Pitt Chem. & Sanitary Supply Holding Co. v. Generational Equity, LLC

PITT CHEMICAL & SANITARY SUPPLY HOLDING COMPANY, INC.,PITT CHEMICAL & SANITARY SUPPLY CO., INC., PITTCHEM SUPPLY CO., INC.AND RICHARD W. SCHOMAKER, Appellants v. GENERATIONAL EQUITY, LLC, McCREARY & STOCKFORD, L.P.D/B/A THE STOCKFORD FIRM AND BRAD STOCKFORD

J. A25007/13

No. 1839 WDA 2012

SUPERIOR COURT OF PENNSYLVANIA

FILED: December 24, 2013

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

Appeal from the Order Entered October 23, 2012,

in the Court of Common Pleas of Allegheny County

Civil Division at No. GD 12-003125

BEFORE: FORD ELLIOTT, P.J.E., ALLEN AND COLVILLE,^* JJ.

MEMORANDUM BY FORD ELLIOTT, P.J.E.:

This is an appeal from the order entered October 23, 2012, sustaining, in part, defendants/appellees' preliminary objections to the amended complaint. We affirm.

This matter involves a fee dispute between Generational Equity, LLC ("Generational Equity") and Pitt Chemical & Sanitary Supply Holding Company, Inc. ("Pitt Chemical"), and its owner, Richard W. Schomaker ("Schomaker"). The service contract between Generational Equity and Pitt Chemical contained an arbitration agreement. While this fee disputewas ongoing, Schomaker decided to sell the company and found a buyer in Pittchem Supply Co., Inc. ("Buyer"). The sale of the company was to be financed through a loan by WesBanco Bank, Inc. ("WesBanco"). Schomaker and Buyer warranted to WesBanco that Schomaker and Pitt Chemical owned or leased all of the equipment and personal property held by Pitt Chemical, and it was free and clear of all liens other than those reflected on its financial statements, which did not disclose any lien by Generational Equity.

On or about July 1, 2011, the Stockford law firm, on behalf of Generational Equity, filed a "UCC-1"¹ financing statement asserting a security interest of $228,500. The firm also sent a letter to WesBanco informing WesBanco that Generational Equity had a first priority lien in the amount of $550,000 and that payments received by WesBanco were required to be applied to the claim of Generational Equity. Despite this, the deal went through and Buyer purchased the company on July 28, 2011.

Appellants filed a complaint on February 14, 2012, alleging that the service contract did not give Generational Equity a security interest in any of Schomaker's or Pitt Chemical's assets; that Generational Equity had no lien right; that the UCC-1 financing statement was ineffective and illegal; that the letter sent to WesBanco falsely represented that the amount of the lien was $550,000; and that the sole purpose of the lien letter was to disrupt the sale to gain leverage in the fee dispute. Appellants asserted that theysuffered damage to their reputation and incurred certain fees and costs in removing the improper UCC-1.

Appellees filed preliminary objections, which were sustained on May 11, 2012, without prejudice to appellants' right to file an amended complaint within 30 days. An amended complaint was filed on June 11, 2012, which included claims for defamation, commercial disparagement, interference with contractual relations, and violating the UCC. Appellees again filed preliminary objections, and appellants filed preliminary objections to appellees' preliminary objections. Argument was held on October 16, 2012, and on October 23, 2012, the trial court overruled appellants' preliminary objections and sustained appellees' preliminary objections in part.

The trial court's October 23, 2012 order dismissed Count I of the amended complaint without prejudice to appellants' right to submit the claim to arbitration.² Appellants were also granted leave to amend Counts VI and VII (interference with contractual relations) within 20 days. However, instead of filing a second amended complaint, appellants filed a "praecipe to dismiss amended complaint" on November 16, 2012. Appellants then filed anotice of appeal from the October 23, 2012 order on November 21, 2012. On January 30, 2013, the Honorable Judith L.A. Friedman filed an opinion.³

Appellants have raised the following issues for this court's review:

A. Can an attorney be found liable in tort for sending a letter which includes false statements to a third party intending to harm [appellants'] business relationship?

B. Upon preliminary objections to claims for defamation and commercial disparagement, are [appellants'] averments of fact that statements made to a third party were false required to be accepted by the lower court and must privilege be pled as an affirmative defense?

C. Does a Plaintiff named as a debtor in a UCC-1 lien document have standing to recover damages under the UCC when the filing party inaccurately identifies that Plaintiff's name?

D. Can arbitration be compelled where the claim at issue does not arise from the Agreement containing the arbitration clause?

E. Are [appellants] required to plead a specific sum for an unliquidated damage claim?

Appellants' brief at 4.

