvent or on the brink of insolvency." The Complaint also states that Defendants refused to arbitrate certain claims after they fired Jim.

Jim now asserts eleven Counts, with some combination of Jack, Barbara, DVLT, and Penn named as Defendants⁴ for each: Appointment of Custodian under 15 Pa. C.S.A. § 1767(a)(2) (Count I); Involuntary Winding Up and Dissolution of DVLT under 15 Pa. C.S.A. § 1981 (Count II); Declaratory Judgment (Count III); Injunction to Bar Jack and DVLT from Continuing to Use Penn as the Attorney for DVLT (Count IV); Breach of Fiduciary Duty (Count V); Conversion (Count VI); Unjust Enrichment (Count VII); Breach of Contract and Breach of the Covenant of Good Faith and Fair Dealing (Count VIII); Waste of Corporate Assets (Count IX); Damages Resulting from Tortious Conduct (Count X); and, Civil Conspiracy and Aiding and Abetting Torts (Count XI).

III. DISCUSSION

The legal question at the core of the Complaint and motions to dismiss is: Does the Complaint adequately allege that Jim's firing violated the Shareholder Agreement? The answer is yes. Because the answer to this question helps resolve many of the other Counts asserted by Jim, the breach of contract claim (Count VIII) will be addressed first, and the remaining Counts will follow.⁵

A. Breach of Contract

Count VIII asserts that Jack breached the Shareholder Agreement contract with Jim. To state a breach of contract claim in Pennsylvania, a plaintiff must allege: "(1) the existence of a contract, including its essential terms, (2) a breach of the contract; and, (3) resultant damages." Meyer, Darragh, Buckler, Bebenek & Eck, P.L.L.C. v. Law Firm of Malone Middleman, P.C. , 635 Pa. 427, 137 A.3d 1247, 1258 (2016). "[C]ontract interpretation is a question of law." In re Old Summit Mfg., LLC , 523 F.3d 134, 137 (3d Cir. 2008) (quoting Dep't of Transp. v. Pa. Indus. for the Blind & Handicapped , 886 A.2d 706, 711 (Pa. Commw. 2005) ). The parties only dispute whether there was a breach.

Section 26 of the Shareholder Agreement requires "unanimous consent of the Shareholders" for all "major decisions of the Corporation[.]"⁶ It appears that the core of Jim's Complaint is that Jack breached the Agreement by unilaterally taking a "major decision"—ousting Jim, the only other Shareholder, from the Company—without seeking Jim's consent, thus breaching the Agreement by violating the "unanimous consent" provision. Jim has adequately alleged this breach.

Jack argues that firing Jim could not be a breach for two reasons. First, Jack points to Section 3(a) of the Shareholder Agreement, which refers to the "voluntary or involuntary" termination of a shareholder from the Company. Jack takes Section 3(a) to allow for the "involuntary" termination of a Shareholder. But even if a Shareholder may under certain circumstances be involuntarily terminated, not all involuntary terminations of Shareholders are countenanced by the Agreement—if that involuntary termination does not happen in accordance with the rest of the Agreement, then the termination would constitute a breach. That is what Jim alleges happened here—the termination did not accord with the rest of the Agreement.

Jack also points to Section 26(c) of the Agreement. That provision states both that "major decisions of the Corporation shall require unanimous consent of the Shareholders," and also that, "[i]n the event of a disagreement between the Shareholders," their father, John, "shall resolve such disagreement." Jack argues that Section 26(c) "can only be interpreted as having been included to prevent precisely the type of shareholder deadlock which Plaintiff claims barred Jack from firing him, hiring the Penn Firm, or taking any corporate action without his consent."⁷ Again, it may well be the case that in certain circumstances Section 26(c) allows for a Shareholder to be fired from the Company—but only where its strictures have been followed. Jim's allegation is that they have not been followed.⁸

Because Jim has adequately alleged that Jack breached the Shareholder Agreement, the motion to dismiss this Count will be denied.

B. Remaining Claims

Many of the remaining claims are resolved, at least in part, based on the conclusion that Jim has adequately alleged a breach of contract.

a. Count One (Appointment of Custodian)

Count I seeks appointment...