LISA PUPO LENIHAN, Magistrate Judge.
The August 10, 2015 Motion for Partial Summary Judgment as to Tort Claims and Punitive Damages ("Plaintiff's MPSJ") (ECF No. 145) filed by 84 Lumber Company, L.P. (hereafter "84 Lumber" or the nominal "Plaintiff") will be granted only as to (a) Count II, negligent misrepresentation only as brought by Defendant M&M Development, LLC a non-party to the 1997 Commercial Credit Agreement; (b) Count III, fraudulent/intentional misrepresentation related to Plaintiff's defective/negligent construction and/or failure to repair/replace under Subcontractor Agreements, only as brought by the non-individual Defendants; and (c) Defendants' claim(s) for any entitlement to punitive damages. The remainder of said Motion: Count I — fraud in the inducement as brought only by Defendant Gregory Mortimer (hereafter "Mortimer"); Count II — negligent misrepresentation as also brought by Mortimer and Defendant Gregory Mortimer Builders, designated as parties to the 1997 Commercial Credit Agreement in Plaintiff's Complaint;
The September 11, 2015 Defendants' Cross-Motion for Partial Summary Judgment ("Defendants' Cross-Motion for PSJ") (ECF No. 151) filed by Gregory Mortimer Builders, et al. (hereafter individually "GMB", and collectively "the Mortimer Entities" or the nominal "Defendants") but limited to summary judgment on Plaintiff Mortimer's individual contract claims, Counts IV through IX of the Second Amended Counterclaim (ECF No. 44), will be denied due to the existence of material fact questions. The Court further concludes that Defendant's Motion for Partial Summary Judgment of the same date ("Defendants' MPSJ") (ECF No. 149) which, despite its caption, seeks "dismissal of all counts contained in 84 Lumber's Complaint" will be granted as to dismissal of Count IV, Unjust Enrichment, in the alternative, against Defendant Mortimer as Guarantor and clear party to any underlying contracts, but denied as to all other counts due to the existence of questions of material fact.
The extensively documented factual and legal history in this now almost five (5) year old case arising from disputes between the parties with regard to (a) construction material purchases and (b) sub-contracted construction of housing in Defendants' two multi-duplex residential developments — Timberlake Village (hereafter "Timberlake") and Cedar Creek
The record before this Court, which contains multiple submissions of the 84 Lumber form contract documents at issue, indicates (despite the parties' varyingly inconsistent representations, particularly as to 84 Lumber, regarding their written contracts and terms and parties):
Mortimer was the signatory party to an 84 Lumber Commercial Credit Application form dated May 9, 1997 (the "1997 CCA"). The Court notes that Gregory Mortimer executed this document, with a box check for Proprietorship, as designated "Owner, Partner or Corporate Officer" of an unnamed "General Contractor Business" begun in 1994 and that the signatory language certifies that he is the "principal of the above business and [did] personally guarantee . . . payment of any sums due by the above named business".
Defendants allege that during the 2007 tenure of a Garrett County, Maryland store manager subsequently discharged for fraud, 84 Lumber defrauded Defendants on materials purchased for the construction of a residence by, e.g., charging for materials never provided or delivered, overcharging for materials or substituting lesser grade materials for those charged.
84 Lumber also provides to the litigation record its subsequent January 23, 2009 Credit Department correspondence addressed to Mortimer individually and serving as notice of modification of the terms and conditions of the CCA which assertedly "will take effect thirty (30) days after the date of this letter" and be deemed accepted absent written objection by certified mail within thirty days. The substantially lengthier terms of this document (the "2009 CCA")
The new limitations of liability, contained in paragraph 14, provide — in addition to disclaimer of warranties of merchantability or fitness for purpose, now revised to include "building materials or installation purchased by Customer" — that "[i]n no event shall 84 be liable for liquidated, incidental, punitive or consequential damages in connection with building materials or installation purchased by Customer" or "shall 84's liability exceed the replacement cost of building materials or installation." New choice of law, consent to jurisdiction and forum selection provisions in paragraphs 15 and 16 designate Pennsylvania law and specified Courts, respectively.
In addition to the documentation detailed above, Mortimer (as contractor) and 84 Lumber (as subcontractor) were the signatory parties to 84 Lumber "Subcontractor Agreement/Scope of Work" forms (the "Subcontractor Agreements") for the installation of purchased materials at five (5) development projects — three (3) at Timberlake (buildings 8, 11 and 12)
Each of these essentially identical Subcontractor Agreements provided that the work would be properly performed "per print and manufacturer specifications", with "competent supervision", and would "meet or exceed local building codes" and "pass all required inspections".