Appellants' first two issues relate to their claims against Brad Stockford, Esq., and his law firm ("Stockford"). Appellants brought claims against Stockford for defamation, commercial disparagement, and interference with contractual relations on the basis of the letter to WesBanco. Appellants allege that Stockford knew or should have known that the UCC-1 lien filed by Generational Equity was ineffective and illegal. Appellants also claim that the sole purpose for sending the letter to WesBanco was to disrupt the sale of Pitt Chemical and put pressure on Pitt Chemical and Schomaker to resolve the ongoing fee dispute with Generational Equity.

"Defamation is a communication which tends to harm an individual's reputation so as to lower him or her in the estimation of the community or deter third persons from associating or dealing with him or her." Elia v. Erie Insurance Exchange, 430 Pa.Super. 384, 634 A.2d 657, 660 (1993). Only statements of fact, not expressions of opinion, can support an action in defamation. Id. In a defamation case, a plaintiff must prove: "(1) The defamatory character of the communication; (2) its publication by the defendant; (3) its application to the plaintiff; (4) the understanding by the recipient of its defamatory meaning; (5) the understanding by the recipient of it as intended to be applied to the plaintiff; (6) special harm resulting to the plaintiff from its publication; and (7) abuse of a conditionally privileged occasion." Porter v. Joy Realty, Inc., 872 A.2d 846, 849 n. 6 (Pa.Super. 2005), quoting, 42 Pa.C.S.A. § 8343(a).

See also, Weber v. Lancaster Newspapers, Inc., 878 A.2d 63 (Pa.Super. 2005).

Moore v. Cobb-Nettleton, 889 A.2d 1262, 1267 (Pa.Super. 2005).

It is for the trial court to determine as a matter of law whether a statement is one of fact or opinion, as well as to determine whether a challenged statement is capable of having defamatory meaning. Elia, 634 A.2d at 660, citing Braig v. Field Communications, 310 Pa.Super. 569, 456 A.2d 1366 (1983), cert. denied, 466 U.S. 970, 104 S.Ct. 2341, 80 L.Ed.2d 816 (1984). "A communication is . . . defamatory if it ascribes to another conduct, character or a condition that would adversely affect his fitness for the proper conduct of his proper business, trade or profession." Maier v. Maretti, 448 Pa.Super. 276, 671 A.2d 701, 704 (1995), appeal denied, 548 Pa. 637, 694 A.2d 622 (1997), citing Gordon v. Lancaster Osteopathic Hospital Association, 340 Pa.Super. 253, 489 A.2d 1364 (1985). Additionally, the court should "consider the effect the statement would fairly produce, or the impression it would naturally engender, in the minds of average persons among whom it is intended to circulate." Maier, 671 A.2d at 704, citing Rybas v. Wapner, 311 Pa.Super. 50, 457 A.2d 108 (1983).

Constantino v. University of Pittsburgh, 766 A.2d 1265, 1270 (Pa.Super. 2001). "It is clear that expressions of pure opinion that rely on disclosed facts are not actionable." Feldman v. Lafayette Green Condominium Ass'n, 806 A.2d 497, 501 (Pa.Cmwlth. 2002) (citations omitted).

Instantly, Stockford's letter to WesBanco asserting that Generational Equity had a superior lien was a statement of opinion based on disclosed facts. The UCC-1 financing statement and the service contract between Generational Equity and Pitt Chemical were both attached to theletter as exhibits. The factual basis for Stockford's legal opinion that a valid lien existed was fully disclosed. Although the UCC-1 lien was subsequently determined to be improper because Generational Equity did not have a security interest in Pitt Chemical's assets, Stockford's opinion was based on information available at the time. As the trial court remarked during argument on preliminary objections,

No, they - lawyers do it all the time. They make a mistake. That's why I have a job. They say we have a security interest. They send a letter to WesBanco. This is what we base our security interests on, the agreement that's appended to the UCC1 and here's our filing, and we've got it, and you should have known it. And so forth. Okay? They say they're entitled to fees in the amount of $550,000 in their letter. That's the amount that they say they're still owed. I don't see how it's actionable. I mean, we're talking about defamation. Lawyers would be sued every day for defamation if they took a legal position that was later found to be incorrect. But legal opinion - and as I read their letter, it is - it's just expressing the legal opinion saying this is what we base it on.

Notes of testimony, 10/16/12 at 39. "So a separate action in defamation, that even as a matter of just general policy, lawyers would be subjected to a lawsuit for defamation every time they asserted their client's position to an opponent." (Id. at 40.)

Appellants argue that judicial privilege is an affirmative defense which must be raised as new matter, not via preliminary objections. However, Stockford did not assert judicial privilege, and the trial court did not decide the matter on the basis of privilege. Cf. Bochetto v. Gibson, ...