Nationwide Life Ins. Co. v. Franklin Mills Assocs. Ltd., CIVIL ACTION NO. 13-0038

NATIONWIDE LIFE INSURANCE COMPANY v. FRANKLIN MILLS ASSOCIATES LIMITED PARTNERSHIP

CIVIL ACTION NO. 13-0038

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

MARCH 31, 2017

MEMORANDUM

SURRICK, J.

Presently before the Court are Defendant's Motion for Partial Summary Judgment (ECF No. 34) and Plaintiff's Motion for Summary Judgment (ECF No. 35). For the following reasons, the Motions will be denied.

I. BACKGROUND

This action is a dispute over the terms of a purported settlement agreement between Plaintiff Nationwide Insurance Company ("Nationwide") and Defendant Franklin Mills Associates Limited Partnership ("Franklin Mills").

A. The Assessment Litigation

This is the second time that these parties have been before this Court to settle a dispute over a property located at 1933 Franklin Mills Circle, a/k/a 4301 Byberry Road, Unit M3, Philadelphia, Pennsylvania (the "Property"). The Property is part of a parcel of land that was developed as the Franklin Mills Mall. (Compl. ¶ 7, ECF No. 1.) In the first action (the "Assessment Litigation"), Franklin Mills filed a complaint alleging that Nationwide owed it promotional and maintenance assessment payments (the "Assessments") related to the Property. (See Compl., Franklin Mills Assocs., L.P. v. Nationwide Life Ins. Co., No. 09-3045 (E.D. Pa. July 8, 2009), ECF No. 1.) The parties filed cross-motions for summary judgment at the close of discovery. We determined that "the covenant to pay Annual Assessments runs with the land and is binding on subsequent property owners. Accordingly, summary judgment in favor of Plaintiff on its breach of contract claim is appropriate with respect to Defendant's liability to pay Annual Assessments." Franklin Mills Assocs., L.P. v. Nationwide Life Ins. Co., 836 F. Supp. 2d 238, 250 (E.D. Pa. 2011). Summary judgment with respect to damages was denied pending further discovery and a trial, if necessary. Id. at 250-51.

B. The Settlement Agreement

Following our summary judgment decision, the parties engaged in a settlement conference (the "Settlement Conference") before then-Magistrate Judge L. Felipe Restrepo. Jay Kagan, Esq., represented Franklin Mills at the conference, while Paul Scheuritzel, Esq., represented Nationwide. Each party also had a corporate representative present for the negotiations, namely James Owen, Esq. for Franklin Mills and Dana Anthony, Esq. for Nationwide. At the Settlement Conference, which took place on May 31, 2012, Nationwide and Franklin Mills reached an agreement (the "Settlement Agreement") to settle the Assessment Action, the essence of which was read into the record before Judge Restrepo as follows:

Mr. Kagan: We have resolved the litigation for a total sum of $1,450,000. Of that amount, $636,000 is to be paid to my client on or before June 10^th, 2012. The remaining $814,000 will be paid at the closing of a real estate transaction which I'm going to discuss.

As a secondary part of the resolution of this case, Franklin Mills has agreed to take—take ownership of this particular parcel of land from Nationwide subject to a couple of conditions. The first: Franklin Mills will be afforded an opportunity to expect [sic] the premises and Mr. Scheuritzel and I will workout [sic] some language setting forth the criteria for that inspection and any limitations relating thereto.

Nationwide has also indicated that it will provide insurable title to Franklin Mills. We have advised Nationwide that this entire transaction has to be approved by David Simon, the CEO of Simon Property Group and, also, has to be approved by Franklin Mills and Simon Property Group's lenders.

Mr. Scheuritzel: And, just, it's my understanding that these points will be reduced to a—a settlement agreement with mutual releases according to customary terms before June 10^th.

Mr. Kagan: Yes.

Mr. Scheuritzel: And—and that we would like a confidentiality provision as well. I imagine you would, too.

Mr. Kagan: Yes.

(May 31, 2012 Hr'g Tr. 3:25-5:1, Compl. Ex. A.) Nationwide alleges that during negotiations with Judge Restrepo, the parties agreed that Franklin Mills' right to reject the Property would be limited to a situation in which the inspection revealed the building to be structurally unsound (the "Structural Inspection Limitation"). (Compl. ¶ 14.) Nationwide also alleges that it disclosed that there were issues regarding water infiltration with the Property, and that it would not accept this as a reason for Franklin Mills to reject the Property. (Id.) On May 31, 2012, understanding that the matter had been settled, we entered an order dismissing the Assessment Action pursuant to Fed. R. Civ. P. 41.1(b).