Subcontractor Agreement paragraph 15 contained 84 Lumber's "guarantee" that the work would conform to specifications, comply with laws, and be free from defects in workmanship and materials. Paragraph 15 limited 84 Lumber's "liability hereunder" (emphasis added) to the "extent of 84's negligence" and its obligations to "repair or replacement of any defective or nonconforming [w]ork." Mortimer agreed that 84 Lumber was not liable "for any consequential, indirect, exemplary or punitive damages of any type in connection with any claim under this paragraph." (emphasis added) And the guarantee expressly commenced "upon commencement of the [w]ork and [continued] for a period of one (1) years [sic] from the date of sale with respect to defects in non-structural and structural materials sold by 84." (emphasis added).
The remainder of each form Subcontractor Agreement provides specifications for each type of work undertaken which varies somewhat as to the particular construction projects and locations (e.g., framing, decks, windows and doors, roofing, siding and exterior trim).
Defendants assert that Plaintiff materially breached each Subcontract Agreement by, e.g., failing to install materials according to manufacturer's instructions and failing to conform to local building code; that Defendants received Correction Notices from the County Office of Buildings and Permits; and that Plaintiff made misrepresentations as to its work performance and failed/refused to make and made further misrepresentations regarding the requisite repairs to its work.
Defendants assert that their harm from Plaintiff's actionable conduct includes not only diminution in value of the subject properties, but other development properties as well, and more generally, their business reputations and related income, and financing positions and costs.
And most emphatically, the Court must direct (a) Plaintiff's attention to the actual dates and actual language (in many quite significant respects) of 84 Lumber's own CCA and Subcontractor Agreements as differentiated from Plaintiff's litigation assertions, and the present substantial factual record (including evidence such as testimony and expert reports) as to construction defects and repair/replacement costs; and (b) Defendants' attention to the relative absence of contract provisions regarding particular laborers, the Subcontractor Agreements'own limitation of damage provisions applicable to construction defects, the present factual record as to the construction material costs owed, and the less-substantial factual record as to the surviving fraudulent/intentional or negligent misrepresentation claims.
As discussed above, 84 Lumber, a Pennsylvania limited partnership, initiated this litigation by the filing of a Complaint in the Court of Common Pleas of Allegheny County in April, 2011 against Gregory Mortimer Builders ("GMB"), a Maryland development corporation, as Defendant, and Gregory Mortimer ("Mortimer"), an individual residing and engaged in residential development in Maryland, as Guarantor; and said parties removed it to this Court on April 28, 2011 (ECF No. 1). The Complaint asserts (implicitly on the basis of the 2009 CCA later asserted to have been mailed to Mortimer, since there is no such provision in the 1997 CCA) that the Defendant contractually agreed to Pennsylvania jurisdiction/litigation. It includes counts for (1) breach of contract against Gregory Mortimer Builders (under the CCA) owing to GMB's purchase, receipt and nonpayment "on [GMB's] account", of approximately $579,000 in goods/supplies delivered, together with ongoing fees/penalties and attorney's fees; (2) breach of contract against Mortimer as personal guarantor "of [GMB]'s obligations" under the CCA; and (3) separate counts against each Defendant for unjust enrichment in the alternative. ECF No. 1, Ex. A.
In May, 2011, Defendants responded with an Answer and Counter-Claim (ECF No. 2), adding M&M Development, LLC (the Mortimer-affiliated entity holding title to the real estate developed, hereafter "MMD") as an additional counter-plaintiff and asserting, in a somewhat convoluted and overlapping manner, counter-claims:
(a) by all Defendants for negligent construction, and for fraud/intentional misrepresentation in allegedly (i) representing that construction experts and specialists who were employed as part of 84 Lumber's existing national program would perform Defendants' subcontracted work, (ii) representing that such work was subsequently properly performed and/or would be corrected, and (iii) improperly charging and subsequently concealing charges to Defendants' CCA account; and
(b) by Mortimer for breach of contract as to each of five (5) units separately subcontracted for construction work by 84 Lumber, and separate counts for (a) breach of contract for materials and labor generally (
The counts for negligent construction (Count I) and an accounting (Count IX) were voluntarily withdrawn by Defendants' Amended Counterclaim (ECF No. 15) filed in response to 84 Lumber's May 26, 2011 Partial Motion to Dismiss (ECF No. 10).
