ROBERT D. MARIANI, District Judge.
After filing their initial Complaint (Doc. 1), Plaintiffs filed an Amended Complaint (Doc. 8). Defendant filed an Answer (Doc. 10) including counterclaims, to which
The Second Amended Complaint (SAC) sets forth five counts: (1) breach of contract, (2) promissory estoppel, (3) negligence and negligent misrepresentation, (4) fraudulent misrepresentation, and (5) punitive damages. (Id.) Plaintiffs allege that in May 2007, the parties entered a contract whereby Defendant accepted Plaintiffs' supermarket into its purchase/supply network. (Id. at ¶ 7). Previously, Plaintiffs were supplied by Associated Wholesalers, Inc. (AWI), with whom it had a purchase supply agreement. (Id. at ¶¶ 5, 19). As part of the alleged contract, Defendant agreed to pay off the $380,000 Plaintiffs owed to AWI. (Id. at ¶¶ 18-19). Defendant then removed AWI's equipment and re-tagged inventory at Plaintiffs' store with Defendant's bar codes. (Id. at ¶ 25). However, once AWI learned that Plaintiffs planned to leave AWI for a competitor, it threatened to sue Defendant for tortious interference with contract, as Plaintiffs warned Defendant would happen. (Id. at ¶¶ 21-22, 26) Defendant then allegedly abandoned its contract with Plaintiffs, leaving them stranded with Defendant's equipment that could not order inventory from AWI, and Defendant's bar-coded inventory, which had to be rung up manually. (Id. at ¶ 28). Plaintiffs assert, inter alia, lost profits, loss of inventory, and loss of goodwill. (Id. at ¶ 31).
In their tort claims, Plaintiffs argue that by removing AWI's machines and bar-codes, Defendant "had overmastering dominance on its part and weakness, dependence, and justifiable trust on the part of Plaintiffs." (Id. at ¶ 38). Defendant also "negligently refused to supply [Plaintiffs] with consigned merchandise," which "was a substantial part of Bozzuto's contract with Bruno's Market." (Id. at ¶ 40). "Bozzuto's carelessly and negligently added the requirement that Plaintiffs present Bozzuto's with a certified check in advance of Bozzuto's shipping merchandise to plaintiffs, a condition contrary to the original contract between the parties." (Id. at ¶ 41). "At all times ... Defendant misrepresented to Plaintiffs that Bozzuto's would complete its contract with Plaintiffs." (Id. at ¶ 43). The Defendant had direct dealings with Plaintiffs' bank "for the mutual benefit of Plaintiffs and Defendant" and because of those dealings, the "lender became aware that Bruno's had no supplier and, therefore, did not have sufficient financial ability to justify financing." (Id. at ¶¶ 54, 55).
During the course of discovery, Defendant sought original paper copies of invoices, trial balances, income statements, and balance sheets. Plaintiffs admitted that they had thrown out the paper copies but insisted the records still existed in electronic form with AWL (Doc. 94, Ex. D, Affidavit of L Bruno, at 43, 52:19-53:6). Defendant filed a motion for sanctions for spoliation of evidence and sought an award of summary judgment as appropriate relief. (Doc. 94).
For the reasons that follow, the Court will deny Defendant's Motion to Dismiss Bruno's Market II, Inc. as a Plaintiff (Doc. 64), grant Defendant's Motion to Dismiss Counts III, IV, and V of the SAC (Doc. 113), and grant in part and deny in part Defendant's Motion for Sanctions for Spoliation of Evidence (Doc. 94).
On motions to dismiss, courts "must accept as true all factual allegations in the
The SAC states that "Bruno's Market II came into existence on or about August 2007, when Bruno's Market reopened under the name, Bruno's Market II." The two businesses also share the same address (401 Kennedy Boulevard, Pittston, PA 18640). (Doc. 63, ¶¶ 3, 4). Though a corporation changes its name, its identity does not change. Gen. Teamsters Union v. Bill's Trucking, Inc., 493 F.2d 956 (3d Cir.1974). Viewing the assertions in the SAC most favorably to Plaintiffs, they are claiming that Bruno's Market II, Inc. is the same entity as Bruno's Market, Inc., so the privity of contract issue is moot. If the two corporations are the same entity, or if one is a successor to the other (i.e., there is substantial continuity of ownership and operation), then Bruno's Market II, Inc. is an appropriate party to the case, and if damages are warranted, its presence is essential to their calculation. Defendant's motion to dismiss is denied accordingly.
Defendant also moved to dismiss Counts III, IV, and V of the SAC, asserting the "gist of the action" doctrine,
The doctrine bars tort claims "(1) arising solely from a contract between the parties; (2) where the duties allegedly breached were created and grounded in
In eToll, the plaintiff had developed a product called "e-mail 97," which the defendant contracted to market and advertise. In its complaint, the plaintiff alleged that the defendant charged for services not rendered, inflated charges instead of billing at cost, did not disclose cheaper alternatives, etc. The court found that "all of these alleged acts of fraud arose in the course of the parties' contractual relationship," and the "fraud claims [were] inextricably intertwined with the contract claims." Id. at 21.
In this case, Plaintiffs' tort counts arise solely from contractual duties, so the
Plaintiffs argue that a special or confidential relationship existed between the parties, such that Defendant owed a duty to Plaintiffs independent of the contract, citing Duquesne Light Co. v. Westinghouse Elec. Corp., 66 F.3d 604, 612 (3d Cir.1995). Plaintiffs assert that Defendant's duty to Plaintiffs arose when it retagged Plaintiffs' inventory and removed AWI's equipment from Plaintiffs' store. Even assuming that the removal and retagging were independent of the contract's terms, there is no special or confidential relationship here. After Duquesne was decided, eToll stated that parties to an arms-length business contract could not be in a "special relationship."