The parties focused on the June 10 date to put the Settlement Agreement in writing because the trial on damages was scheduled to begin on June 11, 2012. (Compl. ¶¶ 8, 15.) In the weeks following the Settlement Conference, Nationwide and Franklin Mills engaged in a series of communications in an attempt to fulfill the terms of the Settlement Agreement. Excerpts from the email chain between Messrs. Scheuritzel and Kagan read as follows:

June 5, 2012 (1:35 PM): Mr. Kagan (Franklin Mills) to Mr. Scheuritzel (Nationwide)

Please forward the [$636,000] check to me on or before June 10 (which I just realized is a Sunday—so preferably by Friday 6/8). Thank you. JayJune 5, 2012 (2:49 PM): Mr. Scheuritzel to Mr. Kagan

Thanks. Have Mr. Simon and the lenders approved the settlement?

June 7, 2012 (2:20 PM): Mr. Kagan to Mr. Scheuritzel

Paul—we need a current Phase 1. Thereafter, the documentation needed to close will include an acceptable property condition report, title report, survey, zoning compliance, no legal violations rep and closing adjustments for real estate taxes.

Please be reminded that the check for $636,000 should be delivered to my office tomorrow.

June 7, 2012 (6:26 PM): Mr. Scheuritzel to Mr. Kagan

Please take a look at the attached agreement, which I believe embodies our discussions. In it, I have tried to address your concerns expressed below. Zoning compliance will be shown by an ALTA survey. We'll also need an L&I cert to transfer the property, so I think the items you raise are unlikely to cause problems.

My client has yet to review the attached, so I need to reserve their comments.

(Compl. Ex. C.)

The attachment to this email is a draft of the written Settlement Agreement ("June 7 Proposed Written Agreement") created by counsel for Nationwide. It contains the following provision:

2. Transfer of the property. Subject only to a physical inspection of the Property by a reputable and independent third-party inspector reasonably acceptable to Nationwide engaged by Franklin Mills, which inspection shall be completed within thirty (30) days after execution of this Confidential Settlement Agreement and Release and documented in a written report, Nationwide shall transfer and Franklin Mills will accept by quit claim deed insurable title . . . to the Property. Such transfer shall occur within forty-five (45) days after execution of this Confidential Settlement Agreement and Release. Simultaneous with the transfer of title to the Property from Nationwide to Franklin Mills, Nationwide shall make an additional payment to Franklin Mills in the amount of Eight Hundred Fourteen Thousand Dollars ($814,000.00), to be paid to Franklin Mills Associates Limited Partnership by check . . . .

The purpose of Franklin Mills' physical inspection of the Property is to determine whether the structural elements (those that are load bearing) of the existing improvements at the Property are sound. Franklin Mills agrees to accept transfer of the Property unless structural repairs are required and necessary to render such improvements suitable for occupation and such repairs will cost more than $1,000,000 to implement . . . .

Except as otherwise provided herein, Franklin Mills shall accept the Property "as is."

(Id.)

In a separate June 7, 2012 email exchange between Kagan and Scheuritzel each sought to clarify his client's position:

June 7, 2012 (4:14 PM): Mr. Kagan to Mr. Scheuritzel

Thx. Just to clarify--your email to me earlier asked about Mr. Simon and the lenders approving the "settlement". Your question was a bit broad. They have already approved the settlement of the lawsuit for $636,000. We advised of that at the mediation last week. They are now in the process of looking at, evaluating and approving the transaction taking the property into the Simon portfolio. My last email to you contained a list of items we need to complete that process. Thx.

June 7, 2012 (4:23 PM): Mr. Scheuritzel to Mr. Kagan

As far as we are concerned there is one settlement transaction that needs to be approved in principle before the $636,000 is paid. Nationwide will pay the $636,000 subject to a later inspection for structural problems and delivery of insurable title (which would necessarily require the issuance of a new title report).

I will have the check in my possession Saturday morning.

Zoning should not present a problem because nothing has occurred at the property in the last 11 years. I cannot imagine that there is anything controversial that would be disclosed by a survey. Bob Blue did the last survey of which I am aware.

(Def.'s Summ. J. Mot., Ex. A 115.)

On June 8, Kagan emailed Scheuritzel asking him to "confirm the $636k is en route to me." (Ans. Ex. B, ECF No. 7.) Scheuritzel replied, "I have the check in my possession." (Id.)The next day, Kagan sent an email stating that he would send someone to pick the check up on Monday, June 11. (Id.) The following is an excerpt from a subsequent email exchange that occurred between Scheuritzel and Kagan in which they again attempted to clarify the terms under which they were moving forward:

June 11, 2012 (8:47 AM): Mr. Scheuritzel to Mr. Kagan

Are you sending over a signed settlement agreement?

June 11, 2012 (11:26 AM): Mr. Kagan to Mr. Scheuritzel

Regarding a settlement agreement, the contemplated transaction transferring the property from Nationwide

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