During the Fall of 2011 the parties attempted Alternative Dispute Resolution ("ADR") but the case was not resolved. Defendants' Second Amended Counterclaim, comprised of nine (9) Counts, 36 pages and 223 paragraphs, was filed April 9, 2012 (ECF No. 44). It was followed by a request to modify the Amended Counterclaim to incorporate existing allegations on fraudulent misrepresentations already set forth in Count I (a claim for fraud in the inducement by Mortimer) in an additional claim by all Defendants for negligent misrepresentation (a new Count II).
(a) by each of the Defendants for (i) unspecified negligent misrepresentations (implicitly and by incorporation those misrepresentations made to Mortimer and underlying Count I), and (ii) fraud/intentional misrepresentation/concealment expressly with regard to Summer, 2009 representations to Mortimer regarding faulty construction issues and Plaintiff's intent to correct or purported correction of them (Counts II and III, respectively);
(b) by Mortimer for breach of contract as to each of five (5) separately subcontracted Timberlake (8, 11, 12) and Cedar Creek (1, 2) units (Counts IV-VIII); breach of contract more clearly delineated as to the Commercial Credit Agreement (Count IX), specifically by false and/or excessive charges and concealment;
There followed this Court's grant of Branch Banking & Trust Company's March, 2012 Motion to intervene to protect its financial interests in the Timberlake and Cedar Creek properties, and the May 25, 2012 filing of its Third Party Complaint alleging negligence in construction/conduct against 84 Lumber (ECF No. 54).
The Court must pause to note that the history of the case, including the Motions and supporting documentation presently pending, reflect changes in counsel, questionable characterizations of both the facts and the law on the part of all parties, mutual over-reaching, and an unfortunate degree of litigiousness, all of which have undoubtedly contributed to the parties' inability to reach resolution of this matter.
The Court must also note — upon completion of its extensive and through review of the now voluminous record — that the damages ultimately at issue given the Subcontractor Agreements' provisions regarding damage limitations; the factual support of record as to construction defects and reasonably associated costs, the factual strength of the remaining fraudulent and negligent misrepresentation claims, and damages attributable to reliance thereon; the parties' histories; and the Defendants' alleged outstanding materials costs as against the Plaintiff's outstanding liability for contractual construction undertakings/alleged breaches, all strongly suggest that the parties would be best served by resolution of this matter by means other than a series of pre-trial motions and a fact-intensive, protracted trial.
As noted above, currently pending are:
(1) Plaintiff's August 10, 2015 MPSJ (ECF No. 145) seeking summary judgment on Defendants' tort claims (fraud in the inducement by Mortimer (Count I); negligent misrepresentation (premised on the same allegations) by all Defendants (Count II); and fraud/intentional misrepresentation (premised on defective-construction related conduct) by all Defendants (Count III)) and claims for punitive damages; and
(2) Plaintiff's August 10, 2015 Damages Motion (ECF No. 144) seeking summary judgment on the basis of (a) the absence of any contractual relationship with any party but Mortimer and (b) contractual and legal damage limitations. This motion seeks the Court's judgment that (1) Defendant Gregory Mortimer is the only party that may seek damages from 84 Lumber; (2) Mortimer's damages, to the extent any exist, are limited to contractually endorsed repair or replacement costs regardless of whether claims sound in tort or contract; (3) Mortimer is not entitled to consequential, exemplary, punitive, or compensatory damages and is likewise forbidden from seeking attorney's fees, costs, and interest; (4) the contractual limitations period for filing claims forbids all Counterclaims; and (5) Mortimer has not, and cannot, suffer damages.
(3) Defendants' September 11, 2015 Cross-Motion for PSJ (ECF No. 151), which is limited to summary judgment as to liability on Mortimer's individual breach of contract claims set forth in Counts IV through IX of the Second Amended Complaint, on the basis that "the parties entered into six valid, enforceable construction contracts and one valid, enforceable credit agreement" and "[t]here is no genuine dispute that 84 Lumber failed to perform its own obligations and materially breached each of these contracts."
(4) Defendants' MPSJ of the same date (ECF No. 149), which asserts that "[a]s a matter of law, 84 Lumber may not recover damages on a claim of breach of [the CCA] because Mortimer's subsequent nonpayment is excused. It further asserts that 84 Lumber's unjust enrichment claims fail as a matter of law because the parties' express contracts control the claims" and seeks dismissal of 84 Lumber's Complaint.