Finally, Plaintiffs contended that Defendant interfered with their ability to obtain refinancing (Id. at ¶ 42) because the Defendant had direct dealings with Plaintiffs' bank "for the mutual benefit of Plaintiffs and Defendant" and the "lender became aware that Bruno's had no supplier and, therefore, did not have sufficient financial ability to justify financing." (Id. at ¶¶ 54, 55). This is the only statement that might suggest a cause of action other than breach of contract. However, Plaintiffs still have not identified what independent duty that would give rise to such an action, and the other statements in support of the alleged torts are inextricably intertwined with the breach of contract allegations. The Court finds that the "gist of the action" doctrine applies and will thus dismiss Counts III and IV of the SAC. Because Plaintiffs cannot recover punitive damages on a breach of contract or promissory estoppel theory, the Court also dismisses Count V of the SAC. Ash v. Continental Ins. Co., 593 Pa. 523, 932 A.2d 877 (2007).
A party which reasonably anticipates litigation has an affirmative duty to preserve relevant evidence. Baliotis v. McNeil, 870 F.Supp. 1285, 1290 (M.D.Pa. 1994). The duty arises whenever there is "(1) pending or probable litigation involving the defendants; (2) knowledge by the plaintiff of the existence or likelihood of litigation; (3) foreseeability of harm to the defendants, or in other words, discarding the evidence would be prejudicial to defendants; and (4) evidence relevant to the litigation." Id. The breach of contract allegedly occurred in May 2007. Plaintiff Lisa Bruno testified at her deposition that at the time of the alleged breach, she was already contemplating litigation. (Doc. 94, Ex. D, 3/29/11, at 9:5-15). At this time, Plaintiffs' duty to preserve evidence was triggered. She and her husband moved to California in August or September of 2008. (Doc. 94, Ex. D, 3/28/11, at 53:4-6). Before they left, they destroyed all paper copies of invoices, balance sheets, income statements, and trial balances. (Id. at 52:19-53:6). Their rationale was that there was no storage space for all of the documents, and it was redundant to keep them because online copies were available through RORC and there were also records on the computer (that subsequently crashed) using DAC EASY software. (Id. at 53:23-54:16). Plaintiffs then filed their initial complaint in May 2009. (Doc. 1).
Under Pennsylvania law, to determine the penalty for a spoliation of evidence claim, Defendant must show 1) the degree of fault of Plaintiff, 2) the degree of prejudice it has suffered, and 3) the availability of a lesser sanction that will protect Plaintiff's rights and deter future similar conduct. Schroeder v. Commonwealth of Pa., 551 Pa. 243, 710 A.2d 23, 27 (1998) (adopting the Third Circuit's approach in Schmid v. Milwaukee Elec. Tool Corp., 13 F.3d 76 (3d Cir.1994) in design defect case). A finding of "bad faith" is not necessary to find fault. Baliotis, 870 F.Supp. at 1291.
Plaintiffs hired two experts who opined that Plaintiffs had lost over $2 million in equity value from their stores' closings. (Doc. 94, Ex. V — Dragotto — Rajan Report). In their report dated June 3, 2011, Dragotto and Rajan stated they relied primarily on the Defendant's projections of
Plaintiffs say they no longer possess this data in paper form, but it is available in electronic form on the RORC computer system owned by AWI. (Doc. 94, Ex. D, Affidavit of L Bruno, at 43). They aver that during the course of discovery, they signed a release authorizing Defendant to have access to all of their bank records and cancelled checks, (Doc. 105, Ex. D to Ex. F) as well as revealed that the electronic documents were in the possession of AWI. Of note, there is nothing on the record to show that AWI still possesses these documents. Defendant is correct that Plaintiffs had a duty to preserve evidence once litigation became likely, and this duty encompassed original paper records of sales transactions and intermediate accounting records. Plaintiffs cite no case law or other authority in their briefs under which a court would sanction the destruction of a certain form of evidence so long as it was still available in another form. FED. R. CIV. P. 26(b)(2)(C)(i) states:
Id. (internal citations omitted). However, the Court does not construe this to mean that Defendant is obligated to subpoena AWI for the information it seeks and then re-create the lost records from the raw data it collects. Plaintiffs cannot throw the burden on a third party to meet Defendant's discovery demands. To do so would unduly burden Defendant, especially considering that Defendant and AWI are direct competitors and AWI is unlikely to accede to Defendant's discovery demands with any alacrity.
As far as degree of fault goes, Plaintiffs admit they destroyed all of their paper records. The Court is not attributing any malice or bad faith on their part, because they believed as long as the evidence was available in one form or another, it was permissible. (Doc. 94, Ex. D, Affidavit of L. Bruno, at 43). Even though Plaintiffs did not act in bad faith, they did destroy original paper records that had been used to tally final sales figures, expenses, and net income. Defendant claims that without the paper records, it cannot adequately make out its three defenses of 1) pre-existing poor financial condition, 2) no profit in 2006, and 3) a competing expert report using independent numbers. (Doc. 109). Obviously, if the documents still exist in electronic form, then Defendant
For the reasons above, the Court will deny Defendant's Motion to Dismiss Bruno's Market II, Inc. as a Plaintiff (Doc. 64), grant Defendant's Motion to Dismiss Counts III, IV, and V of the SAC (Doc. 113), and grant in part and deny in part Defendant's Motion for Sanctions for Spoliation of Evidence (Doc. 94).