Summary judgment may be granted if, drawing all inferences in favor of the nonmoving party, "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 that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986). See also Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986); Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, (1986). The moving party has the initial burden of identifying evidence which demonstrates the absence of a genuine issue of material fact. The party opposing the motion, however, cannot rely merely upon bare assertions, conclusory allegations, or suspicions to support the claim; rather, the non-movant "must do more than simply show that there is some metaphysical doubt as to the material facts," Matsushita, 475 U.S. at 586, and must produce more than a "mere scintilla" of evidence to demonstrate a genuine issue of material fact. See Big Apple BMW, Inc. v. BMW of North America, Inc., 974 F.2d 1358, 1363 (3d Cir.1992). See also Celotex, 477 U.S. at 324 (observing that Rule 56(e) permits a summary judgment motion to be opposed by any of the kinds of evidentiary materials listed in Rule 56(c), except the mere pleadings themselves).
The inquiry to be made is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." The non-moving party "must be able to produce evidence that `when considered in light of that party's burden of proof at trial, could be the basis for a jury finding in that party's favor.'" SEC v. Hughes Capital Corp., 124 F.3d 449, 452 (3d Cir.1997) (quoting Kline v. First W. Gov't Sec., 24 F.3d 480, 484 (3d Cir.1994)). If the non-moving party fails to present evidence sufficient to establish an "element essential to that party's case, and on which that party will bear the burden of proof at trial", summary judgment is appropriate. Celotex, 477 U.S. at 322. Where there is no material fact in dispute, the moving party need only establish that it is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c)(2).
The assertion in Plaintiff's Damages Motion, ECF No. 144 p.6, that "Pennsylvania law controls — at a minimum — contractual interpretation issues"
Absent a binding agreement to Pennsylvania law, it is clear from those facts not in question (the Maryland location of the Defendants and their residential development enterprises; the Maryland location of Plaintiff's Garrett County store, Defendants' CCA account, and alleged materials account liabilities (on the parts of both 84 Lumber and Defendants); the location of alleged representations/misrepresentations; and the location of the alleged defective construction, Code violations and breaches of the Subcontractor Agreements and resultant harm to Defendants), that Maryland law would apply to claims regarding the parties' contract performance as well.
Defendants' Second Amended Counterclaim brings counts for breach of contract solely by Mortimer as to each of five (5) Timberlake and Cedar Creek Subcontractor Agreements and the CCA (Counts IV through IX). Defendants' somewhat convoluted Cross-Motion for PSJ, ECF No. 151, seeking summary judgment as to liability on these counts will be denied because, as explained, supra, the record does not entirely remove from a reasonable fact-finder the establishment of 84 Lumber's liability on the basis that "the parties entered into six valid, enforceable construction contracts and one valid, enforceable credit agreement" and "[t]here is no genuine dispute that 84 Lumber failed to perform its own obligations and materially breached each of these contracts."
Plaintiff's April, 2011 Complaint, ECF No. 1, Ex. A, brought, on the basis of the CCA, four (4) separate counts comprised of breach of contract and, in the alternative, unjust enrichment claims against both GMB, as the account holder and obligor, and Mortimer as the guarantor. Defendants' MPSJ, ECF No. 149, seeks dismissal of all counts of the Complaint. To the extent Defendants assert that Plaintiff's claims should be dismissed owing to the latter's material breach, they err. The starting point is that Plaintiff is entitled to contract pricing for substantial performance subject to remedies for breaches. This Motion will be denied as to all claims but Count IV, Unjust Enrichment against Mortimer, as — Defendants' lengthy and repeated assertions to the contrary notwithstanding — the record fails to remove from a reasonable fact finder questions as to Plaintiff's material breach. For example, there are allegations of breach of the Subcontract Agreements by the use of non — or inadequately skilled workers, by substandard construction workmanship, and/or by failure to correct or repair such workmanship. Assuming such breach is established, there remains the question of the materiality of said breach to Defendants' non-payment(s) under the applicable CCA. Beyond the establishment of 84 Lumber's liability, until damages pursuant to its breach of the Subcontractor Agreements have been liquidated as a finding of fact, it cannot be concluded that the existence of such breach excused, as is here asserted, Defendants' non-payment for construction materials under the CCA as a matter of law.
And although Defendants are correct that where an express contract clearly governs, the plaintiff cannot maintain an equitable claim for unjust enrichment in the alternative, it is less than clear from the parties' pleadings whether they maintain that Defendant GMB did or did not have a contractual relationship with 84 Lumber under the CCA — although the initial Complaint expressly alleges that it did. Accordingly, Count III, Unjust Enrichment as against GMB remains permissible in the alternative, as the liability of GMB could then become a question of quantum meruit. On the other hand, Defendants' alternative Count IV, as against Mortimer, individually, whom the parties unequivocally agree was a contractual party to the CCA governing the material purchases at issue, cannot stand.
Defendants' Second Amended Counterclaim, ECF No. 44, brings the following tort claims:
Count I by Mortimer for fraud in the inducement by both (i) misrepresenting that improper CCA charges made in 2007 by a subsequently-fired Maryland manager would not recur and that a Fall 2008 internal audit was conducted and showed no improper CCA charges, and (ii) misrepresenting that subcontracted work would be performed by 84 Lumber's existing national "install program" construction experts/specialists; Count II by all Defendants for negligent misrepresentation, premised on the allegations underlying Count I; and Count III by all Defendants for fraud/intentional misrepresentation/concealment expressly with regard to Summer, 2009 representations to Mortimer regarding faulty construction issues and Plaintiff's intent to correct or purported correction of them.
The Court notes that in a summary judgment determination on the elements for a cause of action for tortious misrepresentation, whatever the mens rea component alleged (i.e., intentional/fraudulent or negligent), questions of the degree of intent usually entail fact questions inappropriate for resolution on summary judgment, and both fraudulent and negligent misrepresentation claims contain a requirement of fault. Such cause of action also requires material fact(s) intended to induce and demonstrably inducing reasonable reliance to the plaintiff's detriment. Thus, the showings evaluated on summary judgment include those on the elements of (a) present misrepresentation as to material fact(s) and (b) detrimental reliance. And in circumstances such as those sub judice, the detrimental reliance is generally entry into/continuation in/performance under the parties' contractual relationship and this is the causal nexus between the defendant's wrongful conduct and the plaintiff's injury.
Plaintiff's MPSJ, ECF No. 145, seeks summary judgment as to Defendants' tort claims (Counts I-III) and claims for punitive damages. The Court will deny said Motion as to Count I, Fraudulent Inducement, brought only by Defendant Mortimer. As to the underlying allegations of representations that improper charges would not recur, the Court notes the long-established general rule that claims of intentional misrepresentation cannot be predicated upon statements made with the intent of inducing reliance, but which are promissory in nature and relate to future actions or conduct, unless it can be established that the statements were made with no present intention of carrying them out.
The Court will grant this Motion as to Count II, negligent misrepresentation, as brought by Defendant M&M Development, LLC a non-party to the 1997 Commercial Credit Agreement because none of the allegations on which this Count is premised provide a basis of liability to MMD (e.g., the record raises no material question of its detrimental reliance in continued contractual/business dealings). The claim must stand, however, as to both Mortimer and GMB given the record, as allegations regarding misrepresentations resulting in continued business dealings under the CCA provide a potential basis of liability to GMB.
The Court will also grant the Motion as to Count III, fraudulent/intentional misrepresentation related specifically to Plaintiff's defective/negligent construction and/or failure to repair/replace under the Subcontractor Agreements, as brought by the non-individual Defendants, as Defendant Mortimer is the sole contractual party. To the extent such claims stand separately from contract claims for fraud in factum/performance (as perhaps by, e.g., misrepresentations of promise without intent or misrepresentations of repair work performed), the causal nexus remains contractual.
In denying summary judgment as to some of Defendants' tort claims, the Court again notes the presently applicable standard, and the degree of sufficiency of the evidence as to, e.g., particular misrepresentations and detrimental reliance.
Finally, the Court will grant the Motion for summary judgment as to punitive damages. Defendants are not, under the record of this case, entitled to maintain any potential claim for punitive damages and Plaintiffs' pleadings analysis is sufficiently correct in this regard. Such damages as to breaches of contract (as by, e.g., negligent work performance) are clearly precluded by the Subcontract Agreement provisions.
Plaintiff also brings a Damages Motion, ECF No. 144, and said Motion must be denied for the following reasons: the record does not establish for summary judgment purposes that (1) Mortimer is the only party that may seek damages from 84 Lumber;
A separate Order will follow.
The Court also observes that absent a binding and applicable contractual agreement to Pennsylvania law, Maryland law applies under the factual circumstances which are undisputed. That is, under the choice of law rules of the forum state, Pennsylvania, even in the event this Court determined a true conflict, Maryland clearly has the greater interest in the application of its laws hereto.
